UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORTS OF SMALL BUSINESS ISSUERS
[X] Quarterly report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 30, 2001
[ ] Transition report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number: 0-26901 .
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IJOIN SYSTEMS, INC. .
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(Exact name of small business issuer as specified in its charter)
DELAWARE 65-0869393
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2505 SECOND AVENUE, SUITE 500, SEATTLE, WA 98121 .
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(Address of principal executive offices)
206-374-8600
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(Issuer's telephone number)
--------------------------------------------------------------.
(Former Name and Former Address, if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes.X.No...
Applicable only to corporate issuers:
As of August 16, 2001, the number of shares of common stock, par value
$.0001 per share, outstanding was 5,929,288.
Transitional Small Business Disclosure Format (check one);
Yes......No....X....
IJOIN SYSTEMS, INC.
FORM 10-QSB
INDEX
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2001 (unaudited) and December 31, 2000 F-1
Consolidated Statements of Operations and Deficit for the three (3) months and six (6) F-2
months ended June 30, 2001 and 2000
Consolidated Statements of Cash Flows for the six (6) months ended June 30, 2001 and 2000 F-3
Consolidated Statement of Stockholders' Equity for the six (6) months ended June 30, 2001 F-4
Notes to Consolidated Financial Statements F-5
Item 2. Plan of Operations 2
PART II. OTHER INFORMATION 4
Item 2. Changes in Securities and Use of Proceeds 4
Item 4. Submission of Matter to a Vote by Security Holders 5
Item 5. Other Information 5
Item 6. Exhibits and Reports on Form 8-K 6
SIGNATURES 7
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PART I
ITEM 1. FINANCIAL STATEMENTS
iJoin Systems, Inc.
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2001 December 31,
(unaudited) 2000
------------ ------------
Current assets
Cash $ 47,202 $ 585,257
Accounts receivable 436,242 321,521
Related party receivable 82,435 -
Finished goods inventory 102,566 -
Prepaid expenses and deposits 159,118 345,905
------------ ------------
Total current assets 827,563 1,252,683
Property and equipment, net 580,025 478,977
Other assets
Goodwill, net 710,019 -
Other 42,201 42,201
------------ ------------
Total assets $ 2,159,808 $ 1,773,861
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,358,920 $ 311,163
Accrued liabilities 137,154 189,580
Deferred revenue 8,301 -
Shareholder loans 150,000 11,254
Notes payable 250,000 -
------------ ------------
Total current liabilities 1,904,375 511,997
Convertible note payable - 1,000,000
Stockholders' equity
Preferred stock, $0.0001 par value - authorized, 10,000,000 shares, 30 30
liquidation value $750,000
Common stock, $0.0001 par value - authorized, 40,000,000 shares 568 538
Additional paid-in capital 8,173,645 3,222,799
Deferred Stock Compensation (1,698,062) -
Subscription receivable (139,900) (284,400)
Accumulated deficit (6,080,848) (2,677,103)
------------ ------------
255,433 261,864
------------ ------------
Total liabilities and stockholders' equity $ 2,159,808 $ 1,773,861
============ ============
The accompanying notes are an integral part of these financial statements.
