As Filed With The Securities And Exchange Commission On August 22, 2000
Commission File No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
JOINUSONLINE.COM, INC.
(Name of small business issuer in its charter)
Delaware 7389 65-0395513
-------- ---- ----------
(State or Jurisdiction of (Primary Standard (IRS Employer
Organization or Industrial Classification Identification
Incorporation) Code Number) Number)
110 East Atlantic Avenue, Suite 400
Delray Beach, Florida 33444
561-454-3300
(Address and telephone number of principal executive
offices and principal place of business)
William R. Becker, Chief Executive Officer
JoinUsOnline.com, Inc.
110 East Atlantic Avenue, Suite 400
Delray Beach, Florida 33444
561-454-3300
(Name, address and telephone number of agent for service)
Copies to:
Steven D. Dreyer, Esq. [ ]
Hall Dickler Kent Goldstein & Wood, LLP [ ]
909 Third Avenue [ ]
New York, New York 10022 [ ]
(212) 339-5400 [ ]
Fax: (212) 935-3121 [ ]
Approximate date of proposed sale to the public: AS SOON AS PRACTICAL AFTER THE
EFFECTIVE DATE OF THE REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: |_|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to rule 434, check
the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of Each Class Proposed Maximum Maximum Amount of
of Securities to be Amount Offering Price Aggregate Registration
Registered to be Registered Per Share Offering Price Fee
---------- ---------------- --------- -------------- ---
<S> <C> <C> <C> <C>
Common stock, par value $.001
per share 2,300,000 (1) $10.00 (2) $23,000,000 (1) (2) $6,072.00
Common stock issuable upon
exercise of warrant to be issued to
representative of underwriters 200,000 14.00 (2) $ 2,800,000 (2) 739.20
----------- ---------
$25,800,000 $6,811.20
</TABLE>
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(1) Includes 300,000 shares which the Underwriters have the option to purchase
to cover over-allotments of shares. See "Underwriting".
(2) Estimated solely for the purpose of calculating the amount of the
Registration Fee in accordance with Rule 457(a) under the Securities Act of
1933.
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 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion, Dated August __, 2000
Prospectus
[ ] Shares
JoinUsOnline.com, Inc.
Common Stock
This is an initial public offering of shares of our common stock. All
[ ],000,000 shares of common stock are being sold by us.
We offer privileged access to Internet business-to-business and
business-to-consumer benefits, products and services. Through our agreements
with such organizations, more than 29,000,000 households and 1,500,000
businesses have access to those benefits, products and services. As of the date
of this prospectus, approximately 3,500,000 of those households and businesses
have obtained one or more of the benefits, products and services that that we
provide. We offer such benefits, products and services through web portals that
we develop and operate for our own use, and also through "private labeled" web
portals that we develop and operate for other businesses and organizations.
Prior to this offering, no public market existed for our common stock. We
estimate that the initial public offering price per share will be between $[
].00 and $[ ].00. We intend to apply for quotation of our common stock on the
Nasdaq National Market under the symbol "JUOL".
SEE "RISK FACTORS" ON PAGE [ ] TO READ ABOUT FACTORS YOU SHOULD CONSIDER BEFORE
BUYING SHARES OF THE COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Per Share Total
--------- -----
Initial public offering price........................ $ $
Underwriting discount................................ $ $
Proceeds, before expenses, to us..................... $ $
To the extent that the underwriters sell more than [ ],000,000 shares of our
common stock, the underwriters have the option to purchase up to an additional
[ ],000 shares from us at the initial public offering price less the
underwriting discount.
The underwriters expect to deliver the shares against payment in [ ] on
[ ], 1999.
[Name of Lead Underwriter]
Prospectus dated , 1999.
<PAGE>
ARTWORK FOR PROSPECTUS INSIDE FRONT COVER PAGE CONSISTS OF [ ]
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus summary 1
Risk factors.
Use of proceeds.
Dividend policy.
Capitalization
Selected financial data
Management's discussion and analysis of financial condition and results
of operations.
Business
Management
Certain relationships and related transactions
Principal stockholders
Description of securities.
Shares eligible for future sale.
Legal matters.
Experts
Additional information
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
IN CONNECTION WITH AN UNDERWRITTEN OFFERING, THE SEC RULES PERMIT THE
UNDERWRITERS TO ENGAGE IN TRANSACTIONS THAT STABILIZE THE PRICE OF OUR
SECURITIES. THESE TRANSACTIONS MAY INCLUDE, AMONG OTHER THINGS, PURCHASES FOR
THE PURPOSE OF FIXING OR MAINTAINING THE PRICE OF OUR SECURITIES AT A LEVEL THAT
IS HIGHER THAN THE MARKET WOULD DICTATE IN THE ABSENCE OF SUCH TRANSACTIONS. WE
DO NOT KNOW WHETHER THE UNDERWRITERS WILL ENGAGE IN ANY TRANSACTIONS OF THAT
SORT. IF THE UNDERWRITERS ENGAGE IN ANY TRANSACTIONS, OF THAT TYPE, THEY MAY
DISCONTINUE THEM AT ANY TIME.
Until _______________, 2000 (40 days after the date of this prospectus), all
dealers effecting transactions in the common stock may be required to deliver a
prospectus. This is in addition to the obligations of dealers to deliver a
prospectus when acting as underwriters.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, the risks of investing in our common stock,
and our financial statements and notes to those statements appearing elsewhere
in this prospectus.
OUR BUSINESS
General Background
We offer to companies, businesses, fund raising organizations, large
associations, affinity groups, their members and customers privileged access to
Internet business-to-business and business-to-consumer benefits, products and
services. Through our agreements with such organizations, more than 29,000,000
households and 1,500,000 businesses have access to those benefits, products and
services. As of the date of this prospectus, approximately 3,500,000 of those
households and businesses have obtained one or more of the benefits, products
and services that that we provide.
We offer such benefits, products and services through web portals that we
develop and operate for our own use, and also through "private labeled" web
portals that we develop and operate for other businesses and organizations. An
employee or member of any of the companies or organizations with whom we have
agreements can obtain the various benefits, goods and services that are offered
by that organization through us either by entering his user name and password at
our Web site located at www.joinusonline.com, or by clicking on the JoinUsOnline
button located at his organization's Web site. In that latter case, the employee
or member is connected to a private labeled version of the JoinUsOnline web
portal which contains his employer's or organization's logos. Thus, without
leaving his employer's or organization's Web site, the employee or member can:
o sign up for any of the free benefits and purchase any of the other
benefits, products and services that the employer or organization
has agreed to provide to him through JoinUsOnline;
o access all of the data and information contained at a MyWay.com web
portal which has been customized by MyWay.com, a subsidiary of CMGI,
Inc., to include his employer's or organization's trademarks and
logos, and incorporated, i.e., linked, to his employer's or
organization's Web site; and
o access various Internet chat rooms maintained by MyWay.com.
Revenue Sources
We derive and will in the future derive our revenues from the enrollment fees
that we charge our clients, from the dot com sub-portal turnkey fees that we
charge, from the revenues that our clients and the dot coms will be deriving
from purchases made through the JoinUsOnline.com portal system and from
utilization fees paid by many of the program benefits and service
<PAGE>
providers who provide goods and services to the members of our clients who
enroll in such programs. The pricing of our programs range from free to $49.95
per year per member. The costs to our clients are based upon the type of program
designed for the client. Our revenues, operating expenses and operating earnings
and (losses) before provision for taxes during each of the periods described
below were, as follows:
<TABLE>
<CAPTION>
Years Ended December 31, Six Months Ended June 30,
------------------------ -------------------------
1998 1999 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Benefits and Services $ 3,274,055 $ 2,011,257 $ 1,240,434 $ 404,911
Portal fees from affiliates -- -- -- 1,200,000
----------- ----------- ----------- -----------
$ 3,274,055 $ 2,011,257 $ 1,240,434 1,604,911
Operating expenses ................ 1,464,398 2,093,769 891,189 1,221,719
Operating earnings (loss) ......... 1,118,301 (1) (82,512) (1) 213,539 (1) 231,208
</TABLE>
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(1) During 1998 and between January 1 and February 26, 1999, we were an S
corporation. Accordingly we were not subject to federal income taxation. These
figures are presented on a pro forma basis assuming that our income had been
subject to taxation.
Our Strategy
During the 1990s, we successfully built a business which provided the consumers
and merchants who were employees and members of our clients' organizations with
access to various benefit and service programs offered by third parties with
whom we contracted to make such offerings available. The strategy we have been
pursuing since 1999 has been
o to convert our benefits and services business from
o a paper-based system which was grounded on the distribution of
brochures and leaflets which describe the various benefit and
service offerings and the mailing or faxing of coupons and
certificates by our client organizations' members in order to
activate a benefit or service,
o to an internet-based system where members and employees can
log-on to a web page that we create for their organization
through which they can instantaneously receive information
about, and activate any benefit or service offered through
their organization; and
o to leverage our access to the millions of consumer members of our
client organizations by creating a one-stop Internet portal system
called JoinUsOnline.com
o which we private label for our client organizations and
o through which their employees and members can instantaneously
link to the websites of participating businesses who desire to
offer and sell their products and services to those consumers.
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<PAGE>
In order to implement that strategy, we employed the facilities and expertise of
three other subsidiaries of our parent corporation to
o build an infrastructure on the Internet for web hosting and
development,
o to create our own proprietary search engine and
o incorporate the ability to process credit card transactions for
products, benefits and services sold at various websites within the
JoinUsOnline.com portal system.
Corporate History
We are an 80% owned subsidiary of Interactive Technologies.com, Ltd., a publicly
owned company which has a class of common stock which trades over the counter
under the Pink Sheet symbol "INTR." The 20% balance of our ownership is held
William R. Becker, our Chairman and Chief Executive Officer, his wife,
individually and jointly with him, and a family trust established by Mr. Becker
Our principal executive offices are located at 110 East Atlantic Avenue, Suite
400, Delray Beach, Florida 33444, and our telephone and fax numbers are
561-454-3300 and 561-454-3330, respectively. Our Web site address is
www.juol.com. Information accessed on or through our Web site, or the Web sites
of our parent corporation or any of its other subsidiaries, do NOT constitute a
part of this prospectus.
Use of Proceeds
We intend to use the net proceeds of this offering for
o development of Internet portals for use by our client organizations
o advertising, marketing and trade show expenses
o general corporate purposes
3
<PAGE>
THE OFFERING
Shares Offered [ ] shares of common stock
Net proceeds to us $[ ] after payment of
aggregate offering expenses of
approximately $[ ]
Common stock to be outstanding after the [ ]
offering
Proposed Nasdaq National Market symbol JUOL
EXCEPT AS NOTED, ALL OF THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT NEITHER
THE WARRANTS TO BE ISSUED TO THE REPRESENTATIVE OF THE UNDERWRITERS OR THE
UNDERWRITERS' OVER-ALLOTMENT OPTION ARE EXERCISED, AND DOES NOT REFLECT THE
ISSUANCE OF ANY OF OUR [ ] SHARES OF COMMON STOCK AVAILABLE FOR FUTURE GRANTS
OF OPTIONS UNDER OUR INCENTIVE STOCK OWNERSHIP PLAN.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates and projections about our industry, our beliefs and
assumptions. Words including "may," "could," "would," "will," "anticipates,"
"expects," "intends," "plans," "projects," "believes," "seeks," "estimates" and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. We are not obligated to update these statements or publicly release
the result of any
4
<PAGE>
SUMMARY FINANCIAL DATA
STATEMENTS OF OPERATIONS DATA
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------ --------
1998 1999 1999 2000
---- ---- ---- ----
(unaudited)
(in thousands except per share data)
<S> <C> <C> <C> <C>
Total revenues $ 3,274 $ 2,011 $ 1,240 $ 1,605
Selling, general and administrative expenses 1,464 2,094 891 1,222
Net Earnings (loss) (1) 1,810 (83) 259 231
Basic earnings (loss) per share (2) $ .18 $ (.01) $ .03 $ .02
</TABLE>
----------
(1) Through February 26, 1999 we were an S corporation for federal income tax
purposes. Accordingly, we were not required to pay any taxes on our earnings.
(2) Based upon 10,000,000 shares outstanding during each period.
The following table indicates a summary of our balance sheet as of December 31,
1999 and June 30, 2000.
BALANCE SHEET DATA
December 31, 1999 June 30, 2000
----------------- -------------
(unaudited)
(in thousands)
Cash and cash equivalents $ 43 $ -
Total current assets 43 231
Total assets 94 305
Total current liabilities 341 70
Total liabilities 341 70
Total stockholders' (deficit) equity (247) 234
5
<PAGE>
RISK FACTORS
OUR BUSINESS HAS A LIMITED OPERATING HISTORY.
We have been operating as a provider of benefits, goods and services since 1990.
However, we have recently shifted the focus of our marketing approach away from
a paper-based system which relies on the mails to an Internet-based system which
functions through web portals. Our prospects are subject to the risks, expenses
and uncertainties frequently encountered by companies in the new and rapidly
evolving markets for Internet and interactive media products and services. In
addition, we will be subject to all of the risks, uncertainties, expenses,
delays, problems and difficulties typically encountered in the growth of an
emerging business and the development and market acceptance of new products and
services. There can be no assurance that unanticipated expenses, problems or
technical difficulties will not occur which would result in material delays in
market acceptance of our products and services or that our efforts will result
in such market acceptance.
WE HAVE HAD TO RELY ON PAYMENTS MADE BY OUR PARENT AS A SOURCE OF FUNDING OUR
OPERATIONS.
A substantial portion of our operating revenues during the first half of the
year ending December 31, 2000 consisted of portal use fees that we charged to
our affiliates. Inasmuch as our affiliates have not sustained sufficient
operating revenues to make such payments to us, they have had to rely on our
parent to advance such fee payments to us in their behalf. There can be no
assurance of our parent's continued ability to make such payments to us on
behalf of those affiliates. If such payments were not made, we would suffer a
material adverse change in our financial condition.
WE MUST DO BUSINESS IN A DEVELOPING MARKET AND FACE NEW ENTRANTS. FAILURE TO
MEET THE CHALLENGES OF NEW PRODUCTS AND COMPETITORS WILL REDUCE OUR MARKET SHARE
AND THE VALUE OF YOUR INVESTMENT.
The market for Internet products and services is rapidly evolving and is
characterized by an increasing number of market entrants. The diverse segments
of the Internet market might not provide opportunities for more than one
dominant supplier of products and services similar to ours. If a single supplier
other than us dominates one or more market segments, our revenue is likely to
decline and we will become a less valuable company.
BECAUSE WE LACK THE NAME RECOGNITION, CUSTOMER BASE AND RESOURCES OF OTHER
COMPANIES PROVIDING INTERNET BASED PRODUCTS AND SERVICES, WE MAY BE UNABLE TO
COMPETE SUCCESSFULLY WHICH WOULD REDUCE OUR REVENUE AND THE VALUE OF YOUR
INVESTMENT.
