UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8/S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VIRTUALSELLERS.COM, INC.
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(Exact name of registrant as specified in its charter)
CANADA 911353658
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1000, 120 North LaSalle Street, Chicago, Illinois 60602
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(Address of Principal Executive Offices) (Zip Code)
EMPLOYMENT AGREEMENT - KEVIN DUDLEY
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(Full title of the plan)
DENNIS SINCLAIR
VIRTUALSELLERS.COM, INC.
SUITE 1000, 120 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60602
(Name and address of agent for service)
(312) 920-9999
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(Telephone number, including area code, of agent for service)
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
VIRGIL Z. HLUS
CLARK, WILSON, BARRISTERS AND SOLICITORS
#800 - 885 WEST GEORGIA STREET
VANCOUVER, BRITISH COLUMBIA, CANADA, V6C 3H1
TELEPHONE: (604) 687-5700
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<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Securities to Amount to be Maximum Offering Maximum Aggregate Amount of
be Registered Registered Price Per Share Offering Price Registration Fee
------------------------------- ----------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Common Shares, A maximum of
no par value 100,000 shares(2) $ 1.00(1) $ 100,000(1) $ 26.40(1)
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<FN>
(1) The price is estimated in accordance with Rule 457(h)(1) under the Securities Act of 1933, as amended,
solely for the purpose of calculating the registration fee, based on the average of the bid and asked price
($0.953 bid; $1.047 ask) of the common shares as reported on the National Association of Securities Dealers
Inc.'s Over the Counter Bulletin Board on November 24, 2000.
(2) Pursuant to an Employment Agreement between the Company and Kevin Dudley, dated March 15, 2000, the
Company issued 100,000 common shares to Kevin Dudley as a performance bonus for services rendered.
</TABLE>
EXPLANATORY NOTE
Virtualsellers.com, Inc. (the "Company") has prepared this Registration
Statement in accordance with the requirements of Form S-8 under the Securities
Act of 1933, as amended (the "1933 Act"), to register shares of the Company's
common shares, no par value, issued pursuant to the Employment Agreement (the
"Employment Agreement") between the Company and Kevin Dudley, dated March 15,
2000.
Under cover of this Form S-8 is the Company's Reoffer Prospectus, prepared in
accordance with Part I of Form S-3 under the 1933 Act. This Reoffer Prospectus
has been prepared pursuant to Instruction C of Form S-8, in accordance with the
requirements of Part I of Form S-3, and may be used for reofferings and resales
on a continuous or delayed basis in the future of up to an aggregate of 100,000
common shares which have been issued pursuant to the Employment Agreement.
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
We will send or give the documents containing the information specified in Part
I of Form S-8 to Kevin Dudley as specified by the Securities and Exchange
Commission Rule 428(b)(1) under the 1933 Act. We do not need to file these
documents with the Securities and Exchange Commission either as part of this
Registration Statement or as prospectuses or prospectuses supplements under Rule
424 of the 1933 Act.
PRE-OFFER PROSPECTUS
The date of this Prospectus is the 27th day of November, 2000
100,000 Shares
VIRTUALSELLERS.COM, INC.
Suite 1000, 120 North LaSalle Street
Chicago, Illinois 60602
Common Shares (without par value)
The 100,000 common shares in our capital stock being registered pursuant to this
registration statement are offered by one of our employees and shareholders,
Kevin Dudley. The common shares owned by Kevin Dudley may be offered for sale
from time to time at market prices prevailing at the time of sale or at
negotiated prices by Kevin Dudley, and without payments of any underwriting
discounts or commission, except for usual and customary selling commissions paid
to brokers or dealers. We will not receive any proceeds from the sale of any of
the common shares by Kevin Dudley. Kevin Dudley is an employee who has acquired
the 100,000 common shares pursuant to an Employment Agreement. We are paying
the expenses incurred in registering the common shares.
<PAGE>
The 100,000 common shares are "restricted securities" under the 1933 Act because
they were issued to the employee prior to the filing of this registration
statement. The reoffer prospectus has been prepared for the purpose of
registering the common shares under the 1933 Act to allow for future sales by
the employee (the selling stockholder), on a continuous or delayed basis, to the
public without restriction. To our knowledge, the selling stockholder has no
arrangement with any brokerage firm for the sale of the 100,000 common shares.
The selling stockholder may be deemed to be an "underwriter" within the meaning
of the 1933 Act. Any commissions received by a broker or dealer in connection
with the resales of the common shares may be deemed to be underwriting
commissions or discounts under the 1933 Act.
Our common shares are traded on the National Association of Securities Dealers
Over-the Counter Bulletin Board under the symbol VDOT. As of November 24, 2000,
the average of the bid and asked price ($0.953 bid; $1.047 ask) of our common
shares as reported on the National Association of Securities Dealers Inc.'s Over
the Counter Bulletin Board on November 24, 2000 was $1.00.
<PAGE>
THE COMMON SHARES OFFERED PURSUANT TO THIS REGISTRATION STATEMENT INVOLVE A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 8 OF THE 10(A) PROSPECTUS. THESE
ARE SPECULATIVE SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
TABLE OF CONTENTS
PART I PAGE
Information Required in the Section 10(A) Prospectus ii
Reoffer Prospectus 1
Available Information 1
Incorporation of Documents by Reference 1
The Company 2
Risk Factors 8
Use of Proceeds 17
Determination of Offering Price 17
Dilution 17
Selling Shareholders 17
Plan of Distribution 18
Description of Securities 18
Interests of Named Experts and Counsel 19
Legal Matters 19
Disclosure of Commission Position 19
<PAGE>
AVAILABLE INFORMATION
You should only rely on the information incorporated by reference or provided in
this reoffer prospectus or any supplement. We have not authorized anyone else
to provide you with different information. The common shares are not being
offered in any state where the offer is not permitted. You should not assume
that the information in this reoffer prospectus or any supplement is accurate as
of any date other than the date on the front of this reoffer prospectus.
Virtualsellers.com, Inc. files annual, quarterly and special reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "SEC") as is required by the Securities Exchange Act of 1934, as amended
(the "1934 Act"). You may read and copy any reports, statements or other
information we have filed at the SEC's Public Reference Room at 450 Fifth Street
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Rooms. In addition, copies may be obtained
(at prescribed rates) at the SEC's Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the SEC's Regional offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
75 Park Place, Room 1228, New York, New York 10007. Our filings are also
available on the Internet at the SEC's website at http:\\www.sec.gov, and from
commercial document retrieval services, such as Primark, whose telephone number
is 1-800-777-3272.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this reoffer
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this reoffer
prospectus, except for any information superseded by information in this reoffer
prospectus.
We filed the following documents, which are incorporated into this reoffer
prospectus by reference:
1. Our Form 10-K Annual Report, filed on June 14, 2000;
2. Our Form 8-K Current Report, filed on June 15, 2000;
3. The Proxy Statement circulated to our shareholders pursuant to Section
14(a) of the Securities Act of 1934, filed on June 28, 2000, with respect to our
Annual General Meeting held on August 4, 2000;
4. Our Form 10-Q Quarterly Report, filed on July 14, 2000, for the quarter
ending May 31, 2000;
5. Our Form 8-K/A Current Report, filed on August 25, 2000; and
6. Our Form 10-Q Quarterly Report, filed on October 16, 2000, for the
quarter ending August 31, 2000.
In addition to the foregoing, all documents that we subsequently file pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act, prior to the filing of a
post-effective amendment indicating that all of the securities offered pursuant
to this reoffer prospectus have been sold or deregistering all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference in
this registration statement shall be deemed to be modified or superseded for
purposes of this registration statement to the extent that a statement contained
in this reoffer prospectus or in any subsequently filed document that is also
incorporated by reference in this reoffer prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this registration
statement.
<PAGE>
WE WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS REOFFER
PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST, A COPY OF ANY OR ALL
DOCUMENTS INCORPORATED BY REFERENCE INTO THIS REOFFER PROSPECTUS (EXCLUDING
EXHIBITS, UNLESS THE EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THE INFORMATION THE REOFFER PROSPECTUS INCORPORATES). REQUESTS SHOULD BE
DIRECTED TO DENNIS SINCLAIR, SUITE 1000, 120 NORTH LASALLE STREET, CHICAGO,
ILLINOIS, USA, 60602. OUR TELEPHONE NUMBER AT THAT LOCATION IS (312) 920-9120.