F-1
iJoin Systems, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(Development (Development
Stage Company) Stage Company)
Net sales $ 1,204,463 $ -- 1,688,507 $ --
Cost of sales 801,148 -- 1,117,357 --
----------- ----------- ----------- -----------
Gross profit 403,315 -- 571,150 --
Operating expenses
Selling and marketing 113,912 16,000 224,883 16,000
Research and development -- 34,696 1,910 67,217
General and administrative 2,422,338 862,955 3,487,997 874,052
----------- ----------- ----------- -----------
Total operating expenses 2,536,250 913,651 3,714,790 957,269
----------- ----------- ----------- -----------
Loss from operations (2,132,935) (913,651) (3,143,640) (957,269)
Other income (expense)
Interest (1,190) 632 (264,134) 632
Other 370 -- 4,029 --
----------- ----------- ----------- -----------
Net loss $(2,133,755) $ (913,019) $(3,403,745) $ (956,637)
=========== =========== =========== ===========
Net loss per share - basic and diluted $ (0.36) $ (0.18) $ (0.59) $ (0.19)
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-2
iJoin Systems, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six month period ended June 30,
(unaudited)
Increase (decrease) in cash 2001 2000
----------- -----------
(Development
Cash flows from operating activities Stage Company)
Net loss $(3,403,745) $ (956,637)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 123,683 --
Common stock issued for interest expense 254,000 --
Warrants issued for services 43,500 --
Common stock issued for services 5,000 --
Amortization of deferred compensation 967,519 --
Loss on disposal of assets 20,598 --
Changes in operating assets and liabilities:
Accounts receivable and related party receivable (197,156) --
Deferred Compensation 43,750 --
Other current assets
Finished goods inventory 5,265 --
Prepaid expenses and deposits 182,190 (42,791)
Accounts payable 1,036,503 (17,300)
Accrued liabilities (74,189) (16,960)
Deferred revenue 8,301
----------- -----------
Net cash used in operating activities (984,781) (1,033,688)
Cash flows from investing activities
Cash paid for assets of Right! Systems' Boise TRB assets (309,593) --
Purchases of property and equipment (17,681) 33,780
----------- -----------
Net cash used in investing activities (327,274) 33,780
Cash flows from financing activities
Proceeds from notes payable 408,500 1,000,000
Proceeds from shareholder loans 150,000 --
Proceeds from sale of common stock 215,500 --
Net proceeds from issuance of preferred stock -- 2,454,000
----------- -----------
Net cash provided by financing activities 774,000 3,454,000
----------- -----------
Net decrease in cash (538,055) 2,454,092
Cash at beginning of period 585,257 --
----------- -----------
Cash at end of period $ 47,202 $ 2,454,092
=========== ===========
Supplemental non-cash investing and financing activities:
Issuance of preferred stock for purchase of Right! Systems' Boise TRB assets $ 687,693 $ --
Conversion of note payable and accrued interest to common stock 1,065,602 --
Preferred stock issued or subscription receivables -- 99,900
Warrants issued in connection with convertible debt -- 77,908
The accompanying notes are an integral part of these financial statements.
F-3
iJoin Systems, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Six months ended June 30, 2001
(unaudited)
Preferred stock Common stock Additional
--------------- ------------ paid - in
Shares Amount Shares Amount capital
------ ------ ------ ------ -------
Balance at January 1, 2001 (development stage company) 300,000 $ 30 5,384,820 $538 $ 3,222,799
Conversion of special voting common stock to preferred stock 2 - (30,000) (30) 30
Conversion of note payable to common stock - - 213,121 21 1,065,581
Conversion of note payable to common stock - - 40,000 4 253,996
Common stock issued for purchase of Right! Systems Boise assets - - 260,000 26 687,667
Proceeds received for stock subscription receivable - - - - -
Conversion of note payable to common stock, less issuance costs of $21,500 - - 64,800 6 158,494
Issuance of common stock - - 15,547 2 70,998
Issuance of common stock for services - - 1,000 1 4,999
Issuance of warrants for services - - - - 43,500
Stock options granted to employees with exercise prices below fair value - - - - 2,665,581
Amortization of deferred stock compensation - - - - -
Net loss - - - - -
Balance at June 30, 2001 300,002 $ 30 5,949,288 $568 $ 8,173,645
Deferred
Stock Subscription Accumulated
Compensation Receivable Deficit Total
------------ ---------- ------- -----
Balance at January 1, 2001 (development stage company) - $ (284,400) $(2,677,103) $ 261,864
Conversion of special voting common stock to preferred stock - - - -
Conversion of note payable to common stock - - - 1,065,602
Conversion of note payable to common stock - - - 254,000
Common stock issued for purchase of Right! Systems Boise assets - - - 687,693
Proceeds received for stock subscription receivable - 144,500 - 144,500
Conversion of note payable to common stock, less issuance costs of $21,500 - - - 158,500
Issuance of common stock - - - 71,000
Issuance of common stock for services - - - 5,000
Issuance of warrants for services - - - 43,500
Stock options granted to employees with exercise prices below fair value (2,665,581) - - -
Amortization of deferred stock compensation 967,519 - - 967,519
Net loss - - (3,403,745) (3,403,745)
Balance at June 30, 2001 (1,698,062) $ (139,900) $(6,080,848) $ 255,433
F-4
iJoin Systems, Inc.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
The unaudited interim financial statements of iJoin Systems, Inc. (Company) as
of June 30, 2001, and for each of the three-month and six-month periods ended
June 30, 2001 and 2000, have been prepared by the Company pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosure normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
The results of operations for interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year ended December 31, 2001.
