EXHIBIT 4.12 SHORT FORM OFFERING
FORM 4H
SHORT FORM OFFERING DOCUMENT
DATED: APRIL 30, 2003
STOCKGROUP INFORMATION SYSTEMS INC.
(the "Issuer" or the "Company")
HEAD OFFICE REGISTRAR AND TRANSFER AGENT
500 - 50 W. Pender St. Pacific Corporate Trust Company
Vancouver, BC V6C 2T7 10th Floor - 625 Howe St.
Vancouver, B.C. V6C 3B8
$1,998,000
OFFERING OF UP TO 5,400,000 UNITS
PRICE: $0.37 PER UNIT
This is an offering (the "Offering") of up to 5,400,000 units ("the Units") of
the Issuer at a price of $0.37per Unit AND IS NOT SUBJECT TO ANY MINIMUM
SUBSCRIPTION AMOUNT. Each unit is comprised of one share of common stock (a
"Share") in the capital of the Issuer and one non-transferable share purchase
warrant (a "Warrant"). Each two Warrants will entitle the holder thereof to
purchase one additional Share in the capital of the Issuer for a period of 12
months following the date the Units are distributed (the "Closing Date") at a
price of $0.75 per Share. The Units are being offered through First Associates
Investments Inc., 440 - 2nd Avenue S.W., Suite 2200, Calgary, AB, T2P 5E9 (the
"Agent") as exclusive Agent for the Issuer for sale only in the provinces of
British Columbia and Alberta. See "Plan of Distribution".
NUMBER OF AGENT NET PROCEEDS TO
Description PRICE(1) SECURITIES COMMISSION(2) ISSUER(3)
- ------------ ------------ ------------- ---------- ----------------
Per Unit . . $ 0.37 1 $ 0.0296 $ 0.3404
- ------------ ------------ ------------- ---------- ----------------
Offering (4) $ 1,998,000 5,400,000 $ 159,840 $ 1,838,160
- ------------ ------------ ------------- ---------- ----------------
Notes:
- -----
(1) The offering price for the Units was established by negotiation between the
Issuer and the Agent.
(2) The Issuer has agreed to pay First Associates Investments Inc. (the
"Agent"): (i) a commission equal to 8% of the gross proceeds of the sale of
Units under the Offering, (ii) options ("Agent's Options") to purchase a
number of Units equal to 10% of the total number of Units sold under the
Offering, exercisable at $0.37 per Unit for a period of 24 months from the
Closing Date; and (iii) a $20,000 administration fee together with all of
the Agent's costs incurred with respect to the Offering.
(3) After deducting the Agent's commission, but before deducting the expenses
of the Offering, estimated to be $45,000.
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(4) Assuming the Offering is fully subscribed.
THE SECURITIES OFFERED HEREUNDER ARE SPECULATIVE IN NATURE. INFORMATION
CONCERNING THE RISKS INVOLVED MAY BE OBTAINED BY REFERENCE TO THIS OFFERING
DOCUMENT; FURTHER CLARIFICATION, IF REQUIRED, MAY BE SOUGHT FROM THE AGENT OR AN
ADVISOR REGISTERED UNDER THE SECURITIES ACT (ALBERTA) (THE "ALBERTA ACT") OR THE
SECURITIES ACT (BRITISH COLUMBIA) (THE "BC ACT") (COLLECTIVELY, THE "ACTS").
(SEE "RISK FACTORS").
NEITHER THE TSX VENTURE EXCHANGE (THE "EXCHANGE"), NOR ANY SECURITIES REGULATORY
AUTHORITY HAS IN ANY WAY PASSED UPON THE MERITS OF THE SECURITIES OFFERED UNDER
THIS OFFERING DOCUMENT.
THE SECURITIES OFFERED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THEUNITED STATES
- --------------------------------------------------------------------------------
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE LAWS OF ANY STATE,
- --------------------------------------------------------------------------------
AND WILL BE ISSUED PURSUANT TO REGULATION S, WHICH IS AN EXEMPTION FROM
- --------------------------------------------------------------------------------
REGISTRATION UNDER THE 1933 ACT. THE SECURITIES OFFERED HEREUNDER MAY NOT BE
- --------------------------------------------------------------------------------
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE UNITED STATES OR TO
- --------------------------------------------------------------------------------
U.S. PERSONS PRIOR TO THE END OF A ONE-YEAR PERIOD COMMENCING ON THE LATER OF
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(I) THE DATE THE SECURITIES ARE FIRST OFFERED TO PERSONS OTHER THAN DISTRIBUTORS
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(AS DEFINED IN REGULATION S OF THE 1933 ACT) OR (II) THE DATE OF THE FINAL
- --------------------------------------------------------------------------------
CLOSING OF THE OFFERING OF THE SECURITIES BY THE COMPANY, UNLESS SUCH OFFER,
- --------------------------------------------------------------------------------
SALE, TRANSFER, PLEDGE OR HYPOTHECATION (A) IS MADE IN ACCORDANCE WITH THE
- --------------------------------------------------------------------------------
PROVISIONS OF REGULATION S OR (B) IS MADE PURSUANT TO REGISTRATION OR AN
- --------------------------------------------------------------------------------
APPLICABLE EXEMPTION UNDER THE 1933 ACT.
