U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
BIDHIT.COM, INC.
(Name of Small Business Issuer in its charter)
Nevada 91-1973193
(State or other jurisdiction of (I.R.S. Employer
Incorporation of organization) Identification No.)
Suite 204
18702 North Creek Parkway
Bothell, Washington 98011
(Address of principal executive offices) (Zip code)
(425)424-3660
(Issuer's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Shares
(Title of Class)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ITEM 1 - DESCRIPTION OF BUSINESS..........................................................................3
ITEM 2 - DESCRIPTION OF PROPERTY..........................................................................4
ITEM 3 - LEGAL PROCEEDINGS................................................................................4
ITEM 4 - MARKET FOR COMMON EQUITY AND RELATED STOCHOLDER MATTERS..........................................4
ITEM 5 - DESCRIPTION OF SECURITIES........................................................................5
ITEM 6 - MANAGEMENT'S PLAN OF OPERATION...................................................................6
ITEM 7 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS....................................................6
ITEM 8 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.....................................6
ITEM 9 - EXECUTIVE COMPENSATION...........................................................................9
ITEM 10 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................10
ITEM 11 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................................10
ITEM 12 - FINANCIAL STATEMENTS...........................................................................11
ITEM 13 - EXHIBITS.......................................................................................11
</TABLE>
<PAGE>
ITEM 1 - DESCRIPTION OF BUSINESS
The Issuer was incorporated under the laws of the State of Nevada on October 13,
1995 under the name "Painted Desert Farms, Inc.". The Issuer changed its name to
"Third Millennium Software Corp." on January 5, 1998, and then to "BidHit.com,
Inc." on May 7, 1999. The Issuer has not been involved in any bankruptcy,
receivership or similar proceedings. There has been no material
reclassification, merger, consolidation or purchase or sale of significant
assets not in the ordinary course of the Issuer's business.
The Issuer is an internet service provider which has developed an interactive
online auction house business. Through the Issuer's web site located at
www.BidHit.com, the Issuer operates a live Internet auction which retails
computers and consumer electronics.
There is no requirement for any government approval of the Issuer's principal
products or services. There are no existing or probable governmental regulations
which will have a material affect on the current business of the Issuer.
The Issuer specializes in providing leading business-to-business and
business-to-consumer auction services for brand name consumer electronics and
computer products, and has recently expanded its offerings to include sports
memorabilia.
Presently, the Issuer offers close to 1,000 products for sale each week, during
two auction periods. The Issuer derives commission revenue from its
pre-qualified vendors based on completed product sales. At the close of each
auction, each pre-qualified vendor is forwarded their respective order
information, and the items are drop-shipped directly to the customer. The Issuer
holds no inventory and assumes no liability for the items offered for auction.
Although the Issuer has several new services in the design process, none have
been publicly announced to date.
Industry research makes it clear that there is considerable upside potential in
the Online Auction business. However, the quality of service and the number of
providers in the Online Auction industry constantly fluctuate. The Issuer's
research indicates that many online auction customers find it difficult to
obtain reliable and authoritative product and category information and that they
are often disappointed with the nature and quality of the product and the
reliability of the vendor. The Issuer is focusing on meeting these consumer
needs to develop a strong return-customer base. The Issuer's commitment to
enable its members to make smart and informed decisions will keep them coming
back to the Issuer.
The Issuer's competitive edge will be in building its online community and in
attracting and retaining its customers with the industry's most highly focused
and effective consumer education and customer service programs. The Issuer is
also offering an unparalleled commitment to a vendor and product validation
process to ensure that its products and services adhere to rigid quality
standards. The Issuer is combining this strategy with cutting-edge database
reporting and tracking capabilities, consistent with its privacy and permission
marketing policies, to institute a smart and innovative database-driven
relational marketing program to serve the needs and interests of its community.
<PAGE>
There are a number of well-known and well-financed companies in the online
auction industry. However, the Issuer believes that by focusing on providing
services of real benefit and interest to its customers, the Issuer can create
and sustain a significant and growing market niche within the burgeoning online
electronic commerce industry.
The Issuer is not a manufacturer and does not deal with any raw materials. The
suppliers of goods listed for auction include Mirage Monitors of California,
Telecom Corporation of Chicago, Liage International of New York, Leasure Time
Industries of Florida, and Purplus Soft of California. As an Internet sales
company with a broad customer base, the Issuer does not have a dependence on one
customer.
The Issuer has no patents or trademarks in place or pending at this time. The
Issuer has no franchises and does not have any royalty agreements in place. Both
Tim Black, President and Jeff Mendenhall, Vice-President of the Issuer, are
under 2 year employment contracts. Also see item 9 "Executive Compensation".
The Issuer does not require government approval for any of its products or
services. There are no government regulations being imposed or considered for
the online auction industry. The Issuer is compliant with all government
regulations to date.
The Issuer has spent approximately 120 hours over the past two years on research
and development. None of the costs of this R & D was borne directly by the
Issuer's customers.
There are no federal, state or local environmental laws with which the Issuer is
not in compliance.
The Issuer has 4 full-time employees and no part-time employees.
The Issuer owns no real property.
ITEM 2 - DESCRIPTION OF PROPERTY
The Issuer leases approximately 1900 square feet of commercial space at 18702
North Creek Parkway, Bothell, Washington, 98011 which serves as the Issuer's
principal operations office. The Issuer's President, Mr. Tim Black and
Vice-President, Mr. Jeff Mendenhall service the Issuer's web site,
administration and accounting from this location.
The Issuer is not engaged in real estate activities.
ITEM 3 - LEGAL PROCEEDINGS
The Issuer is not a party to any pending or threatened legal proceedings.