The accompanying unaudited financial statements and related notes should be read
in conjunction with the audited financial statements of the iJoin Systems, Inc.,
enclosed herein, as of December 31, 2000, and the audited carved-out financial
statements of Right! Systems, Inc. Boise, Idaho Technology Resale Business,
filed in the Company's Form 8K/A on July 20, 2001.
1. Presentation
------------
Effective May 7, 2001, iJoin entered into an Agreement and Plan of Merger
(Acquisition) with Tech Creations, Inc. (Tech), a non-operating public shell
company. As a result of the Acquisition, all of iJoin's issued and outstanding
shares of common and preferred stock, with the exception of Series B preferred
stock, were exchanged for Tech's common stock at a 5 to 1 ratio. In conjunction
with the Acquisition, the then shareholders of iJoin, Inc. appointed all three
directors of the Company's Board of Directors. The new Board of Directors and
former management of iJoin, Inc. assumed control of the operations and
management of the resulting company, iJoin Systems, Inc. The Acquisition
resulted in the owners and management of iJoin having effective operating
control of the combined entity.
Under accounting principles generally accepted in the United States of America,
the Acquisition is considered to be a capital transaction in substance, rather
than a business combination. That is, the Acquisition is equivalent to the
issuance of stock by iJoin for the net monetary assets of Tech accompanied by a
recapitalization, and is accounted for as a change in capital structure.
Accordingly, the accounting for the Acquisition is identical to that resulting
from a reverse acquisition, except that no goodwill is recorded. Under reverse
takeover accounting, the post-reverse-acquisition financial statements of the
"legal acquirer" Tech, are those of the "legal acquiree" (iJoin), meaning the
accounting acquirer.
Accordingly, the financial statements of Tech as of and for the three-months and
six-months ended June 30, 2001, are the historical financial statements of iJoin
and have been adjusted for the share exchange contained in the Agreement and
Plan of Merger as follows:
(a) Every five shares of iJoin common (including those shares issuable upon
conversion of iJoin Series A and Series C preferred stock but excluding
1,500,000 shares of Series B preferred stock) issued and outstanding was
automatically converted into the right to receive one
F-5
iJoin Systems, Inc.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
share of Tech common stock. The 1,500,000 shares of Series B preferred
stock were exchanged for 300,000 shares of preferred stock of Tech. The
common stock exchanged, in addition to the existing Tech shares
outstanding, collectively resulted in the recapitalization of the Company.
(b) Loss per share calculations include the Company's change in capital
structure for all periods presented.
On February 7, 2001, the Company acquired certain assets and assumed certain
liabilities of the Idaho operations of Right! Systems, Inc. (Boise TRB) for a
purchase price of $1,012,307. Consideration paid included $312,307 in cash and
1,300,000 shares of the Company's Series C convertible preferred stock. Net
assets acquired consisted primarily of inventory, other current assets, property
and equipment and accrued liabilities. The transaction was accounted for under
the purchase method of accounting.
As a result of the acquisition of the assets of Right! Systems, Inc. Boise,
Idaho Technology Resale Business, the Company is no longer considered a
development stage company. The Statement of Operations for the three and six
months ended June 30, 2001, includes the operations of Right! Systems, Inc.
Boise, Idaho Technology Resale Business beginning on the acquisition date of
February 7, 2001. Goodwill representing the excess of cost over the fair value
of net assets acquired is being amortized over its estimated useful life of 10
years.