You may read and copy any reports, statements or other information we have filed
at the SEC's Public Reference Rooms at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Rooms. Our filings are also available on the Internet at the
SEC's website at http:\\www.sec.gov, and from commercial document retrieval
services, such as Primark, whose telephone number is 1-800-777-3272.
THE COMPANY
Our business operations focus on traditional and e-commerce transaction
processing and "backroom support" services for other businesses. Part of our
services assist businesses in their transition from old technologies or
dissimilar software systems to state-of-the-art e-commerce capable websites so
that they can retail their products and/or services over the Internet.
We provide the following services and/or products:
- through our call center, we provide transaction processing, centralized
billing, customer and technical support, customer service, order entry, order
fulfilment, bill collection, help desk services and dispatch functions;
- through Virtualsellers.com, we provide turnkey e-commerce transaction
processing and website development, maintenance and hosting services;
- through CallDirect, we sell telephone related products and provides
transaction processing and customer services;
- through Virtualsellers.com, we sell our proprietary software engine and
language interpreter called TAME (Tag Activated Markup Enhancement). TAME is an
interpretative language which enables developers to create Internet and
e-commerce applications that interface with all major operating systems and web
browsers. The scope and functionality of the TAME language is comparable to
Java or Javascript; and
- through Sullivan Park, an internet services developer, we will continue to
provide e-business development services to medium and large-sized businesses,
offer services as a business-to-business incubator, e-commerce development,
internet consulting, back-office integration and web-based remote application
services.
VirtualSellers.com
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VirtualSellers.com can provide turnkey e-commerce transaction processing,
website development, maintenance and hosting services. VirtualSellers.com is
able to assist companies in designing, building, deploying and managing
sophisticated, secure e-commerce ready Internet websites, which provide
immediately available, customized, secure and complete e-commerce transaction
processing capabilities enabling companies to retail their products and/or
services over the Internet. VirtualSellers.com can also convert existing
websites into e-commerce enabled websites within a matter of hours.
In addition, VirtualSellers.com can offer these businesses live customer
service, order processing and other "backroom support" services through our call
center. As a result, VirtualSellers.com can truly offer a complete set of
traditional and e-business / e-commerce service solutions.
<PAGE>
By offering such a wide scope of services, VirtualSellers.com is positioned to
help businesses at any stage in the development of their e-commerce solution.
For instance, VirtualSellers.com can provide clients with complete, end-to-end
e-commerce transaction processing systems or can provide only specific services
in conjunction with clients' existing websites and Internet service providers.
VirtualSellers.com allows clients to bypass the traditional steps necessary to
create a secure website, including the need for software and hardware, Internet
access, software programming and website design, and Internet-accepted business
banking accounts. In addition, clients will avoid hiring and paying for the
labour necessary to learn the systems and process the orders.
VirtualSellers.com has the capability to build, maintain and host an e-commerce
capable website, thereby enabling businesses to develop an online selling
presence by reducing a business' time to market and allowing the business'
existing customers to purchase the business' products or services over the
Internet. VirtualSellers.com offers a variety of e-commerce transaction
processing services, including:
- integrated online marketing;
- secure real time on-line order processing and clearing, including a
proprietary 8-point fraud verification check;
- secure online order billing, payment acceptance and verification, and
payment collection;
- business banking account services;
- shopping cart software which allows consumers to order several items,
calculates applicable taxes, totals the order and accepts a credit card as
payment;
- inventory interface;
- order fulfilment tracking;
- inventory tracking;
- payment collection;
- customer service support;
- order tracking;
- retention of commissions at the point-of-sale; and
- provision of all the necessary documentation to facilitate product
delivery.
VirtualSellers.com has been providing e-commerce solutions for three years and
has serviced more than 100 companies in both the business-to-business and
business-to-consumer markets. VirtualSellers.com's clients include a wide range
of businesses and have included the Kansas City Royals, former AFL Kansas City
Chiefs football coach Hank Stram, Beanie Babies stuffed toys and various music
products.
VirtualSellers.com has found that a vast majority of managers of businesses - as
well as entrepreneurs - do not have the time or resources to create and manage a
website designed to sell their products in a secure environment. Moreover, many
larger corporations continue to outsource this aspect of their e-commerce
business in order to keep their focus on products and product development and to
minimize incremental costs associated with marketing over the Internet. These
two types of businesses provide VirtualSellers.com with its core market. Other
target customers for VirtualSellers.com's e-commerce transaction services
include Internet-centered businesses, including those who have developed custom
transaction processing systems and established retailers that have opened online
stores to supplement their traditional retail models. VirtualSellers.com
reaches these businesses through a sales force as well
<PAGE>
as through an indirect sales channel that leverages existing sales and marketing
infrastructures developed by its affiliates.
All products and services are also offered directly through our e-commerce
capable website "Virutalsellers.com". VirtualSellers.com's efforts in marketing
and selling the e-commerce transaction processing services, and the website
development, maintenance and hosting services is accomplished through:
- our website;
- direct sales by our own staff through outbound telemarketing programs;
- tradeshows;
- referrals provided through a marketing agreement with IMC (Internet
Marketing Consortium) Cable Print Network Marketing Inc.; and
- strategic partnerships and agents.
TAME (Tag Activated Markup Enhancer)
----------------------------------------
TAME is a browser based, cross platform, scripting language that is compatible
with Unix, Linux, Microsoft Windows NT and virtually every major operating
system. The scope and functionality of the language can be compared to ASP,
Javascript and Java Server Pages. TAME's competitive advantage is derived from
its ease of programming and deployment, its scalability and flexibility, and its
extensive ability to be customized. TAME's simplification and other inherent
advantages lead to rapid application development.
TAME is also fully compatible with XML (eXtensible Markup Language), a website
programming language that has quickly become the de facto standard for
electronic business information. XML is easy to learn, easily extensible to
support new data attributes and flexible enough to represent any information.
The Company uses TAME to provide businesses with a quick, easy and seamless way
to establish an e-commerce enabled presence on the Internet, and as the key
facilitator for other e-business solutions. With the software, a business can
launch a new website, upgrade an existing one, add leading-edge shopping cart
technology to a website, or add new services for its own customers. For those
companies with existing websites, TAME enable them to remain on the cutting edge
of Internet technology without having to continually invest in new software and
hardware.
In addition to using TAME to assist our clients, we operate a high technology
laboratory in the Chicago area that serves as the testing ground for TAME - both
in terms of upgrading the software to keep pace with technology changes and to
test new applications for clients. Through the operation of the lab, we ensure
that new versions of and new applications for TAME are market-ready and real
world tested.
TAME has many benefits and competitive advantages, including the following:
- PLATFORM INDEPENDENCE. TAME is compatible with Unix, Linux, Microsoft
Windows NT and simplifies Web and enterprise infrastructure development over
clients' existing architectures.
- SIMPLIFICATION. TAME takes disparate technologies and legacy systems and
runs them within one environment eliminating downtime and upgrade
incompatibilities. TAME connects software, hardware, and different operating
systems into one cohesive group.
- DRAMATIC COST SAVINGS. TAME enables businesses to keep using their legacy
systems, saving significant amounts of money by eliminating the need for
software acquisitions, upgrades and additional programming. TAME also allows
incompatible legacy systems and databases to communicate with minimal coding.
<PAGE>
- EASE OF USE. TAME is quick and easy to learn, and dramatically reduces
coding time, as compared to other competing software languages. TAME's
predefined tags eliminate whole processes which save programmer's time, reduces
the development process and reduces time to delivery.
- REDUCTION OF BANDWIDTH REQUIREMENTS. Because TAME processes data requests
at the server side, only formatted data results are sent to the user's browser.
This savings in file size translates directly to savings in bandwidth. The less
data being sent, the less bandwidth an application will require.
- FASTER LOADING. For users connected to the Internet via modems, TAME
means dramatically faster loading of pages. For businesses hosting websites on
dedicated (and expensive) Internet connections, it means lowered connection
costs.
- TAME IS XML-ENABLED. XML (extensible Markup Language) is acclaimed as the
new standard in data sharing via the Internet. This technology breakthrough is
also believed to be the replacement for current electronic data interchange
(EDI) technology that many companies use for business-to-business transactions.
