U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act
of 1934
For the quarterly period ended JUNE 30, 2000
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _______ to _______.
Commission File No. Pending
USWEBAUCTIONS,INC.
------------------
(Name of Small Business Issuer in Its Charter)
FLORIDA 65-0986953
------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
22 SOUTH LINKS AVENUE, STE. 204 34236
------------------------------- (Zip Code)
SARASOTA, FLORIDA
-----------------
(Address of Principal
Executive Offices)
(941) 330-8051
(Issuer's Telephone Number, Including Area Code)
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, and (2) has
been subject to such filing requirements for the past 90 days. Yes |X| No | |
There were 14,734,000 shares of Common Stock outstanding as of August
17, 2000.
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PART I
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS.
-----------------------------
USWEBAUCTIONS, INC.
(FORMERLY AUGUST PROJECT 1 CORPORATION)
FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
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<TABLE>
<CAPTION>
USWEBAUCTIONS, INC.
(FORMERLY AUGUST PROJECT 1 CORPORATION)
(A Development Stage Company)
Balance Sheets
ASSETS
------
June 30, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 30,959 $ --
---------------- ---------------
Total Current Assets 30,959 --
----------------
OTHER ASSETS
Note receivable - related party - net (Note 3) 178,530 --
---------------- ---------------
Total Other Assets 178,530 --
---------------- ---------------
TOTAL ASSETS $ 209,489 $ --
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 41,737 $ --
---------------- ---------------
Total Current Liabilities 41,737 --
---------------- ---------------
STOCKHOLDERS' EQUITY
Common stock authorized: 50,000,000 common
shares at $0.001 par value; 8,060,000 and
5,000,000 shares issued and outstanding 8,060 5,000
Capital in excess of par value 758,940 (3,000)
Stock subscription receivable (500,000) --
Deficit accumulated during the
development stage (99,248) (2,000)
---------------- ---------------
Total Stockholders' Equity (167,752) --
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 209,489 $ --
================ ===============
</TABLE>
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<TABLE>
<CAPTION>
USWEBAUCTIONS, INC.
(FORMERLY AUGUST PROJECT 1 CORPORATION)
(A Development Stage company)
Statements of Operations
(Unaudited)
From
Inception
For the Three Months For the Six Months on July 10, 1997
Ended June 30, Ended June 30, through
---------------------- ---------------------- June 30,
2000 1999 2000 1999 2000
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ -- $ --
EXPENSES
General and
administrative 72,828 -- 97,828 -- 99,828
---------- ---------- ---------- ---------- -----------
Total Expenses 72,828 -- 97,828 -- 99,828
---------- ---------- ---------- ---------- -----------
OTHER (EXPENSE) INCOME
Interest income 580 -- 580 -- 580
---------- ---------- ---------- ---------- -----------
Total Other (Expense)
Income 580 -- 580 -- 580
---------- ---------- ---------- ---------- -----------
NET LOSS $(72,248) $ -- $ (97,248) $ -- $(99,248)
========== ========== ========== ========== ===========
BASIC LOSS PER SHARE $ (0.01) $ 0.00 $ (0.02) $ (0.00)
========== ========== ========== ==========
WEIGHTED AVERAGE
NUMBER OF SHARES 5,672,527 5,000,000 5,336,264 5,000,000
========== ========== ========== ==========
</TABLE>
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<TABLE>
<CAPTION>
USWEBAUCTIONS, INC.
(FORMERLY AUGUST PROJECT 1 CORPORATION)
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on July 10, 1997 Through June 30, 2000
Deficit
Accumulated
Common Stock Additional Stock During the
----------------- Paid-in Subscription Development
Shares Amount Capital Receivable Stage
------ ------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at inception on July 10, 1997 -- $ -- $ -- $ -- $ --
Common stock issued for services 5,000,000 5,000 (3,000) -- --
Net loss from inception on July 10,
1997 to December 31, 1997 -- -- -- -- (2,000)
--------- -------- --------- ------- -------
Balance, December 31, 1997 5,000,000 5,000 (3,000) (2,000)
Net Loss for the year ended
December 31, 1998 -- -- -- -- --
---------- -------- --------- ------- -------
Balance, December 31, 1998 5,000,000 5,000 (3,000) -- (2,000)
Net loss for the year ended
December 31, 1999 -- -- -- -- --
---------- ------- --------- ------- -------
Balance, December 31, 1999 5,000,000 5,000 (3,000) -- (2,000)
Common stock issued for cash
at $0.25 per share (unaudited) 3,060,000 3,060 761,940 (500,000) --
Net loss for the six months
ended June 30, 2000 (unaudited) -- -- -- -- (97,248)
---------- -------- --------- ----------- --------
Balance, June 30, 2000 (unaudited) 8,060,000 $ 8,060 $ 758,940 $ (500,000) $ (99,248)
========== ======== ========= =========== ===========
</TABLE>
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<TABLE>
<CAPTION>
USWEBAUCTIONS, INC.