2. Revenue Recognition
-------------------
Revenue is derived from the resale of computer hardware, installation and
configuration of systems to end-users. Revenue from the sale of each system is
recognized upon delivery of the product if remaining vendor obligations are
insignificant and collection of the resulting receivable is probable, otherwise
revenue from such systems is deferred until such time as vendor obligations are
met and collection is reasonably assured.
In conjunction with the acquisition, the Company entered into an agreement with
Right! Systems, Inc. of Olympia, Washington (Right! Systems), whereby Right!
Systems is processing a portion of the Company's sales and purchases of
inventory for resale on behalf of the Company. Upon completion of the
transaction by Right! Systems, the gross margin of the transaction, less a
percentage kept by Right! Systems, is remitted to the Company and recorded as
revenue.
3. Accounts Receivable
-------------------
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is provided. Should amounts become
uncollectible, they will be charged to operations when that determination is
made.
F-6
iJoin Systems, Inc.
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
4. Inventories
-----------
Inventory is valued at the lower of cost or market utilizing the first-in,
first-out (FIFO) cost basis. Inventory consists primarily of computer hardware
and parts.
5. Loss Per Share
--------------
Basic loss per share is based on the weighted average number of common shares
outstanding during the period. The weighted average number of common shares
outstanding for the three-month periods ended June 30, 2001 and 2000 was
5,909,474 and 5,054,517, respectively. Diluted loss per share includes the
effect of all potentially dilutive common stock issuances. Diluted loss per
share is not presented because the effect would be anti-dilutive. At June 30,
2001 and 2000, there were 1,703,184 and 556,440, respectively, shares of common
stock issuable upon exercise of stock options and warrants then outstanding.
6. Deferred Stock Compensation
---------------------------
In connection with the reverse acquisition, the Company granted options to
employees with exercise prices below the market value of the Company's common
stock. Accordingly, the Company recognized deferred stock compensation of
$2,665,581 based on the difference between the market value of the Company's
stock and the exercise price of the options. For the three months ended June 30,
2001, the Company recognized stock compensation expense of approximately
$967,500 in conjunction with the vested options.
F-7
ITEM 2. PLAN OF OPERATIONS
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WHEN USED HEREIN, THE WORDS "MAY", "WILL", "EXPECT", "ANTICIPATE", "CONTINUE",
"ESTIMATE", "PROJECT", "INTEND", "PLAN" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, REGARDING EVENTS, CONDITIONS AND
FINANCIAL TRENDS THAT MAY AFFECT THE COMPANY'S FUTURE PLANS OF OPERATIONS,
BUSINESS STRATEGY, OPERATING RESULTS AND FINANCIAL POSITION. ALL STATEMENTS,
OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED OR INCORPORATED BY REFERENCE
IN THIS FORM 10-QSB WHICH ADDRESS ACTIVITIES, EVENTS OR DEVELOPMENTS WHICH THE
COMPANY EXPECTS OR ANTICIPATES WILL OR MAY OCCUR IN THE FUTURE, INCLUDING SUCH
THINGS AS FUTURE CAPITAL EXPENDITURES (INCLUDING THE AMOUNT AND NATURE THEREOF),
BUSINESS STRATEGY, EXPANSION AND GROWTH OF THE COMPANY'S BUSINESS AND
OPERATIONS, AND OTHER SUCH MATTERS ARE FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE BASED ON CERTAIN ASSUMPTIONS AND ANALYSES MADE BY THE COMPANY IN
LIGHT OF ITS EXPERIENCE AND ITS PERCEPTION OF HISTORICAL TRENDS, CURRENT
CONDITIONS AND EXPECTED FUTURE DEVELOPMENTS AS WELL AS OTHER FACTORS IT BELIEVES
ARE APPROPRIATE IN THE CIRCUMSTANCES. SUCH STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND ARE SUBJECT TO RISKS AND SIGNIFICANT UNCERTAINTIES AND
THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE INCLUDED WITHIN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. THE OCCURRENCE OF ANY
UNANTICIPATED EVENTS MAY CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE EXPRESSED OR
IMPLIED BY THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. YOU ARE CAUTIONED
NOT TO PLACE UNDUE RELIANCE ON THESE STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
OF THIS REPORT.