The membership benefits and service industry serves a market of consumers and
businesses nationwide. Benefits companies have traditionally marketed their
benefits programs via direct sales, credit card issuers, airline services, oil
companies, banking institutions, and most recently
6
<PAGE>
Internet web sales. The majority of customers for these programs are considered
to be consumers, with a small percentage of small business owners. Individual
benefit and service program offerings vary dramatically from Company to Company.
Our principal competitors in the benefits and services industry include The
Signature Group and Cendant Corp. They have longer operating histories, larger
client bases, longer relationships with clients, greater brand or name
recognition and significantly greater financial, technical, marketing and public
relations resources than we possess.
As a result of the foregoing, our principal competitors may respond more quickly
than we can to new or changing opportunities and technologies. For all of the
reasons stated above, we may be unable to compete successfully against our
current and future competitors.
WE DEPEND HEAVILY ON THE INTERNET, AND ANY ADVERSE DEVELOPMENT WITH REGARD TO
THE INTERNET COULD MATERIALLY ADVERSELY AFFECT US.
Our future success substantially depends upon continued growth in the use of the
Internet and the Web. Such growth seems necessary to support the sale of our
products, services and advertising. Rapid growth in the use of the Internet and
the Web is a recent phenomenon. There can be no assurance that communication or
commerce over the Internet will become more widespread. In addition, if Internet
use continues to grow significantly, there can be no assurance that the Internet
infrastructure will remain adequate for supporting the increased demands placed
upon it. The Internet could lose its viability due to either:
o Delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity; or
o Increased governmental regulation
Changes in or insufficient availability of telecommunications services to
support the Internet also could slow response times and adversely affect usage
of the Web and our Web sites. The failure of the Internet use to continue to
grow, or failure of the Internet infrastructure to support effectively growth
that may occur, could materially adversely affect our business, operating
results and financial condition.
WE ARE EXPOSED TO NUMEROUS RISKS DUE TO POTENTIAL FUTURE TECHNOLOGICAL CHANGE.
The Internet and electronic markets involve certain characteristics that expose
our existing and future Web sites, technologies, service practices and
methodologies to the risk of obsolescence. These characteristics included the
following:
o Rapid changes in technology
o Rapid changes in user and customer requirements
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<PAGE>
o Frequent new service or product introductions embodying new
technologies
o The emergence of new industry standards and practices
Our performance will partially depend on our ability to license leading
technologies, enhance our existing services, and respond to technological
advances and emerging industry standards and practices on a timely and
cost-effective basis. The development of Web sites entails significant technical
and business risks. There can be no assurance that we will use new technologies
effectively or adapt our Web sites to consumer, vendor, advertising or emerging
industry standards. Our inability (for technical, legal, financial or other
reasons) to adapt in a timely manner to changing market conditions or customer
requirements could materially adversely affect our business, results of
operations and financial condition.
ELECTRONIC COMMERCE IS A DEVELOPING MARKET AND INVOLVES CONSIDERABLE UNCERTAINTY
The electronic market for products and services has only recently begun to
develop and is rapidly changing. As is typical for a new and rapidly evolving
market, demand for products, services and advertising over the Internet is
considerably uncertain. There exist few proven services and products. Since the
market for electronic commerce on the Internet is new and evolving, predictions
of the size and future growth (if any) of this market are difficult. Moreover,
no standards have yet been widely accepted for the measurement of the
effectiveness of Web-based advertising. There can be no assurance that such
standards will develop sufficiently to support Web-based advertising as a
significant advertising medium. Our business, results of operations and
financial condition could be materially adversely affected if any of the
following events occur:
o The markets for our electronic commerce fail to develop
o The markets for our electronic commerce develop more slowly than
expected
o The markets for our electronic commerce become saturated with
competitors
o Our electronic commerce fails to achieve market acceptance
ELECTRONIC COMMERCE INVOLVES A NUMBER OF SECURITY RISKS.
A significant barrier to electronic commerce and communications is the secure
transmission of confidential information over public networks. We will rely on
encryption and authentication technology licensed from third parties to provide
the security and authentication necessary for secure transmission of
confidential information. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography or other events or
developments will not compromise or breach the algorithms we use to protect
customer transaction data. Any such compromise of our security could materially
and adversely affect our business, results of operations and financial
condition. A party able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our operations.
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<PAGE>
We may need to expend significant capital and other resources to protect against
the threat of such security breaches or to alleviate problems caused by such
breaches. Concerns over the security of Internet transactions and the privacy of
users may also inhibit the growth of the Internet generally, and the Web in
particular, especially as a means of conducting commercial transactions. To the
extent that our activities or the activities of third party contractors involve
the storage and transmission of proprietary information (such as credit card
numbers), security breaches could expose us to a risk of loss or litigation and
possible liability. There can be no assurance that our security measures will
prevent security breaches or that failure to prevent such security breaches will
not materially and adversely affect our business, results of operations and
financial condition.
OUR SUCCESS DEPENDS TO A GREAT EXTENT ON OUR ABILITY TO PROTECT OUR INTELLECTUAL
PROPERTY.
The development of our brands depends significantly on the protection of our
trademarks and trade names. We intend to register our name and logo, the
"Changing the Way America Buys" slogan which we employ, as well as other slogans
which we will use in connection with the operation of our business, as
trademarks in the United States. We also claim common law trade name rights in
these and other names. Nonetheless, there can be no assurance that we will be
able to secure significant protection for these trademarks. Our current and
future competitors or others may adopt product or service names similar to our
trademarks, thereby impeding our ability to build brand identity and possibly
leading to customer confusion. Our inability to protect our trademarks and trade
names might materially and adversely affect our business, results of operations
and financial condition. In addition, in the future third parties may claim
certain aspects of our business infringe their intellectual property rights.
While we are not currently subject to any such claim, any future claim (with or
without merit) could result in one or more of the following:
o Significant litigation costs
o Diversion of resources, including the attention of management
o Our agreement to certain royalty and licensing arrangements
Any of these developments could materially and adversely affect our business,
results of operations and financial condition. In the future, we may also need
to file lawsuits to enforce our intellectual property rights, to protect our
trade secrets, or to determine the validity and scope of the proprietary rights
of others. Such litigation, whether successful or unsuccessful, could result in
substantial costs and diversion of resources. Such costs and diversion could
materially and adversely affect our business, results of operations and
financial condition.
WE HAVE NO ASSURANCE OF MARKET ACCEPTANCE OF OUR PRODUCTS AND SERVICES. IF WE
ARE UNABLE TO RAISE MARKET AWARENESS OF OUR PRODUCTS AND SERVICES, WE MAY
EXPERIENCE DECLINING OPERATING RESULTS WHICH WOULD DIMINISH THE VALUE OF YOUR
INVESTMENT.
9
<PAGE>
We are at an early stage of development and our earnings growth depends
primarily upon market acceptance of our products and services. There can be no
assurance that our product and service development efforts will progress further
with respect to any potential new products and services, or that they will be
successfully completed. In addition, there can be no assurance that our
potential new products or services will achieve customer acceptance.
WE FACE LEGAL UNCERTAINTIES ASSOCIATED WITH THE INTERNET AND ELECTRONIC COMMERCE
THAT COULD INCREASE OUR COSTS OR REDUCE DEMANDS FOR OUR SERVICES.
Our operations on the Internet are not currently subject to direct regulation by
any government agency in the United States beyond regulations applicable to
businesses generally. However, the adoption of new laws or the application of
existing laws may decrease the use of the Internet, which would decrease the
demand for our services and might increase our cost of doing business.
A number of legislative and regulatory proposals under consideration by federal,
state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including the following:
o taxation;
o access charges;
o online content;
o user privacy;
o liability for third-party activities; and
o jurisdiction.
The tax treatment of the Internet and electronic commerce is currently unsettled
and has been a subject of debate in Congress, which is awaiting the
recommendation of The Advisory Commission on Electronic Commerce. A number of
proposals have been made that could impose taxes on the sale of goods and
services and other Internet activities. In October 1998, the Internet Tax
Freedom Act was signed into law placing a three-year moratorium on new state and
local taxes on Internet commerce. The moratorium ends October 21, 2001. However,
we cannot assure you that future laws imposing taxes or other regulations would
not substantially impair the growth of our business and our financial condition.
Some local telephone carriers claim that the increasing popularity of the
Internet has burdened the existing telecommunications infrastructure and that
many areas with high Internet use are experiencing interruptions in telephone
service. These carriers have petitioned the Federal Communications Commission to
impose access fees on Internet service providers. If these access fees are
imposed, the costs of communicating on the Internet could increase, which could
decrease demand for our services and increase our cost of doing business.
10
<PAGE>
LOSS OF KEY MEMBERS OF OUR SENIOR MANAGEMENT COULD ADVERSELY AFFECT OUR BUSINESS
AND PROSPECTS.
Our success will be dependent largely upon the personal efforts of our Chairman
and Chief Executive Officer, William R. Becker, as well as other senior
managers. The loss of their services could have a material adverse effect on our
business and prospects. We have no life insurance on any of our officers. Mr.
Becker's services are governed by an employment agreement. Our success is also
dependent upon our ability to hire and retain additional qualified management,
marketing, technical, financial and other personnel. Competition for qualified
personnel is intense and there can be no assurance that we will be able to hire
or retain qualified personnel. Any inability to attract and retain qualified
management and other personnel could have a material adverse effect on us.
WILLIAM R. BECKER CONTROLS US.
After we complete this offering, Interactive Technologies.com, Ltd. will
beneficially own [ ]% of our outstanding common stock. William R. Becker, our
Chairman and Chief Executive Officer, is also the Chairman and Chief Executive
Officer of Interactive Technoliogies.com. Mr. Becker, his wife, Joni, both
jointly and individually and Mrs. Becker, in her capacity as the trustee of the
William R. Becker Family Trust, beneficially own 20% of our outstanding common
stock and the outstanding common stock of our parent corporation. Accordingly,
Mr. Becker will control us and will have the ability to elect and/or remove all
of the members of our board of directors and to approve significant corporate
transactions, including key mergers and acquisitions and subsequent financing
transactions. He will also have the ability to delay or prevent a change in our
control and to discourage a potential acquiror of us or our shares.
ISSUANCE OF OUR AUTHORIZED PREFERRED STOCK COULD DISCOURAGE A CHANGE IN CONTROL,
COULD REDUCE THE MARKET PRICE OF OUR COMMON STOCK AND COULD RESULT IN THE
HOLDERS OF PREFERRED STOCK BEING GRANTED VOTING RIGHTS THAT ARE SUPERIOR TO
THOSE OF THE HOLDERS OF COMMON STOCK
We are authorized to issue 10,000,000 shares of preferred stock without
obtaining the consent or approval of our stockholders. The issuance of preferred
stock could have the effect of delaying, deferring, or preventing a change in
control. We may also grant superior voting rights to the holders of preferred
stock. Any issuance of preferred stock could materially and adversely affect the
market price of the commons stock and the voting rights of the holders of
commons stock. The issuance of preferred stock may also result in the loss of
the voting control of holders of common stock to the holders of preferred stock.
NEW INVESTORS WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of our common stock will incur immediate substantial dilution in
net tangible book value per share from the initial public offering price in the
amount of $[ ]. You may also
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be further diluted if future stock options to purchase our common stock or if
the warrants to be issued to the underwriters' representative at the closing of
this offering are exercised.
EXISTING SHAREHOLDERS WILL BENEFIT DISPROPORTIONATELY FROM THIS OFFERING
Existing stockholders will benefit if a market for their securities develops
upon completion of this offering. Current stockholders will experience an
immediate increase in net tangible book value per share of $[ ] per share. The
average price per share paid by existing stockholders for their common stock
$[ ] per share, meaning that those stockholders would have an average
unrealized gain of $[ ] per share and an aggregate unrealized gain of
$[ ] upon the completion of this offering, assuming a $[ ] initial public
offering price per share. See "Dilution."
THE PRICE OF OUR SECURITIES MAY BE HIGHLY VOLATILE
The stock markets generally, and the Internet sector in particular, have
experienced and are likely to continue to experience, significant price and
volume fluctuations. This could result in sharp decreases in the price of the
securities we are offering hereby no matter how well or poorly we perform. The
trading price of our securities could also fluctuate significantly in response
to fluctuations in quarterly operating results, failures to meet analysts'
expectations, developments in the Internet industry and our business, and other
factors.
WE WILL PAY NO DIVIDENDS TO YOU
We have not paid, and do not expect to pay, any dividends on common stock in the
foreseeable future.
WE HAVE OUTSTANDING A LARGE NUMBER OF SHARES OF COMMON STOCK THAT ARE ELIGIBLE
FOR SALE UNDER CERTAIN CIRCUMSTANCES, AND SALES, OR EVEN THE MERE POSSIBILITY OF
SALES, OF THESE SHARES MAY MATERIALLY ADVERSELY THE PRICE OF THE COMMON STOCK.
Approximately 10,000,000 shares of Common Stock are issued and outstanding. All
of these shares are "restricted securities" as that term is defined in Rule 144
promulgated under the Act. Rule 144 provides in general that a person (or
persons whose shares are aggregated) who has satisfied a one-year holding
period, may sell within any three month period, an amount which does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks before such sale. The vast
majority of the restricted shares have been outstanding for over one year and
thus are eligible for sale under Rule 144. Rule 144 also permits the sale of
shares, under certain circumstances, without any quantity limitation, by persons
who are not affiliates of the Company and who have beneficially owned the shares
for a minimum period of two years. Hence, the possible sale of these restricted
shares may, in the future dilute an investor's percentage of freely tradable
shares and may depress the price of our Common Stock. Also, if substantial, such
sales might also adversely affect our ability to raise additional equity
capital. However, all of the 10,000,000
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shares believed to be "restricted securities" are held by affiliates of the
Company and must (by law) be sold subject to the volume limitations of Rule 144
described above, thus restraining the number of shares that can sold in any
period of time.
OUR OBLIGATION TO INDEMNIFY OUR OFFICERS AND DIRECTORS COULD PREVENT OUR
RECOVERY FOR LOSSES CAUSED BY THEM.
Our Bylaws provide that we must indemnify each director, officer, agent and/or
employee to the maximum extent provided for in the General Corporation Law of
Delaware. Further, we have purchased and maintain customary officer and director
insurance on behalf of certain of these persons. Such insurance may cover
certain matters for which we do not have the power to indemnify such persons.
Consequently, because of the actions of officers, directors, agents and
employees, we could incur substantial losses and be prevented from recovering
such losses from such persons. Further, the United States Securities and
Exchange Commission maintains that indemnification is against the public policy
expressed in the Securities Act of 1933 (the "Securities Act"), and is therefore
unenforceable.
FORWARD-LOOKING STATEMENTS
YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing forward-looking statements may be found in
the material set forth under "Prospectus summary," "Management's discussion and
analysis of financial condition and results of operations," and "Business," as
well as within this prospectus generally. In addition, when used in this
prospectus, the words "believes," "intends," "plans," "anticipates," "expects,"
and similar expressions are intended to identify forward-looking statements.
Forward-looking statements are subject to a number of risks and uncertainties.