(FORMERLY AUGUST PROJECT 1 CORPORATION)
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From Inception
For the For the on July 10,
Three Months Ended Six Months Ended 1997 Through
June 30, June 30, June 30,
--------------------- ------------------- -------------
2000 1999 2000 1999 2000
--------- --------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (72,248) $ -- $ (97,248) $ -- $(99,248)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Issuance of stock for services -- -- -- -- 2,000
Changes in operating assets and
liability accounts:
(Increase) decrease in notes
receivable - related party (178,530) -- (178,530) -- (178,530)
Increase (decrease) in
accounts payable 41,737 -- 41,737 -- 41,737
Increase (decrease) in notes
payable - related party (25,000) -- -- -- --
--------- ------- --------- --------
Net Cash (Used) by
Operating Activities (234,041) -- (234,041) -- (234,041)
--------- ------- --------- -------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES -- -- -- -- --
--------- ------- --------- -------- ---------
CASH FLOWS FROM FINANCING -- -- --
ACTIVITIES --------- ------- --------- -------- ---------
Issuance of stock for cash 265,000 -- 265,000 -- 265,000
--------- ------- --------- -------- ---------
Net Cash Provided by
Financing Activities 265,000 -- 265,000 -- 265,000
--------- ------- --------- -------- ---------
NET INCREASE (DECREASE) IN
CASH 30,959 -- 30,959 -- 30,959
CASH AT BEGINNING OF PERIOD
-- -- -- -- --
--------- ------- --------- -------- ---------
CASH AT END OF PERIOD $ 30,959 $ -- 30,959 $ -- $ 30,959
--------- ------- --------- -------- ---------
CASH PAYMENTS FOR:
Income taxes $ -- $ -- $ -- $ -- $ --
Interest $ -- $ -- $ -- $ -- $ --
SCHEDULE OF NON-CASH
FINANCING ACTIVITIES
Common stock issued for
services $ -- $ -- $ -- $ -- $ 2,000
Stock subscription receivable $ 500,000 $ -- $ 500,000 $ -- $ 500,000
</TABLE>
F-5
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USWEBAUCTIONS, INC.
(FORMERLY AUGUST PROJECT 1 CORPORATION)
(A Development Stage Company)
Notes to Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
August Project I Corporation (the "Company") was organized July 10,
1997 under the laws of the State of Florida for the purpose of engaging
in any lawful activity. The Company has had no significant operations
since inception and is considered a development stage company in
accordance with Statement of Financial Accounting Standards No.7.
b. Provision for Taxes
At June 30, 2000, the Company had net operating loss carryforwards of
approximately $99,000 that may be offset against future taxable income
through 2019. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential
tax benefits of the net operating loss carryforwards are offset by a
valuation allowance of the same amount.
c. Accounting Method
The financial statements are prepared using the accrual method of
accounting. The Company has elected a calendar year end.
d. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
F-6
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AUGUST PROJECT I CORPORATION
(A Development Stage Company)
Notes to Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Basic Loss Per Share
For the Six Months Ended
June 30, 2000
----------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
--------------- ------------- --------------
Net Loss $ (97,248) 5,336,264 $ (0.02)
=============== ============= ==============
For the Six Months Ended
June 30, 1999
----------------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
--------------- ------------- --------------
Net Loss $ -- 5,000,000 $ 0.00
=============== ============= ==============
Basic loss per share has been calculated based on the weighted average
number of shares of common stock outstanding during the period.
g. Revenue Recognition
The Company currently has no source of revenues. Revenue recognition
policies will be determined when principal operations begin.
h. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which, in the opinion of management, are necessary for a fair
presentation. Such adjustments are of a normal recurring nature.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The Company has not established revenues sufficient to cover
its operating costs and allow it to continue as a going concern.