OVERVIEW
iJoin Systems, Inc. (the "Company" or "iJoin") was incorporated on
October 8, 1998, as Tech-Creations, Inc. The Company changed its name to iJoin
Systems, Inc. effective May 7, 2001, in connection with the merger (the
"Acquisition") by and among the Company, iJoin, Inc. and IJC Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of the Company formed for
purposes of the Acquisition ("IJC"). Pursuant to the Acquisition, iJoin, Inc.
became a wholly-owned subsidiary of the Company. iJoin, Inc. was incorporated on
January 6, 2000 for the purpose of developing an "intelligent business Web" to
streamline information technology (IT) processes and automatically integrate
disparate vendors into a single source. A single source provider enables IT
professionals to procure, deploy, and maintain custom solutions and lower their
total cost of technology ownership. As of June 30, 2001, the intelligent
business web development has not yet been completed.
PLAN OF OPERATIONS
The Company has incurred recurring losses from operations and has a
total accumulated deficit of $6,080,848 at June 30, 2001. The continued
development of the Company's technology and products will not require a
commitment of substantial funds, but will require additional capital for new
versions of the technology as new partners are introduced. However, the rate at
which the Company expends its resources is variable, may be accelerated, and
will depend on many factors.
As of June 30, 2001, the Company raised a total of $ 4,315,000 in
equity and debt financings. The entire amount of the debt financings were
subsequently converted into equity. The Company will need to raise substantial
additional capital to fund the expansion of its operations and may seek such
additional funding through public or private equity or debt
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financing. There can be no assurance that such additional funding will be
available on acceptable terms, if at all.
The Company had $47,202 cash on hand as at June 30, 2001. The Company's
continued existence as a going concern is ultimately dependent upon its ability
to secure additional funding for completing and marketing its technology and the
success of its future operations. The Company plans to raise the capital
required to sustain operations and seek potential acquisitions to complement its
business strategy. The Company is currently in discussions with several groups
regarding funding, and expects to close one or more transactions in the near
future.
In addition to sustaining its operations, the Company intends to raise
additional capital required to acquire business operations and assets consistent
with its business plan. It is the Company's strategy to acquire systems
integrators perceived as profitable or as producing sufficient revenues, which
acquisition(s) would enable the Company to capitalize on the long-standing,
entrenched customer relationships of any acquired business as well as increased
geographic diversification. Management believes that most of these systems
integrators typically only supply a portion of the IT solutions required by
their customers. By leveraging these acquisitions, and taking advantage of
synergies and perceived cost savings, it is the Company's intention to use its
existing technology and strategic partnerships to capture a share of the
remaining IT solution needs of such customers and realize increased gross
margins.
On May 7, 2001 the Company completed the Acquisition, as a result of
which all of iJoin, Inc.'s issued and outstanding shares of common stock and,
after the conversion, the preferred stock, with the exception of Series B
preferred stock, were exchanged for the common stock of the Company at a 5 to 1
ratio and the Company changed its name to iJoin Systems, Inc. The Acquisition
resulted in the stockholders and management of iJoin, Inc. being granted
effective operating control of the combined entity. Pursuant to the 5:1 exchange
ratio used in the Acquisition, every five shares of iJoin, Inc. common stock
issued and outstanding at the effective time of the Acquisition was
automatically converted into the right to receive one share of the common stock
of the Company. By its terms, the Acquisition also provided for the Company to
issue (i) to the holders of the Series B preferred stock of iJoin, Inc., 300,000
shares of the Company's convertible Series B Preferred Stock (convertible into
300,000 shares of the Company's common stock) and (ii) to the holders of the
shares of special voting stock of iJoin, Inc., 2 shares of the Company's
convertible Series A Special Voting Preferred Stock, representing an aggregate
of 30,000 shares of the Company's common stock issuable upon the exchange of
certain exchangeable shares of the Canadian subsidiary of iJoin, Inc. In
addition, the Company assumed outstanding warrants and options of iJoin, Inc.
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PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
On July 9, 2001 the Company issued to two members of its Board of
Directors options to purchase up to 20,000 shares of the common stock of the
Company pursuant to the Company's 2001 Stock Option Plan. The options are
exercisable at a price of $11.00 per share, and were issued as compensation for
their serving on the Board.