- ---------------------------------------------
THE SECURITIES OFFERED HEREUNDER ARE DEEMED "RESTRICTED SECURITIES" UNDER RULE
- --------------------------------------------------------------------------------
905 OF REGULATION S AND UNDER RULE 144 OF THE 1933 ACT.
- ------------------------------------------------------------------
AFTER A ONE-YEAR PERIOD HAS ELAPSED AS SET OUT ABOVE, A PURCHASER OF SECURITIES
- --------------------------------------------------------------------------------
OF THE COMPANY UNDER THIS OFFERING MAY OFFER, SELL, TRANSFER, PLEDGE OR
- --------------------------------------------------------------------------------
HYPOTHECATE SUCH SECURITIES IN THE U.S. OR TO U.S PERSONS PURSUANT TO THE
- --------------------------------------------------------------------------------
PROVISIONS OF RULE 144(E) OF THE 1933 ACT (WHICH IS MORE COMMONLY KNOWN AS THE
- --------------------------------------------------------------------------------
"DRIBBLE OUT" PERIOD STARTING FROM THE 13TH MONTH TO THE 24TH MONTH OF OWNERSHIP
- --------------------------------------------------------------------------------
OF SUCH SECURITIES).
- ----------------------
No person is authorized by the Issuer to provide any information or to make any
representation other than those contained in this Offering Document in
connection with the issue and sale of the Units of the Issuer.
The information provided in this Offering Document is supplemented by disclosure
contained in the documents listed below which are incorporated by reference into
this Offering Document. These documents must be read together with this
Offering Document in order to provide full, true and plain disclosure of all
material facts relating to the securities offered by this Offering Document.
The documents listed below are not contained within, or attached to this
Offering Document, and will be provided by the Issuer, at no charge, upon
request. Alternatively, the documents may be accessed by the reader of the
Offering Document at the following locations:
130
Type of Document Date of Location At Which Document
Document May Be Accessed
- ---------------------- ----------------- --------------------------
Annual Information . . December 6, 2002 www.sedar.com
Form
- ---------------------- ----------------- --------------------------
Press Release. . . . . December 17, 2002 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report December 17, 2002 www.sedar.com
- ---------------------- ----------------- --------------------------
BC Form 51-901F Year . April 11, 2003 www.sedar.com
End December 31, 2002
Audited Financial
Statements
- ---------------------- ----------------- --------------------------
Press Release. . . . . January 22, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report January 22, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . January 31, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report January 31, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . February 5, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report February 5, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . February 18, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report February 18, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . March 18, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report March 18, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . March 21, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report March 21, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . March 27, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report March 27, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . April 15, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report April 15, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Press Release. . . . . April 17, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Material Change Report April 17, 2003 www.sedar.com
- ---------------------- ----------------- --------------------------
Any material change report (a "Subsequently Triggered Report") filed under
securities legislation, regulations, rules, policies, notices, instruments and
blanket orders applicable to the Issuer after the date that this Offering
Document is certified but before a purchaser enters into an agreement of
purchase and sale will be deemed to be incorporated into this Offering Document.
Securities offered by this Offering Document are being offered under an
exemption from the prospectus requirements. Purchasers may not receive all of
the information required by or have all of the rights available to a purchaser
under a prospectus.
THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN CONTAIN MEANINGFUL AND MATERIAL
INFORMATION RELATING TO THE COMPANY AND PROSPECTIVE SUBSCRIBERS FOR UNITS SHOULD
131
REVIEW ALL INFORMATION CONTAINED IN THIS OFFERING DOCUMENT AND THE DOCUMENTS
INCORPORATED BY REFERENCE BEFORE MAKING AN INVESTMENT DECISION.
ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE INCORPORATED
BY REFERENCE HEREIN SHALL BE DEEMED TO BE MODIFIED OR SUPERSEDED FOR THE
PURPOSES OF THIS OFFERING DOCUMENT TO THE EXTENT THAT A STATEMENT CONTAINED IN
THIS OFFERING DOCUMENT OR IN ANY SUBSEQUENTLY TRIGGERED REPORT THAT ALSO IS OR
IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN MODIFIES OR SUPERSEDES SUCH
STATEMENT. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT CONSTITUTE A PART
OF THIS OFFERING DOCUMENT, EXCEPT AS SO MODIFIED OR SUPERSEDED. THE MODIFYING OR
SUPERSEDING STATEMENT NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR
STATEMENT OR INCLUDE ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT THAT IT
MODIFIES OR SUPERSEDES. THE MAKING OF SUCH A MODIFYING OR SUPERSEDING STATEMENT
SHALL NOT BE DEEMED AN ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR
SUPERSEDED STATEMENT, WHEN MADE, CONSTITUTED A MISREPRESENTATION, AN UNTRUE
STATEMENT OF A MATERIAL FACT OR AN OMISSION TO STATE A MATERIAL FACT THAT IS
REQUIRED TO BE STATED OR THAT IS NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN
LIGHT OF THE CIRCUMSTANCES IN WHICH IT WAS MADE.