Because TAME contains an XML object interpreter, the time required to develop
website tags is greatly reduced. TAME can access many dissimilar databases from
different operating systems and provide a common interface to display the data.
TAME includes a dynamic Internet web page engine and provides Internet access to
databases, giving developers the ability to easily create solutions that can be
deployed on all major operating systems and server environments, resolving
common problems associated with many of today's non-XML Internet browsers.
- BROWSER COMPATIBILITY. Unlike most XML solutions, which require specific
Internet browsers, TAME XML will function on nearly all browsers. This browser
compatibility is a key advantage to TAME because industry standards for XML are
still in their infancy.
We market and sell TAME to businesses using a combination of direct and indirect
distribution channels, including the following:
- direct sales by our staff through our outbound telemarketing program;
- sales through our website - www.tameable.com;
- sales through industry trade shows like COMDEX;
- sales through reselling agreements with companies like RedHat Inc.; and
- sales through agents and strategic partnerships.
We intend to market and sell TAME using the following direct and indirect
distribution channels:
- sales through strategic relationships with hardware vendors;
- direct sales to application service providers who in turn sell to their
customers;
- direct sales to Internet and other service providers who provide website
development and e-commerce solutions;
- agents who develop or resell integrated solutions;
- organizations that use TAME to create websites and Internet applications
with electronic commerce, content management and personalization capabilities
for Internet, intranet and extranet use; and
- sponsorship of seminars for potential customers and promoting special
events.
Our website allows visitors to download, evaluate and purchase TAME. Electronic
distribution provides us with a low-cost, globally accessible, 24-hour sales
distribution channel. We continue to develop market awareness of the "TAME"
brand. Our branding strategy includes participating in trade shows and
conferences, promoting special events and advertising our products and services
in print and electronic media.
Sullivan Park
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<PAGE>
We recently acquired all of the property, assets and undertakings of the
Internet services development business carried on by Sullivan Park. We intend
to continue the business operations of Sullivan Park by incorporating its
customers, operations and employees into a new subsidiary which we have recently
incorporated. Sullivan Park is an Internet services developer, focussing on
building successful business-to-business Internet companies, providing
e-business development services to medium and large-sized businesses, and
offering services as a business-to-business incubator. General services
provided by Sullivan Park include designing and running websites, e-commerce
development, Internet consulting, back-office integration and web-based remote
application services. Specific services to Sullivan Park's customers include
the development and hosting of on-line stores, including services such as site
concept, site design, media production, media acquisition, artwork, animation,
web programming, database programming and application server programming.
The Call Center
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We operate one call center through our subsidiary, NorthNet Telecommunications,
Inc., doing business as Northstar Telesolutions. The call center specializes in
providing the following transaction processing and backroom services for our
clients:
- inbound/outbound telemarketing, including targeted marketing campaigns,
cold calling, inbound marketing promotions and up-selling campaigns;
- customer and technical support;
- customer order entry;
- credit reporting;
- centralized customer billing which can be based on a specified anniversary
date or cycles which are bi-monthly, quarterly, semi-annually or annually;
- customer account reconciliations and reporting using either a client's own
banking structure or specially dedicated accounts at our bank;
- customer payment collection including credit card and pre-authorized
checking;
- collection of customer accounts or disbursement of customer refunds;
- order fulfilment;
- help desk services;
- customer service and dispatch functions;
- direct mail services which involves inserting the direct mail or other
related items into customers' bills before mailing; and
- other computer telephone applications.
We are able to provide our customers with a package of bundled services or a
customized package of any variety of services required by that particular
customer, while providing high quality customer and order support. By
partnering with Rockwell Electronic Commerce Corporation, we have equipped the
call center with a powerful and flexible multimedia customer contact software
solution, which provides the call center with comprehensive and responsive live
e-commerce customer service.
We have expanded the scope of our call center operations to offer our services
to the following businesses:
<PAGE>
- e-commerce businesses;
- cable television operators;
- Internet service providers;
- providers of technical help desk support services;
- providers of property management services;
- direct broadcast satellite services providers;
- retailers of medical, healthcare and consumer products;
- in-house call centers;
- reservation centers; and
- providers of mail order catalogues, other forms of direct mail, broadcast
fax and more traditional forms of marketing services.
We market the call center through periodic advertising and outbound
telemarketing of the services provided by the call center, as well as by
appearances at trade shows relevant to the call center industry. We entered
into a Co-operative Marketing Agreement with Rockwell Electronic Commerce
Corporation, a company engaged in the design, development, manufacture and
support of call center systems. Under this arrangement, we have agreed to work
with Rockwell to create a marketing plan to develop and pursue opportunities for
the marketing and sale of each company's products and services.
CallDirect Enterprises
-----------------------
Through its subsidiary Preferred Telemanagement Inc., doing business as
CallDirect Enterprises ("CallDirect"), we operate as a catalogue reseller of
telephone-related equipment, as well as other products such as multimedia,
entertainment, travel, security and computer accessories for offices and homes.
We use the call center to provide customer service functions for CallDirect, and
through the website "www.calldirect.com", we retail CallDirect's products over
the Internet.
CallDirect's current product line, which is updated continually to ensure access
to the latest telecommunications products and services, is divided into the
following categories:
- headset products;
- cordless telephones;
- telecom products;
- CTI (computer telephone integration) products;
- line switch products;
- call identification products;
- office products;
- cellular and wireless products; and
- miscellaneous and accessory products.
<PAGE>
CallDirect's catalogue and website are its primary sales tools which are
designed to provide all the information necessary for a customer to purchase any
of its products. We believe that CallDirect's direct response catalogue and its
website will enable us to establish a direct relationship with the end user,
especially small home office users. Direct marketing to this target customer
offers the customer superior purchasing convenience, access to technical
knowledge and support, and a wider selection of products than those which are
offered through competing distribution channels. CallDirect plans to continue
to realize sales growth by:
- acquiring new customers through increased catalogue circulation and via
its website;
- stimulating repeat purchases from new and existing customers via e-mail
broadcasts;
- supplementing catalogue mailing, links and banners with outbound
telemarketing to target potentially high volume key accounts; and
- working with the larger inter-connect companies that are more involved
with selling large switches and key systems and not involved in the accessories
to these telephone users.
Increasing the number of prospective customers can also be achieved by accessing
customer lists that have been developed by other major business-to-business
direct marketers. CallDirect has an opportunity to significantly increase the
number of its active customers who have a proven tract record of purchasing both
through catalogues and over the Internet.
We intend to use CallDirect to market the rest of our products and services in
Canada. Accordingly, CallDirect will be able to offer full e-business and other
support services to other catalogue resellers and other businesses located in
Canada.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE DECIDING TO PURCHASE SHARES. ANY OF THE FOLLOWING RISKS
COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS, FINANCIAL CONDITION OR
RESULTS OF OPERATIONS OR ON THE VALUE OF OUR SHARES.
WE HAVE A HISTORY OF LOSSES
We have incurred substantial net losses. A portion of these losses were
incurred in operations which we no longer operate. We incurred losses when we
were involved in the alternate long distance telecommunications business and
have continued to lose money during the transition to becoming a transaction
processing/customer service company. For the fiscal year ended February 29,
2000, we incurred losses of $4,693,230. While we feel confident that we can
secure additional funds through private placement financing and successfully
carry out our business plan, there can be no assurance that we will accomplish
these tasks and achieve profitability.
WE HAVE A LACK OF HISTORY IN THE INTERNET AND E-COMMERCE TRANSACTION PROCESSING
BUSINESSES
Due to the lack of history regarding both Internet business and e-commerce
transaction processing businesses, there is little information on which to base
projections of future profitability. Consideration should be given to risks
inherent to start up businesses and the volatility of emerging technology. Our
viability will depend on our ability to anticipate changes in e-commerce
technology and avoid the pitfalls associated with new businesses. If we are not
successful in addressing these risks, our business will likely be adversely
affected.