On June 20, 2001 the Company issued to an individual investor an
aggregate of 4,409 shares of the Company's common stock pursuant to a private
placement. The consideration paid by such individual investor was based on a
price per share equal to a 30% discount as to the market price on the date of
the purchase and sale, or $5.67, for a total purchase price of $25,000. The
issuance of such shares was based, in part, upon representations and warranties
of such individual, including a representation as to its status as an
"accredited" investor (as such term is defined in Rule 501(a) of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act")). This sale
was exempt from the registration requirements of the Securities Act pursuant to
Regulation D promulgated by the Securities and Exchange Commission (the "SEC")
under Section 4(2) of the Securities Act.
On June 7, 2001 the Company issued to an individual investor an
aggregate of 11,138 shares of the Company's common stock pursuant to a private
placement. The consideration paid by such individual investor was based on a
price per share equal to a 30% discount as to the market price of the date of
the purchase and sale, or $4.13, for a total purchase price of $46,000. The
issuance of such shares was based, in part, upon representations and warranties
of such individual, including a representation as to its status as an
"accredited" investor (as such term is defined in Rule 501(a) of Regulation D
under the Securities Act). This sale was exempt from the registration
requirements of the Securities Act pursuant to Regulation D promulgated by the
SEC under Section 4(2) of the Securities Act.
On May 8, 2001 the Company issued to two individual investors an
aggregate of 64,800 shares of the Company's common stock and warrants to
purchase up to 19,440 shares of the Company's common stock, upon the conversion
of convertible notes entered into by iJoin, Inc. and each of the individual
investors as of April 1, 2001 and May 6, 2001. The warrants are exercisable at
a price of $1.50 per share. The issuance of such shares and warrants was based,
in part, upon representations and warranties of such individuals, including a
representation as to their status as "accredited" investors (as such term is
defined in Rule 501(a) of Regulation D under the Securities Act). These sales
were exempt from the registration requirements of the Securities Act pursuant to
Regulation D promulgated by the SEC under Section 4(2) of the Securities Act.
On May 7, 2001 the Company granted options to purchase up to an
aggregate of 1,052,504 shares of the common stock of the Company to forty-one
individuals pursuant to the Company's 2001 Stock Option Plan. The options are
exercisable at exercise prices ranging from $0.20 to $1.00 per share. Of these,
703,361 options were granted to senior management.
On May 7, 2001 in connection with the merger of iJoin, Inc. with and
into a wholly-owned subsidiary of the Company, the Company issued (i) an
aggregate of 1,767,941 shares of its common stock to the stockholders of iJoin,
Inc. as consideration for the purchase of all of the issued and outstanding
shares of capital stock of iJoin Inc.; (ii) an aggregate of 300,000 shares of
-4-
the Company's Series B Preferred Stock to the holders of the Series B preferred
stock of iJoin, Inc. in exchange for all of such holders' issued and outstanding
shares of the Series B preferred stock of iJoin, Inc. and (iii) two (2) shares
of the Company's Series A Special Voting Preferred Stock to the holders of the
special class of voting stock of iJoin, Inc. (representing the shares of
exchangeable stock of iJoin.com Acquisition Corporation, a Canadian subsidiary
of iJoin, Inc.) in exchange for the two (2) issued and outstanding shares of
such special voting stock. In issuing these securities, the Company relied on
the exemption afforded by Section 4(2) of the Securities Act and Regulation D,
as transactions by an issuer not involving any public offering.
On April 24, 2001 iJoin, Inc. issued options to purchase up to an
aggregate of 1,275,000 shares of the common stock of iJoin, Inc. to twenty-three
individuals in return for services rendered by such individuals to iJoin, Inc.
The options are exercisable at prices ranging from $0.01 per share to $1.00 per
share.
On April 19, 2001 iJoin, Inc. issued to two individual investors an
aggregate of 5,000 shares of the common stock of iJoin, Inc. for services
rendered to iJoin, Inc. The issuance of such shares was exempt from the
registration requirements of the Securities Act under Section 4(2) of the
Securities Act.