Management intends to seek a merger with an existing, operating company,
in the interim it has committed to meeting the Company's minimal operating
expenses.
NOTE 3 - RELATED PARTY TRANSACTION
The Company has loaned a related party $178,530, bearing interest at 10%,
unsecured and due on demand. This amount is shown net of an allowance for
doubtful accounts of $35,325 and accrued interest of $580.
NOTE 4 - CANCELLATION OF PROPOSED MERGER
The Company's merger with USWEBAUCTIONS, INC. was rescinded. All
of the shares issued have been cancelled and returned.
F-7
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ITEM 2. MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS.
-----------------------------------------------------------
INTRODUCTORY STATEMENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. THIS FILING CONTAINS
FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS,
(A) OUR COMPANY'S PROJECTED SALES AND PROFITABILITY, (B) OUR COMPANY'S BUSINESS
PLAN AND GROWTH STRATEGIES, (C) TRENDS IN OUR COMPANY'S INDUSTRY, (D) OUR
COMPANY'S FUTURE FINANCING PLANS AND (E) OUR COMPANY'S ANTICIPATED NEEDS FOR
WORKING CAPITAL. IN ADDITION, WHEN USED IN THIS FILING, THE WORDS "BELIEVES,"
"ANTICIPATES," "INTENDS," "IN ANTICIPATION OF," "EXPECTS," AND SIMILAR WORDS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS ARE BASED LARGELY ON OUR COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A
NUMBER OF RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR COMPANY'S
CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CHANGES IN TRENDS IN THE ECONOMY AND OUR COMPANY'S
INDUSTRY, DEMAND FOR OUR COMPANY'S SERVICES, COMPETITION, THE AVAILABILITY OF
FINANCING AND OTHER FACTORS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THERE
CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FILING
WILL IN FACT OCCUR.
OVERVIEW
We are a development stage company that has had no operations or income
since inception in 1997. We were incorporated in the State of Florida on July
10, 1997 as August Project 1 Corp. We were formed for the sole purpose of
acquiring or merging with an operating company. On January 27, 2000, Lido
Capital Corporation, a Florida corporation ("LIDO"), purchased 97.3% of the
then-outstanding common stock of our company from its controlling shareholder,
Eric Littman. On April 10, 2000, our company acquired all of the outstanding
capital stock of USWEBAUCTIONS, Inc., a Florida corporation ("USWA"). In
consideration of all of USWA's outstanding capital stock, our company issued
9,734,000 shares of our company's common stock to the former shareholders of
USWA.
On April 20, 2000, the board of directors of our company and USWA,
together with the shareholders holding a majority of the outstanding shares of
common stock and the sole shareholder of USWA, which is our company, approved
the merger of USWA with and into our company. We were the surviving corporation
in the merger. Upon the effective date of the merger, May 17, 2000, the name of
our corporation was changed to USWEBAUCTIONS, Inc.
On July 13, 2000, we entered into a Rescission Agreement and Mutual
Release with the former shareholders of USWA, Jon Kochevar ("KOCHEVAR") and John
Allen ("ALLEN"), whereby Kochevar and Allen returned all 9,734,000 shares of our
common stock they received in the acquisition of all of the outstanding shares
of capital stock of USWA described above in exchange for the return of all of
the assets owned by USWA prior to such acquisition.
Since the rescission of the USWA acquisition on July 13, 2000, we have
been active in seeking potential operating businesses and business opportunities
with the intent to acquire or merge with such businesses. We have been in the
development stage since inception and have undertaken limited business
operations to date. As such, we are considered a "shell" corporation, as our
principal purpose is to locate and consummate a merger or acquisition with a
private entity. We have limited cash and no other material assets. We currently
do not have a source of revenue to cover operating costs to allow us to continue
as a going concern. Accordingly, our independent accountants have included in
our financial statements a going concern qualification footnote. Further, there
can be no assurance that we will have the ability to acquire or merge with an
operating business, business opportunity or property that will be of material
value to us.