WE DEPEND UPON KEY CUSTOMERS FOR SOME OF OUR OPERATIONS
Our call center is dependent upon a limited number of customers for a
substantial portion of its revenues. The loss of any of these customers would
have a significant, materially adverse impact upon the call center's revenues
and prospects for profits but would not significantly impact our working
capital, liquidity or our long term prospects. Each customer accounted for no
more than 25% of the call center's total revenue for the year ended February 29,
<PAGE>
2000. Although we expect to expand our customer base, there can be no assurance
that we will be successful and, if the customer base is expanded, that we will
be able to retain our existing customers. Furthermore, an unexpected decline in
sales to any of such customers could have a materially adverse effect upon our
business. In addition, there are no firm contracts governing our relationship
with any of our Call Center customers. Accordingly, such business relationships
could be terminated or curtailed at any time. The lack of firm contracts with
our customers could have a materially adverse impact on our revenue.
Our e-commerce business is estimated to produce 80% to 90% of our continuing
revenue. While several of our clients may produce substantial sales, none will
account for more than 5% of our total revenue. The remaining revenues will be
generated from the call center and CallDirect operations. As with the call
center, an unexpected decline in sales to any of its e-commerce customers could
have a materially adverse effect on our business. In addition, all sales of
services to our clients are based on short-term contracts, usually 12-months,
and as a result such relationships could be terminated before they expire. This
could have a materially adverse impact on our revenue.
WE FACE STRONG COMPETITION IN ALL OF OUR OPERATIONS
Many of our competitors in both the call center and e-commerce business segments
are substantially larger than us and have significantly greater financial
resources and marketing capabilities than us, together with better name
recognition. It is also possible that new competitors may emerge and acquire
significant market share in each or either of these markets. Competitors with
superior resources and capabilities may be able to utilize such advantages to
market their products and services better, faster and/or cheaper than the we are
able to. Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could have a materially
adverse effect upon our business, results of operations and financial condition.
In addition, there can be no assurance that we will be able to compete
successfully against its present or future competitors in each or either of
these markets.
The telecommunications and Internet markets are both very competitive. We will
compete directly with companies providing similar products and services which
may have certain commercial advantages. Our ability to compete successfully
will require it to develop and maintain technologically advanced products and
services, attract and retain highly qualified personnel, obtain a significant
customer base using our e-commerce transaction processing services and our call
center services, whether alone or with third parties. There can be no assurance
that we will be able to achieve these objectives. Failure to do so would have a
materially adverse effect on our business, operating results and financial
condition. Furthermore, our potential products and services, if successfully
developed, will compete directly with other existing and subsequently developed
products using competing technologies. There can be no assurance that our
competitors will not succeed in developing or marketing technologies and
products that are more effective and commercially desirable than those we
develop or market or that would render our technology and products
non-competitive. Failure of our potential products to compete successfully with
products using competing technologies will have a materially adverse effect on
our business, operating results and financial condition.
The market for customer-premise telecommunications products is highly
competitive. CallDirect competes with a variety of traditional dealers and
retailers, including catalog companies, electronics specialty stores, office
products and computer superstores. A variety of external and internal factors
could effect its ability to compete, including:
- the function, performance, price and reliability of the products offered
by CallDirect and its competitors;
- the timing and success of CallDirect and its competitors' new products;
- development efforts; and
- the effectiveness of CallDirect and its competitors' marketing efforts.
Certain of CallDirect's competitors have greater financial, technical, sales,
marketing, and other resources than its has. CallDirect may not be able to
compete effectively against existing competitors or against new competitors that
may enter the market. In addition, while CallDirect currently does not know of
any competitor specializing in distributing a broad line of telecommunications
products directly to business end users via catalog, outbound
<PAGE>
telemarketing and the Internet, it may not be able to compete successfully in
the future in these direct marketing channels, which may attract new market
entrants, or in other channels that CallDirect may enter or that may be
developed for the sale of telecommunications products.
COSTS OF CATALOG MAILING, PAPER, AND PRINTING MAY INCREASE
Increases in postal rates and paper and printing costs increase the cost of
catalog mailings incurred by CallDirect in the future. An increase in postal
rates or higher than anticipated paper and printing costs could harm our
financial position and results of operations to the extent that we are unable to
pass such increase directly on to customers by raising prices or offset such
increase by implementing more efficient printing, mailing and delivery systems.
WE FACE GOVERNMENT REGULATIONS RELATING TO MAILING LISTS
We are seeking to expand our in-house list of customers and potential customers
by continually renting appropriate mailing lists and sending its catalogs to
prospects obtained from these lists. In the event that the federal or state
governments enact privacy legislation resulting in the increased regulation of
mailing lists, we may be unable to enhance and expand our customer list for
CallDirect. If that was to occur, we could also experience increased costs in
complying with potentially burdensome regulations concerning the solicitation of
consents to keep or add customer names to our mailing lists.
WE DEPEND UPON KEY PERSONNEL
The loss of the services of any of our management and other key employees, for
any reason, may have a materially adverse effect on our continuing operations.
We have entered into a month-to-month employment agreement with Dennis Sinclair,
our President and CEO. As such, there is nothing preventing Dr. Sinclair from
terminating his employment with us at any time. Although we believe that the
loss of Dr. Sinclair will not have a materially adverse impact upon our
business, there can be no assurance in this regard, nor any assurance that we
will be able to find a suitable replacement for Dr. Sinclair. Furthermore, we
do not maintain "key man" life insurance on the lives of Dr. Sinclair or any of
our other officers. To the extent that the services of any of our key employees
becomes unavailable, we will be required to retain other qualified persons;
however, there can be no assurance that it will be able to employ qualified
persons upon acceptable terms.
Our business is labour intensive and places significant importance on its
ability to recruit and retain technical and professional personnel. Our success
is therefore dependent upon its ability to identify, hire and retain additional
qualified personnel, for whose services we will be in competition with other
prospective employers, many of which may have significantly greater resources
than we do. Additionally, demand for qualified personnel conversant with
certain technologies is intense and may outstrip supply as new and additional
skills are required to keep pace with evolving computer technology. There can
be no assurance that we will be able to hire and, if so, retain such additional
qualified personnel. Failure to attract and retain such personnel could have a
materially adverse effect upon our business.
WE RELY UPON TECHNOLOGY AND COMPUTER SYSTEMS
Our call center and transaction processing systems utilize sophisticated and
specialized telecommunications, network and computer technology, and have
focused on the application of these technologies to meet our clients' needs. We
anticipate that it will be necessary to continue to invest in and develop new
and enhanced technology on a timely basis to maintain our competitiveness.
Significant capital expenditures may be required to keep our technology up to
date. Investments in technology and future investments in upgrades and
enhancements to software for such technology may not necessarily ensure our
competiveness. Our future success will also depend in part on our ability to
anticipate and develop information technology solutions which keep pace with
evolving industry standards and changing client demands.
In addition, our business is highly dependent upon our computer and telephone
equipment and software systems, and the temporary or permanent loss of such
equipment or systems, through casualty, operating malfunction or otherwise,
could have a materially adverse effect upon our business. Our business systems
depend on the smooth
<PAGE>
operation of computer systems that may be affected by circumstances beyond our
control. Events that could cause system interruptions are:
- fire;
- earthquake;
- hurricane;
- power loss;
- telecommunications failure; and/or
- unauthorized entry or other events.
We have experienced growing transaction volumes that have occasionally exceeded
its ability to process them. There is a possibility that its existing systems
may be inadequate if demand increases substantially. Finally, although we back
up data as a matter of course, and take other measures to protect against loss,
there is still a certain degree of risk of such losses. A system outage or data
loss could adversely affect our business.
Despite the security measures we maintain, our systems may be vulnerable to
computer viruses, hackers, rogue employees or similar sources of disruption.
Any interruptions in our operations could have a materially adverse effect on
our business. Any problem of this nature could result in significant liability
to customers or financial institutions and may deter potential customers from
using our services. We attempt to limit this sort of liability through back-up
systems, contractual provisions and insurance. However, there is no assurance
that these contractual limitations would be enforceable, or that our insurance
coverage would be adequate to cover potential liabilities.
WE MAY ENCOUNTER SOFTWARE DEFECTS OR DELAYS IN PRODUCT DEVELOPMENT
Internet applications are complex and rely on sophisticated software,
technologically advanced hardware, and the integration of often-incompatible
operating systems. For these reasons, system development often encounters
developmental delays. Software may contain undetected errors. Systematic
failure may occur when revisions are brought on line or when demand for services
increases. We may experience unanticipated delays in the development of software
or implementation on systems underlying our services. Despite testing by
potential customers and by our employees, it is possible that our software may
nevertheless contain errors, and this could have an adverse effect on our
business.