Actual results could differ materially from those described in the
forward-looking statements as a result of the risk factors set forth and the
information provided in this prospectus generally. We do not intend to update
any forward-looking statements.
DIVIDEND POLICY
We plan to retain all of our earnings, if any, to finance the expansion of our
business and for general corporate purposes. We have not declared or paid any
cash dividends on our common stock. We do not anticipate paying cash dividends
in the foreseeable future except possibly on preferred stock. The terms of our
outstanding preferred stock prohibit the payment of dividends on our common
stock unless all dividends accrued on the preferred stock have been paid.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $[ ] from our
sale of the common stock offered by this prospectus, at the initial public
offering price of $[ ] per share.
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If the underwriters fully exercise their over-allotment option, we will receive
net proceeds of approximately $[ ]. That amount is after deducting estimated
underwriting discounts and commissions and other fees and expenses payable by
us.
We expect to use the net proceeds for the following purposes:
o to develop high speed Internet portals for use by our
clients and members $ x,xxx,000
o to pay the costs that we will incur for advertising
and marketing and attending various trade shows x,xxx,000
o for general corporate purposes xx,xxx,000
-----------
$xx,xxx,000
===========
CAPITALIZATION
The following table shows, as of June 30, 2000: (1) our actual capitalization,
and (2) pro forma capitalization as adjusted to give effect to the sale of the
[ ] shares offered by us at the initial public offering price of $[ ] per
share after deducting underwriting discounts and commissions and estimated
offering expenses and the application of the net proceeds as described in "Use
of Proceeds." You should read this table together with the financial statements
and notes to financial statements appearing elsewhere in this prospectus.
June 30, 2000
-------------
(unaudited)
Pro Forma
(in thousands) Actual As Adjusted
------ -----------
Stockholders' equity: $ 89
Preferred stock $.001 par value;
10,000,000 shares authorized;
none issued (1) -- --
Common stock, $.001value,
40,000,000 shares authorized;
12,000,000 issued and outstanding,
pro forma as adjusted (1) 10 [ ]
Accumulated (deficit) earnings (97) [ ]
Total capitalization $ 460 [ ]
----------
(1) On August 17, 2000, our authorized capital changed to 50,000,000 shares, of
which 10,000,000 shares may be issued in various series or classes of preferred
stock carrying different rights and privileges. The remaining 40,000,000 shares
are common stock. Prior to that date, we were not authorized to issue any shares
of preferred stock.
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The information provided above excludes 695,000 shares of common stock issuable
upon exercise of the Representative's Warrants and outstanding options to
purchase our common stock.
DILUTION
Our pro forma net tangible book value as of June 30, 2000, giving effect to the
issuance of [ ] shares of common stock, was $[ ] $[ ] per share. Net
tangible book value per share represents the amount of net tangible assets, less
total liabilities, divided by the number of shares of common stock outstanding.
After giving effect to the sale by us of [ ] shares offered by this
prospectus at the initial public offering price of $[ ] per share, our pro
forma net tangible book value as of June 30, 2000 would have been $[ ], or
$[ ] per. This represents an immediate increase in net tangible book value of
$[ ] per share to existing stockholders and an immediate dilution of $[ ]
per share to new investors. The following table illustrates this per share
dilution:
Initial public offering price per share.................. $xx.00
Pro forma net tangible book value before offering........ $x.xx
Increase in net tangible book value per share
attributable to new investors.......................... $x.xx
-----
Pro forma net tangible book value before offering........ $xx.xx
------
Dilution per share to new investors...................... $xx.xx
======
Assuming the exercise in full of the underwriters' over-allotment option, our
pro forma net tangible book value at June 30, 2000 would have been approximately
$[ ] per share, representing an immediate increase in net tangible book value
of $[ ] per share, to our existing stockholders and an immediate dilution in
net tangible book value of $[ ] per share to new investors.
The following table summarizes, as of June 30, 2000, the differences in the
number of shares of common stock purchased from us, the total consideration paid
to us, and the average price paid per share purchased by existing and new
investors, assuming that the [ ] shares offered by this prospectus are sold
by us at the initial public offering price of $[ ] per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
-------------------------- ------------------------ Price Per
Number Percent Number Percent Share
------ ------- ------ ------- -----
<S> <C> <C> <C> <C> <C>
Existing stockholders...............
New investors.......................
Total...............................
</TABLE>
SELECTED FINANCIAL DATA
The following selected financial data is qualified by reference to and should be
read in conjunction with the financial statements and notes to financial
statements and the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and
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other financial information included elsewhere in this prospectus. The
statements of operations data for the years ended December 31, 1999 and 1998 and
the balance sheet data at December 31, 1999 and 1998 are derived from and
qualified by reference to the audited financial statements included elsewhere in
this prospectus.
The statements of operations data for the six months ended June 30, 2000 and
1999 and the balance sheet data at June 30, 2000 have been derived from our
unaudited financial statements but have been prepared on the same basis as our
audited financial statements which are included in this prospectus. In our
opinion, these unaudited financial statements include all adjustments,
consisting of normally recurring adjustments, considered necessary for a fair
presentation of our financial position and result of operations for that period.
STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
December 31, June 30,
------------ ----------------
1998 1999 1999 2000
---- ---- ---- ----
(unaudited)
(in thousands except per share data)
<S> <C> <C> <C> <C>
Total revenues $ 3,274 $ 2,011 $ 1,240 $ 1,605
Selling, general and administrative expenses 1,464 2,094 891 1,222
Net Earnings (loss) (1) 1,810 (83) 259 231
Basic earnings (loss) per share (2) $ .18 $ (.01) $ .03 $ .02
</TABLE>
----------
(1) Through February 26, 1999 we were an S corporation for federal income tax
purposes. Accordingly, we were not required to pay any taxes on our earnings.
(2) Based upon 10,000,000 shares outstanding during each period.
The following table indicates a summary of our balance sheet as of December 31,
1999 and June 30, 2000.
BALANCE SHEET DATA
December 31, 1999 June 30, 2000
----------------- -------------
(unaudited)
(in thousands)
Cash and cash equivalents $ 43 $ -
Total current assets 43 231
Total assets 94 305
Total current liabilities 341 70
Total liabilities 341 70
Total stockholders' (deficit) equity (247) 234
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO
INCLUDED ELSEWHERE IN THIS REPORT, AS WELL AS "RISK FACTORS."
Results of Operations
Years Ended December 31, 1999 and 1998
Revenue Revenue for the year ended December 31, 1999 decreased 38.6% to
approximately $2,000,000, as compared to approximately $3,274,000 for the year
ended December 31, 1998. The decrease in our revenues was primarily due to a
reduction of the per-member fees we charged during 1999.
Expenses
Selling. We incurred selling expenses of $527,924 for the year ended December
31, 1999, a 94.3% increase from the $271,608 we incurred for the year ended
December 31, 1998. This increase was primarily due to the additional marketing
and advertising costs incurred to enhance and expose the JoinUsOnLine image at
many different venues such as trade shows, trade journals, magazines and
newspapers.
General and administrative. We incurred general and administrative expenses of
approximately $1,566,000 during the year ended December 31, 1999, a 31.3%
increase over the approximately $1,193,000 of G&A expenses incurred in 1998. The
increase was primarily due to our employment of a larger number of corporate
personnel and an increase in professional fees.
Marketing and advertising. Advertising costs are expensed as incurred and are
included in selling expenses. Total advertising costs for the years ended
December 31, 1999 and 1998 were $171,322 and $1,406, respectively.
Net Earnings. We incurred a significant change in our net earnings results
between 1998 and 1999. During 1998 we achieved net earnings of approximately
$1,810,000. On a pro forma basis, assuming we were not an S corporation in 1998,
and that we did pay taxes on our income in that year, our net earnings would
have been approximately $1,118,000. In 1999, we suffered a net loss of
approximately $83,000. This 14-fold reversal of approximately $1,201,000 between
our 1998 pro forma results and our 1999 results was primarily due to the
decrease in our historic revenues as a result of the reduction of the per-member
fees we charged in 1999. This shrinkage in our membership was due, in large
part, to the shift in the focus of our business that we undertook during 1999
from a paper-based operation to an Internet-based operation.
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Six Months Ended June 30, 2000 and 1999
Revenue Our revenue for the six months ended June 30, 2000 increased 29.4% to
approximately $1,605,000 as compared to approximately $1,240,000 for the six
months ended June 30, 1999. This increase was primarily due to two factors: a
decrease in our historic revenues as a result of the continued impact of the
reduction in per-member fees we charged, and our receipt of Web portal use fee
revenue from Integrated Merchant Services, Inc, United Interactive Technologies,
Inc. and Express Financial Corp., each of which is a subsidiary of our parent
corporation. We charge those three affiliated entities $66,667 monthly to
provide the customized Web portals that they employ in their respective
businesses. The agreements we have with each of them are cancelable upon 90 days
notice. Total portal use fee revenue for the six months ended June 30, 2000
amounted to $1,200,000.
Expenses
Selling. We incurred selling expenses of approximately $38,000 for the six
months ended June 30, 2000, a 390% increase over the approximately $7,800 we
incurred for the same period last year. This increase was due to the additional
personnel we employed for marketing and advertising during the latter period.
General and administrative. We incurred general and administrative expenses of
approximately $933,000 during the six months ended June 30th, 2000 a 5.6%
increase over the approximately $883,000 of G&A expenses we incurred during the
same period last year. The increase was due to an increase in professional fees.
Marketing and advertising. During the first six months of 2000 and 1999, our
marketing and advertising expenses amounted to $37,233 and $29,426,
respectively.
Earnings. Our net earnings increased by approximately 7.9% from a pro forma
$214,000 during the six months ended June 30, 1999 (assuming we were a taxable
entity during that year) to approximately $231,000 during the corresponding
period of 2000. This increase is wholly due to the portal use fees received from
our affiliates.
Liquidity and Capital Resources
As of December 31, 1999, we had cash and cash equivalents of approximately
$43,000. At June 30, 2000, we did not have any cash and cash equivalents.
Net cash provided by operating activities for the year ended December 31, 1999
totaled approximately $146,000 as compared to approximately $1,132,000 in 1998.
The primary factor which caused this reduction in operating cash flows was our
net earnings to net loss reversal of approximately $1,892,000. The major
component of the cash provided from operating activities in 1998 was our net
earnings of approximately $1,810,000. Net cash used in operating activities
during the six month period which ended on June 30, 2000 amounted to
approximately $10,100, as compared to approximately $48,000 of net cash provided
by such activities during 1999. The primary factors which resulted in the
$58,000 reversal in our operating cash flows during the first
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six months of 2000 was an increase in revenue due to/from affiliates and
deferred revenue totaling approximately $167, 000 which was offset by a decrease
in related party receivables, prepaid assets and accounts payable totaling
approximately $232,000..
The $26,000 increase in net cash used in investing activities between 1998 and
1999, and the $30,000 increase in such cash usage between the six month periods
ending June 30, 1999 and 2000 resulted from our purchase of computers,
workstations, servers and other equipment to support our growth in technology
support services and costs related to software development.
In 1998, by reason of our status as an S corporation not subject to federal
income taxes, we distributed approximately $1,137,000 to William R. Becker, who
was our sole stockholder at that time. As a result of the completion of the
reverse acquisition at the end of February 1999, our S corporation status came
to an end. The distributions we made to our pre-reverse acquisition stockholders
in that year (Mr. and Mrs. Becker and the Becker Family Trust) amounted to
approximately $83,000. Those distributions constituted all of our cash flows
from financing activities during those two years. During the first six months of
1999, we distributed $42,000 to our parent.
Certain expenses incurred by our parent corporation, IMS, United Interactive and
Express Financial consisting of administrative support, operational and
financial management and other general infrastructure related items have been
charged to us. Total amounts charged to us for shared services were
approximately $163,000 and $297,000 in 1998 and 1999 and $56,000 and $61,000
during the six months ended June 30, 1999 and 2000, respectively. The expense
sharing methodologies took into account personnel, payroll cost, square footage
or other factors. Although we believe the allocation methods and costs for these
services to be reasonable, these costs may not be indicative of the costs that
would have been incurred if we had been an independent entity and contracted for
the services from an independent third party.
Since inception, we have increased our operating costs and we anticipate that we
will continue to experience increases in our operating costs for the foreseeable
future. In addition, we may use cash resources, including cash generated by the
sale of securities, to fund acquisitions or investments in joint ventures,
businesses, technologies and products or services complementary to our business.
Recently Issued Accounting Pronouncements
Recent accounting pronouncements issued by the Financial Accounting Standards
Board and the Securities and Exchange Commission are not expected to have a
material impact on our financial statements.
Year 2000 Compliance
We did not experience any interruptions in our operations when the calendar year
changed to the year 2000. We believe that our products and services, and
products which we purchase from third party vendors, are designed to operate
continuously regardless of date changes.
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<PAGE>
BUSINESS
OVERVIEW
We offer to companies, businesses, fund raising organizations, large
associations, affinity groups, their members and customers, privileged access to
Internet business-to-business and business-to-consumer benefits, products and
services. Through the agreements that we have with such organizations, more than
29,000,000 households and 1,500,000 businesses have access to those benefits,
products and services. As of the date of this prospectus, approximately
3,500,000 of those households and businesses have obtained one or more of the
benefits, products and services that that we provide.
We offer such benefits, products and services through web portals that we
develop and operate for our own use, and also through "private labeled" web
portals that we develop and operate for other businesses and organizations. An
employee or member of any of the companies or organizations with whom we have
agreements can obtain the various benefits, goods and services that offered by
that organization through us either by entering his user name and password at
our Web site located at www.joinusonline.com, or by clicking on the JoinUsOnline
button located at his organization's Web site. In that latter case, the employee
or member is connected to a private labeled version of the JoinUsOnline web
portal which contains his employer's or organization's logos. Thus, without
leaving his employer's or organization's Web site, the employee or member can:
o sign up for any of the free benefits and purchase any of the other
benefits, products and services that he employer or organization has
agreed to provide to him through us;
o access all of the data and information contained at a MyWay.com web
portal which has been customized by MyWay.com, a subsidiary of CMGI,
Inc., to include his employer's or organization's trademarks and
logos, and incorporated, i.e., linked, to his employer's or
organization's Web site; and
o access various Internet chat rooms maintained by MyWay.com.
We draw upon the resources of several majority- or wholly- owned subsidiaries of
our parent corporation. Each of those subsidiaries performs a function or
provides a service which is complementary to the basic business that we conduct.