ITEM 4 - MARKET FOR COMMON EQUITY AND RELATED STOCHOLDER MATTERS
<PAGE>
(A) MARKET INFORMATION
The Issuer's shares have been quoted on the NASD OTC Bulletin Board since May
13, 1999 under the symbol "BHIT". The Issuer's shares were previously quoted
under the symbol "TMSW"
<TABLE>
<CAPTION>
QUARTER PERIOD HIGH BID LOW BID SOURCE
- - -------------- -------- ------- ------
<S> <C> <C> <C>
October, 1997 21 1/4 8-1/8 Bloomberg
to December, 1997
January, 1998 10 2-7/16 Bloomberg
to March, 1998
April, 1998 Not Available Not Available Not Available
to June, 1998
July, 1998 1 1/4 1 1/4 Not Available
to September, 1998
October, 1998 1 1/4 5/8 Not Available
to December, 1998
January, 1999 Not Available Not Available Not Available
to March, 1999
April, 1999 6.50 4.00 PC Quote
to June, 1999
July, 1999 6.50 2.75 PC Quote
to September, 1999
</TABLE>
Quotations for the Issuer's common shares reflect inter-dealer prices, without
retail markup, markdown or commission and may not represent actual transactions.
(B) STOCKHOLDERS
The Issuer has approximately 42 holders of common shares.
No dividends have been declared on the Issuer's common shares. There are no
restrictions that limit the ability to pay dividends on the Issuer's common
shares.
ITEM 5 - DESCRIPTION OF SECURITIES
The Issuer's authorized capital stock consists of 50,000,000 shares of Common
stock, par value $0.001 per share. There are 10,788,750 shares of Common stock
issued and outstanding as of the date of this filing.
Common Stock
All shares of Common stock have equal voting rights and, when validly issued and
outstanding, are entitled to one vote per share in all matters to be voted upon
by shareholders. The shares of Common stock have no pre-emptive, subscription,
conversion or redemption rights and may be issued only as fully paid and
non-assessable shares. Cumulative voting in the election of directors is not
permitted, which means that the holders of a majority of the issued and
outstanding shares of Common stock represented at any meeting at which a quorum
is present will be able to elect the entire Board of Directors if they so choose
and, in such event, the holders
<PAGE>
of the remaining shares of Common stock will not be able to elect any director.
In the event of liquidation of the Issuer, each shareholder is entitled to
receive a proportionate share of the Issuer's assets available for distribution
to shareholders after the payment of liabilities and after distribution in full
of preferential amounts, if any. All shares of the Issuer's Common stock issued
and outstanding are fully paid and non-assessable. Holders of the Common stock
are entitled to share pro rata in dividends and distributions with respect to
the Common stock, as may be declared by the Board of Directors out of funds
legally available.
The Issuer has not offered any debt securities.
The Issuer has not registered any securities.
ITEM 6 - MANAGEMENT'S PLAN OF OPERATION
The Issuer's plan of operation for the next twelve months is as follows:
(i) At its current and 12 month projected rate of expenditure, the Issuer
can satisfy all of its cash requirements and does not anticipate
raising additional funds during the period.
(ii) The Issuer plans no product research and development over the course
of the next 12 months.
iii) The Issuer does not expect to purchase any operation or sell any of
its current operation for the term of the plan.
(iv) The Issuer plans to add employees only as needed and projects growth
of 8 full-time employees in the next 12 months.
ITEM 7 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On April 30, 1999, the Issuer's former auditor, Barry L. Friedman, was asked to
resign to permit the appointment of Davidson & Company as auditors.
Mr. Friedman's report on the financial statements of the Issuer for both of the
past two fiscal years contained no adverse opinion or disclaimer of opinion nor
was it modified as to uncertainty, audit scope or accounting principles.
The decision to change accountants of the Issuer was recommended and approved by
the Issuer's board of directors.
There were no disagreements with Mr. Friedman on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure.
ITEM 8 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and officers of the Issuer are as follows:
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ---- --- --------
<S> <C> <C>
Tim Black 31 President, Secretary and Director
Jeff Mendenhall 27 Vice-President and Director
Alan Gerson 53 Director
</TABLE>
The above listed officers and directors will serve until the next annual meeting
of the shareholders or until their death, resignation, retirement, removal, or
disqualification, or until their successors have been duly elected and
qualified. Vacancies in the existing Board of Directors are filled by majority
vote of the remaining directors. Officers of the Issuer serve at the will of the
Board of Directors. There are no family relationships between any executive
officer or director of the Issuer.
Mr. Tim Black, Mr. Jeff Mendenhall and Mr. Alan Gerson are the directors of the
Issuer. Messrs. Black, Mendenhall and Gerson have been directors of the Issuer
since May 28, 1999. Mr. Tim Black holds offices of president, secretary and
treasurer.
Messrs. Black, Mendenhall and Gerson hold no other directorships in any other
reporting companies. The following are descriptions of Messrs. Black, Mendenhall
and Gerson's business experience for the past five years.
TIM BLACK
Timothy J. Black founded Interactive Auction Online (IAO) in February of 1997.
Prior to forming IAO, Mr. Black headed the Materials department of Midisoft
Corporation (OTCBB:MIDI) located in Issaquah, Washington. While with Midisoft,
Mr. Black's team was responsible for the procurement, planning, scheduling and
implementation of the entire Midisoft software and hardware product base. Before
joining Midisoft, he was a Senior Purchasing Agent for software giant Attachmate
Corporation, located in Bellevue, Washington.
Since the formation of IAO, Mr. Black has been responsible for the development,
planning and execution of all major aspects of the business, including supplier
negotiation, product planning and development, Internet marketing, and strategic
alliance positioning. In May of 1999, IAO changed its name to BidHit.com
(http://www.Bidhit.com). BidHit.com is now publicly traded (OTC BB: BHIT), and
has set forth a marketing campaign and expansion plan to become one of the
market share leaders in the online auction industry. Mr. Black has stayed on as
President and CEO, and is overseeing the operations and further growth of the
company.