WE DEPEND UPON TREND TOWARD OUTSOURCING BY BUSINESSES
Our call center and e-commerce businesses and growth depend in large part on the
industry trend toward outsourcing information technology and administrative
services. There can be no assurance that this trend will continue, as
organizations may elect to perform such services in-house. We intend to
alleviate our dependence upon any one revenue stream by expanding our business
operations vertically and horizontally. Nevertheless, a significant change in
the direction of this trend toward outsourcing could have a material adverse
effect on our business.
RISK OF EMERGENCY INTERRUPTION OF CALL CENTER AND NETWORK OPERATIONS
Our operations are dependent upon our ability to protect our call center,
e-commerce business and information databases against damage that may be caused
by fire, power failure, telecommunications failures, unauthorized intrusion,
computer viruses and other emergencies. We have taken precautions to protect
both our business and our customers from events that could interrupt delivery of
our services. These precautions include off-site storage of backup data, fire
protection and physical security systems, backup power generators and a disaster
recovery plan. We also maintain business interruption insurance in amounts that
we consider adequate. Notwithstanding such
<PAGE>
precautions, there can be no assurance that a fire, natural disaster, human
error, equipment malfunction or inadequacy, or other event will not occur.
Similar precautions have been implemented with the development of the network
and telecommunication systems for the e-commerce transaction processing
business. Duplication has been built into the networks by having redundant
equipment maintained onsite. Back-up generators and power protection systems
have been installed to ensure continuous operations and firewalls have been
installed to ensure system integrity and safety. Duplicate providers of
bandwidth have been chosen to ensure that connectivity will be uninterrupted.
All of this ensures that customers and vendors will have continuous service to
the e-commerce systems, barring a complete interruption of the
telecommunications and power infrastructures. Notwithstanding such precautions,
there can be no assurance that a fire, natural disaster, human error, equipment
malfunction or inadequacy, or other event will not occur.
WE MAY NOT BE ABLE TO MANAGE OUR FUTURE GROWTH
Our ability to achieve our planned growth is dependent upon a number of factors
including, but not limited to, our ability to hire, train and assimilate
management and other employees, the adequacy of our financial resources, our
ability to identify and efficiently provide and perform such new products and
services as our customers may require in the future and our ability to adapt our
own systems to accommodate our expanded operations. In addition, there can be
no assurance that we will be able to achieve our planned expansion or that we
will be able to manage successfully such expanded operations. Failure to manage
anticipated growth effectively and efficiently could have a materially adverse
effect on our business.
IMPLEMENTATION OF ACQUISITION STRATEGY
Although we have acquired the call center, VirtualSellers.com, CallDirect and
Sullivan Park, we intend to pursue other acquisitions. There can be no
assurance that we will be able to consummate or, if consummated, successfully
integrate the operations and management of future acquisitions. Acquisitions
involve significant risks which could have a materially adverse effect on our
business, including: (i) diversion of management's attention to the assimilation
of the business to be acquired; (ii) the risk that the acquired business will
fail to maintain the quality of services that we have historically provided;
(iii) the need to implement financial and other systems and add management
resources; (iv) the risk that key employees of the acquired business will leave
after the acquisition; (v) potential liabilities of the acquired business; (vi)
unforeseen difficulties in the acquired operations; (vii) adverse short-term
effects on our operating results; (viii) lack of success in assimilating or
integrating the operations of acquired businesses with our business; (ix) the
dilutive effect of the issuance of additional equity securities; (x) the
incurrence of additional debt; and (xi) the amortization of goodwill and other
intangible assets involved in any acquisitions that are accounted for using the
purchase method of accounting. There can be no assurance that we will
successfully implement its acquisition strategy. Furthermore, there can be no
assurance that any acquisition will achieve levels of revenue and profitability
or otherwise perform as expected, or be consummated on acceptable terms to
enhance shareholder value. We will, however, continue to monitor acquisition
opportunities.
WE OPERATE IN AN ENVIRONMENT THAT FACES RAPID TECHNOLOGICAL CHANGE
Our future success will depend in large part upon our ability to keep pace with
technology. Rapid changes have occurred, and are likely to continue to occur.
There can be no assurance that our development efforts will not be rendered
obsolete by research efforts and technological advances made by others. The
market for information technology services is characterized by rapid
technological advances, frequent new product introductions and enhancements, and
changes in customer requirements. Although we believe that the call center and
e-commerce business are sufficient for the present, we believe that our future
success will depend in large part on our ability to service new products,
platforms and rapidly changing technology. These factors will require us to
provide adequately trained personnel to address the increasingly sophisticated,
complex and evolving needs of its customers. Our ability to capitalize on
future acquisitions in the call center and e-commerce industries will depend on
our ability to (i) enhance its software and successfully integrate such software
into our technical product support services, (ii) adapt such software to new
hardware and operating system requirements and (iii) develop new software
products in an industry characterized by increasingly rapid product and
technological obsolescence. Any failure by us to anticipate or respond rapidly
to technological advances, new products and enhancements, or changes in customer
requirements could have a materially adverse effect on our business.
<PAGE>
WE HAVE A LIMITED SALES FORCE AND NEW DISTRIBUTION CHANNELS
We have only a limited number of sales and marketing employees and, therefore,
rely heavily on distribution channels for sales of our products. Because of the
rapidly evolving nature of Internet business, we are not certain that
established distribution channels for our products and services will be an
adequate network for us to achieve our goals, or that we will be able to develop
alternative channels.
OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE
We have experienced and will continue to experience quarterly variations in net
sales and net income as a result of many factors, including the following:
- the number and timing of catalog mailings;
- catalog response rates;
- product mix;
- the level of selling, general and administrative expenses;
- the timing and level of product development expenses; and
- the timing and success of our new product introductions, as well as that
of our competitors.
We plan our operating expenditures based on sales forecasts. If our net sales
are below our expectations in any given quarter, our operating results will
suffer. Due to the foregoing factors, in some future quarter our operating
results may be below the expectations of public market analysts and investors.
In such event, the price of our common shares would likely suffer.
WE NEED TO DEVELOP NEW PRODUCTS SUCCESSFULLY
The market for telecommunications products is generally characterized by rapidly
changing technology that can render existing products obsolete and unmarketable.
We believe that the current and future success of CallDirect will depend on our
ability to identify, develop, or source and successfully introduce and market,
in a timely manner, enhancements to our existing products and new products that
respond effectively to technological change. To accomplish this, we intend to
consult with our direct customer contacts and use our product development
capabilities. We have experienced delays in the past in introducing certain of
our products and could encounter similar technical difficulties in the future
that could result in delayed product introductions or expensive recalls. We may
not successfully anticipate technological changes or select and develop new and
enhanced products on a timely basis. In addition, if were are able to develop
or source any products, these products may not gain market acceptance.
MOST OF OUR AGREEMENTS ARE SHORT TERM
The standard customer agreement for both customers of the call center and of
Virtualsellers.com are short-term and can be terminated without cause by either
party. We expect that there will be terminations and non-renewals from time to
time and that we may not be able to replace all of these clients. Our financial
performance could be damaged by a significant number of terminations or
non-renewals.
WE ARE DEPENDANT ON THE GROWTH OF THE INTERNET AS A COMMUNICATION MEDIUM AND AS
A VEHICLE FOR COMMERCE
Use of the Internet by businesses and consumers as a medium for commerce is at
an early stage of development, and is therefore subject to uncertainty.
E-commerce is a relatively recent development. We cannot be certain that
<PAGE>
acceptance and use of the Internet will continue to develop or that a
sufficiently broad base of businesses and consumers will adopt, and continue to
use, the Internet to exchange goods and services.
The development of the Internet as a commercial marketplace may occur more
slowly than anticipated. Factors influencing its growth include development of
the necessary network infrastructure and associated technologies. Delays in
the development or adoption of new standards and protocols required to handle
increased levels of Internet activity could also have a detrimental effect.
These factors could result in slower response times or adversely affect usage of
the Internet, resulting in lower numbers of e-commerce transactions and
decreased demand for the services provided by the Internet.
INTERNET TECHNOLOGY IS RAPIDLY CHANGING
The market for Internet products and services is in a constant state of flux,
characterized by rapid technological developments and changing industry
standards. New products are introduced constantly as bandwidth becomes cheaper.