Copies of documents incorporated herein by reference may also be obtained, upon
request, without charge from the Corporate Secretary of the Issuer at Suite 500
- - 750 West Pender Street, Vancouver, BC, V6C 2T7, (phone: 604-331-0995)
CURRENCY
Unless otherwise indicated, all reference to "$" or "dollars" in this Offering
Document refer to the Canadian dollar. The financial statements incorporated
herein by reference are reported in United States dollars.
Agent
First Associates Investment Inc.
440 - 2nd Avenue S.W., Suite 2200
Calgary, Alberta T2P 5E9
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TABLE OF CONTENTS
CURRENCY 3
DETAILS OF THE OFFERING AND PLAN OF DISTRIBUTION 2
USE OF PROCEEDS 4
BUSINESS OF THE ISSUER 4
RISK FACTORS 4
ACQUISITIONS 7
CORPORATE INFORMATION 7
DIRECTORS, OFFICERS, PROMOTERS AND PRINCIPAL HOLDERS OF VOTING SECURITIES 7
OPTIONS TO PURCHASE SECURITIES OF THE ISSUER 9
SECURITIES OF THE ISSUER HELD IN ESCROW 10
PARTICULARS OF ANY OTHER MATERIAL FACTS 10
CONTRACTUAL RIGHTS OF ACTION 11
CONTRACTUAL RIGHTS OF WITHDRAWAL 11
CERTIFICATE OF PROMOTERS OF THE COMPANY 12
CERTIFICATE OF THE DIRECTORS OF THE COMPANY 13
CERTIFICATE OF THE AGENT 14
133
DETAILS OF THE OFFERING AND PLAN OF DISTRIBUTION
DETAILS OF THE OFFERING
The Offering consists of 5,400,000 Units, each Unit consisting of one Share and
one Warrant.
SHARES
The Shares are Shares without par value in the capital stock of the Issuer. All
of the Shares of the Issuer are Shares of the same class and rank equally as to
dividends, voting powers and participation in assets. No Shares have been
issued subject to call or assessment. There are no pre-emptive or conversion
rights and no provision for redemption, purchase or cancellation, surrender or
sinking or purchase funds. The Shares issuable under this Offering will not be
registered in the United States and will be subject to certain trading
restrictions in the United States.
WARRANTS
The Warrants will be non-transferable and two Warrants will entitle the holder
to purchase one Share of the Issuer for a period of 12 months following the
Closing Date at a price of $0.75 per Share. The Warrants will contain
provisions for the appropriate adjustment in the class, number and price of
Shares issuable under such Warrants upon the occurrence of certain events,
including any subdivision, consolidation, or reclassification of the Shares of
the Issuer, the payment of stock dividends or the amalgamation of the Issuer.
The Shares underlying the Warrants issuable under this Offering will not be
registered in the United States and will be subject to certain trading
restrictions in the United States.
PLAN OF DISTRIBUTION
The Issuer and the Agent have entered into an agreement ("Agency Agreement")
under which the Issuer has appointed the Agent as its exclusive agent to offer
the Units for sale. Closing will take place on a date determined by the Agent
and the Issuer not later than 60 days from the date that this Offering Document
is accepted by the Exchange.
On Closing, the Agent will be paid a cash commission equal to 8 % of the
Offering Price for each of the Units sold, and the Agent's Options will be
issued. In addition, the Issuer will pay the Agent a corporate finance fee of
$20,000. The Issuer will also reimburse the Agent for reasonable expenses
related to the Offering.
The Agent may terminate its obligations under the Agency Agreement by notice in
writing to the Issuer at any time prior to the conclusion of the Offering at its
discretion on the basis of its assessment of the state of the financial markets
or upon the occurrence of certain stated events.
134
Provided that at least $1,000,000 of Units is sold under the Offering, the Agent
will have the right of first refusal to provide its services, based upon
industry standard terms, and to participate up to 50% as co-agent or selling
group member, in any Canadian offering or the Canadian tranche of any United
States offering of securities conducted by the Issuer through a broker dealer or
other intermediary during the 12 months from the Closing Date.
Under the Agency Agreement the Agent has reserved the right to offer selling
group participation in the normal course of the brokerage business to other
licensed investment dealers.
Other than as described above, there are no payments in cash, securities or
other consideration being made, or to be made, to a promoter, finder or any
other person or company in connection with the Offering. The directors, officers
and other insiders of the Issuer may purchase Units under the Offering.
The Agent's Professional Group as defined in National Instrument 33-105,
beneficially owns directly or indirectly zero Shares of the Issuer.
EXEMPTION
The Units in this Offering are being distributed pursuant to:
(a) in British Columbia, BC Instrument 45-509, entitled "Short Form
Offerings of Listed Securities and Units by Qualifying Issuer" (the
"BC Instrument") of the British Columbia Securities Commission, which
provides an exemption from the prospectus requirements of the BC Act
and the rules and the regulations thereto (the "BC Securities Rules");
and
(b) in Alberta, Alberta Blanket Order 45-507, entitled "Order Under
Sections 144(2), 213 and 214(1) of the Alberta Act, Offerings by the
Exchange Short Form Offering Document" (the "Alberta Blanket Order")
of the Alberta Securities Commission, which provides an exemption from
the prospectus requirements of the Alberta Act and the rules and
regulations thereto (the "Alberta Securities Rules").