Our proposed business activities classify our company as a "blank check"
company. Many states have enacted statutes, rules and regulations limiting the
sale of securities of "blank check" companies in their respective jurisdictions.
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Any business combination or transaction that we may enter into will
likely result in a significant issuance of stock and substantial dilution to our
present shareholders. A business combination or transaction will likely result
in our shareholders losing a controlling interest in our company.
BALANCE SHEET. At June 30, 2000, we had total assets of $0.02 million
and had current liabilities of $41,800.
INCOME STATEMENT. We have not had any revenue since inception. Prior to
the acquisition of USWA and the rescission of such acquisition, our main
operating expenses were expected to consist of the costs of complying with the
reporting requirements of the Securities Act of 1933, including legal and
accounting fees. For the quarter ended June 30, 2000, we recorded $98,000 in
general and administrative expenses. Our net loss was $97,248.
PLAN OF OPERATION
CASH REQUIREMENTS. As of June 30, 2000, we had $31,000 cash-on-hand.
Since inception, our management has loaned money to our company in order to fund
our business operations. Since March 31, 2000, we have raised approximately
$765,000 from the sale of securities. See "Changes in Securities and Use of
Proceeds." Our company intends to register these securities (approximately
3,100,000 shares of common stock) and any additional securities sold in our
company's private offering with the Securities and Exchange Commission as soon
as reasonably practicable. See "Certain Business Risk Factors - Sales of common
stock by private placement investors may cause our stock price to decline." We
will need to raise additional capital to fund our business operations and to
develop our company's business strategy for the next twelve months and beyond.
Currently, our cash requirements consist primarily of employee salaries, rent,
professional fees and related expenses. Our company believes that it needs to
raise approximately $735,000 in additional capital in order to meet these cash
requirements.
We intend to acquire assets or stock of an entity actively engaged in
business in exchange for our common stock. We have no agreement with any
business opportunity.
CHANGES IN NUMBER OF EMPLOYEES. We currently have 4 employees, each of
whom is an executive officer. We are currently reviewing our personnel needs for
2000 and beyond. As of the date hereof, we do not anticipate hiring numerous
employees until we consummate a merger or acquisition with an operating
business. We believe that our current personnel will be adequate to accomplish
the task of identifying a merger or acquisition candidate.
CURRENT
DEPARTMENT EMPLOYEES
---------- ---------
Administrative and Other
Support Positions 4
---------
Total Employees 4
=========
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had $31,000 cash-on-hand. A discussion of how we
generated and used cash in the period follows:
OPERATING ACTIVITIES. Our operating activities used $98,000 in cash
during the six-month period ended June 30, 2000. This consisted primarily of
professional fees in connection with becoming a "reporting" company under the
Securities Act of 1933 and the acquisition of USWA and the rescission of such
acquisition.
In order to meet our cash requirements over the next twelve months, we
intend to raise additional capital from the continued sale of common stock in a
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private offering. Our company believes that it needs to raise approximately
$735,000 in capital in order to meet these cash requirements.
As of June 30, 2000, our company was owed $178,529 by Earl Ingerfield or
corporations controlled by Mr. Ingerfield. These amounts are payable to the
company upon demand.
GOING CONCERN OPINION
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with the 1999 and 1998 financial statements
which states that our company does not have significant cash or other material
assets to cover its operating costs and to allow it to continue as a going
concern. Our ability to obtain additional funding will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
CERTAIN BUSINESS RISK FACTORS
We are subject to various risks, which may have a material adverse
effect on our company's business, financial condition and results of operations.
Certain risks are discussed below:
WE HAVE NO OPERATING HISTORY OR REVENUE FROM WHICH TO EVALUATE OUR
BUSINESS
We have had no operating history or revenue from operations since
inception. In addition, we have no assets or financial resources. Due to our
lack of operations and revenue, we expect to incur operating losses for the
foreseeable future. Due to our lack of operations, there is limited information
upon which investors can evaluate our business. Our independent auditors have
noted that our company does not have significant cash or a source of revenue to
cover its operating costs and to allow it to continue as a going concern.