Mr. Black has over 10 years experience in the high tech field, including over
two years in Internet retail auction sales with IAO. In addition, his career has
included extensive working knowledge of computer systems, hardware, software and
consumer electronics. He is a Certified Purchasing Manager (CPM) and has held a
membership with the National Association of Purchasing Management (NAPM).
JEFF MENDENHALL
<PAGE>
Jeffrey Mendenhall has an extensive career in the Information Technology field,
starting with US West Corporation. As an Information Technology Learning Systems
Coordinator at US West, he supported a 25 employee team of Software Training
Brokers. In 1995, Mr. Mendenhall continued his career at Microsoft's global
headquarters in Redmond, Washington. Starting in Microsoft's Internet Technology
Group as a Network Engineer, Mr. Mendenhall advanced to a lead position in
Microsoft's worldwide data center. He was responsible for training and leading a
team of System Engineers, while supporting, testing, consulting and documenting
Microsoft's Intranet software and database client/server hardware standards.
Subsequently, Mr. Mendenhall consulted for two years as an industry certified
Computer Systems Engineer in Microsoft's Personal Business Systems Training
group. He was solely responsible for six state-of-the-art-training labs, while
testing and auditing of all Microsoft's MOC Courseware before final release. Mr.
Mendenhall continued to consult to Microsoft on new technologies and train key
employees on the internal infrastructures and new business practices of the
company until joining BidHit.
Mr. Mendenhall joined BidHit.com in June of 1999 as Vice President and Director
of Vendor Relations. Bringing his vast knowledge and technical expertise, Mr.
Mendenhall is responsible for strengthening the strategic alliances BidHit.com
has in place, as well as forging new partnerships and creating new revenue
models to help propel BidHit.com into an industry leader.
ALAN GERSON
Alan Gerson has had a long and prestigious career in broadcast television,
interactive cable, Internet advertising and direct marketing, and Internet
services. Trained as a communications attorney, he spent almost nineteen years
at NCB, where he was responsible for Program Standards and Broadcast
Administration, as well as for interactive programming and promotions He left
NBC to become the Executive Vice-President of the Home Shopping network, Inc.,
and President of its Diversified Marketing and Media Services Division. After
leaving HSN in 1994, he formed Gerson and Associates, a private consulting
business specializing in transactional television and interactive marketing. In
1995 he joined Ticketmaster, Inc., one of his consulting clients, as Senior Vice
President, Television and Business Development. In 1996, Gerson made the move to
the Internet business full time as President, Marketing Products Group for
SOFTBANK Interactive Marketing, where he designed the SOFTBANK Advertising
Network and Internet-based direct marketing programs. After leaving SOFTBANK in
1997, Gerson served as President and CEO of WorldSite Networks, Inc., an
Internet business solutions provider in Beverly Hills, California, under an
executive consulting arrangement.
Gerson is currently the president of, and a principal in, Interactive Marketing,
Inc. IMI is a leading interactive promotional marketing and consulting firm
serving interactive and broadband media clients. IMI offers strategic and
tactical consulting services in a variety of areas including marketing and
promotions, electronic commerce, Internet advertising and Internet and broadband
business development strategies.
Gerson is a recognized expert in electronic commerce and interactive marketing
and has been a frequent speaker and panellist at Industry seminars and
convocations. He has consulted for some
<PAGE>
of the world's leading media, interactive marketing and electronic commerce
companies, including Apple Computer, Pro Seiben Television GmbH, Transactional
Media Inc., Ticketmaster Corp., EDS, the Times Mirror Company, Home Order
Television (Germany's first 24 hour a day Home Shopping Network), and Redgate
Communications, Inc.
Interactive Marketing Inc., Mr. Gerson's company, provides strategic marketing
consulting services to BidHit under a long-term agreement.
SIGNIFICANT EMPLOYEES
The Issuer has four full time employees. Mr. Tim Black is President, Mr. Jeff
Mendenhall is Vice President, Ms. Sheryl Dwyer is the Accounting Coordinator and
Ms. Jennica Watson is the Administrative Assistant for the Issuer. All of Mr.
Black, Mr. Mendenhall, Ms. Dwyer and Ms. Watson work for the Issuer on a full
time basis
There are no family relationships among the directors, executive officers or
persons nominated or chosen by the Issuer to become directors or executive
officers.
No bankruptcy petition has been filed by or against any business of which Tim
Black, Jeff Mendenhall and Alan Gerson were general partners or executive
officers either at the time of the bankruptcy or within two years prior to that
time.
Tim Black, Jeff Mendenhall and Alan Gerson have never been convicted in a
criminal proceeding and are not subject to a pending criminal proceeding.
Tim Black, Jeff Mendenhall and Alan Gerson have never been subject to any order,
judgement, or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting their involvement in any type of business,
securities or banking activities.
Tim Black, Jeff Mendenhall and Alan Gerson have never been found by a court of
competent jurisdiction (in a civil action), the Commission or the Commodity
Futures Trading Commission to have violated a federal or state securities or
commodities law.
ITEM 9 - EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Awards
<S> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g)
Name and Year Salary ($) Bonus ($) Other Annual Restricted SARs
Position Compensation Stock Awards
- - ----------------------- ------------ --------------- ------------- ------------------ ---------------- --------------
Timothy Black 1999 $48,000 $0 $0 (1) $0
President/CEO
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Jeff Mendenhall 1999 $48,000 $5,000 $0 (2) $0
Vice-President
</TABLE>
(1) Mr. Tim Black and Mr. Jeff Mendenhall are parties to Employment and
Services Agreements dated May 20, 1999 (the "Agreements"). The terms of
the Agreements with respect to stock options are identical for Messrs.
Black and Mendenhall. Messrs. Black and Mendenhall each have options to
acquire 277,875 common shares of the Company at $4.00 per share with
25% of the total options vesting at the end of the third, sixth, ninth
and twelfth months of the first year of the Agreements.