In order to rely on the exemptions provided in the BC Instrument and the Alberta
Blanket Order (collectively, the "Instruments"), the following provisions will
apply to the Offering:
(a) the number of Shares distributed by the Company under the Offering
when aggregated with the Shares of the Company distributed under all
Short Form Offerings during the 12 month period prior to the date of
this Offering Document, may not constitute in excess of 100% of the
number of issued and outstanding Shares at the later of the following
dates:
(i) the date the Company first distributed Shares under a Short Form
135
Offering Document during the 12 month period immediately
preceding the date of this Offering Document; and
(ii) the date that is 12 months before the date of this Offering
Document;
(b) the gross proceeds of the Offering, when added to the gross proceeds
from all Short Form Offerings (excluding the proceeds from the
exercise of any Warrants included therein) completed during the 12
month period immediately preceding the date of this Offering Document,
may not exceed $2,000,000;
(c) all Units acquired by the Agent or a purchaser who is, at the time of
Closing, an insider or promoter of the Issuer or a member of the
Agent's Professional Group as defined in National Instrument 33-105,
will be subject to a hold period which will run for four months from
the date of Closing;
(d) all Units acquired by a Purchaser in excess of $40,000 will be subject
to a four month hold period;
(e) pursuant to the Instruments, no more than 50% of the Units sold
hereunder may be subject to the four month hold period; and
(f) no Purchaser may purchase more than 20% of the Offering.
USE OF PROCEEDS
FUNDS AVAILABLE
Net proceeds of the Offering if fully subscribed will be $1,838,160 prior to the
deduction of the costs of the Offering, which, when added to the Issuer's
working capital deficit (current assets minus current liabilities) of
approximately $682,892 (unaudited, as of March 31, 2003), will result in
$1,155,268 of available funds, which funds are intended to be used for the
purposes outlined in the table below:
Description of Expenditure Fund Allocation
- -------------------------- ---------------
($)
To pay the estimated costs of the Offering
(legal and due diligence): 45,000
Minimum contractually required repayment
of convertible notes, 20% of portion
sold over $725,500 (US$500,000) 254,900
Working capital 358,160
Technology expansion and upgrades 278,027
Marketing 219,181
TOTAL FUNDS AVAILABLE (1) $1,155,268
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Note:
- -----
(1) As the Offering is not subject to a minimum subscription, the entire
gross proceeds of $1,998,000 may not be realized by the Issuer. In
such event, the Issuer will allocate the use of the actual proceeds
received in the priority and order listed above.
BUSINESS OF THE ISSUER
The Issuer is a financial media and technology company providing financial
content and software solutions to media, corporate and financial services
companies, enabling them to provide financial data and news to their customers,
shareholders and employees. The Issuer also provides software that permits
online shareholder disclosure and communication activities and email management
enabling companies to connect better with their investors.
RISK FACTORS
The following factors should be considered carefully in evaluating the Company
and its business. In this section "we", "us", "our" and similar expressions
refer to the Issuer.
Our limited operating history makes it difficult for you to judge our prospects.
We have a limited operating history upon which an evaluation of our current
business and prospects can be based. You should consider any purchase of our
shares in light of the risks, expenses and problems frequently encountered by
all companies in the early stages of its corporate development.
Liquidity and capital resources are uncertain.
Our working capital deficiency at March 31, 2003 was approximately US$464,774.
We incurred a net loss of US$306,677 for the year ended December 31, 2002 [2001
- - US$541,552], and had a working capital deficiency of US$211,045 as at December
31, 2002. These factors raise substantial doubt about our ability to continue as
a going concern. We experienced a reduction in cash used in operations from
US$778,086 in 2001 to US$430,867 in 2002 as a result of cost restructuring
activities initiated in 2001. We have negotiated the conversion of US$392,984 of
our 8% convertible notes on January 28, 2003, thereby eliminating eight
mandatory quarterly payments totaling US$42,012 and a maturity payment of
US$350,972. Of the remaining principal of its 8% convertible notes, US$15,332
was paid on April 2, 2003, an amount equal to 20% of the portion of the gross
proceeds of this Offering in excess of US$500,000 will be paid upon closing of
this Offering, and US$107,324 will be paid in mandatory quarterly payments of
US$15,332 until December 31, 2004, and the balance of between US$993,360 and
US$1,168,360 is due December 31, 2005. Although we have taken steps to achieve
profitable operations in 2003, there are no assurances that we will be
successful in achieving our goals.
137
In view of these conditions, our ability to continue as a going concern is
uncertain and dependent upon achieving a profitable level of operations and, if
necessary, on our ability to obtain necessary financing to fund ongoing
operations.
Computer equipment problems and failures could adversely affect business.