External capital will be required for us to continue as a going concern. We have
no commitments or other sources of capital available to us. Our inability to
continue as a going concern could result in a decline of our stock price, and
you could lose money.
BECAUSE WE HAVE NO OPERATIONS OUR FUTURE BUSINESS OPPORTUNITIES ARE
HIGHLY SPECULATIVE
The success of our proposed plan of operation will be highly dependent
on any business opportunity which may be acquired in the future. Because we have
not identified any such business opportunity, the nature of our future business
operations, if any, will be highly speculative. There can be no assurance that
we will be successful in acquiring any business opportunity, and we cannot
predict the type of business operations any such business opportunity may
conduct. You should consider the likelihood of our future success to be highly
speculative in view of our lack of operating history, as well as a lack of any
identifiable business opportunity. Our inability to acquire an operating
business in a timely manner or at all could cause a decline in our stock price.
WE MAY NOT BE ABLE TO IDENTIFY A BUSINESS OPPORTUNITY DUE TO THE
SCARCITY OF AND COMPETITION FOR SUCH BUSINESS OPPORTUNITIES
A large number of established and well-financed entities, including
venture capital firms, are active in mergers and acquisitions of a relatively
small number of suitable business opportunities. Nearly all of these entities
have significantly greater financial resources, technical expertise and
managerial capabilities than we do and, consequently, we will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Additional competition for
suitable business opportunities comes from other public "shell" companies,
similar to our company. Our inability to identify and combine with a suitable
business opportunity could cause a decline in our stock price, and you could
lose money.
WE HAVE NO AGREEMENT TO ENTER INTO A BUSINESS COMBINATION OR OTHER
TRANSACTION
We have no agreement to acquire or merge with another entity, and there
can be no assurance that we will be successful in identifying and evaluating
suitable business opportunities or in consummating a business combination. If
identified there can be no assurance that we will be able to negotiate a
business combination on terms favorable to our company. Management has not
identified any particular industry or specific business within an industry for
evaluation by our company. Moreover, we have not established any criteria by
which to judge a business opportunity, including a specific length of operating
history or level of earnings, assets or net worth. Accordingly, we may enter
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into a business combination with a business opportunity having no significant
operating history, losses, limited or no potential for earnings, limited assets,
negative net worth, or other negative characteristics. Any of these factors may
cause a decline in our stock price, and you could lose money.
OUR MANAGEMENT IS EXPECTED TO EXERT SIGNIFICANT INFLUENCE OVER THE
DIRECTION OF OUR COMPANY AND WILL DEVOTE A LIMITED AMOUNT OF TIME TO IDENTIFYING
BUSINESS OPPORTUNITIES
Through their stock ownership, management will be able to exert
significant influence over the direction of our company and its business
opportunities. None of our officers has entered into a written employment
agreement with our company, and none is expected to do so in the future. We do
not maintain any key man life insurance. Management is expected to devote about
10 hours per month to the present business of our company. As such, management's
ability to identify a suitable business opportunity will be limited. Despite
these factors, the loss of the services of these individuals, particularly Earl
T. Ingarfield, will jeopardize our ability to identify a suitable business
opportunity and jeopardize our ability to continue operations. This outcome
would likely cause our stock price to decline.
OUR OPERATIONS LACK DIVERSIFICATION
Our proposed operations, even if successful, will in all likelihood
result in our engaging in a business combination with a business opportunity.
Consequently, our activities may be limited to those engaged in by such a
business opportunity. Our inability to diversify our activities into a number of
areas may subject us to economic fluctuations within a particular business or
industry, which may adversely impact our operations and result in a lower stock
price.
MANAGEMENT MAY PARTICIPATE IN BUSINESS DEALINGS WHICH COMPETE WITH OUR
COMPANY
Management may in the future participate in business dealings which
compete with the operations of our company. This may include the formation of
other public "shell" companies, in which event, management will be able to
choose which public "shell" company should acquire or merge with an identified
business opportunity. If our company acquires or merges with a business
opportunity, then management may have or develop other business dealings which
compete with the operations of such business opportunity. This may make it more
difficult for our company to identify a business opportunity or materially harm
the operations of such business opportunity. These events, if realized, may
cause our stock price to decline.
