SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 7, 2002
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FREESOFTWARECLUB.COM, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 000-25671 88-0414076
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 Bancroft Way, Berkeley, CA 94710
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 649-2920
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Item 1. Changes in Control of Registrant.
On March 7, 2002, the Company acquired 3608948 Canada Inc. dba Ideas
and Associates ("Ideas"), a Montreal-based information technology consulting
firm pursuant to a Stock Exhange Agreement (the "Agreement"). Pursuant to the
Agreement, the Company issued 30,000,000 newly issued shares of common stock in
exchange for all of the issued and outstanding shares of Ideas, making Ideas a
wholly-owned subsidiary of the Company. In addition, pursuant to a Stock
Purchase Agreement, the former shareholders of Ideas agreed to purchase newly
issued shares of common stock of the Company in three separate purchases, a
purchase of an aggregate of 9,880,952 shares which occurred on March 7, 2002,
the purchase of an aggregate of 9,880,952 shares to occur on or about April 16,
2002 and the purchase of an aggregate of 39,523,808 shares to occur on or about
May 28, 2002.
On March 7, 2002, John Collins and Jim Estil resigned from the Board of
Directors, and the Board of Directors elected Terence Byrne, Arthur Gutch, Dejan
Nenov, Glen Pearson, John Hartley and Eric Boyd to replace them and fill other
vacancies on the Board of Directors. In addition, on March 7, 2002, Terrence
Byrne was appointed Chief Executive Office of the Company and Arthur Gutch was
appointed President replacing Richard Miles.
As of March 21, 2002, the Company had 56,827,952 common shares issued and
outstanding. Beneficial ownership of the Company, as of March 21, 2002, was as
follows:
Shareholder Number of Common Shares Percentage Ownership
- ----------- ----------------------- --------------------
TT Byrne Capital Investments Inc.* 16,982,811 29.88%
Philip Nanni 5,420,046 9.54
Glen Pearson 5,420,046 9.54
Greg Stark 2,890,691 5.09%
3632563 Canada Inc. 5,420,046 9.54
*Terence Byrne is beneficial owner of such shares
Item 2. Acquisition or Disposition of Assets
On March 7, 2002, the Company acquired 3608948 Canada Inc. dba Ideas and
Associates ("Ideas"), pursuant to a Stock Exchange Agreement whereby all of the
issued and outstanding shares of Ideas was acquired by the Company and Ideas
became a wholly-owned subsidiary of the Company. Consideration for the
acquisition 30,000,000 shares of newly issued common stock of the Company. The
shareholders of Ideas also entered into a Stock Purchase Agreement with the
Company to purchase newly issued shares of the Company (See Item 5 Other
Events).
Item 3. Bankruptcy or Receivership
There has been no bankruptcy, receivership, or similar proceeding by or
against either of the Company or Ideas described in this Form 8-K.
Item 4. Changes in Registrant's Certifying Accountant
The Company has had no changes in and/or disagreements with its
accountants.
Item 5. Other Events
On March 7, 2002, the Company entered into a Stock Purchase Agreement with
the former shareholders of Ideas, whereby they agreed to purchase newly issued
shares of common stock of the Company in three separate purchases, a purchase of
an aggregate of 9,880,952 shares which occurred on March 7, 2002, the purchase
of an aggregate of 9,880,952 shares to occur on or about April 16, 2002 and the
purchase of an aggregate of 39523808 shares to occur on or about May 28, 2002.
Change of Business Direction
The Company, with its new subsidiary, will refocus its business towards
providing information technology (IT) services to clients
The following information provides details on the business of the Company's
Ideas subsidiary.
Forward-Looking Statements
There are forward-looking statements in this document, and in the Company's
public documents to which they may refer that are subject to risks and
uncertainties in addition to those set forth below. These forward-looking
statements include information about possible or assumed future results of the
Company's operations. Also, when any of the words "may," "will," "believes,"
"expect," "anticipate," "estimate," "continue," or similar expressions are used,
the Company is making forward-looking statements. Many possible events or
factors, including but not limited to those set forth herein, could affect
future financial results and performance. This could cause Company results or
performance to differ materially from those expressed in any forward-looking
statements. These and other risks are described in the Company's other publicly
filed documents and reports that are available from the Company and from the
SEC.