Problems or failures in Internet-related equipment, including file servers,
computers and software, could result in interruptions or slower response times
of the our products, which could reduce the attractiveness of the Web site,
financial tools, or software products to advertisers and users. Should such
interruptions continue for an extended period we could lose significant business
and reputation. Equipment problems and failures could result from a number of
causes, including an increase in the number of users of the Web site, computer
viruses, outside programmers penetrating and disrupting software systems, human
error, fires, floods, power and telecommunications failures, and internal
breakdowns. In addition, any disruption in Internet access provided by third
parties could have a material and adverse effect.
We may not be able to compete successfully against current and future
competitors.
We currently compete with several other companies offering similar services.
Many of these have significantly greater financial resources, name recognition,
and technical and marketing resources, and virtually all of them are seeking to
improve their technology, products and services. We can not assure you that we
will have the financial resources or the technological expertise to successfully
meet this competition.
We are significantly influenced by our officers, directors and entities
affiliated with them.
In the aggregate, ownership of our shares by management represents approximately
21% of issued and outstanding shares of common stock. These shareholders, if
acting together, will be able to significantly influence all matters requiring
approval by shareholders, including the election of directors and the approval
of mergers or other business combinations transactions.
We may be unable to protect the intellectual property rights upon which our
business relies.
We regard substantial elements of our Web site and underlying technology as
proprietary and attempt to protect them by relying on intellectual property
laws, including trademark, service mark, copyright and trade secret laws and
restrictions on disclosure and transferring title and other methods. We also
generally enter into confidentiality agreements with employees and consultants
138
and in connection with license agreements with third parties, and seek to
control access to proprietary information. Despite these precautions, it may be
possible for a third party to copy or otherwise obtain or use our proprietary
information without authorization or to develop similar technology
independently. There can also be no assurance that our business activities will
not infringe upon the proprietary rights of others, or that other parties will
not assert infringement claims against us, including claims that by directly or
indirectly providing hyperlink text links to Web sites operated by third
parties, we have infringed upon the proprietary rights of other third parties.
It is unclear how any existing and future laws enacted will be applied to the
Internet industry and what effect such laws will have on us.
A number of legislative and regulatory proposals under consideration by federal,
state, provincial, local and foreign governmental organizations may lead to laws
or regulations concerning various aspects of the Internet, including, but not
limited to, online content, user privacy, taxation, access charges, liability
for third-party activities and jurisdiction. Additionally, it is uncertain how
existing laws will be applied by the judiciary to the Internet. The adoption of
new laws or the application of existing laws may decrease the growth in the use
of the Internet, which could in turn decrease the demand for our services,
increase the cost of doing business or otherwise have a material adverse effect
on our business, results of operations and financial condition.
We may be held liable for online information or products provided by us or third
parties.
Because materials may be downloaded by the public on Internet services offered
by us or the Internet access providers with which we have relationships, and
because third party information may be posted by third parties on our Web site
through discussion forums and otherwise there is the potential that claims will
be made against us for defamation, negligence, copyright or trademark
infringement, or other theories. Such claims have been brought against providers
of online services in the past. The imposition of liability based on such claims
could materially and adversely affect us.
Even to the extent such claims do not result in liability, we could incur
significant costs in investigating and defending against such claims. The
imposition on us of potential liability for information or products carried on
or disseminated through our Web site could require implementation of measures to
reduce exposure to such liability, which may require the expenditure of
substantial resources and limit the attractiveness of services to members and
users.
Our general liability insurance may not cover all potential claims to which we
are exposed or may not be adequate to indemnify us for all liability that may be
imposed. Any imposition of liability that is not covered by insurance or is in
excess of insurance coverage could have a material adverse effect on our
business, results of operations and financial condition.
139
Future sales of shares may adversely impact the value of our stock.
During 2002 we issued 9,421,336 shares of common stock, representing 93% of the
outstanding stock at the beginning of 2002. We also have authorized, reserved,
and registered, as of December 31, 2002, 4,901,875 shares of common stock for
issuance upon the exercise of outstanding warrants, and 3,500,975 shares for
issuance upon the exercise of non-qualified stock options.
If required, we will seek to raise additional capital through the sale of common
stock. Under the terms of outstanding convertible notes and debentures, the
number of shares that may be issued under such instruments may be increased in
the event of certain changes in our capital structure. Future sales of shares
by us or our stockholders could cause the market price of its common stock to
decline.
The departure of key personnel could have an adverse impact on our business.
We employ certain key personnel with skills, including management skills, which
may be difficult to replace quickly. Should one or more of our key personnel
depart our company we may incur time and cost losses replacing them. Even if
replaced, it is possible that their departure could have a long lasting adverse
impact on us.
ACQUISITIONS
There are no plans to use any of the proceeds in this Offering for acquisitions.
CORPORATE INFORMATION
The Issuer was incorporated in 1995 in the State of Colorado. Its shares trade
on the NASD Over-The-Counter Bulletin Board under the symbol "SWEB" and on the
TSX Venture Exchange under the symbol "SWB". The Shares being offered under
this Offering will contain trading restrictions in the United States and Canada,
if applicable, as disclosed on page 2 of this Offering document under the
heading Details of the Offering and Plan of Distribution.