HOLDERS OF OUR STOCK SHOULD EXPECT A CHANGE IN CONTROL UPON THE
CONSUMMATION OF A BUSINESS COMBINATION, IF ANY
If we are able to consummate a business combination, we expect to be
required to issue shares of stock to the shareholders of the target business. We
believe this stock issuance will result in the shareholders of the target
business obtaining a controlling interest in our company. Any such business
combination may require our management to sell or transfer all or a portion of
his stock in our company or resign as officers and directors. This change of
control would preclude management's participation in the future affairs of our
company.
HOLDERS OF OUR STOCK WILL BE DILUTED UPON CONSUMMATION OF A BUSINESS
COMBINATION, IF ANY
Upon consummation of a business combination, if any, we expect to issue
new stock to the shareholders of the target business. This will reduce the
percentage of stock owned by our shareholders, and may result in a change of
control. In such event, if the price of our stock does not increase by a
corresponding amount, the value of the shareholders stock may decline.
TARGETS WILL BE REQUIRED TO HAVE AUDITED FINANCIAL STATEMENTS, WHICH
REQUIREMENT MAY DELAY OR PRECLUDE AN ACQUISITION OR MERGER
Any target acquisition or merger candidate of our company will become
subject to the same reporting requirements as we are upon consummation of any
merger or acquisition. Thus, in the event we successfully complete the
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acquisition of or merger with an operating business, such business must provide
audited financial statements for at least the two most recent fiscal years or,
in the event the business opportunity has been in business for less than two
years, audited financial statements will be required from the period of
inception. This could limit our potential target business opportunities due to
the fact that many private business opportunities either do not have audited
financial statements or are unable to produce audited statements without undo
time and expense. One or more attractive business opportunities may choose to
forego the possibility of a business combination with our company, rather than
incur the expenses associated with preparing audited financial statements.
THERE ARE DISADVANTAGES OF A BLANK CHECK OFFERING
We may enter into a business combination with an entity that desires to
establish a public trading market for its stock. A business opportunity may
attempt to avoid what it deems to be adverse consequences of undertaking its own
public offering by seeking a business combination with us. Such consequences
include times delays of the registration process, significant expenses incurred
in such undertaking or loss of voting control to public shareholders. You should
consider these motivations in determining whether to become a shareholder in our
company.
WE MAY BE SUBJECT TO THE INVESTMENT COMPANY ACT OF 1940, WHICH WOULD
RESULT IN SIGNIFICANT REGISTRATION AND COMPLIANCE COSTS
We do not believe that our company will be subject to the Investment
Company Act of 1940 because we will not be engaged in the business of investing
or trading in securities. If we engage in business combinations in which we end
up holding passive investment interests in a number of entities, we could be
subject to regulation under the Investment Company Act of 1940. In such event,
we would be required to register as an investment company and could be expected
to incur significant registration and compliance costs.
SALE OF COMMON STOCK BY PRIVATE PLACEMENT INVESTORS MAY CAUSE OUR STOCK
PRICE TO DECLINE
We intend to file a registration statement on behalf of the private
placement shareholders with the securities and exchange commission as soon as
reasonably practicable. This registration statement will permit such private
placement shareholders to freely sell their shares of common stock into the open
market. Such sales without corresponding demand may cause our stock price to
decline.
OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK"
Our common stock may be deemed to be "penny stock" as that term is
defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934.
Penny stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
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o Whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last three
years.
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor. These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to resell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline.
PART II
OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
We are not aware of any legal proceedings involving our company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a), (b) and (d) None.
(c)SALES OF UNREGISTERED SECURITIES.
On July 11, 1997, in connection with the formation of our company, we
issued 5,000,000 shares of common stock to thirty-five individuals for total
consideration of $2,000 of services provided by such individuals.
On April 10, 2000, in connection with the acquisition of all of the
outstanding capital stock of USWEBAUCTIONS, Inc., we issued 9,734,000 shares of
common stock to the two former shareholders of USWEBAUCTIONS, Inc.
On July 13, 2000, in connection with the rescission of the acquisition
of all of the outstanding capital stock of USWEBAUCTIONS, Inc., the two former
shareholders of USWEBAUCTIONS, Inc. returned 9,734,000 shares of common stock to
our company.