Thus:
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o United Interactive Technologies, Inc. ("United Interactive")
o serves as our research and development facility
o develops and hosts all of the web portals and Web sites which
we maintain
o offers web portal and Web site development and hosting
services to third parties who subscribe for such services
through the various programs that we offer
o develops various web-based products that we offer, such as the
easy-to-construct customizable three page Web site we offer
through Web Classified.Net, Inc., another subsidiary of our
parent
o provides us and third parties with high speed Internet access
services.
o Interactive Merchant Services, Inc. ("IMS") provides Visa and
MasterCard network credit card processing, check and debit card
processing as well as credit card gateway services for merchants who
sign up for such services either directly at our JoinUsOnline Web
site or through the JoinUsOnline Web site maintained by their
organization, and also to non-members.
o WebClassified.Net, Inc. ("WebClassified") provides to individual and
business members of our JoinUsOnline customer organizations who
elect to purchase an easy to construct and customize three page Web
site
o access to WebClassified's database driven Web site generation
application, and
o the web hosting services required for the maintenance of such
Web sites.
o Express Financial Corp. ("Express Financial") provides
licensed mortgage banking services to individual and business
members of our JoinUsOnline customer organizations, as well as
to individuals and businesses who are not JoinUsOnline
members. Express Financial represents various lending
institutions and is a licensed and approved lender for various
federal lending programs including FHA, VA and Title II loans.
o GKB Software, Inc. ("GKB") is developing a restaurant industry
specific web portal called FattyDaddy.com which will be offered to
JoinUsOnline member organizations.
OUR STRATEGY
During the 1990s, we successfully built a business which provided the consumers
and merchants who were employees and members of our clients' organizations with
access to various benefit and service programs offered by third parties with
whom we contracted to make such offerings available. The strategy we have been
pursuing since 1999 has been
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o to convert our benefits and services business from
o a paper-based system which was grounded on the distribution of
brochures and leaflets which describe the various benefit and
service offerings and the mailing or faxing of coupons and
certificates by our client organizations' members in order to
activate a benefit or service,
o to an internet-based system where members and employees can
log-on to a web page that we create for their organization
through which they can instantaneously receive information
about, and activate any benefit or service offered through
their organization; and
o to leverage our access to the millions of consumer members of our
client organizations by creating a one-stop Internet portal system
called JoinUsOnline.com
o which we private label for our client organizations and
o through which their employees and members can instantaneously
link to the websites of participating businesses who desire to
offer and sell their products and services to those consumers.
In order to implement that strategy we built an infrastructure on the Internet
for web hosting and development through United Interactive, we created our own
proprietary search engine incorporating web pages through WebClassified and we
incorporated the ability to process credit card transactions for products,
benefits and services sold by at various websites within the JoinUsOnline.com
portal system through IMS's e-commerce credit and debit card transaction
operations.
The implementation of that strategy
o has enabled us to significantly lower our costs of delivering our
benefit and service programs by minimizing the need to print and
distribute brochures and fulfillment documents,
o will enable us, we believe, to generate significant revenues from
the sale of JoinUsOnline.com web portals and
o will enable us and our client organizations, we believe, to
participate in the revenues derived by the businesses who sell
products and services to the consumers who link to them via the
private labeled web portals we create for our client organizations.
HISTORICAL SUMMARY OF THE COMPANY
We were incorporated in the State of Delaware in November 1990 under the name GB
International, Inc. After two prior name changes, we changed our name in 1995 to
United Buyers Advantage, Inc. In February 1999, Interactive Technologies.com,
Ltd. acquired 80% of our
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common stock pursuant to a reverse acquisition of each of IMS, United
Interactive, WebClassified and us. As a result of that transaction, William R.
Becker, individually and jointly with his wife, and his wife, individually, and
as trustee of the William R. Becker Family Trust, currently control, directly
and indirectly, 100% of our outstanding common stock. That control is maintained
through:
o their collective ownership of 56.7% of Interactive
Technologies.com's outstanding common stock, which gives them
control of Interactive Technologies.com's 80% ownership interest in
us; and
o their direct collective ownership of the 20% balance of our
outstanding common stock.
In April 1999, we changed our name to Ubuy.com, Ltd. and in April 2000, we
changed our name to JoinUsOnline.com, Inc.
Our Business
We offer an ever-expanding portfolio of discounted benefits and services that
provide privileged access to goods and services to companies, businesses, fund
raising organizations, large associations, affinity groups, their members and
customers. We offer more than 30 different benefit and service programs which
include home shopping, travel, automobile, dining, health, discount coupon,
investment, and other lifestyle enhancement programs, as well as a variety of
business benefits and services. In 1999, we changed the focus of our business
from a paper-based model to an Internet based model. By doing so, we have been
able to substantially reduce our costs of acquiring enrollees in the various
benefits and services programs which we offer to the members of our client
organizations, and our fulfillment costs in providing such benefits and services
to those enrollees. Those costs, which ranged as high as $6.00 per member due
the high labor costs associated with the use of paper-based enrollment and
fulfillment packages, now range as low as $.25 per member due to the ease and
efficiency of capturing storing and using membership and program enrollment data
transmitted from a client organization member's PC over the Internet.
At the present time, the list of benefits and services we offer includes:
<TABLE>
<S> <C> <C>
o Dial Up Internet Access o Personal Financial Services o New Car Buying
o Travel Services o Mortgage Loans o Grocery Coupons
o Automobile Rental o Real Estate Services o CDs and Tapes
o Moving Services o Telephone Services o Golf Services
o Consumer and Health Services o Classified Advertising o Fund Raising
o Personal Web Pages o WebClassified.net o Merchant Services
o New and Used Car Pricing o Hotel and Motel Services o Vision Plans
o Discount Pharmacy Services o Chiropractic Services o Dental Services
o Shopping a la Card o Consumer Legal Services o Business Legal Services
o Web Hosting Services o Bi-Weekly Mortgage Services o Magazine Subscriptions
o Online Business Barter Services
</TABLE>
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Prior to 1999,
o all of our benefits information was packaged as booklets, brochures,
coupons and other paper-based documents; and
o the only way that an employee of a company or member of an
organization which had agreed to offer benefits, products and
services through us could obtain those benefits was by
o filling out, and then mailing or faxing a paper coupon, or
o by calling a telephone number contained in the descriptive
materials and speaking with a person who would enroll the
employee or member in the particular program or service.
Commencing in 1999, we adapted our business to the Internet by creating the
JoinUsOnline Internet portal. This Web site, which is customized to display each
client organization's logos and trademarks, contains a standard format
containing links and buttons which, when clicked, take the user to one or more
web pages which
o describe each of the particular benefits, products or services that
our client organization has agreed to make available to its
employees or members through us; and
o which provide the employee or member with a fill-in-the-blanks
registration screen which instantaneously enrolls him in the
particular program of his choice via a secure Internet connection to
our servers.
The JoinUsOnline Web site of each of our client organizations is linked directly
to the client's existing Web site, or in some cases, serves as the client's Web
site.
Pursuant to an agreement which we entered into in March 2000 with MyWay.com, a
subsidiary of CMGI, Inc., a customized version of the MyWay.com Internet portal
containing the logos and trademarks of the client organization is incorporated
into the client organization's JoinUsOnline Web site. Thus, any employee or
member of a client organization who accesses his employer's or organization's
Web site can receive continuous updates of the latest news and pricing
information for the securities that he would like to follow, maintain an online
address book or calendar, link to various e-commerce shopping sites and link to
Web sites grouped by industry, all via the customized MyWay portal we provide to
his employer or organization, and, at the same time, he can gain access to, sign
up for and purchase all of the benefits products and services at his employer's
or organization's JoinUsOnline portal just by making a few clicks of his mouse.
We package benefits and services which are provided by third party providers
into programs and we offer these programs principally to affinity groups (trade
group and professional associations), businesses and charitable organizations
which in turn make our programs available to their members, employees and/or
customers. To a lesser degree, we market our programs
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directly to individual consumers and businesses. The key to our marketing
strategy is that our programs are "value added." This is due to the fact that
the members of participating affinity groups or the customers of participating
businesses obtain access to our programs as part of their membership dues or in
conjunction with a purchased product or service. All fees associated with
membership in our programs are paid directly by the participating affinity group
or business. Through our numerous long standing relationships and our bulk
purchasing capabilities, we are able to provide an ever expanding portfolio of
benefits and services that offer privileged access to goods and services with
tremendous buying power for our members. Since the commencement of our business
operations in 1990, we have established relationships with over 1,500 affinity
groups with combined memberships in excess of 29 million households and
1,500,000 businesses. As of the date of this prospectus, approximately 3,500,000
of those households and businesses have obtained one or more of the benefits,
products and services that that we provide. On average, our consumer programs
offer participants $2,500 or more in annual savings, and our business programs
can save participating companies $4,000 or more annually.
Our Portal System
In order to leverage our access to the millions of consumer members of our
client organizations, we have created a one-stop Internet portal system called
JoinUsOnline.com. We private label these portals for our client organizations.
As of the date of this prospectus, approximately 65 JoinUsOnline.com client
organization portals are in operation. Through those portals, the employees and
members of those organizations can instantaneously link to the websites and
JoinUsOnline sub-portals (see below) of participating businesses who desire to
offer and sell their products and services to those consumers.
There are tens of thousands of dot com companies who are trying to sell their
products and services via their websites. We believe that a significant portion
of every dot com's operating budget is geared towards customer acquisition. We
further believe that the costs of customer acquisition are ranging as high as
$800 per transaction with millions of dollars being committed by dot coms in up
front access costs just so they can try and get a customer to look at the
product or service offerings at their websites. It is our view that each of
these dot com companies shares a common goal - the desire to gain access to a
base of customers. Dot coms are paying millions dollars in advertising and
website-related operating fees for this access. We are able to offer companies
desiring to gain exclusive access to the millions of consumers who are employees
and members of our client organizations a very low cost of customer acquisition.
The total turnkey cost to a client for a private labeled web sub-portal - a
portal within the JoinUsOnline.com portal system which can be directly accessed
via a hyperlink button which is prominently displayed on each of our client
organizations' JoinUsOnline.com portals - can be as low as $2,400,000. Included
within that turnkey cost is exclusivity, either for a particular category within
the customer base, or for the entire customer base, for the dot com's particular
product or service. For example, a dot com that might be interested in offering
discount golf vacation packages to the employees and members of our client
organizations could, for the price of its sub-portal, gain such access to the
exclusion of all other businesses desiring to make the same type of offering to
that potential customer base.
In addition to the turnkey fee, we will receive a portion of the revenues
derived by the dot com
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from the sale of products and services via its sub-portal. We will share a
portion of that dot com revenue with the client organizations whose members
purchase the products or services that generate such receipts.
As of the date of this prospectus, approximately four JoinUsOnline.com
sub-portals are in operation. Three of those portals are operated for IMS,
United Interactive and Express Financial. We constructed the fourth portal for
Itex Corporation, which operates, directly and through various international
licensees, retail trade exchanges, i.e., barter exchanges, in the United States,
Mexico, New Zealand and Turkey. Those exchanges serve as clearing-houses for the
goods and services traded by their clients. Itex's clients agree to sell goods
and services for trade dollars at the same prices that they would charge if they
were receiving cash.
Itex paid us 2,000,000 trade dollars to build their portal. We have used and
intend to continue to use those trade dollars to purchase goods and services,
such as advertising and printing services, from the businesses who comprise the
more than 12,500 clients of Itex's trade exchange. As of June 30, 2000, we
entered into transactions utilizing 197,000 trade dollars of which 5,400 trade
dollars (having a fair value of $5,400) have been recognized as revenue and
expense to date. We do not recognize the trade dollars as revenue when received.
We only recognize the trade dollars as revenue and expense the fair value of the
trade dollars as the goods or services contracted for are utilized.
We also intend to enter into a 50/50 joint venture with Itex to provide a
customized on-line Internet barter portal. Itex has agreed to pay us 2,000,000
trade dollars to develop a portal to be customized for the joint venture.
Additionally, Itex has agreed to pay us 8,000,000 trade dollars over 48 months
commencing March 15, 2001 to provide a portal to the joint venture through which
it can gain access to our customers.
We derive and will in the future derive our revenues from the enrollment fees
that we charge our clients, from the dot com sub-portal turnkey fees that we
will be charging, from the revenues that our clients and the dot coms will be
deriving from purchases made through the JoinUsOnline.com portal system and from
utilization fees paid by many of the program benefits and service providers who
provide goods and services to the members of our clients who enroll in such
programs. The pricing of our programs range from free to $49.95 per year per
member. The costs to our clients are based upon the type of program designed for
the client. Our revenues, operating expenses and operating earnings (losses)
before provision for taxes during each of the periods described below were, as
follows:
<TABLE>
<CAPTION>
Years Ended December 31, Six Months Ended June 30,
------------------------ -------------------------
1998 1999 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Benefits and Services $ 3,274,055 $ 2,011,257 $ 1,240,434 $ 404,911
Portal fees from affiliates -- -- -- 1,200,000
----------- ----------- ----------- -----------
$ 3,274,055 $ 2,011,257 $ 1,240,434 1,604,911
Operating expenses ................. 1,464,398 2,093,769 891,189 1,221,719
Operating earnings (loss) .......... 1,118,301 (1) (82,512) (1) 213,539 (1) 231,208
</TABLE>
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----------
(1) During 1998 and between January 1 and February 26, 1999, we were an S
corporation. Accordingly we were not subject to federal income taxation. These
figures are presented on a pro forma basis assuming that our income had been
subject to taxation.
Our Target Markets
We market a variety of business and consumer based value-added benefit programs
and Internet portal programs to and through the telecommunications and affinity
marketplaces. Included in the affinity marketplace are large groups,
associations and fund raising organizations. We customize our programs based
upon the demographics of our client organizations' members, customers and/or
employees.
Three of our customers, RRV Enterprises, Inc., Consumers Buyline, Inc. and
Catalyst Communication, Inc., were responsible for 62%, 15% and 9%,
respectively, of our revenues in 1999.
Our Marketing
We have historically focused our marketing activities almost exclusively through
trade shows. However, we have begun adding, as a new marketing channel, a direct
sales force of marketing agents drawn from the pool of independent agents that
work for several of the telecommunications companies who participate as
providers in our benefits programs.
Our Competition
The membership benefits and service industry serves a market of consumers and
businesses nationwide. Benefits companies have traditionally marketed their
benefits programs via direct sales, credit card issuers, airline services, oil
companies, banking institutions, and most recently Internet web sales. The
majority of customers for these programs are considered to be consumers, with a
small percentage of small business owners. Individual benefit and service
program offerings vary dramatically from Company to Company. Our major
competitors are The Signature Group and Cendant Corp.
The Signature Group commenced operations in 1966 and has estimated annual
revenues of more than $900 million. They sell their benefit and service programs
exclusively to end-users, i.e., consumers, who pay annual membership fees. These
membership fees represent a small segment of the potential annual revenues which
The Signature Group can derive from a consumer because additional benefit
program offerings, at additional costs over the basic membership fee are
available to the consumer. Some examples of these additional programs are
health, dental, vision, pharmacy and chiropractic programs. Therefore the annual
savings that Signature Group members can receive can vary dramatically depending
on the programs in which they enroll. The Signature Group markets its various
benefits to a community of banks, oil companies and retailers through
telemarketing, as well as to a more general consumer market via the Internet.