(2) Under Mr. Jeff Mendenhall's employment and services agreement dated May
20, 1999, Mr. Mendenhall will receive 400,000 common shares of the
Issuer from treasury at the rate of 100,000 shares at the end of the
third, sixth, ninth and twelfth months of the term of the employment
and services agreement as additional consideration for Mr. Mendenhall's
services.
ITEM 10 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (5% AND OVER)
<TABLE>
<CAPTION>
(1) (2) (3) (4)
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL AMOUNT AND PERCENT
OWNER NATURE OF OF CLASS
BENEFICIAL
OWNER
- - --------------- ------------------------------- ---------------- --------
<S> <C> <C> <C>
Common Shares Tim Black 926,250 8.58%
Suite 204
18702 North Creek Parkway
Bothell, Washington 98011
</TABLE>
(B) SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
(1) (2) (3) (4)
TITLE OF CLASS NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNER OF CLASS
- - ---------------- ---------------- ---------------- --------
<S> <C> <C> <C>
Common Shares Tim Black 926,250 8.58%
Suite 204
18702 North Creek Parkway
Bothell, Washington 98011
Common Shares Jeff Mendenhall Nil N/A
12221 - 100th Avenue NE
Kirkland WA 98034
Common Shares Alan Gerson Nil N/A
Suite 360
225 South Sepulveda Blvd.
Manhattan Beach CA 90266
</TABLE>
There are no arrangements in place which may result in a change of control of
the Issuer.
Mr. Tim Black and Mr. Jeff Mendenhall are parties to Employment and Services
Agreements dated May 20, 1999 (the "Agreements"). The terms of the Agreements
with respect to stock
<PAGE>
options are identical for Messrs. Black and Mendenhall. Messrs. Black and
Mendenhall each have options to acquire 277,875 common shares of the Company at
$4.00 per share with 25% of the total options vesting at the end of the third,
sixth, ninth and twelfth months of the first year of the Agreements.
ITEM 11 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under share exchange agreement dated May 19, 1999, Mr. Tim Black, President and
Director of the Issuer sold 100% of his interest in BidHit.com, Inc.
(Washington) to the Issuer in exchange for 926,250 common shares of the Issuer
and $300,000 in cash. The Issuer's wholly owned subsidiary, BidHit.com, Inc.
(Washington), owns 100% of the assets and liabilities of Interactive Auction
Online, a sole proprietorship, which developed the online auction business
currently operated by the Issuer.
Mr. Tim Black is the promoter of the Issuer. During the past five years, Mr. Tim
Black has received only the common shares of the Issuer and cash described in
the paragraph above above.
ITEM 12 - FINANCIAL STATEMENTS
The Issuer's financial statements are attached as Schedule "A".
ITEM 13 - EXHIBITS
Index of Exhibits
1. Share Exchange Agreement dated May 19, 1999 among BidHit.com, Inc.
(Washington), Bidhit.com, Inc. (Nevada) and Tim Black.
2. Articles of Incorporation.
3. Bylaws.
4. Employment contracts for Tim Black and Jeff Mendenhall.
5.1 Consent of the Issuer's auditors, Davidson & Company.
5.2 Consent of the Issuer's auditors, Barry L. Freidman, P.C.
6. Subsidiaries of the registrant.
7. Financial data schedule.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
<PAGE>
Dated October 15, 1999
REGISTRANT
BidHit.com, Inc.
Per: /s/ Tim Black, Director and President
-----------------------------------------
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
BidHit.Com, Inc. (Washington)
(A Development Stage Company)
We have audited the balance sheet of BidHit.Com, Inc. (Washington) as at
September 30, 1999 and the statements of operations, changes in stockholders'
equity and cash flows for the period from incorporation on May 19, 1999 to
September 30, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BidHit.Com, Inc. (Washington)
as at September 30, 1999 and the results of its operations, changes in its
stockholders' equity and its cash flows for the period from incorporation on May
19, 1999 to September 30, 1999 in conformity with generally accepted accounting
principles.
"DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
December 2, 1999
A Member of Accounting Group International
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372, Pacific
Centre, Vancouver, BC, Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
BALANCE SHEET
AS AT SEPTEMBER 30, 1999
================================================================================
ASSETS
CURRENT
Cash and cash equivalents $ 2,931,916
Accounts receivable 9,244
Prepaid expenses 17,488
-----------
TOTAL CURRENT ASSETS 2,958,648
CAPITAL ASSETS (Note 3) 21,258
SOFTWARE DEVELOPMENT COSTS (Note 4) 13,932
-----------
TOTAL ASSETS $ 2,993,838
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 5,000
-----------
TOTAL CURRENT LIABILITIES 5,000
DUE TO PARENT $ 3,440,460
LOAN PAYABLE, STOCKHOLDER 706
-----------
3,446,166
-----------
STOCKHOLDERS' EQUITY
Common stock, no par value
Authorized
100 common shares
Issued and outstanding
100 common shares 1,000
Deficit accumulated during the development stage (453,328)
-----------
(452,328)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,993,838
================================================================================
ON BEHALF OF THE BOARD:
/s/ Tim Black Director /s/ Jeff Mendenhall Director
- - ----------------------------- ----------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
STATEMENT OF OPERATIONS
PERIOD FROM INCORPORATION ON MAY 19, 1999 TO SEPTEMBER 30, 1999
================================================================================
REVENUE
Sales commissions $ 9,396
COST OF SALES 4,425
---------
GROSS PROFIT 4,971
---------
EXPENSES
Amortization 853
Consulting 168,031
Marketing materials 227,902
Office and administration 5,761
Professional fees 5,000
Rent 14,799
Salaries and bonuses 48,588
Telephone 2,285
Website, internet fees 5,699
Travel and promotion 3,856
---------
(482,774)
---------
LOSS BEFORE OTHER ITEM (477,803)
---------
OTHER ITEM
Interest income 24,475
---------
LOSS FOR THE PERIOD $(453,328)
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM INCORPORATION ON MAY 19, 1999 TO SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
====================================================================================================================================
Deficit
Accumulated
During
Common Stock the Total
-------------------------------- Development Stockholders'
Shares Amount Stage Equity
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, MAY 19, 1999 -- $ -- $ -- $ --
Shares issued for cash 100 1,000 -- 1,000
Loss for the period -- -- (453,328) (453,328)
--------- --------- --------- ---------
BALANCE, SEPTEMBER 30, 1999 100 $ 1,000 $(453,328) $(452,328)
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
STATEMENT OF CASH FLOWS
PERIOD FROM INCORPORATION ON MAY 19, 1999 TO SEPTEMBER 30, 1999
================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (453,328)
Item not affecting cash:
Depreciation 853
Changes in non-cash working capital items:
Increase in accounts receivable (9,244)
Increase in prepaid expenses (17,488)
Increase in accounts payable and accrued liabilities 5,000
-----------
Net cash used in operating activities (474,207)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (22,111)
Software development costs (13,932)
-----------
Net cash used in investing activities (36,043)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 1,000
Due to parent 3,440,460
Loan payable, stockholder 706
-----------
Net cash provided by financing activities 3,442,166
-----------
INCREASE IN CASH POSITION FOR THE PERIOD 2,931,916
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD --
-----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,931,916
================================================================================
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
Cash paid for income taxes $ --
Cash paid for interest --
================================================================================
There were no non-cash transactions during the period.