Ideas offers its clients consulting services designed to meet their needs
for custom software development (including Web site development), database
development and data mining, deployment of packaged application software and
information technology planning. Ideas also provides marketing consulting
related to client's e-business initiatives such as strategic consulting,
marketing strategies and ad server management. Ideas' service offerings include
strategy consulting, systems architecture and design, application and technology
infrastructure development, and e-business management. Ideas' services are
designed to improve a client's competitive position and increase efficiency
through the development of innovative business strategies enabled by the
integration of emerging and existing technologies. During 2000 and 2001, Ideas
conducted approximately 20 separate client engagements.
In addition to its custom software development services, Ideas intends to
develop a set of proprietary industry specific software products. These
pre-packaged solutions will allow Ideas to attempt to leverage its experience in
creating applications software and create additional revenue sources. Ideas can
give no assurance that it will be successful in this regard.
IDEAS' METHODOLGY
Ideas has developed a professional services methodology, a well-defined
process that helps it efficiently and successfully deliver Ideas' services. This
methodology provides a framework that facilitates the distribution of knowledge
within a client engagement. The Ideas methodology called "Dynamic Team
Management" ("DTM"), is designed to allow it to provide consistent quality
across engagements and to deliver high value to clients in all aspects of Ideas'
services. Included as part of DTM is "Risk Managed Project Based Development"
("RMPBD"), a process designed to reduce the business risks normally associated
with IT projects. The key to Ideas' methodologies is the iterative improvement
of the innovations that it delivers. Because the needs of its clients are
dynamic, it has designed its methodologies with built-in feedback and iteration
processes in order to improve the services delivered to clients.
SALES AND MARKETING
Ideas currently sells its services directly to clients by direct sales
efforts of its management. Ideas expects to expand its direct sales force in the
US by hiring experienced sales persons, and by developing relationships with
partner companies to accelerate its sales penetration into its target markets.
Ideas sales efforts will also be supplemented by marketing and
communications activities which it pursues further build Ideas' brand name and
recognition in the marketplace. These activities will include direct mail
campaigns targeting corporate executives, public speaking opportunities,
attendance at industry conferences and business events, a public relations
program, sales and marketing materials.
COMPETITION
Ideas markets are intensely competitive. Customer requirements and the
technology available to satisfy those requirements continually change. Ideas
competitors include large information technology consulting companies such as
Accenture, Cambridge Technology Partners, Inc., Electronic Data Systems
Corporation, IBM Global Services and KPMG LLP; companies focused primarily on
Web site development such as Razorfish, Viant and Sapient Corporation and
numerous other companies the size of Ideas and smaller. Many of these companies
have greater financial resources and larger customer bases than Ideas does and
may have larger technical, sales, and marketing resources than Ideas does.
Ideas' expects to encounter additional competition as we address new markets and
as the computing and communications markets converge.
Ideas must frequently competes with its clients' own internal information
technology capability, which may constitute a fixed cost for the client. This
may increase pricing pressure on Ideas. If Ideas is forced to lower our pricing
or if demand for its services decreases, its business, financial condition, and
results of operations will be materially and adversely affected.
Ideas competes on the basis of a number of factors, including the
attractiveness of the business strategy and services that it offers, breadth of
services it offers, pricing, technological innovation, quality of service, and
ability to invest in or acquire assets of potential customers. Some of these
factors are outside of Ideas' control. Ideas cannot be sure that it will compete
successfully against its competitors in the future.
RESEARCH AND DEVELOPMENT
As a services company, Ideas research and development efforts have been
focused on the improvement of its software development methodologies which it
utilizes in its client engagements. This is an on-going process with its
methodologies being refined from feedback from client engagements. Currently,
Ideas has no separate budget for, or employees dedicated solely to, research and
development. Ideas intends, in the future, to devote efforts "productizing" some
of the software applications it has developed in connection with client
engagements. Once "productized", Ideas intends to market such applications to
potential clients on a licensing basis. There are no assurances that Ideas' will
be able to license such applications or that such licensing arrangements would
be profitable.