Cendant Corp. offers 20 individual membership programs, has annual revenues
exceeding $5
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billion and claims to have access to over 30 million customers. It derives most
of its earnings from the $69.00 annual membership fee that it charges its
customers. Cendant has a multi-tiered membership fee that starts at $69.00 and
increases depending on the benefits selected. As in the case of The Signature
Group, the actual saving to the end-user varies depending on the consumer
programs in which the end-user chooses to participate. Like The Signature Group,
Cendant's marketing focus consists mainly of telemarketing through credit card
companies, oil companies and retailers. Cendant is in the process of
establishing a marketing presence on the Internet, but does not currently market
via the Internet.
Our most important competitors have longer operating histories, larger client
bases, longer relationships with clients, greater brand or name recognition and
significantly greater financial, technical, marketing and public relations
resources than we possess. However, we believe that we provide one of the most
comprehensive benefits and service programs that the industry affords, and that
one factor which separates us from our competition and provides us with a
significant competitive advantage over them is that the members of our client
organizations pay no membership fee to us.
Our Employees
We currently have 15 employees. None of our employees is represented by a labor
union and we believe our employee relations are excellent.
Our Intellectual Property
Our intellectual property includes our JoinUsOnline trademarks, and various
slogans, such as "Changing the Way America Buys." We believe that our
intellectual property is an important factor in maintaining our competitive
position in our core businesses. To protect our proprietary rights, we rely
generally on copyright, trademark and trade secret laws. Despite these
protections, a third party could, without authorization, copy or otherwise
obtain and use our products or technology to develop similar products or
technology.
We have applied for, or intend to apply for registration of our primary
trademarks in the United States, including "JoinUsOnLine." We intend to continue
to pursue the registration of these and certain of our other trademarks in the
United States and in other countries; however, we cannot be sure that we can
prevent all third-party use of our trademarks. We have obtained
"JoinUsOnLine.com" and "JUOL.com" as Internet domain names.
The laws of some foreign countries do not protect our proprietary rights to the
same extent as do the laws of the United States, and effective copyright,
trademark and trade secret protection may not be available in these
jurisdictions.
Third parties may assert infringement claims against us. From time to time we
may be subject to claims in the ordinary course of our business, including
claims of alleged infringement of the trademarks, patents and other intellectual
property rights of third parties by us or our users. Any such claims, or any
resultant litigation, should it occur, could subject us to significant liability
for damages and could result in the invalidation of our proprietary rights. In
addition, even if we
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<PAGE>
were to win any such litigation, such litigation could be time-consuming and
expensive to defend, and could result in the diversion of our time and
attention, any of which could materially and adversely affect our business,
results of operations and financial condition. Any claims or litigation may also
result in limitations on our ability to use such trademarks, patents and other
intellectual property unless we enter into arrangement with such third parties,
which may be unavailable on commercially reasonable terms.
Research And Development
Although we do not have a specific research and development budget, United
Interactive serves as our research and development facility. As such, it
develops various web-based products that we offer, such as the JoinUsOnline
portal system and Web Classified's easy-to-construct, customizable three page
Web site.
Properties
We occupy approximately 8,400 square feet of our parent corporation's
headquarters office in Delray Beach, Florida. That office consists of a total of
approximately 12,000 square feet on one floor which is leased from an
unaffiliated landlord through 2009. The annual rental under the lease is
$181,000, including common area maintenance, taxes and other costs. The lease
contains rent escalation provisions which will increase the annual rent over a
period of ten years to a total of $275,245 (including common area maintenance,
taxes and other costs) for the final year. We pay 70% of the monthly rental and
other charges for such space.
Legal Proceedings
There are no legal proceedings pending against us.
MANAGEMENT
The following table sets forth the names, positions and ages of our executive
officers and directors. Directors will be elected at our annual meeting of
stockholders and serve for one year or until their successors are elected and
qualify. Officers are elected by the board and their terms of office are, except
to the extent governed by employment contracts, at the discretion by the Board.
Name Age Position
---- --- --------
William R. Becker 43 Chief Executive Officer, Director and Chief
Operating Officer
Matthew J. Cohen 41 Director and Chief Financial Officer
Peter Tamayo, Jr. 36 Chief Technical Officer
Lawrence J. Brady 59 Director
Larry Pressler 58 Director
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William R. Becker is the Chief Executive Officer and Chairman of the Board of
Interactive Technologies.com, Ltd. and each of its subsidiaries. He has served
as our Chief Executive Officer since June 1992..
Matthew Cohen has served as our Chief Financial Officer and as the CFO of our
parent corporation since February 1999. He has served as a member of our Board
and as a member of our parent's Board since September 1999. Between April 1997
and August, 1999, he served as Chief Financial Officer and as a Director of
Legal Club of America Corporation, a provider of the nation's largest legal
benefit programs. From 1984 to June 1996, he was Vice President and Chief
Financial Officer of Standard Brands of America, Inc., a $100 million publicly
held retailer of consumer electronics and appliances.
Peter Tamayo has served as a Senior Vice President and Chief Technical Officer
of the Interactive Technologies.com, Ltd. since February, 1999. Since April
1995, he has served as our Chief Technical Officer and as President of United
Interactive. Mr. Tamayo holds several patents in the computer industry, one in
the electronics field and several dozen copyrights. He is a graduate of Morgan
Technical Institute with majors in Industrial Electronics and Computer Science &
Technology.
Lawrence J. Brady has served in senior management positions in government and
the private sector, including founder and director of Capitoline International
Group, Ltd.; a senior Vice President of Hill and Knowlton Public Affairs
Worldwide; and Director of International Marketing for Sanders Associates, a
Lockheed Corporation subsidiary. During the Reagan administration Mr. Brady
served as Assistant Secretary of Commerce for Trade Administration,
administering the government's export and import trade regulatory functions,
including the high technology export control program, as well as the U. S. laws
designed to prevent unfair sales of foreign products into the United States. He
also administered the U.S. Government foreign trade zone program. Mr. Brady
served also in senior staff roles in the Executive Office of the President in
the Nixon and Ford administrations. He has represented the U.S. in trade
negotiations in Europe, Japan and China and has been a frequent witness before
Congress on international economic and trade issues.
Larry Pressler served two terms as a member of the US House of Representatives
from 1975 - 1979, and he served three terms as a member of the US Senate from
1979 - 1997. During 1997 - 98, Senator Pressler was a partner in Lawyer,
Pressler & Associates, a Washington, D.C. law firm. Since 1997, he has been a
partner in the law firm of O'Connor & Hannon, a Washington, D.C. based law firm.
Senator Pressler holds a B.A degree in Political Science from the University of
South Dakota and a J.D. degree from Harvard University. He is a member of the
Phi Beta Kappa Society and attended Oxford University as a Rhodes Scholar.
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<PAGE>
Executive Compensation
Between April 1998 and December 1999, our chief executive officer was paid a
base salary of $250,000 per year, plus other benefits. Our obligation to make
such payments is governed by a five year automatically renewable employment
agreement. Prior to our reverse acquisition transaction with Interactive
Technologies.com, Ltd., our Chief Executive Officer also received compensation
payments from United Interactive and IMS. Since the closing of the reverse
acquisition, we and our parent corporation have paid compensation to our Chief
Executive Officer's salary. Between the date of the reverse acquisition and
December 1999, we paid our Chief Financial Officer's compensation. Since January
2000, his compensation has been paid by our parent corporation, and a portion
(approximately 80%) of such compensation has been charged to us. We have not
paid or expensed any compensation to our Chief Technical Officer to date. United
Interactive always has paid our Chief Technical Officer's compensation. Those
three officers (collectively, the "Named Executive Officers") are our only
executives who receive annual compensation and bonus of $100,000 or more.
The following table sets forth compensation awarded to, earned by or paid to the
Named Executive Officers during the three years ended December 31, 1999. We have
not paid any compensation that would qualify as payouts pursuant to long-term
incentive plans ("LTIP Payouts"), or "All Other Compensation" and we did not
issue any SARs during such period of time.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards
-------------------------------------------- --------------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying
Position Year Salary ($) Bonus ($) Compensation ($) Awards ($) Options (#)
-------------------------- ---- ---------- --------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
William R. Becker, CEO 1999 $369,313 (1) -- -- -- --
1998 $381,084 (2)
1997 $148,806
Matthew Cohen, CFO 1999 $36,462 (3) -- -- -- --
Peter Tamayo, CTO 1999 -- (4) -- -- -- --
1998 -- (4)
1997 -- (4)
</TABLE>
----------
(1) Does not include $83,353 of equity distributions which we made, and $52,289
of distributions made by affiliated entities directly to Mr. Becker or his wife,
or which Mr. Becker may be deemed to have received by reason of his direct and
indirect ownership interest in our parent corporation, United Interactive and/or
IMS.
(2) Does not include $1,136,629 of distributions which we made directly to Mr.
Becker or his wife, or which Mr. Becker may be deemed to have received by reason
of his direct and indirect ownership interest in United Interactive and/or IMS.
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<PAGE>
(3) Does not include part-time compensation of $25,000 from February 1999 -
September 13, 1999, the date of commencement of Mr. Cohen's employment. Annual
compensation of $120,000 is paid to Mr. Cohen by our parent company and 80%
thereof is allocated to us.
(4) United Interactive paid Mr. Tamayo's annual compensation of $104,000 in
1997, 1998 and 1999..
Option/SAR Grants In Last Fiscal Year
We did not grant any options or SARs to any of the Named Executives during 1999.
Aggregated Option/Sar Exercises In Last Fiscal Year
And Fiscal Year-End Option/SAR Values
None of the Named Executive Officers exercised any options in 1999.
Compensation Of Directors
The Company has not paid and does not presently propose to pay compensation to
any director for acting in such capacity, except for nominal sums for attending
Board of Directors meetings and reimbursement for reasonable expenses in
attending those meetings.
Employment Contracts, Termination Of Employment And Change In Control
Arrangements
In April 1998, we entered into a five year employment agreement with Mr. Becker
which, as amended, obligates us
o to pay Mr. Becker a base salary of $250,000 per year,
o to increase his base salary at a rate which is not less than 10% per
year.
o to pay him 5% of all gross revenues which we receive from parties
who are not affiliated with our parent corporation and
o to provide him or his designee with a $1,000,000 life insurance.
In the event that we have insufficient funds to meet our payment obligation to
Mr. Becker, the agreement provides for accrual of all unpaid amounts until we
can pay what we owe to him
The agreement is automatically renewable for additional one year periods, unless
either party gives notice of its non-renewal not later than 30 days prior to the
end of the then current term or renewal term.
Messrs. Becker and Cohen also have entered into employment agreements with our
parent corporation, pursuant to which Mr. Becker receives an annual salary of
$250,000 and Mr. Cohen
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<PAGE>
receives an annual salary of $120,000, 80% of which is charged to us. We do not
have any other employment agreements, termination of employment or change of
control agreements with any of the Named Executive Officers.
Stock Option Plan
We have a qualified stock option plan, the JoinUsOnline.com, Inc. Stock Option
Plan. The purpose of the Option Plan is to increase our employees' and
non-employee directors' proprietary interests in our company and to align more
closely their interests with the interests of our stockholders, as well as to
enable us to attract and retain the services of experienced and highly qualified
employees and non-employee directors.
Options granted under the Option Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options that do not so qualify
("Non-Qualified Options"). Any Incentive Option granted under the Option Plan
must provide for an exercise price of not less than 100% of the fair market
value of the underlying shares on the date of such grant, but the exercise price
of any Incentive Option granted to an eligible employee owning more than 10% of
our common stock must be at least 110% of such fair market value as determined
on the date of the grant.
The term of each Plan Option and the manner in which it may be exercised is
determined by the Board of the Directors or the Compensation Committee of the
Board, provided that no Plan Option may be exercisable more than 10 years after
the date of its grant and, in the case of an Incentive Option granted to an
eligible employee owning more than 10% of our common stock, no more than five
years after the date of the grant. The exercise price of Non-Qualified Options
shall be determined by the Board of Directors or the Compensation Committee
The per share exercise price of shares granted under the Option Plan may be
adjusted in the event of certain changes in our capitalization, but any such
adjustment shall not change the total purchase price payable upon the exercise
in full of Plan Options granted under the Option Plan. The persons who serve as
our officers, directors, key employees and consultants, or as officers,
directors, key employees and consultants of our subsidiaries will be eligible to
receive Non-Qualified Options under the Option Plan. Only persons who serve as
our, or our subsidiaries' officers, directors and employees are eligible to
receive Incentive Options.
We have reserved an aggregate of 18,000,000 shares of common stock for issuance
pursuant to options granted under the Option Plan. We have not yet granted any
options under the Option Plan. The Board of Directors or the Board's
Compensation Committee will administer the Option Plan including, without
limitation, the selection of the persons who will be granted Options under the
Option Plan, the type of Plan Options to be granted, the number of shares
subject to each Plan Option and the Option Plan Option price.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
William R. Becker, our Chairman, Chief Executive and a controlling stockholder,
is the owner of a travel service business with which we conduct business. We do
not pay any fees or other compensation to such travel service. All compensation
earned by the travel service is paid by the various airlines and other travel
service providers at standard industry rates. Total amounts paid to the travel
service amounted to $18,800 and $16,932 for the years 1998 and 1999 and $6,575
and $29,414 for the six months ended June 30, 1999 and 2000, respectively.
In January 2000, we entered into portal technology and software agreements, and
we also entered into portal marketing agreements, with each of IMS, United
Interactive and Express Financial. Pursuant to the portal technology agreements,
we have agreed to provide each of those affiliates with a customized Web portal
at a cost to each of them of $66,667 per month. Each of those agreements is
terminable on 90 days notice. During the six months ended June 30, 2000, the
total amount payable to use under the three portal technology agreements was
$1,200,000. Inasmuch as our affiliates have not sustained sufficient operating
revenues to make such payments to us, our parent advanced such fee payments to
us in their behalf. Pursuant to the portal marketing agreements, we have agreed
to market the product and service offerings of our affiliates through our
JoinUsOnline.com Web portals. Each of those affiliates will pay to us, pursuant
to those agreements, fees based upon the revenues they derive from our marketing
efforts. We did not receive any of such fees during the six months ended June
30, 2000.
PRINCIPAL STOCKHOLDERS
The following table sets forth the holdings of our common stock as of the date
of this prospectus by (1) each person or entity known to us to be the beneficial
owner of more than 5% of our outstanding shares of common stock; (2) each of our
directors and named executive officers; and (3) all directors and executive
officers as a group. All of the holders of common stock are entitled to one vote
per share.
Number of Shares Percent
Name and Address of Beneficial Owner (1) Beneficially Owned (2) Owned (3)
---------------------------------------- ---------------------- ---------
Interactive Technologies.com, Ltd. ........ 8,000,000 (4) 80.0%
William R. Becker .......................... 1,888,667 (5) 18.9%
Matthew Cohen .............................. 0 0%
Peter Tamayo. ............................... 0 0%
Lawrence J. Brady (6) ...................... 0 0%
Larry Pressler (7) ......................... 0 0%
All Directors and Executive Officers
As a Group (5 Persons) ...................... 10,000,000 (8) 98.9%
----------
(1) Except as otherwise noted, the address of each of the persons listed below
is 110 East Atlantic Avenue, Suite 400, Delray Beach, Florida 33444.