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on May 19, 1999, under the laws of the State
of Washington. The Company issued 100 of its common shares for $1,000.
The Company is an internet service provider that has developed an
interactive online auction house business. Through the Company's website
located at www.BidHit.com, the Company operates a live internet auction
which retails computers and consumer electronics.
2. ACCOUNTING POLICIES AND PROCEDURES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all investments with a maturity of three months or
less to be cash equivalents.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred
tax asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards.
Deferred tax expense (benefit) results from the net change during the
year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities" which
establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 is effective for all
fiscal quarters of fiscal years beginning after September 15, 1999. The
Company does not anticipate that the adoption of the statement will have
a significant impact on its financial statements.
REPORTING ON COSTS OF START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs
of Start-Up Activities" which provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred.
SOP 98-5 is effective for fiscal years beginning after December 15, 1998
with initial adoption reported as the cumulative effect of a change in
accounting principle.
COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130
("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total
stockholders' equity as of September 30, 1999.
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly compensation
cost for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
SOFTWARE DEVELOPMENT
The Company has adopted Statement of Position 98-1 ("SOP 98-1"),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", as its accounting policy for internally developed
computer software costs. Under SOP 98-1, computer software costs
incurred in the preliminary development stage are expensed as incurred.
Computer software costs incurred during the application development
stage are capitalized and amortized over the software's estimated useful
life.
CAPITAL ASSETS
Capital assets are recorded at cost less accumulated depreciation. The
cost of capital assets is depreciated over the estimated useful life of
four to ten years on a straight-line basis of the related assets.
REVENUE RECOGNITION
The Company will be recognizing sales commission revenues as items are
sold on its internet site and collection of the amounts is reasonably
assured.
ADVERTISING COSTS
The Company recognizes advertising expenses in accordance with Statement
of Position 98-7, "Reporting on Advertising Costs". As such, the Company
expenses the cost of communicating advertising in the period in which
the advertising space or airtime is used.
3. CAPITAL ASSETS
================================================================================
Accumulated Net Book
Cost Depreciation Value
- - --------------------------------------------------------------------------------
Office furniture and equipment $ 22,111 $ 853 $ 21,258
================================================================================
4. SOFTWARE DEVELOPMENT COSTS
Software development costs of $13,932 represent amounts incurred to
develop the Company's portal website.
<PAGE>
BIDHIT.COM, INC. (WASHINGTON)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
================================================================================
5. INCOME TAXES
The Company's total deferred tax asset is as follows:
Net operating loss carryforward $ 154,132
Valuation allowance (154,132)
----------
$ --
==========
The Company has a net operating loss carryforward of approximately
$448,328 which expires between the years 2002 and 2006. The Company
provided a full valuation allowance on the deferred tax asset because
of the uncertainty regarding realizability.
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts
receivable, due to parent and loan payable, stockholder. Unless
otherwise noted, it is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
7. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
incorrectly recognize the year 2000 as some other date, resulting in
errors. The effects of the Year 2000 Issue may be experienced before,
on, or after January 1, 2000 and, if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant systems failure which could affect an entity's ability to
conduct normal business operations. It is not possible to be certain
that all aspects of the Year 2000 Issue affecting the Company,
including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
<PAGE>
BIDHIT.COM, INC.