AUTHORIZED CAPITAL
The Issuer is authorized to issue up to 75,000,000 Shares and 5,000,000 shares
of preferred stock. No preferred stock is issued and outstanding.
The number of Shares outstanding as of April 28, 2003 was 21,295,571.
140
DIRECTORS, OFFICERS, PROMOTERS AND PRINCIPAL HOLDERS OF VOTING SECURITIES
The table below and the paragraphs that follow present certain information
concerning directors, executive officers and significant employees, updated to
April 28, 2003. Mr. David Caddey is Mr. Marcus New's wife's uncle. Other than
this relationship, none of our directors, executive officers or significant
employees has any family relationship with any other director, executive officer
or significant employee.
NUMBER AND NUMBER AND
EXECUTIVE OFFICER/ PERCENTAGE OF NON- PERCENTAGE OF
NAME AND MUNICIPALITY DIRECTOR SINCE PRINCIPAL OCCUPATION ESCROWED VOTING ESCROWED VOTING
OF RESIDENCE POSITION WITH AND POSITIONS HELD SHARES BENEFICIALLY SHARES BENEFICIALLY
COMPANY DURING LAST FIVE OWNED POST OFFERING OWNED POST OFFERING
YEARS
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
Marcus A. New,. . . . . . Chairman of the 05/04/95 Businessman. Founder 1,352,000 1,664,500
Coquitlam, BC . . . . . . Board, Chief and Chief Executive (5.06%) (6.24%)
Executive Office Officer of Stockgroup
Director, from May 1995 to
Promoter present.
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
Craig D. Faulkner,. . . . Director 05/04/95 Businessman. From 227,500 556,500
Vancouver, BC May 1995 to March (0.85%) (2.08%)
2002, Chief Technology
Officer of Stockgroup.
From April 2002 to
present, President of
Kikara Martial Arts
Academies Ltd., a
franchisor of martial
arts academies
(privately held).
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
Leslie Landes, West . . . President, Chief 08/04/98 Businessman. 752,810 78,750
Vancouver, BC . . . . . . Operating Office President of Stockgroup (2.82%) (0.29%)
Director from August 1998 to
present. President of
Landes Enterprises
Ltd., a business
consulting company
(privately held), from
1992 to present.
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
David Caddey, Delta, BC . Director 05/04/95 Businessman. Vice 115,000 45,000
President of Space (0.43%) (0.17%)
Missions for MacDonald
Dettwiler & Associates,
a TSX listed company
(T.MDA), since August
1996.
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
141
NUMBER AND NUMBER AND
EXECUTIVE OFFICER/ PERCENTAGE OF NON- PERCENTAGE OF
NAME AND MUNICIPALITY DIRECTOR SINCE PRINCIPAL OCCUPATION ESCROWED VOTING ESCROWED VOTING
OF RESIDENCE POSITION WITH AND POSITIONS HELD SHARES BENEFICIALLY SHARES BENEFICIALLY
COMPANY DURING LAST FIVE OWNED POST OFFERING OWNED POST OFFERING
YEARS
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
Louis deBoer II, New. . . Director 10/07/99 Businessman. 100,000 NIL
York, NY President of (0.37%)
MediaFutures, Inc., a
consulting company to
the Internet and cable
broadcasting industries
(privately held), from
June 1998 to June
2000, and again from
June 2001 to present.
President of Automatic
Media, a builder of
online networks
(privately held), from
July 2000 to May 2001
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
David Gillard, Vancouver, Chief Financial 11/16/01 Professional accountant 100,000 NIL
BC. . . . . . . . . . . . Officer (CGA). CFO of (0.37%)
Stockgroup from
November 2001 to
present. Controller of
Stockgroup from March
2000 to November
2001.
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
Jeffrey Berwick,. . . . . Director 07/19/02 Businessman. 109,307 327,923
Vancouver, BC President of (0.41%) (1.23%)
Stockhouse Media Inc.,
a developer of Internet
financial communities
(privately held), from
1995 to present.
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
All Directors, Officers, Executive Officers and Significant 2,756,617 2,672,673
employees as a group (10.33%) (10.01%)
- --------------------------- ------------------- ------------------ -------------------- ------------------- -------------------
To the knowledge of Management, no director, officer or promoter of the Issuer
is, or within five years prior to the date of the Offering Document has been, a
director, officer or promoter of any other Issuer that while that person was
acting in that capacity:
i) was the subject of a cease trade or similar order or an order that denied
the Issuer access to any statutory exemptions for a period of more than 30
consecutive days, or
ii) was declared bankrupt or made a voluntary assignment in bankruptcy, made a
proposal under any legislation relating to bankruptcy or insolvency or has
been subject to or instituted any proceedings, arrangement or compromise
with the creditors or had a receiver, receiver manager or trustee appointed
to hold the assets of that person, except for Marcus New, the CEO of
Stockgroup, who was an outside director of Golden Maritime Resources Ltd.,
which was previously listed in the TSX Venture Exchange, and which company
received a Cease Trade Order for failing to file financial statements and
eventually de-listed due to lack of capital. Mr. New was also an outside
director of iaNett International Systems Ltd. between May 7, 2001 and
August 14, 2002, and during that period iaNett made a proposal under the
Bankruptcy and Insolvency Act.