As Internet access becomes more widely available, we may be required to make
significant changes to the design and content of our products and services.
Failure to effectively adapt to these or any other technological developments
could adversely affect our business, operating results and financial condition.
PROTECTION OF TRADENAMES AND DOMAIN NAMES AGAINST ALL INFRINGERS
We currently hold the Internet domain name "virtualsellers.com" as well as
various other related names, and use "VirtualSellers" and "TAME" as tradenames.
Domain names generally are regulated by Internet regulatory bodies and are
subject to change and may be superseded, in some cases, by the laws, rules and
regulations governing the registration of tradenames and trademarks with the
United States Patent and Trademark Office and certain other common law rights.
In the event that the domain registrars are changed, new ones are created or we
are deemed to be infringing upon another's tradename or trademark, it could be
unable to prevent third parties from acquiring or using, as the case may be, our
domain name, tradenames or trademarks which could adversely affect our brand
name and other proprietary rights.
WE FACE RISKS ASSOCIATED WITH INTELLECTUAL PROPERTY RIGHTS
We rely on a combination of patent, copyright, trademark and trade secret laws,
and contractual provisions to protect our proprietary rights in our products and
services. As part of our confidentiality procedures, we generally enter into
non-disclosure agreements with our employees, contractors, consultants,
distributors, and corporate partners, and limit access to and distribution of
our software, documentation, and other proprietary information. Despite these
precautions, a third party may copy or otherwise obtain and use its products or
technology independently. In addition, effective protection of intellectual
property rights may be unavailable or limited in certain foreign countries.
No material claims are currently pending regarding the infringement of the
proprietary rights of third parties by our products, trademarks, or other
proprietary rights. However, we may receive, in the future, communications from
third parties asserting that our products infringe, or may infringe, the
proprietary rights of third parties. In the event of litigation to determine
the validity of any third-party claims, such litigation, whether or not
determined in our favor, could result in significant expense to us and divert
the efforts of our technical and management personnel from productive tasks. In
the event of an adverse ruling in such litigation, we might be required to
discontinue the use and sale of infringing products, expend significant
resources to develop non-infringing technology, or obtain licenses to infringing
technology. We may be unable to obtain a license for the disputed third-party
technology on reasonable commercial terms or at all. If someone asserts a
successful claim against us and we are unable to develop or license a substitute
technology, our business would suffer.
OUR LIMITED MARKETING AND SALES RESOURCES COULD PREVENT US FROM EFFECTIVELY
MARKETING OUR PRODUCTS AND SERVICES
We have limited internal marketing and sales resources and personnel. In order
to market any products and services we may develop, we will have to either
develop a marketing and sales force with technical expertise and distribution
<PAGE>
capability or outsource such duties to independent contractors. There can be no
assurance that we will be able to establish sales and distribution capabilities
or that we will be successful in gaining market acceptance for any products or
services we may develop. There can be no assurance that we will be able to
recruit skilled sales, marketing, service or support personnel, that agreements
with distributors will be available on terms commercially reasonable to us, or
at all, or that our marketing and sales efforts will be successful. Failure to
successfully establish a marketing and sales organization, whether directly or
through third parties, would have a materially adverse effect on our business,
financial condition, cash flows, and results of operations. To the extent that
we arrange with third parties to market our products or services, the success of
such products and services may depend on the efforts of such third parties.
There can be no assurance that any of our proposed marketing schedules or plans
can or will be met.
WE MAY NOT BE ABLE TO PROTECT OUR PATENTS AND PROPRIETARY TECHNOLOGY, WHICH
COULD HAVE A MATERIALLY ADVERSE EFFECT ON OUR BUSINESS
Our ability to compete effectively in the e-commerce industry may depend on our
success in developing and marketing our products and services and/or acquiring
other suitable e-commerce businesses and protecting our proprietary technology,
both in the United States and abroad. The patent positions of technology
companies generally involve complex legal and factual questions. There can be
no assurances that any patent that we apply for will be issued, or that any
patents issued will not be challenged, invalidated, or circumvented, or that the
rights granted thereunder will provide any competitive advantage. We may incur
substantial costs in defending any patent or license infringement suits or in
asserting any patent or license rights, including those granted by third
parties, the expenditure of which we might not be able to afford.
OUR SHARE PRICE IS EXTREMELY VOLATILE
The trading price of our common shares has been, and in the future is expected
to be, volatile and we expect to experience further market fluctuations as a
result of a number of factors. These factors include, but are not limited to,
current and anticipated results of operations as well as changes in our
business, operations or financial results, the timing of sales of common shares
by selling shareholders, prospects of general market and economic conditions and
other factors.
OUR COMMON SHARES ARE TRADED ON THE OTC BULLETIN BOARD
Our common shares are currently traded on the OTC Bulletin Board and are not
listed for trading on the NASDAQ system. An issuer must meet certain
quantitative criteria relating to its total assets, its capital and the trading
prices of its securities to be included on the NASDAQ system. In addition, the
NASDAQ staff may consider other factors, such as the issuer's management and the
circumstances surrounding the issuer's operations, when determining whether to
approve an issuer's application for inclusion in the NASDAQ system. We cannot
guarantee that we will ever by listed on NASDAQ or any other stock exchange or
automated quotation system. As a result, it may be more difficult to dispose
of, or to obtain adequate quotations as to, the prices of our common shares.
NEED FOR ADDITIONAL FINANCING
We have had significant working capital deficiencies in the past. As of
February 29, 2000, the accumulated deficit was $100,445,398. Furthermore, we
have experienced negative cash flows during each of the last three years of
operations. We have historically depended upon capital infusion from the
issuance of long term debt and equity securities to provide the cash needed to
fund operations. Our ability to continue in business depends upon our continued
ability to obtain significant financing from external sources. We are currently
raising additional funds through the sale of additional equity and are looking
to secure asset financing for network computer equipment. If this additional
capital were raised through borrowing or other debt financing, we would incur
substantial additional interest expense. Sales of additional equity securities,
through a traditional underwritten offering, would dilute, on a pro rata basis,
the percentage ownership of all holders of common shares. There can be no
assurance that any such financing would be available upon terms and conditions
acceptable to us, if at all. The inability to obtain additional financing in a
sufficient amount when needed and upon acceptable terms and conditions could
have a material adverse effect upon our business.
<PAGE>
Although we believe that we can raise financing sufficient to meet its immediate
needs, we will require funds to finance our development and marketing activities
in the future. There can be no assurance that such funds will be available or
available on terms satisfactory to us. If additional funds are raised by
issuing equity securities, further dilution to existing or future stockholders
is likely to result. If adequate funds are not available on acceptable terms
when needed, we may be required to delay, scale-back or eliminate marketing of
one or more of our products or development programs or obtain funds through
arrangements with collaborative partners or others that may require that we
relinquish rights to certain of our technologies, product candidates or
potential products that we would not otherwise relinquish. Inadequate funding
also could impair our ability to compete in the marketplace and could result in
its dissolution. We regularly examine opportunities to expand our technology
base and product line through means such as licenses, joint ventures and
acquisition of assets of ongoing business and may issue securities in connection
with such transactions. However, no commitments to enter into or pursue any
such transaction have been made at this time and there can be no assurance that
any such discussions will result in any transaction being concluded in the
future.
AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED SHARES
We are authorized to issue 150,000,000 each of Class A and Class B Preference
Shares, with such designations, rights and preferences as may be determined from
time to time by our Board of Directors. Accordingly, our Board of Directors is
empowered, without stockholder approval, to issue Preference Shares with
dividend, liquidation, conversion or other rights which could adversely affect
the rights of the our shareholders. The issuance of Preference Shares could,
among other things, adversely affect the voting power of our shareholders and,
under certain circumstances, make it more difficult for a third party to gain
control of our business, discourage bids for common shares at a premium or
otherwise adversely affect the market price for common shares.
LIMITED LIABILITY OF DIRECTORS, OFFICERS AND OTHERS
Our bylaws contain provisions limiting the liability of our officers and
directors for all acts, receipts, neglects or defaults of themselves and all of
our other officers or directors or for any other loss, damage or expense
happening to us which shall happen in the execution of the duties of such
officers or directors. Such limitations on liability may reduce the likelihood
of derivative litigation against our officers and directors and may discourage
or deter our shareholders from suing our officers and directors based upon
breaches of their duties, though such an action, if successful, might otherwise
benefit our business and our shareholders.