(FORMERLY THIRD MILLENIUM SOFTWARE CORP.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
(PREPARED BY MANAGEMENT)
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1999
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Prepared by Management)
<TABLE>
<CAPTION>
=======================================================================================
(Audited)
September 30, December 31,
1999 1998
- - ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 2,934,426 $ --
Accounts receivable 9,244 --
Prepaid expenses 17,488 --
----------- -----------
Total current assets 2,961,158 --
NOTE RECEIVABLE (Note 3) -- 70,000
CAPITAL ASSETS (Note 5) 21,258 --
DOMAIN NAME RIGHTS (Note 6) 538,005 --
SOFTWARE DEVELOPMENT COSTS (Note 7) 13,932 --
----------- -----------
TOTAL ASSETS $ 3,534,353 $ 70,000
=======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 5,000 $ --
Due to shareholder 706 --
Note payable (Note 4) -- 70,000
----------- -----------
Total current liabilities 5,706 70,000
----------- -----------
STOCKHOLDERS' EQUITY (Note 8)
Common stock
Authorized
50,000,000 common shares with a par value of $0.001
Issued and outstanding
September 30, 1999 - 10,788,750 common shares
December 31, 1998 - 125,000 common shares 10,788 125
Additional paid-in capital 4,131,562 27,875
Deficit accumulated during the development stage (530,703) --
Deficit (83,000) (28,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,528,647 --
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,534,353 $ 70,000
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Prepared by Management)
<TABLE>
<CAPTION>
====================================================================================================================================
From Start of
Development
Stage
on May 1, Three Month Three Month Nine Month Nine Month
1999 to Period Ended Period Ended Period Ended Period Ended
September 30, September 30, September 30, September 30, September 30,
1999 1999 1998 1999 1998
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Sales commission $ 9,396 $ 6,192 $ -- $ 9,396 $ --
COST OF SALES 4,425 4,425 -- 4,425 --
----------- ----------- ------------- ----------- -------------
GROSS PROFIT 4,971 1,767 -- 4,971 --
----------- ----------- ------------- ----------- -------------
EXPENSES
Amortization 20,345 14,073 -- 20,345 --
Bad debt (Note 3) -- -- -- 70,000 --
Consulting fees 184,778 149,931 -- 184,778 --
Depreciation 853 807 -- 853 --
Directors fees -- -- -- 5,000 --
Legal fees -- -- -- 15,000 --
Listing and filing fees 14,094 175 -- 14,094 --
Marketing materials 247,902 163,053 -- 247,902 --
Office and administration 20,931 18,081 -- 20,931 --
Professional fees 13,103 -- -- 22,603 --
Salaries and bonuses 48,588 39,478 -- 48,588 --
Travel and promotion 3,856 3,856 -- 3,856 --
Website/internet fees 5,699 2,091 -- 5,699 --
----------- ----------- ------------- ----------- -------------
560,149 391,545 -- 659,649 --
----------- ----------- ------------- ----------- -------------
OTHER ITEM
Interest income 24,475 22,391 -- 24,475 --
----------- ----------- ------------- ----------- -------------
LOSS BEFORE EXTRAORDINARY ITEM (530,703) (367,387) -- (630,203) --
EXTRAORDINARY ITEM
Gain on forgiveness of debt
(net of tax) (Note 4) -- -- -- 44,500 --
----------- ----------- ------------- ----------- -------------
LOSS FOR THE PERIOD $ (530,703) $ (367,387) $ -- $ (585,703) $ --
====================================================================================================================================
BASIC AND DILUTED LOSS PER SHARE
BEFORE EXTRAORDINARY ITEM $ (0.04) $ -- $ (0.42) $ --
EXTRAORDINARY ITEM -- -- 0.03 --
----------- ------------- ----------- -------------
BASIC AND DILUTED LOSS PER SHARE $ (0.04) $ -- $ (0.39) $ --
====================================================================================================================================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 9,743,152 125,000 1,504,011 125,000
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Prepared by Management)
<TABLE>
<CAPTION>
============================================================================================================================
Deficit
Accumulated Total
Common Stock Additional During the Stock-
-------------------------- Paid-in Development holders'
Shares Amount Capital Stage Deficit Equity
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVERSE STOCK SPLIT 20:1
EFFECTIVE MAY 17, 1999
(Note 8)
BALANCE, DECEMBER 31, 1996 254,688 $ 254 $ 69,246 $ -- $ (36,338) $ 33,162
January 17, 1997
Stock Recision
Note 1 (106,250) (106) (33,894) -- -- (34,000)
Note 1 (23,438) (23) (7,477) -- -- (7,500)
Income for the year -- -- -- -- 8,338 8,338
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1997 AND 1998 125,000 125 27,875 -- (28,000) --
Common stock issued
for cash 9,737,500 9,737 3,845,263 -- -- 3,855,000
Common stock issued
for acquisition of subsidiary 926,250 926 258,424 -- -- 259,350
Loss for the period -- -- -- (530,703) (55,000) (585,703)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30,
1999 10,788,750 $ 10,788 $ 4,131,562 $ (530,703) $ (83,000) $ 3,528,647
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Prepared by Management)
<TABLE>
<CAPTION>
=================================================================================================================
From Start of
Development
Stage
on May 1, Nine Month Nine Month
1999 to Period Ended Period Ended
September 30, September 30, September 30,
1999 1999 1998
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (530,703) $ (580,703) $ --
Items not involving cash outlay:
Bad debt -- 70,000 --
Gain on settlement of debt -- (44,500) --
Depreciation and amortization 21,198 21,198 --
Changes in non-cash working capital items:
Increase in accounts receivable (5,970) (5,970) --
Increase in prepaid expenses (17,488) (17,488) --
Increase in accounts payable and accrued liabilities 5,000 -- --
Decrease in loan payable (4,599) (4,599) --
Decrease in due to shareholder (110) (110) --
-------------- ----------- -----------
Net cash used in operating activities (532,672) (562,172) --
-------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash acquired on acquisition of subsidiary 1,655 1,655 --
Domain name rights (300,000) (300,000) --
Capital assets (21,331) (21,331) --
Software development costs (13,932) (13,932) --
-------------- ----------- -----------
Net cash used in investing activities (333,608) (333,608) --
-------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to shareholder 706 706 --
Issuance of common stock 3,800,000 3,855,000 --
Note payable -- (25,500) --
-------------- ----------- -----------
Net cash provided by financing activities 3,800,706 3,830,206 --
-------------- ----------- -----------
INCREASE IN CASH POSITION FOR THE PERIOD 2,934,426 2,934,426 --
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -- -- --
-------------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,934,426 $ 2,934,426 $ --
=================================================================================================================
</TABLE>
SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 11)
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Prepared by Management)
SEPTEMBER 30, 1999
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized October 13, 1995, under the laws of the State
of Nevada, as Painted Desert Farms, Inc. The Company, in accordance
with Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises", is considered a
development stage company.