(2) Includes shares actually and beneficially owned.
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<PAGE>
(3) Based upon 10,000,000 shares outstanding on the date of this prospectus.
(4) Mr. Becker is the Chairman and Chief Executive Officer of, and he
controls, directly and indirectly, more than 50% of the outstanding common
stock of, Interactive Technologies.com, Ltd. Therefore, he is deemed to
possess the power to control the disposition of, and to vote, all of these
shares.
(5) Includes (a) 220,000 shares which Mr. Becker owns directly; (b) 666,667
shares which Mr. Becker owns jointly with his wife, Joni; and (c)
1,000,000 shares held by Mrs. Becker as Trustee of the William R. Becker
Irrevocable Family Trust. Does not include 113,333 shares held by Mrs.
Becker, as to which Mr. Becker disclaims beneficial ownership.
(6) The address of Mr. Brady is 480 South Orange Grove Blvd #16 Pasadena, Ca
91105.
(7) The address of Mr. Pressler is 1666 K Street, N.W., Washington, D.C.
20006-2803.
(8) Include the shares which Mr. Becker is deemed to control pursuant to note
4 above. Does not include the shares excluded from the percentage
ownership calculations made with respect to Mr. Becker pursuant to note 5
above.
DESCRIPTION OF SECURITIES
The following summary description of our capital stock is not intended to be
complete and is subject to and qualified in its entirety by reference to our
Certificate of Incorporation, as amended, copies of each of which are filed as
exhibits to the registration statement of which this prospectus forms a part.
General
Our authorized capital stock consists of 40,000,000 shares of common stock,
$.001 par value per share and 10,000,000 shares of preferred stock, $.001 par
value per share.
Common Stock
The shares of common stock:
o have equal rights to dividends from funds legally available therefor,
when, as and if declared by the Board of Directors of the Company;
o are entitled to share ratably, subject to the rights of the holders of
any securities which are senior to, or which have preferences greater than the
common stock, in all of our assets available for distribution to holders of
common stock upon liquidation, dissolution or winding up of our affairs;
o are not subject to preemptive, subscription or conversion rights;
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<PAGE>
o have no redemption or sinking fund provisions applicable thereto; and
o are entitled to one non-cumulative vote per share on all matters which
stockholders may vote on at all meetings of stockholders.
All of the 10,000,000 shares of common stock now outstanding are fully paid and
non-assessable.
Inasmuch as our common stock does not have cumulative voting rights, the holders
of more than 50% of the outstanding shares can elect all of the directors, if
they choose to do so, in which event the holders of the remaining shares cannot
elect any directors. Accordingly, inasmuch as our current officers, directors
and a control person or persons own more than 98% of the outstanding shares,
they will continue to be able to elect all of the directors.
We have paid no cash dividends and it is not anticipated that any cash dividends
will be paid in the foreseeable future. In all events, the declaration of cash
dividends will depend upon future earnings, if any, our financial needs, and
other pertinent factors.
Our Transfer Agent is Our Transfer Agent is American Stock Transfer & Trust
Company, 40 Wall Street, New York, New York 10005.
We intend to apply for listing of our common stock on the Nasdaq National Market
under the symbol "JUOL."
We intend to furnish our stockholders with annual reports of our operations,
containing audited financial statements and with additional information
concerning our business and affairs whenever deemed appropriate by our Board of
Directors.
Preferred Stock
Pursuant to our certificate of incorporation, we are authorized to issue up to
10,000,000 shares of "blank check" preferred stock, which may be issued from
time to time in one or more series upon authorization by our Board of Directors.
The Board of Directors, without further approval of the stockholders, will be
authorized to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to each series of
the preferred stock. The issuance of preferred stock, while providing
flexibility in connection with possible acquisitions and other corporate
purposes could, among other things, adversely affect the voting power of the
holders of common stock and, in certain circumstances, make it more difficult
for a third party to gain control of us, discourage bids for our common stock at
a premium, or otherwise adversely affect the market price of the common stock.
Currently, there are no shares of preferred stock outstanding.
Outstanding Options
36
<PAGE>
In June 2000 we entered into a written agreement which codified the terms of an
understanding that we first made in February 1999 regarding the compensation
that Boru Enterprises, Inc. ("Boru") would be entitled to receive for making the
introductions which resulted in the reverse acquisition of our parent
corporation by our affiliated companies and us. In accordance with that
agreement, we agreed to compensate Boru by issuing to it an option (the "Boru
Option") to purchase a block of unregistered, restricted shares of our common
stock equal to 4.95% of the total number of such shares outstanding immediately
prior to the consummation of the reverse acquisition at a total exercise price
equal to $495,000. As a result of the forward split of our outstanding common
stock from 1,500 shares to 10,000,000 shares, the number of shares issuable
under the Boru option has increased from 74.25 shares to 495,000 shares. That
increase in the number of shares has resulted in a reduction in the exercise
price per share payable under the Boru Option from $6,666.66 per share to $1.00
per share.
Registration Rights
The Representative's warrant confers certain registration rights upon the
holders thereof. See "Underwriting."
DELAWARE BUSINESS COMBINATION PROVISIONS
We are governed by the provisions of Section 203 of the Delaware General
Corporation Law ("DGCL"). In general, this statute prohibits a publicly held
Delaware corporation from engaging, under certain circumstances, 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:
o prior to the date at which the stockholder became an interested
stockholder, the Board of Directors approved either the business combination or
the transaction in which the person became an interested stockholder;
o the stockholder acquired more than 85% of the outstanding voting stock
of the corporation (excluding shares held by directors who are officers and
shares held in certain employee stock plans) upon consummation of the
transaction in which the stockholder became an interested stockholder; or
o the business combination is approved by the Board of Directors and by at
least 66-2/3% of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder) at a meeting of stockholders (and not
by written consent) held on or after the date such stockholder became an
interested stockholder.
An "interested stockholder" is a person who, together with affiliates and
associates, owns (or at any time within the prior three years did own) 15% or
more of the corporation's voting stock. Section 203 defines a "business
combination" to include, without limitation, mergers, consolidations, stock
sales and asset-based transactions and other transactions resulting in a
financial benefit to the interested stockholder.
37
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the DGCL enables a corporation in its original certificate
of incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to a corporation or its stockholders for violations of
the director's fiduciary duty, except:
o for any breach of a director's duty of loyalty to the corporation or its
stockholders,
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions), or
o for any transaction from which a director derived an improper personal
benefit.
Our Certificate of Incorporation provides in effect for the elimination of the
liability of directors to the extent permitted by the DGCL.
Section 145 of the DGCL provides, in summary, that directors and officers of
Delaware corporations are entitled, under certain circumstances, to be
indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. Our By-Laws entitle
our officers and directors to indemnification to the fullest extent permitted by
the DGCL.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the provisions described above, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
SHARES ELIGIBLE FOR FUTURE SALE
38
<PAGE>
As of the date of this offering, we have [ ] shares of common stock
outstanding, none of which is freely tradable without restriction or further
registration. Of that amount, [ ] shares would be deemed "restricted
securities" within the meaning of Rule 144 under the Securities Act. Restricted
securities may not be sold in the absence of registration unless an exemption
from registration is available, including the exemption contained in Rule 144.
[ ]of the presently outstanding restricted securities shall become eligible
for resale under Rule 144 on or before [ ], and [ ] of such securities
will become eligible for resale under Rule 144 on various dates falling between
[ ] and [ ].
In general, under Rule 144, a stockholder who has beneficially owned shares of
common stock for at least one year is entitled to sell, within any three-month
period, a number of "restricted" shares that does not exceed the greater of one
percent of the then outstanding shares of common stock or the average weekly
trading volume during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to sale limitations, notice requirements and the
availability of current public information about us. Rule 144(k) provides that a
stockholder who is not deemed to be an "affiliate" and who has beneficially
owned shares of common stock for at least two years is entitled to sell those
shares at any time under Rule 144(k) without regard to the limitations described
above.
We are unable to estimate the number of shares that may be sold in the future by
existing holders of shares of our common stock or holders of options or warrants
or convertible securities that are outstanding or the effect, if any, that sales
of shares of common stock by these persons will have on the market price of the
common stock prevailing from time to time. Sales of substantial amounts of
common stock by these persons could adversely affect the then prevailing market
prices of the common stock and warrants.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the form of
which is filed as an exhibit to the registration statement filed with the
Commission of which this prospectus is a part, the underwriters named below
have, severally and not jointly, agreed through [ ], as the representative
of the underwriters, to purchase from us, and we have agreed to sell to the
underwriters, the aggregate number of shares of common stock set forth opposite
their respective names:
Underwriters Number of shares
------------ ----------------
[ ]
Total [ ]
39
<PAGE>
The underwriting agreement provides that the obligations of the several
underwriters under that agreement are subject to certain conditions precedent,
including the absence of any material adverse change in our business and the
receipt of certain certificates, opinions and letters from our counsel and our
independent public accountants. The underwriters are committed to take and to
pay for all of the shares offered hereby, if any are purchased. In the event of
a default by any of the underwriters, purchase commitments of the non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.
The underwriters have advised us that they propose to offer all or part of the
shares offered hereby directly to the public initially at the price set forth on
the cover page of this prospectus. They have also advised us that they may offer
shares to certain dealers at a price that represents a concession of not more
than $.[ ] per share, and that the underwriters may allow, and these dealers may
reallow, a concession of not more than $.[ ] per share to certain other dealers.
After the commencement of this offering, the price to the public and the
concessions may be changed.
We have granted to the underwriters an option, exercisable within 30 days after
the effective date of the registration statement of which this prospectus is a
part, to purchase up to an additional [ ] shares at the same price per share
as the initial [ ] shares to be purchased by the underwriters. The
underwriters may exercise this option only to cover over-allotments, if any. To
the extent the underwriters exercise this option, each of the underwriters will
have a firm commitment, subject to certain conditions, to purchase the same
percentage of the additional shares as the percentage of the initial [ ]
shares to be purchased by that underwriter.
We have agreed to indemnify the underwriters and their controlling persons
against certain liabilities, including certain liabilities under the Securities
Act, and to contribute to payments the underwriters and their controlling
persons may be required to make in respect thereof.
We have agreed to pay the representatives of the underwriters a non-accountable
expense allowance equal to [ ]% of the gross proceeds of this offering, of
which $[ ] has been paid as of the date of this prospectus. We have also
agreed to pay all expenses in connection with qualifying the securities under
the laws of those states the representatives may designate, including fees and
expenses of counsel retained for such purposes by the representatives and the
costs and disbursements in connection with qualifying the offering with the
National Association of Securities Dealers, Inc.
We have agreed to issue to the representative of the underwriters, for a total
of $[ ], warrants to purchase an aggregate of [ ],000 shares exercisable
for a period of four years commencing one year after the effective date of the
registration statement of which this prospectus is a part, at a price equal to
[ ]% of the initial public offering price of the shares. The representatives'
warrants contain anti-dilution provisions providing for automatic adjustments of
the exercise price and number of shares issuable on exercise price and number of
shares issuable on exercise of the representatives' warrants upon the occurrence
of some events, including stock dividends, stock splits, mergers, acquisitions
and recapitalizations. The representatives' warrants contain certain
registration rights relating to the [ ],000 shares issuable thereunder. For the
life of the representatives' warrants, the representatives will have the
opportunity to profit from a rise in the market price for the [ ],000 shares.
The holders of the representatives' warrants will have no
40
<PAGE>
voting, dividend or other stockholder rights with respect to those warrants. The
holders of shares issued upon exercise of those warrants will have the voting,
dividend, and other stockholder rights of holders of shares. The
representatives' warrants are restricted from sale, transfer, assignment or
hypothecation for the one year period from the date of this prospectus, except
to officers or partners of the underwriters and members of the selling group
and/or their officers or partners.
We have also granted to the representatives of the underwriters the right, for a
period of five years from the closing of this offering, to nominate a designee
of the representatives for election to our board of directors. The
representatives have not yet exercised their right to designate this person. If
the representatives elect not to exercise this right, then the representatives
may designate one person to attend meetings of our board of directors.
Our officers, directors and present stockholders have agreed that, for a period
of [ ] days after the completion of this offering, without the prior written
consent of the representative of the underwriters, none of us will sell or
otherwise dispose of any of our respective equity securities or securities
convertible into our equity securities, directly or indirectly, except for the
sale of ordinary shares to the underwriters under the terms of the underwriting
agreement.
The representative of the underwriters has informed us that the underwriters do
not expect any sales of the shares offered by this prospectus to be made to
discretionary accounts controlled by the underwriters.
Prior to this offering, there has been no established market in the United
States or elsewhere for our securities. The public offering price will be
determined by us in consultation with the representative of the underwriters. It
is expected that the price determination will take several factors into account,
including our results of operations, our future prospects and the prevailing
market and economic conditions at the time of this offering. There can be no
assurance that an active trading market will develop for any of the securities
offered by this prospectus, or that any of such securities will trade in the
public market subsequent to this offering at or above the initial public
offering price, or at all.
The representative, on behalf of the underwriters, may engage in over-allotment,
stabilizing transactions, syndicate covering transactions and penalty bids.
Over-allotment involves syndicate sales in excess of this offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the shares being offered so long as the stabilizing bids do not exceed
a specified maximum. Syndicate covering transactions involve purchases of the
shares in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit the representatives to
reclaim a selling concession from a syndicate member when the shares originally
sold by the syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions. Stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the shares to be higher
than it would otherwise be in the absence of such transactions. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time. In addition, the underwriters may
engage in passive market making transactions in our securities on the Nasdaq
National Market in accordance with Rule 103 of Regulation M. Neither
41
<PAGE>
we nor the underwriters make any representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the securities offered by this prospectus.
LEGAL MATTERS
Hall Dickler Kent Goldstein & Wood, LLP, New York, New York, has advised us with
respect to the validity of the shares of common stock offered by this
prospectus. Certain legal matters relating to this offering will be passed upon
for the underwriters by [ ], [ ].
EXPERTS
Grant Thornton LLP, independent auditors, have audited our financial statements
for the years ended December 31, 1998 and 1999, as set forth in their report,
which is included in this prospectus. Our financial statements are included in
this prospectus in reliance on their report, given their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, a registration statement on Form SB-2 under the
Securities Act with respect to the securities offered. As permitted by SEC
rules, this prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. For further information concerning the company and the securities
offered, we refer you to the registration statement and the exhibits and
schedules filed as a part of the registration statement.
Statements contained in this prospectus concerning the contents of any contract
or any other document are not necessarily complete. In each instance where a
copy of that contract or document has been filed as an exhibit to the
registration statement, we refer you to the copy of the contract or document
that has been filed. Each statement is qualified in all respects by reference to
that exhibit. The registration statement, including its exhibits and schedules,
may be inspected without charge at the SEC's Public Reference Room, at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional
offices at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and 7 World Trade Center, New York New York 10048.
Copies of all or any part of those documents may be obtained from the SEC's
office after payment of the SEC's prescribed fees. You may call the SEC at
1-800-SEC-0330 for further information on the operation of the SEC's public
reference rooms. The SEC maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding companies that file electronically with the SEC.