Between April 18, 2000 and June 30, 2000, our company sold subscriptions
to purchase 3,060,000 shares of our common stock at a price of $0.25 per share
for cash of $765,000. All of these shares were purchased by unrelated parties.
With respect to the sale of unregistered securities referenced above,
these transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, and Regulation D promulgated thereunder. In each
instance, the purchaser had access to sufficient information regarding our
company so as to make an informed investment decision.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
--------------------------------
Not applicable.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
On April 20, 2000, by written consent in lieu of a special meeting, Earl
T. Ingarfield, as sole director, and the shareholders (including Earl T.
Ingarfield) holding a majority of the issued and outstanding shares of common
stock of our company, approved the merger of USWA with and into our company. We
were the surviving corporation in the merger. Upon the effective date of the
merger, the name of our company was changed to USWEBAUCTIONS, Inc. This matter
was approved by the affirmative vote of 14,601,000 shares of common stock. The
remaining 133,000 shares of common stock did not vote in connection with this
matter.
ITEM 5. OTHER INFORMATION.
------------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
<S> <C> <C>
2.01 Stock Purchase Agreement dated as of January 27, 2000 Incorporated by reference to Exhibit 2.01 to our company's
among our company, Lido Capital Corporation, Eric P. Registration Statement on Form 10-SB filed with the
Littman and Dennis Sturm Securities and Exchange Commission on February 24, 2000.
2.02 Stock Purchase Agreement dated as of April 10, 2000, Incorporated by reference to Exhibit 2.02 to our company's
among our company, USWEBAUCTIONS, Inc., Jon Kockevar, Current Report on Form 8-K filed with the Securities and
and John Allen Exchange Commission on May 26, 2000.
2.03 Articles of Merger dated as of April 21, 2000 of Incorporated by reference to Exhibit 2.03 to our company's
USWEBAUCTIONS, Inc. into our company, together with Current Report on Form 8-K filed with the Securities and
the Plan of Merger Exchange Commission on May 26, 2000.
2.04 Rescission Agreement and Mutual Release dated as of Incorporated by reference to Exhibit 2.01 to our company's
July 13, 2000 among our company, Jon Kochevar, and Current Report on Form 8-K filed with the Securities and
John Allen Exchange Commission on July 13, 2000.
3.01 Articles of Incorporation filed on July 10, 1997 with Incorporated by reference to Exhibit 3.01 to our company's
the Florida Secretary of State Registration Statement on Form 10-SB filed with the
Securities and Exchange Commission on February 24, 2000.
3.02 Articles of Amendment to Articles of Incorporation Incorporated by reference to Exhibit 3.02 to our company's
Registration Statement on Form 10-SB filed with the
Securities and Exchange Commission on February 24, 2000.
3.03 Bylaws Incorporated by reference to Exhibit 3.03 to our company's
Registration Statement on Form 10-SB filed with the
Securities and Exchange Commission on February 24, 2000.
9
<PAGE>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
11.01 Statement re: Computation of Earnings Not Applicable.
15.01 Letter on Unaudited Interim Financial Information Not Applicable.
16.01 Letter on Change in Certifying Accountant Not Applicable.
21.01 Subsidiaries of our company Not Applicable.
23.01 Consent of Independent Accountants Not Applicable.
24.01 Power of Attorney Not Applicable.
27.01 Financial Data Schedule Provided herewith.
</TABLE>
(B) REPORTS ON FORM 8-K.
Two reports on Form 8-K were filed during the quarterly period ended
June 30, 2000. On April 10, 2000, our company acquired all of the outstanding
capital stock of USWEBAUCTIONS, Inc. We filed a Form 8-K regarding this
transaction on May 26, 2000.
On July 13, 2000, our company entered into a Rescission Agreement and
Mutual Release with the two former shareholders of USWEBAUCTIONS, Inc., whereby
these individuals returned all the shares of our company's common stock received
by them in the acquisition of USWEBAUCTIONS, Inc. in exchange for the return of
all of the assets owned by USWEBAUCTIONS, Inc. prior to such acquisition. We
filed a Form 8-K regarding this transaction on July 21, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 18, 2000 AUGUST PROJECT 1 CORP.
By: /s/ Earl T. Ingarfield
------------------------
Earl T. Ingarfield, President
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