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To the knowledge of Management, no director, officer or promoter of the Issuer
has, within ten years prior to the date of the Offering Document, been subject
to any penalties, or sanctions imposed by a court or securities regulatory
authority relating to trading in securities, promotion or management of a
publicly traded Issuer, or theft or fraud.
OPTIONS TO PURCHASE SECURITIES OF THE ISSUER
The following table sets out certain details of outstanding options to purchase
Shares currently held by directors, officers, and promoters of the Issuer.
Optionee Securities Exercise Price Expiration
Underlying Per Share Date
Options Granted US$
- --------------- --------------- --------------- ----------
Marcus New . . 400,000 $ 0.22 04/03/08
300,000 $ 0.17 12/05/08
100,000 $ 0.12 17/09/07
--------------- --------------- ----------
Leslie Landes. 533,200 $ 0.22 09/08/07
300,000 $ 0.15 21/10/08
--------------- --------------- ----------
Craig Faulkner 50,000 $ 0.15 21/10/08
100,000 $ 0.12 17/09/07
--------------- --------------- ----------
David Caddey . 50,000 $ 0.22 09/08/07
50,000 $ 0.15 21/10/08
--------------- --------------- ----------
Louis de Boer. 50,000 $ 0.22 10/08/07
50,000 $ 0.15 21/10/08
--------------- --------------- ----------
David Gillard. 7,500 $ 0.31 30/04/07
92,500 $ 0.15 12/05/08
--------------- --------------- ----------
The following table sets out certain details of outstanding options to purchase
Shares currently held by employees of the Issuer, as a group, who are not
directors, officers, or promoters of the Issuer.
Securities Exercise Price Expiration Date
Underlying Options
Granted
- ------------------ -------------- ---------------
264,700. . . . . . $ 0.15 2008
- ------------------ --------------- ---------------
150,000. . . . . . $ 0.31 2005
- ------------------ --------------- ---------------
50,000 . . . . . . $ 0.40 2008
- ------------------ --------------- ---------------
50,000 . . . . . . $ 0.594 2006
- ------------------ --------------- ---------------
OUTSTANDING WARRANTS TO PURCHASE SHARES
The following table sets out certain details of all options, warrants, and other
rights to purchase securities of the Issuer, not disclosed above.
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# of Warrants Exercise Price Expiry Date
(US$)
- ------------- ---------------- --------------------
250,000 $ 0.30 September 15, 2003
- ------------- ---------------- --------------------
1,664,900 $ 0.30 September 30, 2003
- ------------- ---------------- --------------------
1,701,875 $ 0.22 December 31, 2003
- ------------- ---------------- --------------------
150,000 $ 0.16 December 31, 2003
- ------------- ---------------- --------------------
281,818 $ 3.00 March 31, 2005
- ------------- ---------------- --------------------
500,000 $ 0.25 July 31, 2005
- ------------- ---------------- --------------------
300,000 $ 0.50 July 31, 2005
- ------------- ---------------- --------------------
CONVERTIBLE NOTES
The principal balance of US$1,225,684 in convertible notes matures on December
31, 2005. The notes are non-interest bearing and are convertible into Shares at
the option of the holder at any time at a fixed conversion price, which upon
completion of this offering will be US$0.32, through to December 31, 2003. From
January 1, 2004 to December 31, 2005, or sooner in the event of a default on any
mandatory quarterly payment of US$15,332, the notes bear interest at 8% and are
convertible into Shares at the option of the holder at any time at a conversion
price equal to the lesser of (i) the adjusted initial conversion price of
US$0.32 and (ii) 88% of the average of the 5 lowest closing prices of the
Issuer's Shares during the 30 trading days prior to the date of conversion.
JOINT VENTURE DEVELOPMENT AND OPERATING AGREEMENT
Under the terms of a Joint Venture Development and Operating Agreement ("JV")
with Stockhouse Media Corporation ("SMC"), after June 18, 2004 and before June
19, 2005, SMC may elect and option to cause the Issuer to purchase SMC's
interest in the JV for a formula-driven amount of Shares of the Issuer which is
between 920,000 and 1,120,000 Shares.
PRINCIPAL HOLDERS OF VOTING SECURITIES
To the knowledge of the directors and senior officers of the Issuer, no person
or company, other than those disclosed in the directors and officers table
hereinabove, directly or indirectly owns, controls or exercises control or
direction over shares carrying more than 10% of the voting rights attached to
all shares of the Issuer as at the date of this Offering Document.