POTENTIAL EXPENSES ARISING FROM INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our bylaws contain provisions entitling our directors and officers to
indemnification from all costs, charges, expenses, including any amount paid to
settle an action or satisfy a judgment reasonably incurred by such officer or
director with respect to any civil, criminal or administrative action or
proceeding to which such officer or director is made a party by reason of being
or having been an officer or director. We have authorized the indemnification
of our officers and directors in such other circumstances permitted under the
Canadian Business Corporations Act (the "CBCA"), which may reduce the likelihood
of derivative litigation against directors and officers and may discourage or
deter shareholders from suing directors or officers for breaches of their
duties, though such an action, if successful, might otherwise benefit our
business and our shareholders. Our bylaws also provide for the indemnification
of our directors and officers from judgments, fines, amounts paid in settlement
and reasonable expenses as a result of an action or proceeding in which they may
be involved by reason of being or having been a director or officer as long as
the acts were done in good faith. We are not presently aware of any claims
which would result in its indemnification of its directors and officers. Such
provisions do not eliminate the personal liability of its directors and officers
for monetary damages as a result of a breach of fiduciary duty. We will
indemnify against reasonable costs and expenses incurred in connection with any
action, suit or proceeding to which any of such individuals were made a party by
reason of his or her being or having been such a director of officer, unless
such person has been adjudicated to have been liable for negligence or
misconduct in his or her corporate duties. Although we may obtain an insurance
policy which will cover such indemnity, there can be no assurance that such a
policy will be available or that, if available, it will be adequate. To the
extent that we are required to expend funds to indemnify officers and directors,
it could have a materially adverse effect upon our financial condition.
<PAGE>
Furthermore, our bylaws allow for insurance for the benefit of our officers and
directors against such liabilities and in such amounts as the Board of Directors
may determine. We currently subscribe to Directors and Officers Liability
Insurance from Tri-City Brokerage of Illinois, Inc. for $2,000,000 for each
claim and as an annual aggregate.
DILUTION AND DIVIDEND POLICY
The grant and exercise warrants of creditors or otherwise or stock options would
likely result in a dilution of the value of the common shares. Moreover, we may
seek authorization to increase the number of its authorized common shares and to
sell additional securities and/or rights to purchase such securities at any time
in the future. Dilution of the value of the common shares would likely result
from such sales.
In addition, we may decide to grant additional stock options or other forms of
equity-based incentive compensation to the Company's management and/or employees
to attract and retain such personnel. In the future, we may also offer equity
participation in connection with the obtaining of non-equity financing, such as
debt or leasing arrangements accompanied by warrants to purchase our equity
securities. Any of these actions could have a dilutive effect upon the holders
of the common shares.
We have never paid a cash dividend on the common shares and does not expect to
pay dividends in the foreseeable future.
USE OF PROCEEDS
We will not receive any proceeds from the sale of any of the shares by Kevin
Dudley.
DETERMINATION OF OFFERING PRICE
Not applicable.
DILUTION
Not applicable.
SELLING SHAREHOLDERS
The following table identifies the selling shareholder and indicates (i) the
nature of any material relationship that such selling shareholder has had with
us for the past three years, (ii) the number of shares held by the selling
shareholder, (iii) the amount to be offered for the selling shareholder's
account, and (iv) the number of shares and percentage of outstanding shares of
the common shares in our capital to be owned by the selling shareholder after
the sale of the shares offered by the selling shareholder pursuant to this
offering. The selling shareholder is not obligated to sell the shares offered
in this reoffer prospectus and may choose not to sell any of the shares or only
a part of the shares. SEC rules require that we assume that the selling
shareholder sells all of the shares offered with this reoffer prospectus.
Under the 1934 Act, any person engaged in a distribution of the shares offered
by this reoffer prospectus may not simultaneously engage in market making
activities with respect to our common shares during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and
without limiting the foregoing, the selling shareholder will be subject to
applicable provisions of the 1934 Act and the rules and regulations thereunder,
which provisions may limit the timing of purchases and sales of the shares by
the selling shareholder. As of September 30, 2000, there were 127,709,132
common shares in the our capital issued and outstanding.
<PAGE>
KEVIN DUDLEY
Relationship: Employee
Shares Beneficially Owned Prior to Offering: 100,000
Percentage Beneficially Owned Prior to Offering: (less than 1%)
Shares to be Sold: 100,000
Shares : 0
Percentage Beneficially Owned After Offering: 0%
THE INFORMATION PROVIDED IN THE TABLE ABOVE WITH RESPECT TO THE SELLING
SHAREHOLDER HAS BEEN OBTAINED FROM THE SELLING SHAREHOLDER. BECAUSE THE SELLING
SHAREHOLDER MAY SELL ALL OR SOME PORTION OF THE SHARES OF COMMON STOCK
BENEFICIALLY OWNED BY HIM, ONLY AN ESTIMATE (ASSUMING THE SELLING SHAREHOLDER
SELLS ALL OF THE SHARES OFFERED HEREBY) CAN BE GIVEN AS TO THE NUMBER OF SHARES
OF COMMON STOCK THAT WILL BE BENEFICIALLY OWNED BY THE SELLING SHAREHOLDER AFTER
THIS OFFERING. IN ADDITION, THE SELLING SHAREHOLDER MAY HAVE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF, OR MAY SELL, TRANSFER OR OTHERWISE DISPOSE OF, AT ANY
TIME OR FROM TIME TO TIME SINCE THE DATE ON WHICH HE PROVIDED THE INFORMATION
REGARDING THE SHARES OF COMMON STOCK BENEFICIALLY OWNED BY HIM, ALL OR A PORTION
OF THE SHARES OF COMMON STOCK BENEFICIALLY OWNED BY HIM IN TRANSACTIONS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.
PLAN OF DISTRIBUTION
The selling shareholder may sell the shares for value from time to time under
this reoffer prospectus in one or more transactions on the OTC Electronic
Bulletin Board, in negotiated transactions or in a combination of such methods
of sale, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at prices otherwise negotiated. The selling
shareholder may effect such transactions by selling the shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the respective selling
shareholder and/or the purchasers of the shares for whom such broker-dealers may
act as agent (which compensation may be less than or in excess of customary
commissions).
The selling shareholder and any broker-dealers that participate in the
distribution of the shares may be deemed to be an "underwriter" within the
meaning of Section 2(11) of the 1933 Act, and any commissions received by them
and any profit on the resale of the shares sold by them may be deemed to be
underwriting discounts and commissions under the 1933 Act. All selling and
other expenses incurred by the selling shareholder will be borne by the selling
shareholder.
In addition to any shares sold hereunder, the selling shareholder may, at the
same time, sell any shares of common shares, including the shares, owned by him
in compliance with all of the requirements of Rule 144, regardless of whether
such shares are covered by this reoffer prospectus.
There is no assurance that the selling shareholder will sell all or any portion
of the shares offered.
We will pay all expenses in connection with this offering and, apart from
receipt of the exercise price on the related options, we will not receive any
proceeds from sales of any shares by the selling shareholder.
DESCRIPTION OF REGISTRANT'S SECURITIES
Our authorized capital includes: 200,000,000 shares of common stock without par
value, of which 127,709,132 were issued and outstanding as at September 30,
2000, and 150,000,000 each of Class A and Class B Preference Shares, none of
which were issued and outstanding as at September 30, 2000. All of our
authorized shares of common stock are of the same class and, once issued, rank
equally as to dividends, voting powers, and participation in assets. Holders of
common shares are entitled to one vote for each share held of record on all
matters to be acted upon by
<PAGE>
the shareholders. Holders of common shares are entitled to receive such
dividends as may be declared from time to time by the Board of Directors, in its
discretion, out of funds legally available therefore. Upon our liquidation,
dissolution or winding up, holders of common shares are entitled to receive pro
rata our assets, if any, remaining after payments of all debts and liabilities.
No common shares have been issued subject to call or assessment. There are no
pre-emptive or conversion rights and no provisions for redemption or purchase
for cancellation, surrender, or sinking or purchase funds.