We intend to provide our stockholders with annual reports containing financial
statements by an independent public accounting firm and will make available to
stockholders quarterly reports containing unaudited financial data for the first
three quarters of each year. On the effective date of the registration statement
of which this prospectus forms a part, we will be subject to the
42
<PAGE>
information and reporting requirements of the Securities Exchange Act of 1934,
as amended, and will thereupon be required to file periodic reports, proxy
statements and other information with the SEC.
43
<PAGE>
JoinUsOnline.com, Inc.
Index to Financial Statements
Page
----
Report of Independent Certified Public Accountants....................... F-2
Balance Sheets at December 31, 1998
and 1999 and at June 30, 2000 (unaudited)........................... F-3
Statements of Operations for the two
years ended December 31, 1999 and for the six
months ended June 30, 1999 and 2000 (unaudited)..................... F-
Statement of Stockholders' Equity (Deficit) for the two years ended
December 31, 1999 and for the six months ended June 30, 1999
and 2000 (unaudited)................................................ F-
Statements of Cash Flows for the two years
ended December 31, 1999 and for the six
months ended June 30, 1999 and 2000 (unaudited)..................... F-
Notes to Financial Statements............................................ F-
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
JoinUsOnline.Com, Inc.
We have audited the accompanying balance sheets of JoinUsOnline.Com, Inc. (the
"Company") as of December 31, 1999 and 1998, and the related statements of
operations, stockholders' deficit, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 audits provide 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 the Company as of December 31,
1999 and 1998, and the results of their operations and their cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States.
As disclosed in note B to the accompanying financial statements, the Company, on
February 26, 1999, became a 80% owned subsidiary of Interactive
Technologies.com, Ltd. Prior to this date the Company was affiliated with other
companies (now subsidiaries of Interactive Technologies.com, Ltd.) under common
ownership and there were extensive transactions among them. Because of these
relationships, it is possible that the terms of these transactions are not the
same as those that would result from transactions among wholly unrelated
parties.
Miami, Florida
February 5, 2000 (except for Notes A and M, as to
which the dates are April 3 and August 17, 2000, respectively)
F-2
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
---------------------- June 30,
1998 1999 2000
--------- --------- ---------
(Unaudited)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 17,185 $ 42,919 $ --
Prepaid expenses and other current assets 99,440
Related party receivable -- -- 19,552
Due from affiliates (Note E) 418,640 -- 111,923
--------- --------- ---------
Total current assets 435,825 42,919 230,915
Property and equipment, net (Note D) 24,426 51,489 73,749
--------- --------- ---------
Total assets $ 460,250 $ 94,408 $ 304,664
========= ========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
Accounts payable and accrued expenses $ 33,709 $ 80,139 $ 48,283
Due to affiliates (Note E) -- 27,309 --
Deferred revenue (Note B) 507,484 233,768 21,981
--------- --------- ---------
Total current liabilities 541,193 341,216 70,264
Commitments (Note J) -- -- --
Stockholders' deficit
Preferred stock - $.001 par value, 10,000,000
Shares authorized; none issued -- -- --
Common stock - $.001 par value, 40,000,000
shares authorized, 10,000,000 issued and
outstanding (at December 31, 1998 and 1999
and June 30, 2000) 10,000 10,000 10,000
Additional paid-in capital -- -- 250,000
Accumulated (deficit) earnings (90,943) (256,808) 82,112
--------- --------- ---------
Total stockholders' (deficit) equity (80,943) (246,808) 234,400
--------- --------- ---------
Total liabilities and stockholders'
(deficit) equity $ 460,250 $ 94,408 $ 304,664
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
--------------------------- ---------------------------
1998 1999 1999 2000
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Benefit and Services $ 3,274,055 $ 2,011,257 $ 1,240,434 $ 404,911
Portal Fees from affiliates (Note B) -- -- -- 1,200,000
------------ ------------ ------------ ------------
3,274,055 2,011,257 1,240,434 1,604,911
Operating expenses
Selling expenses 271,608 527,924 7,835 38,387
General and administrative costs 1,192,790 1,565,845 883,354 933,332
Other -- -- -- 250,000
------------ ------------ ------------ ------------
Total operating expenses 1,464,398 2,093,769 891,189 1,221,719
------------ ------------ ------------ ------------
Income before provision for
income taxes 1,809,657 (82,512) 349,245 383,192
Provision for income taxes (Note E) -- -- 90,470 151,984
------------ ------------ ------------ ------------
Net earnings (loss) $ 1,809,657 $ (82,512) $ 258,775 $ 231,208
============ ============ ============ ============
Earnings (loss) per common share - basic $ .18 $ (.01) $ .03 $ .02
============ ============ ============ ============
Pro Forma Financial Information
(unaudited)
Pro forma earnings before provision
for income taxes 1,809,657 (82,512) 349,245 231,208
------------ ------------ ------------ ------------
Pro forma provision for income
taxes: 691,356 -- 135,706 --
------------ ------------ ------------ ------------
Pro forma net earnings $ 1,118,301 $ (82,512) $ 213,539 $ 231,208
============ ============ ============ ============
Basic pro forma earnings per
common share $ .11 $ (.01) $ .02 $ .02
============ ============ ============ ============
Weighted-average number of
common shares
Outstanding 10,000,000 10,000,000 10,000,000 10,000,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
STATEMENT OF STOCKHOLDERS' (DEFICIT) EQUITY
Two Years Ended December 31, 1999 and the
Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Accumulated
------------------------- Paid-in (Deficit)
Shares Amount Capital Equity Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 10,000,000 $ 10,000 $ -- $ (763,971) $ (753,971)
Net earnings for the year ended
December 31, 1998 -- -- -- 1,809,657 1,809,657
Distributions -- -- -- (1,136,629) (1,136,629)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 10,000,000 10,000 -- (90,943) (80,943)
Net earnings for the year ended
December 31, 1999 -- -- -- (82,512) (82,512)
Distributions -- -- -- (83,353) (83,353)
----------- ----------- ----------- -----------
Balance at December 31, 1999 10,000,000 10,000 -- (256,808) (246,808)
Fair value of options to
Non-employees -- -- 250,000 -- 250,000
Net earnings for the six months
ended June 30, 2000 (unaudited) -- -- -- 231,208 231,208
----------- ----------- ----------- ----------- -----------
Balance at June 30, 2000 (unaudited) $10,000,000 $ 10,000 $ 250,000 $ (25,600) $ 234,400
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
-------------------------- --------------------------
1998 1999 1999 2000
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,809,657 $ (82,512) $ 258,775 $ 231,208
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation 23,590 9,396 3,846 10,569
Changes in operating assets and
liabilities:
(Increase) decrease in assets:
Due from/to affiliate (580,224) 445,949 (17,257) 110,767
Related party receivable -- -- -- (19,551)
Prepaid and other current assets -- -- -- (99,440)
(Decrease) increase in liabilities:
Accounts payable and
accrued expenses 30,721 46,430 80,706 (31,856)
Deferred revenue (151,441) (273,716) (278,027) (211,787)
----------- ----------- ----------- -----------
Net cash provided by
(used in) operating activities 1,132,303 145,547 48,043 (10,090)
Cash flows from investing activities:
Purchase of furniture, fixtures
and equipment (10,245) (36,460) (2,729) (32,830)
----------- ----------- ----------- -----------
Net cash used in
investing activities (10,245) (36,460) (2,729) (32,830)
Cash flows from financing activities:
Distributions to shareholder (1,136,629) (83,353) (41,677) --
----------- ----------- ----------- -----------
Net cash used in
financing activities (1,136,629) (83,353) (41,677) --
----------- ----------- ----------- -----------
Net change in cash and cash
equivalents (14,571) 25,734 3,637 (42,920)
Cash and cash equivalents -
beginning of year 31,756 17,185 17,185 42,920
----------- ----------- ----------- -----------
Cash and cash equivalents -
end of year $ 17,185 $ 42,919 $ 20,822 $ --
=========== =========== =========== ===========
</TABLE>
(continued)
F-6
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
------------------------------ ------------------------------
1998 1999 1999 2000
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid during the period $ -- $ -- $ -- $ --
============= ============= ============= =============
Taxes paid during the period $ -- $ -- $ -- $ 23,000
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE A - NATURE OF BUSINESS
JoinUsOnline.com, Inc., which changed its name from Ubuy.com on April 3, 2000
("the Company"), offers an ever-expanding portfolio of benefits and services
that provide privileged access to goods and services to companies, businesses,
fund raising organizations, large associations, affinity groups, their members
and customers via the Internet. Benefit and service programs offered include
home shopping, travel, automobile, dining, health, discount coupon investment,
and other lifestyle enhancement programs. The Company packages the benefits and
services provided principally by third party providers. An employee or member of
any of the companies or organizations with whom the Company has agreements can
obtain the various benefits, goods and services offered by the Company either by
entering his user name and password at the Company's web site located at
www.joinusonline.com, or by clicking on the "JoinUsOnline" button located at his
organization's web site.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The operations of the Company include the activities formerly conducted by
the Company and two related entities under common control: Tribeck
Enterprises, Inc. and Benefit Services of America, Inc. whose operations
were assumed by the Company on February 26, 1999. The financial statements
prior to that date are presented on a combined basis.
Also on February 26, 1999, an 80% interest in the Company and two other
entities operating under common control, were acquired by Interactive
Technologies.com, Ltd. (the Parent). The Company has shared facilities and
incurs common costs and expenses with the affiliated entities under common
control.
The accompanying financial statements are prepared as if the Company had
existed as a separate corporation for all periods presented and include
the historical assets, liabilities, revenue and expenses that were
specifically identifiable to the Company as well as items that were
allocable using methods which took into consideration personnel, payroll
cost, square footage or other factors. The preparation of the financial
statements required management to make estimates and assumptions regarding
amounts allocated to the Company. It is management's opinion that the
estimates and assumptions are reasonable, however actual results could
differ from the estimates.
(continued)
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Interim Financial Information
The financial statements at June 30, 2000 and for the six months periods
ended June 30, 1999 and 2000 are unaudited and are prepared on the same
basis as the audited financial statements included herein. In the opinion
of management, such interim financial statements include all adjustments
(consisting of normal recurring adjustments) necessary to present fairly
the results for such periods. The results of operations for the six months
ended June 30, 1999 and 2000 are not necessarily indicative of the results
to be expected for the full year or any other interim period.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided for
using the straight-line method over the following estimated useful lives:
Furniture and fixtures 5 yrs
Office equipment 3 yrs
Revenues
The Company packages a variety of program benefits from various service
providers for its clients. The revenue received will generally be based
upon the number and types of services which are included in the program.
The majority of the Company's revenue is derived from monthly fees paid by
client entities based upon the number of participants. The Company
received payment from its major customer 90 days in advance of services
provided through December 31, 1999 at which time the pay in advance
provision of the agreement terminated. The amount received was deferred
and recognized over a 90 day period. The Company also defers payments 30
days in advance of the services provided to other customers which are
recognized as services are rendered.
(continued)
F-9
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
The Company's affiliate United Interactive Technologies, Inc. ("UIT")
developed Internet portals for customers of the Company and affiliated
entities. The proprietary portal internet technology was contributed to
the Company at no charge as UIT did not maintain contemporaneous time
records to measure the development cost of this software. Effective
January 1, 2000 the portals became operational and the Company assumed the
obligation to maintain them for three affiliated entities: Express
Financial Corp., Integrated Merchant Services, Inc., and UIT. The Company
charges its affiliated entities $66,667 monthly to provide its customized
portals for use by them. The agreements are cancelable upon ninety (90)
day notice. Total customized portal use fee revenue for the six months
ended June 30, 2000 amounted to $1,200,000.
Interactive Technologies.com, Ltd. is a holding company whose operations
consist of investments in operating subsidiaries. The operating revenues
of these subsidiaries are not presently sufficient to sustain the payment
of customized portal software use fees charged to the affiliates.
Interactive Technologies.com, Ltd. has had to rely on contributed capital
as a source of funding the obligation of these subsidiaries. Therefore,
there is no assurance that Interactive Technologies.com, Inc. can continue
to fund these subsidiaries (see Note E).
Barter Transactions
The Company intends to enter into a 50/50 joint venture with International
Trade Exchange (ITEX) to provide a customized on-line Internet barter
portal. ITEX has agreed to pay the Company 2,000,000 trade dollars (TD) to
develop a portal to be customized for the joint venture. Additionally,
ITEX has agreed to pay the Company 8,000,000 TDs over 48 months commencing
March 15, 2001 to provide a portal to the joint venture through which it
can gain access to the Company's customers.
ITEX is the manager of an exchange, which provides a clearing-house for
the goods and services traded by its clients. The clients of ITEX agree to
sell goods and services for TDs at the same price as for cash.
(continued)
F-10
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Barter Transactions - Continued
At June 30, 2000, the Company had completed the development of the portal
for which it was paid 2,000,000 TD. As of June 30, 2000, the Company has
entered into transactions utilizing 197,000 TD of which 5,400 TD (having a
fair value of $5,400) have been recognized as revenue and expense to date.
The Company does not recognize the TD as revenue when received, but
recognizes as revenue and expense the fair value of the TD as the goods or
services contracted for are utilized.
Income Taxes
Income taxes on net earnings of the Company were payable personally by the
stockholders pursuant to an election under Subchapter S of the Internal
Revenue Code. The Company terminated its S Corporation Status on February
26, 1999, effective with the acquisition of 80% of the Company by the
Parent. Accordingly, no provision for taxes has been provided through
February 26, 1999 (see Note E).
The Parent company intends to file a consolidated Federal income tax
return. The Company's income tax liability has been computed as though the
Company were filing a separate income tax return. Accordingly, the
computed income tax liability at June 30, 2000 of $243,225 is payable to
the Parent Company whether or not the Parent company has an income tax
liability.
Effective February 27, 1999, the Company provides for income taxes under
the provisions of SFAS No. 109 "Accounting for Income Taxes". SFAS No. 109
requires an asset and liability based approach in accounting for income
taxes. Deferred income taxes assets and liabilities are recorded to
reflect the tax consequences on future years of temporary differences of
revenue and expense items for financial statement and income tax purposes.
Valuation allowances are provided against deferred tax assets which are
not more likely than not to be realized.
(continued)
F-11
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Use of Estimates in Financial Statements
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Shared Services
Certain expenses incurred by the Parent and other affiliated companies
consisting of administrative support, operational and financial management
and other general infrastructure related items have been charged to the
Company. Total amounts charged to the Company for shared services were
$163,441 and $297,381 in 1998 and 1999 and $55,589 and $60,539 for the six
months ended June 30, 1999 and 2000, respectively. The expense sharing
methodologies took into account personnel, payroll cost, square footage or
other factors. Although the Company believes the allocation methods and
cost for these services to be reasonable, these costs may not be
indicative of the costs that would have been incurred if the Company had
been an independent entity and contracted for the services from an
independent third party.