PROPRIETARY RIGHTS
Ideas relies on a combination of trade secret laws, nondisclosure and
other contractual agreements and technical measures to protect its proprietary
rights in its products. Ideas believes that its products, trademark and other
proprietary rights do not infringe on the proprietary rights of third parties.
EMPLOYEES
As of November 30, 2001, Ideas had 50 full time employees.
FACILITIES
Ideas is located in a 7,000 square foot facility in Montreal, Canada at
2050 de Bleury Street, Montreal, QC H3A 2J5. This facility lease, which is from
a non-affiliated party, expires during 2006. Ideas pays a base monthly rent of
approximately $13,000. The rent is subject to an annual increase of
approximately 2% per year.
Item 6. Resignations of Registrant's Directors
On March 7, 2002 John Collins and Jim Estil resigned as directors. The
resignations were not result of a disagreement with the Company. The current
directors and executive officers of the Company are:
Name Age Position
- ---- --- --------
Terence Byrne 44 Chief Executive Officer, President and Director
Arthur Gutch 40 Chief Operating and Marketing Officer and Director
Dejan Nenov 35 CTO and EVP Professional Services and Director
Glen Pearson 39 EVP, General Manager and Director
John Hartley 54 Chairman of the Board of Directors
Eric Boyd 41 Director
Richard Miles 47 Director, Secretary/Treasurer, President of
FreeSoftware.com division
Rene Pardo 53 Director
At each annual meeting of shareholders, all of the directors will be
elected to serve from the time of election and qualification until the next
annual meeting following election. There are no family relationships among any
of the directors.
Richard Miles
Since 1990, Mr. Miles is President of Re:Launch, a computer channel integrated
marketing and advertising firm located in Berkeley, California. Under Mr. Miles'
direction and leadership, Re:Launch has become one of the computer industry's
top marketing and sales service agencies which specializes in assisting clients
in running profitable direct mail programs. Mr. Miles is also primary author of
"The Software Channel Sales Guidebook" used by over 200 firms including
Microsoft, Intuit, IBM, Memorex, and many others.
Rene Pardo
Mr. Pardo is currently the Vice President for Business Development for Online
Direct, and is the CEO of NetProfitEtc., Inc. 1970 he was the founder of Lanpar
Technologies, and took it to $25 million revenue, going public on Toronto Stock
Exchange raising $13 million. In 1994 Mr. Pardo joined Aztech New Media, a
software anthology publisher which was just starting to sell shareware. He
brought in financing and shareholders, in different stages, and established
international sales. Revenues have grown to approx. $CDN10 million. In Sept.
1997, Mr. Pardo established and raised financing for ComCentral Inc. to continue
the development of proprietary "Script Agent" software for enabling the rapid
customization and browsing of CD-ROMs (clients include Compaq, Ziff Davis); and
to build internet community tools (chat, homepages, instant messaging, polling,
forums, e-cards etc) to enhance electronic direct marketing.
Terence Byrne, Director and Chief Executive Officer
Mr. Byrne has been involved in the high technology venture capital arena
for most of the past decade. From 1999 to the present, as the President of Byrne
Mirman Capital Investments, he acts as an investment banker and advisor. Byrne
Mirman has equity interests in companies in the food service,
telecommunications, biotech, e-commerce, entertainment and music industries. In
1997 and 1998, Mr. Byrne held executive positions including Chief Executive
Officer and Chairman for The Tirex Corporation, Inc. Prior to that, Mr. Byrne
served as President of Digital Optronics, Inc., a business engaged in the
manufacturing of digital optronic measuring devices for the defense industry.
Prior to its acquisition by Digital Optronics, Mr. Byrne was the Founder and
President of Byrne Industries, Inc. a manufacturer of electronic defense
equipment that completed numerous contracts with multi-billion dollar defense
industry companies such as Lockheed Aviation. Mr. Byrne has a B.A. degree in
economics from Villanova University in Philadelphia.