On October 13, 1995, the company issued 106,250 of its common shares
for the contribution of four horses appraised at $34,000 or $0.32 per
share.
In February 1996, the Company received $7,500 in cash and issued 23,438
of its common shares at a value of $0.32 per share.
On August 17, 1996, the Company issued 125,000 of its common shares for
cash of $28,000.
On January 17, 1997, at a special meeting of shareholders, the
shareholders approved rescinding the 106,250 shares that had been issued
on October 13, 1995, for the contribution of four horses to the Company
(see above). It also rescinded the issuance of 23,438 shares issued for
the February 1996 transaction of $7,500 (see above).
On January 17, 1997, the Company approved a 25:1 forward stock split,
thus increasing the total number of common shares outstanding from
100,000 shares to 2,500,000 shares.
As of January 17, 1997, stockholders had loaned the Company $31,748 with
zero interest. On January 17, 1997, this debt was settled for $23,116
causing a gain on forgiveness of debt of $8,632 to the Company.
On January 5, 1998, the Company changed its name to Third Millennium
Software Corp.
On April 6, 1999, the Company issued 137,500 shares of common stock
under Rule 504 of Regulation D of the Securities Act of 1993 for
proceeds of $55,000.
On May 17, 1999, the Company approved a 20:1 reverse stock split, thus
decreasing the total number of shares from 5,250,000 issued and
outstanding to 262,500 issued and outstanding common shares.
On May 7, 1999, the Company changed its name to BidHit.Com, Inc.
On May 19, 1999, the Company acquired all of the issued and outstanding
shares of BidHit.Com, Inc. (Washington), a Washington corporation.
On May 25, 1999, the Company issued 9,000,000 shares of common stock
under Rule 504 of Regulation D of the Securities Act of 1933 for
proceeds of $900,000.
On July 12, 1999, the Company issued 600,000 shares of common stock for
proceeds of $2,900,000, which is net of share issuance costs of
$100,000.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary (consisting only of normal
recurring accruals) to present fairly the financial information
contained therein. These statements do not include all disclosures
required by generally accepted accounting principles and should be read
in conjunction with the audited financial statements of the Company for
the year ended December 31, 1998. The results of operations for the
period ended September 30, 1999 are not necessarily indicative of the
results to be expected for the year ending December 31, 1999.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Prepared by Management)
SEPTEMBER 30, 1999
================================================================================
2. ACCOUNTING POLICIES AND PROCEDURES
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include BidHit.Com, Inc.
(Nevada) and its wholly-owned subsidiary, BidHit.Com, Inc. (Washington)
("BHcW"), which was incorporated in the state of Washington on May 19,
1999. All significant inter-company balances and transactions have been
eliminated upon consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS 128"). Under SFAS 128, basic and diluted earnings per
share are to be presented. Basic earnings per share is computed by
dividing income available to common shareholders by the weighted average
number of common shares outstanding in the period. Diluted earnings per
share takes into consideration common shares outstanding (computed under
basic earnings per share) and potentially dilutive common shares.
CAPITAL ASSETS AND DEPRECIATION
Capital assets are recorded at cost less accumulated depreciation. The
cost of capital assets is depreciated over the estimated useful lives,
ranging from four to ten years, of the related assets.
INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred
tax asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards.
Deferred tax expense (benefit) results from the net change during the
period of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities" which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Company does not
anticipate that the adoption of the statement will have a significant
impact on its financial statements.
REPORTING ON COSTS OF START-UP ACTIVITIES
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs
of Start-Up Activities" which provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred.
SOP 98-5 is effective for fiscal years beginning after December 15, 1998
with initial adoption reported as the cumulative effect of a change in
accounting principle.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Prepared by Management)
SEPTEMBER 30, 1999
================================================================================
2. ACCOUNTING POLICIES AND PROCEDURES (cont'd.....)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with
original maturities of three months or less.
SOFTWARE DEVELOPMENT
The Company has adopted Statement of Position 98-1 ("SOP 98-1")
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", as its accounting policy for internally developed
computer software costs. Under SOP 98-1, computer software costs
incurred in the preliminary development stage are expensed as incurred.
Computer software costs incurred during the application development
stage are capitalized and amortized over the software's estimated useful
life of three years.
REVENUE RECOGNITION
The Company will be recognizing sales commission revenues as items are
sold on its internet site and as collection of these amounts is
reasonably assured.
ADVERTISING COSTS
The Company recognizes advertising expenses in accordance with Statement
of Position 98-7, "Reporting on Advertising Costs". As such, the Company
expenses the cost of communicating advertising in the period in which
the advertising space or airtime is used.
DOMAIN RIGHTS
The cost of domain name rights are amortized over 10 years from the date
of commencement of operations.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to account for stock-based
compensation using Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly compensation
cost for stock options is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income". This statement
establishes rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on total
stockholders' equity as of September 30, 1999.
3. NOTE RECEIVABLE
On March 17, 1997, the Company received $70,000 from Ardrail Services
Ltd., as part of a loan agreement between the Company and Peat Moss
International Ltd. ("PMI"). These funds were advanced to PMI as bridge
financing prior to completion of a merger. The merger was subsequently
not completed and the funds remained outstanding as a loan receivable.
Continued communications and correspondence with PMI indicate that the
loan will not be repaid. The Company has made every effort to collect
the loan and deemed the loan to be uncollectible. During the period, a
loss has been recorded for the full amount of the loan receivable.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Prepared by Management)
SEPTEMBER 30, 1999
================================================================================
4. NOTE PAYABLE
The Company is liable for $70,000 payable to Ardrail Services Ltd., for
the funds advanced for the loan receivable mentioned in Note 3. During
the period, the Company repaid $25,500 to Ardrail Services Ltd. as
settlement of the outstanding payable. Repayment of the balance of the
loan payable has been forgiven creating a gain on forgiveness of debt.