Advertising Costs
Advertising costs are expensed as incurred and are included in selling
expenses. Total advertising costs amounted to $1,406 and $171,322 in the
years 1998 and 1999 and $29,426 and $37,233 for the six months ended June
30, 1999 and 2000, respectively.
Earnings Per Share
Basic earnings per share equals net earnings divided by the weighted
average shares outstanding during the year. The Company has no potential
dilutive securities and therefore diluted earnings per share are not
presented.
F-12
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE C - REGISTRATION OF SECURITES
The Company is contemplating the filing of a Registration Statement on
Form SB-2 in connection with the registration under the Securities Act of
1933 to issue a yet undetermined number of shares of common stock in an
initial public offering. The costs in connection with this registration
statement will be offset against the proceeds of such offering or charged
to operations if the offering does not occur.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1998, 1999 and as of June 30,
2000 consist of:
December 31,
---------------------- June 30,
1998 1999 2000
------- ------- -------
(Unaudited)
Furniture and fixtures $12,952 $24,898 $57,444
Office equipment 15,357 39,880 40,164
------- ------- -------
28,309 64,778 97,608
Less accumulated
depreciation 3,883 13,289 23,859
------- ------- -------
$24,426 $51,489 $73,749
======= ======= =======
F-13
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE E - DUE FROM/TO AFFILIATES
Due from/to affiliates represents the net balances of intercompany
transactions between the Company and affiliated entities. In addition,
except for portal use fees, the intercompany transactions principally
result from income tax allocations and shared services discussed in Note B
and G to the financial statements. The amounts due from each affiliate at
December 31, 1998, 1999 and as of June 30, 2000 are as follows:
December 31,
---------------------- June 30,
1998 1999 2000
--------- --------- ---------
(Unaudited)
United Interactive
Technologies, Inc. $ 371,147 $ 485,680 $ --
Integrated Merchant
Services, Inc. 42,563 67,965 --
GKB Software, Inc. -- -- 24,000
Express Financial Corp. -- -- 176,172
Interactive Sales.net, Ltd. -- -- 9,463
Interactive Technologies.com, Ltd.
(Parent) 4,930 (580,954) (97,712)
--------- --------- ---------
Total $ 418,640 $ (27,309) $ 111,923
========= ========= =========
Interactive Technologies.com, Ltd. advanced funds to the Company on behalf
of United Interactive Technologies, Inc; Integrated Merchant Services and
Express Financial Corp. in payment of amounts due the Company. These
advances were required during the six months ended June 30, 2000 to enable
the payment to the Company of intercompany charges including the
customized portal use fees charged to the affiliates.
NOTE F - INCOME TAXES
The Parent company intends to file a consolidated Federal income tax
return. The Company's income tax liability has been computed as though the
Company were filing a separate income tax return. Accordingly, the
computed income tax liability at June 30, 2000 of $151,984 is payable to
the Parent Company whether or not the Parent company has an income tax
liability.
(continued)
F-14
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE F - INCOME TAXES - Continued
Income tax expense consist of the following:
December 31,
------------------------- June 30,
1998 1999 2000
---------- --------- ---------
(Unaudited)
Current
Federal $ -- $ -- $ 210,343
State -- -- 35,715
---------- --------- ---------
-- -- 246,059
Deferred -- -- (94,075)
---------- --------- ---------
Total $ -- $ -- $ 151,984
========== ========= =========
As discussed in Note B, the Company terminated its S Corporation Status
effective February 26, 1999. There was no tax expense from February 27,
1999 through December 31, 1999 since the Company had an operating loss.
The tax benefit associated with the expense for the stock option (Note L)
for the six months ended June 30, 2000 would reduce the computed tax
payable for the Parent Company. Therefore there are no deferred tax assets
or liabilities at December 31, 1999 and June 30, 2000.
The following table summarizes the differences between the Company's
effective tax rate and the statutory federal rate as follows:
December 31,
--------------- June 30,
1998 1999 2000
---- ---- ----
(Unaudited)
Statutory federal rate -- -- 34.0%
State income taxes -- -- 3.2
Travel and entertainment -- -- 2.4
---- ---- ----
Effective tax rate -- -- 39.6%
==== ==== ====
F-15
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE G - SIGNIFICANT CONCENTRATION
In 1999, three of the Company's customers were responsible for 86% of the
Company's revenues. In 1998, three customers accounted for 91% of the
Company's revenues. One customer accounted for 52% of the Company's
benefits and services revenue for the six months ended June 30, 2000.
Approximately 75% of the Company's revenue for the six months ended June
30, 2000 was from portal use fees charged to affiliated companies. The
Company has a contract with each major customer for benefits and services
which includes an automatic annual renewal provision.
NOTE H - COMMITMENTS
Operating Leases
During 1999 and 1998 the Company leased its office space under operating
lease agreements extending through December 31, 1999. The office facility
was shared with the Parent company and other affiliates. The Companies
allocable portion (based on square footage) of rent expense for 1999 and
1998 amounted to $41,015 and $ 16,502 respectively.
On August 1, 1999 the Parent entered into a noncancellable lease agreement
for office space that expires July 31, 2009. The Company occupies 70% of
the office and therefore 70% of rental cost, will be allocated by the
Parent to the Company.
The following is a schedule by years of the approximate future minimum
rental payments allocable to the Company that will be paid to the Parent:
2000 $ 97,374
2001 120,448
2002 124,654
2003 127,763
2004 131,596
Thereafter 654,955
-----------
$ 1,256,790
===========
(continued)
F-16
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE H - COMMITMENTS - Continued
Employment Agreements
The Company has entered into employment agreements with key senior
employees commencing July 1, 2000 providing for aggregate annual
compensation of $381,000 plus bonuses.
Commencing July 1, 2000, the Company intends to pay bonuses to its
employees aggregating 2.25% of revenue generated from outside third
parties subject to certain ceiling limitations.
The company has a five employment agreement with President of the
Company dated April 1, 1998 that requires the payment of a base salary of
$250,000 plus 5% of gross revenues (defined as gross revenue from outside
third parties). Compensation to the President included in the statement of
operations is as follows:
1998 $ 381,084
1999 369,313
Six months ended June 30, 1999 193,272
Six months ended June 30, 2000 193,000
Included in the President's compensation for the six months ended June 30,
2000 is $47,754 attributed to the 2,000,000 TD transaction.
NOTE I - RELATED PARTY TRANSACTIONS
The Company coordinates it travel arrangements through a company owned by
the majority shareholder. Total amounts paid to this company amounted to
$18,800 and $16,932 for the years 1998 and 1999 and $6,575 and $29,414 for
the six months ended June 30, 1999 and 2000, respectively.
The Company's customer contacts are used by the Parent and its
subsidiaries to offer their services to these customers. No fees have been
paid to the Company for the use of the customer list.
Refer to all other notes to the financial statements for the description
of other significant related party transactions.
F-17
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE J- LONG-TERM INCENTIVE PLAN
On August 16, 2000, the Company adopted a Long-Term Incentive Plan for the
benefit of employees. Under the plan, the Board of Directors of the
Company (through a committee) can award a Nonqualified Stock Option, an
Incentive Stock Option, a Stock Appreciation Right, or Restricted Stock to
key employees and other persons who contribute materially to the success
and profitability of the Company. The exercise price of each share subject
to an Incentive Stock Option shall not be less than the fair market value
of the Company's stock on the Incentive Stock Option's date of grant.
Each Option Agreement shall specify the vesting schedule applicable to the
Option. The Committee, in its sole and absolute discretion, may accelerate
the vesting of any Option at any time. The aggregate fair market value
(determined on grant date) with respect to which any Incentive Stock
Options may become exercisable by any individual for the first time in any
calendar year shall not exceed $ 100,000. No options have been granted
under this plan.
The Parent Company has a similar stock option plan. Under this plan, the
parent granted 2,695,000 options to employees of the Company at an
exercise price of $1.50 which equaled the fair market value of the stock
on the date of grant.
NOTE K - PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro forma provision for income taxes differs from the amount of pro forma
income tax determined by applying the applicable federal statutory rates
primarily because of the effect of state income taxes.
NOTE L - STOCK OPTION
On June 7, 2000, the company granted Boru Enterprises, Inc. (Boru) an
option to purchase 495,000 shares of common stock at an exercise price of $1.00
per share. The option was granted to compensate Boru for locating a suitable
company (i.e. the Parent Company) for a reverse acquisition. The fair value of
the option at the date of grant was $250,000. The fair value of the grant was
estimated at the date of grant using the binomial option-pricing model with the
following weighted average assumptions: expected volatility of 101.68 percent,
risk-free interest rate of 6.00%, dividend yield of 0.0 percent and an expected
holding period of five years. The Company has no market for its common stock,
and therefore the Parent Company's stock price and volatility factors were used
to value this option.
F-18
<PAGE>
JoinUsOnline.Com, Inc.
(a subsidiary of Interactive Technologies.com, Ltd.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Two Years Ended December 31, 1999 and for the
Six Months Ended June 30, 1999 and 2000
(Information Relating to the Six Months Ended
June 30, 1999 and 2000 is Unaudited)
NOTE M -SUBSEQUENT EVENT
On August 17, 2000, the Company increased its authorized capital to
50,000,000 shares consisting of 40,000,000 shares of $.001 par value
common stock and 10,000,000 shares that may be issued in various series or
classes of $.001 par value preferred stock carrying different rights and
privileges. Prior to August 17, 2000, the Company's common stock had no
par value. In addition, the Company split its common stock 6,666.66 to 1
resulting in 10,000,000 issued and outstanding shares. The accompanying
financial statements have been restated to reflect the 10,000,000
outstanding shares of common stock and the changes from no par value to
$.001 par value common stock.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Pursuant to the company's certificate of incorporation, the personal liability
of a director or officer of the company to the company or a shareholder for
monetary damages for breach of a fiduciary duty is limited to situations in
which a director's or officer's acts or omissions involve intentional
misconduct, fraud or knowing violations of law.
The company's certificate of incorporation and bylaws provide for the
indemnification of directors and officers of the company to the maximum extent
permitted by law. The bylaws provide generally for indemnification as to all
expenses incurred or imposed upon them as a result of actions, suits or
proceedings if they act in good faith and in a manner they reasonably believe to
be in or not opposed to the best interests of the company. These documents,
among other things, indemnify the company's employees, officers and directors
for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by such person in any action or proceeding,
including any action by or in the right of the company, on account of services
as any employee, officer or director of the company or as an employee, officer
or director of any affiliate of the company. The company believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the company as to which indemnification is being
sought, and the company is not aware of any pending or threatened litigation
that may result in claims for indemnification by any director, officer, employee
or other agent.
Item 25. Other Expenses of Issuance and Distribution
Description Amount
----------- ------
Registration Fee $6,811
NASD Filing Fee
Nasdaq National Market listing fees *
Legal Fees and Expenses (including Blue Sky) *
Accounting Fees and Expenses *
Transfer Agent Fees and Expenses *
Printing Expenses *
Miscellaneous *
------
$*.(1)
======
----------
* To be included by amendment.
Item 26. Recent Sales of Unregistered Securities
None.
II-1
<PAGE>
Item 27. Exhibits
Exhibit
Number Description
------ -----------
2.1 Restated Certificate of Incorporation
2.2 By-laws
4.1 Specimen stock certificate of common stock
4.2 Stock Option Plan (the "Plan")
4.3 Form of Option issuable under the Plan.
4.4 Option dated June 7, 2000 granted to Boru Enterprises, Inc.
10.1 Employment Agreement between the Company and William R. Becker
10.2 Amendment to Employment Agreement dated between the Company and
William R. Becker
10.3 Standard Form of JoinUsOnline.com Benefit and Service Portal
Agreement
10.4 Standard Form of JoinUsOnline Benefit and Service Agreement
10.5 Portal Technology and Software Agreement between the Company and
United Interactive Technologies, Inc.
10.6 Web Development Portal Marketing Agreement between the Company and
United Interactive Technologies, Inc.
10.7 Portal Technology and Software Agreement between the Company and
Integrated Merchant Services, Inc.
10.8 Merchant Referral Portal Marketing Agreement between the Company and
Integrated Merchant Services, Inc.
10.9 Portal Technology and Software Agreement between the Company and
Express Financial Corp.
10.10 Mortgage Lead Portal Marketing Agreement between the Company and
Express Financial Corp.
23.1 Consent of Grant Thornton LLP
II-2
<PAGE>
23.2 Consent of Hall Dickler Kent Goldstein & Wood
24 Power of Attorney (see page II-5)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
Item 28. Undertakings
(a) Rule 415 Offering. Registrant will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statements to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information 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) (Section 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) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities being registered that remain unsold at the end of the offering.
(e) Request for acceleration of effective date. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, 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.
II-3
<PAGE>
In the event that 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 small business issuer 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 competent jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Delray Beach, State of Florida, on August 22, 2000.
JoinUsOnline.Com, Inc.
By: /s/ William R. Becker
------------------------------------
William R. Becker, Chief (Principal)
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears appoints each of William R. Becker and
Matthew J. Cohen, his agent and attorney-in-fact, with full power of
substitution to execute for him and in his name, in any and all capacities, all
amendments (including post-effective amendments) to the Registration Statement
to which this power of attorney is attached.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ William R. Becker Chief (Principal) Executive August 22, 2000
-------------------------------- Officer, Director
William R. Becker
/s/ Matthew J. Cohen Chief (Principal) Financial August 22, 2000
-------------------------------- Officer, Director
Matthew J. Cohen
/s/ Peter Tamayo, Jr. Director August 22, 2000
--------------------------------
Peter Tamayo, Jr.
/s/ Lawrence J. Brady Director August 22, 2000
--------------------------------
Lawrence J. Brady
Director
--------------------------------
Larry Pressler
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
------ ----------- ----
2.1 Restated Certificate of Incorporation
2.2 By-laws
4.1 Specimen stock certificate of common stock
4.2 Stock Option Plan (the "Plan")
4.3 Form of Option issuable under the Plan.
4.4 Option dated June 7, 2000 granted to Boru Enterprises,
Inc.
10.1 Employment Agreement between the Company and William R.
Becker
10.2 Amendment to Employment Agreement dated between the
Company and William R. Becker
10.3 Standard Form of JoinUsOnline.com Benefit and Service
Portal Agreement
10.4 Standard Form of JoinUsOnline Benefit and Service
Agreement
10.5 Portal Technology and Software Agreement between the
Company and United Interactive Technologies, Inc.
10.6 Web Development Portal Marketing Agreement between the
Company and United Interactive Technologies, Inc.
10.7 Portal Technology and Software Agreement between the
Company and Integrated Merchant Services, Inc.
10.8 Merchant Referral Portal Marketing Agreement between the
Company and Integrated Merchant Services, Inc.
10.9 Portal Technology and Software Agreement between the
Company and Express Financial Corp.
10.10 Mortgage Lead Portal Marketing Agreement between the
Company and Express Financial Corp.
23.1 Consent of Grant Thornton LLP
II-6
<PAGE>
23.2 Consent of Hall Dickler Kent Goldstein & Wood
24 Power of Attorney (see page II-5)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
II-7