On April 1, 2001, iJoin, Inc. issued to a third party a warrant to
purchase up to 215,525 shares of the common stock of iJoin, Inc., at an exercise
price of $1.50 per share, for services rendered to iJoin, Inc. The issuance of
the warrant to a Non-U.S. Person (as such term is defined in Rule 902(k) of
Regulation S under the Securiies Act) was exempt from the registration
requirements of the Securities Act pursuant to Regulation S promulgated by the
SEC under the Securities Act.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On April 24, 2001 the holders of 4,500,000 of the 5,000,000 shares of
the issued and outstanding voting stock of the Company approved by written
consent the adoption of the Company's 2001 Stock Option Plan, as set forth in
more detail in the Company's definitive Information Statement on Schedule 14C
filed with the SEC on June 4, 2001.
On May 4, 2001 the holders of 4,500,000 of the 5,000,000 shares of the
issued and outstanding voting stock of the Company approved by written consent
an Amended and Restated Certificate of Incorporation, as set forth in more
detail in the Company's definitive Information Statement on Schedule 14C filed
with the SEC on June 4, 2001.
ITEM 5. OTHER INFORMATION
-----------------
In July, 2001, pursuant to a letter agreement rescinding a prior loan,
as evidenced by a promissory note in the principal sum of $100,000, Bob Bagga,
the Chairman of the Board and Chief Executive Officer of the Company,
surrendered to the Company for cancellation a stock certificate representing
20,000 shares of the common stock of the Company and a warrant instrument to
purchase up to 4,000 shares of the common stock of the Company. The Company, in
return, cancelled the promissory note from Mr. Bagga to the Company.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits.
EXHIBIT # EXHIBIT NAME
--------- ------------
3.1(i) Amended and Restated Certificate of Incorporation of the
Issuer (Filed as Exhibit B to the Issuer's definitive
Information Statement on Schedule 14C filed with the
Securities and Exchange Commission on June 4, 2001).
3.2 By-laws of the Issuer (Filed as Exhibit 3(ii).1 to the
Issuer's Registration Statement on Form 10-SB/12G filed with
the Securities and Exchange Commission on August 2, 1999).
3.3 Certificate of Designation May 4, 2001 designating 300,000
shares of Series A Special Voting Preferred Stock (Filed as
Exhibit 3.1 to the Issuer's Current Report on Form 8K filed
with the Securities and Exchange Commission on May 22,
2001).
3.4 Certificate of Designation dated May 4, 2001 designating two
(2) shares of Series B Preferred Stock (Filed as Exhibit 3.2
to the Issuer's Current Report on Form 8K filed with the
Securities and Exchange Commission on May 22, 2001).
4.1 iJoin Systems, Inc. 2001 Stock Option Plan (Filed as Exhibit
A to the Issuer's definitive Information Statement on
Schedule 14C filed with the Securities and Exchange
Commission on June 4, 2001).
10.1 * Form of Convertible Note dated April 1, 2001
10.2 * Form of Incentive Plan Option Agreement
10.3 * Form of Non-Qualified Plan Option Agreement
10.4 * Form of Warrant Agreement dated May 8, 2001
* Filed herewith.
(b) Reports on Form 8-K
On May 22, 2001, the Company filed a Current Report on Form
8-K relating to Item 2, Acquisition or Disposition of Assets, in
connection with the consummation of the Merger by and among the
Company, iJoin, Inc. and IJC Acquisition Corp.
On July 12, 2001, the Company filed a Current Report on Form
8-K relating to Item 4, Change in Certifying Accountant, in connection
with the dismissal of Dorra Shaw & Dugan, and the engagement of Grant
Thornton, as the Company's certifying accountant.
On July 20, 2001, the Company filed an amended Current Report
on Form 8-K/A relating to Item 7, Financial Statements, providing the
requisite financial statements relating to the Merger by and among the
Company, iJoin, Inc. and IJC Acquisition Corp.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: August 20, 2001 iJoin Systems, Inc.
By: /s/ Raj Kapoor
----------------------------
Chief Financial Officer
(duly authorized officer)
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