5. CAPITAL ASSETS
<TABLE>
<CAPTION>
=============================================================================================================================
Net Book Value
--------------------------------
(Audited)
Accumulated September 30, December 31,
Cost Amorgization 1999 1998
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Office furniture and equipment $ 22,111 $ 853 $ 21,258 $ --
=============================================================================================================================
</TABLE>
6. DOMAIN NAME RIGHTS
<TABLE>
<CAPTION>
=============================================================================================================================
(Audited)
Accumulated September 30, December 31,
Domain name Cost Amortization 1999 1998
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bidhit.com $ 558,350 $ (20,345) $ 538,005 $ --
=============================================================================================================================
</TABLE>
7. SOFTWARE DEVELOPMENT COSTS
Software development costs of $13,932 (December 31, 1998 - $Nil)
represent amounts incurred to develop the Company's portal website.
8. STOCKHOLDERS' EQUITY
REVERSE STOCK SPLIT
On May 17, 1999, the Company implemented a 20:1 reverse stock split
(Note 1). The consolidated statements of changes in stockholders' equity
has been restated to give retroactive recognition of the reverse stock
split for all periods presented by reclassifying from common stock to
additional paid-in capital the par value of consolidated shares arising
from the split. In addition, all references to number of shares and per
share amounts of common stock have been restated to reflect the stock
split.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Prepared by Management)
SEPTEMBER 30, 1999
8. STOCKHOLDERS' EQUITY (cont'd.....)
COMMON STOCK
In connection with a private placement offering made in April 1999, the
Company issued 137,500 shares of common stock under Rule 504 Regulation
D of the Securities Act of 1933 for proceeds of $55,000.
In connection with a private offering made in May 1999, the Company
issued 9,000,000 shares of common stock under Rule 504 of Regulation D
of the Securities Act of 1933 for proceeds of $900,000.
The Company issued 600,000 shares of common stock for proceeds of
$2,900,000, which is net of share issuance costs of $100,000.
As part of the acquisition of BidHit.Com, Inc. (Washington), the Company
issued 926,250 common shares at a deemed value of $259,350 (Note 9).
9. BUSINESS COMBINATION
Pursuant to a share exchange agreement, the Company purchased all of the
issued and outstanding shares of BHcW in consideration for $300,000 in
cash and 926,250 common shares of the Company at a deemed value of
$259,350.
The total purchase price of $559,350 has been allocated as follows:
Cash $ 1,655
Accounts receivable 3,274
Capital assets 780
Domain name 558,350
Accounts payable and accrued liabilities (110)
Loan payable, shareholder (4,599)
-------------
$ 559,350
=============
The 926,250 common shares were deemed to have a value of $0.28 per
share, based on the closing market value quotation of the shares on the
date of acquisition.
10. INCOME TAXES
The Company's total deferred tax asset is as follows:
===============================================================================
(Audited)
September 30, December 31,
1999 1998
- - -------------------------------------------------------------------------------
Net operating loss carryforward $ 206,720 $ 4,200
Valuation allowance (206,720) (4,200)
--------- ---------
$ -- $ --
===============================================================================
The Company has a net operating loss carryforward of approximately
$608,000 which expires between the years 2002 and 2006. The Company
provided a full valuation allowance on the deferred tax asset because of
the uncertainty regarding realizability.
<PAGE>
BIDHIT.COM, INC.
(formerly Third Millenium Software Corp.)
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Prepared by Management)
SEPTEMBER 30, 1999
11. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
================================================================================
September 30, September 30,
1999 1998
- - --------------------------------------------------------------------------------
Cash paid for income taxes $ -- $ --
Cash paid for interest -- --
================================================================================
The following non-cash transaction occurred during the nine month period
ended September 30, 1999:
The Company acquired BHcW for a purchase price of $559,350, of which
$300,000 was paid in cash and 926,250 common shares were issued at a
deemed value of $259,350.
There were no non-cash transactions for the nine month period ended
September 30, 1998.
12. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash
equivalents, accounts receivable and due to shareholder. Unless
otherwise noted, it is management's opinion that the Company is not
exposed to significant interest, currency or credit risks arising from
these financial instruments. The fair value of these financial
instruments approximate their carrying values, unless otherwise noted.
13. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
incorrectly recognize the year 2000 as some other date, resulting in
errors. The effects of the Year 2000 Issue may be experienced before,
on, or after January 1, 2000 and, if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant systems failure which could affect an entity's ability to
conduct normal business operations. It is not possible to be certain
that all aspects of the Year 2000 Issue affecting the Company, including
those related to the efforts of customers, suppliers, or other third
parties, will be fully resolved.
14. SUBSEQUENT EVENT
The Company issued 100,000 shares of common stock as an employment bonus
and 20,000 shares of common stock for fiscal advisory services.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001087356
<NAME> BIDHIT.COM, INC. (Washington)
<MULTIPLIER> 1
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> MAY-19-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,931,916
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<TOTAL-ASSETS> 2,993,838
<CURRENT-LIABILITIES> 5,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> (453,328)
<TOTAL-LIABILITY-AND-EQUITY> 2,993,838
<SALES> 9,396
<TOTAL-REVENUES> 33,871
<CGS> 4,425
<TOTAL-COSTS> 4,425
<OTHER-EXPENSES> 482,774
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<INCOME-TAX> 0
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<DISCONTINUED> 0
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<NET-INCOME> (453,328)
<EPS-BASIC> 0
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001087356
<NAME> BIDHIT.COM, INC.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
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0
0
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<EPS-BASIC> (0.39)
<EPS-DILUTED> (0.39)
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