Arthur Gutch, Director, Chief Operating and Marketing Officer
Mr. Gutch brings almost two decades of experience in corporate management
with a background in operations, marketing, distribution, business-creation and
information technology. Most recently, in 2000 and 2001, Mr. Gutch was CEO of
esolo, an e-learning application for marketing services, where he developed a
proprietary method for developing marketing strategy and tactics. In 1998 and
1999, at Adscience LLC, Mr. Gutch was a General Partner where he was a
consultant to companies from Microsoft to start-ups on strategic marketing and
investment strategy. In 1996 and 1997, he was the CEO of RDC Networks, a
developer of wireless LAN & WAN solutions. Mr. Gutch successfully re-launched
the US operation of RDC Networks and the company was ultimately sold to Marconi.
Dejan Nenov, Director, CTO and EVP Professional Services
Mr. Nenov has held management positions with leading Silicon Valley and
International technology firms. In 2000, he was CTO of Instill Corporation where
Mr. Nenov created and patented cutting-edge technologies in the area of trading
partner integration, data analysis and warehousing and online systems
provisioning. In 1999, Mr. Nenov was was responsible for the operation of the
first online Yellow Pages product, BigBook Inc., which was later acquired by
GTE. From 1997 to 1998, he was Director of Architecture and Methodology of
Solution 6 Pty and responsible for the technology direction of development teams
in four countries. During 1996, he was a VP of High Technology at Pyramid, Inc.
Mr. Nenov holds a degree in Computer Engineering from Rose-Hulman and an
International Baccalaureate from the Armand Hammer United World College.
Glen Pearson, Director, Director, Executive Vice President and General Manager
Mr. Pearson is currently President of Ideas, a position he has held since
2000 and was a co-founder of Ideas. Prior to co-founding Ideas in June of 1999,
Mr. Pearson was the operations manager for an international eyewear company.
Eric Boyd, Director
Mr. Boyd is the principal of FortCap, Inc., a financial consultancy, which
he formed in 2000. From 1996 to 2000, Mr. Boyd was an independent financial
consultant and advisor to private and public companies. Mr. Boyd holds a BA
degree from Concordia University.
Item 7. Financial Statements and Exhibits
As of the date hereof, financial information reflecting the March 7, 2002
transaction is not available. The Company plans to file an amendment to this
Form 8-K reflecting the required financial information no later than 60 days
following the filing of this Form 8-K. Enclosed are unaudited selected
historical financial data from both that Freesoftwareclub.com and Ideas, as of
the period ending December 31, 2002. All financial information for Ideas is
expressed in Canadian Dollars ($CDN)
Freesoftwareclub.com, Inc. Selected Historical Financial Data
(unaudited)
Year Ended
December 31, 1999
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Statement of Operations Data
Net Revenues $ 25,495
Total Cost and Expenses $ 161,734
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Net Loss $(136,239)
Balance Sheet Data
Total Assets $ 26,991
Total Liabilities $ 331,372
Total Stockholders' Equity (deficit) $(304,381)
Total Liabilities and Stockholders' Equity $ 26,991
Ideas and Associates Selected Historical Financial Data
(expressed in Canadian Dollars)
(unaudited)
Year Ended
December 31, 1999
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Statement of Operations Data
Net Revenues $CDN 6,000,871
Total Cost and Expenses 5,317,931
Net Earnings from Operations 682,940
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Net Earnings $CDN 573,966
Balance Sheet Data
Total Assets $CDN 2,505,455
Total Liabilities 1,372,901
Total Stockholders' Equity 1,232,554
Total Liabilities and Stockholders' Equity $CDN 2,505,455
Index to Exhibits
Exhibit Description
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10.1 Stock Exhange Agreement
10.2 Stock Purchase Agreement
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Freesoftwareclub.com, Inc.
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(Registrant)
Date: March 22, 2002 /s/ Terence C. Byrne
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Terence C. Byrne, Chief Executive
Officers