INTERESTS OF NAMED EXPERTS
Our consolidated financial statements have been incorporated in the reoffer
prospectus by reference from our Form 10-K in reliance upon the report of KPMG
LLP, Chartered Accountants, which is also incorporated into this Reoffer
Prospectus by reference, and upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the common shares offered by this reoffer prospectus will be
passed upon for us and the selling shareholder by Clark, Wilson, Vancouver,
British Columbia, Canada.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers or persons controlling our business pursuant to
the provision in the section entitled "Indemnification of Directors and
Officers" (see below), we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act and is therefore unenforceable.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by the Company are incorporated herein by
reference:
1. The Company's Form 10-K Annual Report, filed on June 14, 2000;
2. The Company's Form 8-K Current Report, filed on June 15, 2000;
3. The Proxy Statement circulated to the Company's shareholders pursuant to
Section 14(a) of the Securities Act of 1934, filed on June 28, 2000, with
respect to the Company's Annual General Meeting held on August 4, 2000;
4. The Company's Form 10-Q Quarterly Report, filed on July 14, 2000, for the
quarter ending May 31, 2000;
5. The Company's Form 8-K/A Current Report, filed on August 25, 2000; and
6. The Company's Form 10-Q Quarterly Report, filed on October 16, 2000, for
the quarter ending August 31, 2000.
In addition to the foregoing, all documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, prior to the filing of a post-effective amendment indicating that all
of the securities offered hereunder have been sold or deregistering all
securities then remaining unsold, shall be deemed to be incorporated by
reference in this Registration Statement and to be part hereof from the date of
filing of such documents. Any statement contained in a document incorporated by
reference in this Registration Statement shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any subsequently filed document that is also
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Our authorized capital includes: 200,000,000 shares of common stock without par
value, of which 127,709,132 were issued and outstanding as at September 30,
2000, and 150,000,000 each of Class A and Class B Preference Shares, none of
which were issued and outstanding as at September 30, 2000. All of our
authorized shares of common stock are of the same class and, once issued, rank
equally as to dividends, voting powers, and participation in assets. Holders of
common shares are entitled to one vote for each share held of record on all
matters to be acted upon by the shareholders. Holders of common shares are
entitled to receive such dividends as may be declared from time to time by the
Board of Directors, in its discretion, out of funds legally available therefore.
Upon our liquidation, dissolution or winding up, holders of common shares are
entitled to receive pro rata our assets, if any, remaining after payments of all
debts and liabilities. No common shares have been issued subject to call or
assessment. There are no pre-emptive or conversion rights and no provisions for
redemption or purchase for cancellation, surrender, or sinking or purchase
funds.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 124 of the CBCA provides as follows with respect to the indemnification
of directors and officers:
<PAGE>
(1) Except in respect of an action by or on behalf of the corporation or
body corporate to procure a judgment in its favour, a corporation may indemnify
a director or officer of the corporation, a former director or officer of the
corporation or a person who acts or acted at the corporation's request as a
director or officer of a body corporate of which the corporation is or was a
shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of such corporation or body
corporate, if:
(a) he acted honestly and in good faith with a view to the best
interests of the corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds for believing
that his conduct was lawful.
(2) A corporation may with the approval of a court indemnify a person
referred to in subsection (1) in respect of an action by or on behalf of the
corporation or body corporate to procure a judgment in its favour, to which he
is made a party by reason of being or having been a director or an officer of
the corporation or body corporate, against all costs, charges and expenses
reasonably incurred by him in connection with such action if he fulfils the
conditions set out in paragraphs (1)(a) and (b).
(3) Notwithstanding anything in this section, a person referred to in
subsection (1) is entitled to indemnity from the corporation in respect of all
costs, charges and expenses reasonably incurred by him in connection with the
defence of any civil, criminal or administrative action or proceeding to which
he is made a party by reason of being or having been a director or officer of
the corporation or body corporate, if the person seeking indemnity:
(a) was substantially successful on the merits in his defence of the
action or proceeding; and
(b) fulfils the conditions set out in paragraphs (1)(a) and (b).
(4) A corporation may purchase and maintain insurance for the benefit of any
person referred to in subsection (1) against any liability incurred by him:
(a) in his capacity as a director or officer of the corporation, except
where the liability relates to his failure to act honestly and in good faith
with a view to the best interests of the corporation; or
(b) in his capacity as a director or officer of another body corporate
where he acts or acted in that capacity at the corporation's request, except
where the liability relates to his failure to act honestly and in good faith
with a view to the best interests of the body corporate.
(5) A corporation or a person referred to in subsection (1) may apply to a
court for an order approving an indemnity under this section and the court may
so order and make any further order it thinks fit.
(6) An applicant under subsection (5) shall give the Director notice of the
application and the Director is entitled to appear and be heard in person or by
counsel.
(7) On an application under subsection (5), the court may order notice to be
given to any interested person and such person is entitled to appear and be
heard in person or by counsel.
The Company's By-Laws
Section 8.01 of Part VIII of the by-laws of the Company contains provisions to
limit the liability of directors and officers for the acts, receipts, neglects
or defaults of other directors, officers or employees, or for joining in any
<PAGE>
receipt or other act for conformity, or for any loss, damage or expense
happening to the Company through the insufficiency or deficiency of title of any
property acquired for or on behalf of the Company, or for the insufficiency or
deficiency of any security in or upon which any of the moneys of the Company
shall be invested, or for any loss or damage arising from the bankruptcy,
insolvency or tortious acts of any person with whom any of the moneys,
securities or effects of the Company shall be deposited, or for any loss
occasioned by an error or judgment or oversight on the part of any officer or
director, or for any other loss, damage or misfortune whatever which shall
happen in the execution of the duties of such directors of officers or in
relation thereto; provided that nothing herein shall relieve any director or
officer from the duty to act in accordance with the CBCA or from liability for
any breach thereof.
Section 8.02 of Part VIII of the by-laws of the Company contains provisions
entitling the Company's directors and officers to indemnification from all
costs, charges, expenses, including any amount paid to settle an action or
satisfy a judgment reasonably incurred by such officer or director with respect
to any civil, criminal or administrative action or proceeding to which such
officer or director is made a party by reason of being or having been an officer
or director of the Company, provided that: (a) such director or officer acted
honestly and in good faith with a view to the best interests of the Company; and
(b) in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, such director or officer had reasonable grounds
for believing that his/her conduct was lawful. The Company has also agreed to
indemnify such officers and directors in other circumstances as the CBCA permits
or requires. In addition, the by-laws of the Company allow for insurance for
the benefit of officers and directors of the Company against such liabilities
and in such amounts as the Board may determine. Such provisions do not
eliminate the personal liability of the Company's directors and officers for
monetary damages as a result of a breach of fiduciary duty or for any actions or
omissions which were not done in good faith.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The 100,000 shares registered under this Registration Statement were issued to
Kevin Dudley, an unaccredited investor, pursuant to the exemption from the
registration requirements of the 1933 Act provided by Rule 506 of Regulation D.
Kevin Dudley was provided with all of the information required by Regulation D.
ITEM 8. EXHIBITS.
4.1 Employment Agreement between the Company and Kevin Dudley, dated
March 15, 2000
5 Opinion of Clark, Wilson
23.1 Consents Clark, Wilson (included in Exhibit 5)
23.2 Consent of Independent Auditor (KPMG LLP)
24 Power of Attorney (included in signature page)
ITEM 9. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended (the "Securities Act").
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-effective
amendment hereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration Statement;
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and persons controlling the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company 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 Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
THE COMPANY. Pursuant to the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, in the State of Illinois, on the 31st day
of October, 2000.
Virtualsellers.com, Inc.
By /s/ Dennis Sinclair
Dennis Sinclair, President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Dennis Sinclair his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
date indicated.
/s/ Dennis Sinclair
Dennis Sinclair
President and Chief Executive Officer (principal executive
officer)/Director
October 31, 2000
/s/ Mel Baillie
Mel Baillie
Director
November 2, 2000
/s/ Ray Mol
Ray Mol
Director
October 31, 2000
<PAGE>
/s/ Grayson Hand
Grayson Hand
Director
November 2, 2000
/s/ Pierre Prefontaine
Pierre Prefontaine
Director
October 31, 2000
/s/ Kevin Wielgus
Kevin Wielgus
Secretary
October 31, 2000