SECURITIES OF THE ISSUER HELD IN ESCROW
There are a total of 2,672,673 Shares held in escrow, constituting approximately
13% of our outstanding common stock. After the Offering, the escrowed Shares
will constitute approximately 10% of our outstanding common stock. The shares
held in escrow are held by Marcus New as to 1,667,500 Shares, Leslie Landes as
to 78,750 Shares, Craig Faulkner as to 556,500 Shares, David Caddey as to 45,000
144
Shares, and Jeff Berwick as to 327,923 Shares. All escrowed Shares are released
on the following schedule:
1/3 on June 17, 2003
1/3 on December 17, 2003
1/3 on June 17, 2004
PARTICULARS OF ANY OTHER MATERIAL FACTS
We are currently involved in litigation with a customer to collect amounts owing
pursuant to a contract entered into in September, 2000. The defendant provided a
US$100,000 deposit and contracted us to provide certain lead generation
services. We delivered the requested services throughout October and November,
2000, however, the defendant defaulted on all additional payments. We are suing
the defendant for the US$351,800 balance owing, plus interest and costs. The
defendant has filed a statement of defense and counterclaim to recover the
US$100,000 deposit. As of April 28, 2003, no further action had been taken by
either party and no court date has been set. Although we currently believe the
outcome of the litigation will be in the Company's favour, we have not elected
to aggressively pursue the litigation at this time. We have made no provision
for the counterclaim in the financial statements and any settlement or final
award will be reflected in the statement of operations as the litigation is
resolved.
CONTRACTUAL RIGHTS OF ACTION
"If this Short Form Offering Document, together with any Subsequently Triggered
Report contains a "misrepresentation" as that term is defined in the BC Act or
the Alberta Act, as applicable, and it was a misrepresentation on the date of
investment, the purchaser will be deemed to have relied on the misrepresentation
and will have a right of action, either for damages against the Issuer and its
directors, and every person, except the Agent, who signed the Offering Document,
(the "Issuer's Representatives") or alternatively for rescission of the
agreement of purchase and sale for the securities. In any such action, parties
against whom remedies are sought shall have the same defenses as are available
in section 131 of the BC Act or section 203 of the Alberta Act, as applicable,
as if the Short Form Offering Document were a prospectus.
A purchaser is not entitled to commence an action to enforce this right after
the limitation periods as set out in section 140 of the BC Act or section 211 of
the Alberta Act, as applicable have expired.
The contractual rights provided herein are in addition to and without derogation
from any other right the purchaser may have at law."
145
CONTRACTUAL RIGHTS OF WITHDRAWAL
"An order or subscription for the securities offered under this Short Form
Offering Document is not binding on a purchaser if the dealer from whom the
purchaser purchased the security (or the Issuer if the purchaser did not
purchase the security from a dealer), receives, not later than two business days
after the receipt by the purchaser of the Short Form Offering Document and any
Subsequently Triggered Report, written notice sent by the purchaser evidencing
the intention of the purchaser not to be bound by the agreement.
The foregoing right of withdrawal does not apply if the purchaser is a member of
a "professional group" as defined under National Instrument 33-105, Underwriting
Conflicts or any successor policy or instrument, or if the purchaser disposes of
the beneficial ownership of the security (otherwise than to secure indebtedness)
before the end of the withdrawal period.
The onus of proving that the time for giving notice of withdrawal has ended is
on the dealer from whom the purchaser has agreed to purchase the security, or if
the purchaser did not purchase from a dealer, such onus is on the Issuer."
146
CERTIFICATE OF PROMOTERS OF THE COMPANY
The foregoing, including the documents incorporated by reference constitute
full, true and plain disclosure of all material facts relating to the securities
offered by this Offering Document. The standard for full, true and plain
disclosure is the same as that required for prospectuses by the Securities Act
(British Columbia) or the Securities Act (Alberta), as applicable, and the
regulations thereunder.
DATED: April 30, 2003
STOCKGROUP INFORMATION SYSTEMS INC.
___________________________________
Marcus New
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CERTIFICATE OF THE DIRECTORS OF THE COMPANY
The foregoing, including the documents incorporated by reference constitute
full, true and plain disclosure of all material facts relating to the securities
offered by this Offering Document. The standard for full, true and plain
disclosure is the same as that required for prospectuses by the Securities Act
(British Columbia) or the Securities Act (Alberta), as applicable, and the
regulations thereunder.
DATED: April 30, 2003
STOCKGROUP INFORMATION SYSTEMS INC.
____________________________________ _____________________________
Marcus New David Gillard, CGA
Chief Executive Officer and Director Chief Financial Officer
ON BEHALF OF THE BOARD OF DIRECTORS
___________________________________ ___________________________________
Craig Faulkner Leslie Landes
Director Director
148
CERTIFICATE OF THE AGENT
We have reviewed this Offering Document and the information it incorporates by
reference. Our review consisted primarily of enquiry, analysis and discussion
related to the information supplied to us by the Issuer and information about
the Issuer in the public domain.
We have not carried out a review of the type that would be carried out for a
prospectus filed under the Securities Act (British Columbia) or the Securities
Act (Alberta), as applicable. Therefore, we cannot certify that this document
and the information it incorporates by reference constitutes full, true and
plain disclosure of all material facts relating to the Issuer and the securities
offered by it.
Based on our review, nothing has come to our attention that causes us to believe
that this Offering Document and the information that it incorporates by
reference: (1) contains an untrue statement of a material fact; or (2) omits to
state a material fact necessary to prevent a false statement or misleading
interpretation of any other statement.
DATED: April 30, 2003
FIRST ASSOCIATES INVESTMENTS INC.
_________________________________
S.S. (Ali) Rawji, Vice President Corporate Finance
149