U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-26917
BUYERSONLINE.COM, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 87-0528557
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
66 E. Wadsworth Park Drive, Suite 101, Draper, Utah 84020
(Address of principal executive offices)
(801) 523-8929
(Issuer's telephone number)
BUI, INC.
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the
Exchange Act subsequent to the distribution of securities under
a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity: 3,607,408 shares of common stock as of
May 11, 2000 .
Transitional Small Business Format: Yes [ ] No [ X ]
<PAGE>
FORM 10-QSB
BUYERSONLINE.COM, INC.
INDEX
Page
PART I. Financial Information 2
Balance Sheets as of March 31, 2000 and 3
December 31, 1999
Statements of Operations for the Three
Months Ended March 31, 2000 and 1999 4
Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 5
Notes to the Financial Statements 6
Management's Discussion and Analysis of
Financial Condition 7
PART II. Other Information 10
Changes in Securities and Use of Proceeds 10
Exhibits and Reports on Form 8-K 10
Signatures 10
2
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PART I.
Financial Information
BUYERSONLINE.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March December
31, 31,
2000 1999
ASSETS (unaudited)
Current assets:
Cash $ 374,319 $ 1,088,707
Restricted cash 117,474 170,687
Accounts receivable, net 755,975 889,897
Other current assets 65,337 47,443
Total current assets 1,313,105 2,196,734
Furniture, fixtures and equipment, net 377,850 352,581
Other assets 8,210 -
Total assets $ 1,699,165 2,549,315
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of capital lease obligation $ 87,352 $ 81,133
Accounts payable 648,910 721,828
Accrued liabilities 359,071 226,059
Accrued dividends payable on preferred stock 79,781 160,127
Accrued rebates 110,039 105,410
Total current liabilities 1,285,153 1,294,557
Note payable 1,050,000 1,050,000
Capital lease obligation, net of current portion 60,990 74,063
Total liabilities 2,396,143 2,418,620
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock 200 200
Common stock 361 351
Additional paid-in capital 7,306,292 7,146,175
Warrants and options outstanding 393,494 179,500
Deferred consulting fees (205,077) -
Accumulated deficit (8,192,248) (7,195,531)
Total stockholders' equity (deficit) (696,978) 130,695
Total liabilities and stockholders'
equity (deficit) $ 1,699,165 2,549,315
See accompanying notes
3
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BUYERSONLINE.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
2000 1999
Revenues:
Telecommunications services $ 1,421,431 $ 1,167,254
Other - 24,292
Total revenues 1,421,431 1,191,546
Operating expenses:
Costs of revenues 873,444 800,528
General and administrative 745,732 455,599
Selling and promotion 692,097 130,045
Total operating expenses 2,311,273 1,386,172
Loss from operations (889,842) (194,626)
Other income (expense):
Interest income 8,583 156
Interest expense (35,677) (33,640)
Other - (24,000)
Total other income (expense) (27,094) (57,484)
Net loss $ (916,936) $ (252,110)
Series A preferred stock dividends 79,781 -
Net loss applicable to common stockholders $ (996,717) $ (252,110)
Net loss per common share:
Basic and diluted $ (0.28) $ (0.09)
Weighted average common shares outstanding:
Basic and diluted 3,547,169 2,893,824
See accompanying notes
4
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BUYERSONLINE.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
Net loss $ (916,936) $ (252,110)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 50,969 17,126
Amortization of deferred consulting fees 8,917 -
Changes in operating assets and liabilities:
Restricted cash 53,213 (9,602)
Accounts receivable 133,922 61,617
Other current assets (16,394) (15,871)
Accounts payable (72,918) 107,452
Accrued rebates 4,629 -
Accrued founders settlement - (9,000)
Accrued liabilities 133,012 (56,249)
Net cash used in operating activities (621,586) (156,637)
Cash flows from investing activities:
Deposits and other assets (8,210) -
Purchases of furniture, fixtures and equipment (69,988) (1,905)
Net cash used in investing activities (78,198) (1,905)
Cash flows from financing activities:
Proceeds from borrowings under notes payable - 49,000
Principal payments on notes payable - (7,256)
Principal payments on capital lease obligation (14,604) -
Issuance of common shares for cash, net
of offering costs - 145,158
Net cash provided by (used in) financing activities (14,604) 186,902
Net increase (decrease) in cash (714,388) 28,360
Cash at the beginning of the period 1,088,707 22,690
Cash at the end of the period $ 374,319 $ 51,050
Supplemental cash flow information:
Cash paid for interest $ 35,677 $ 32,776
Supplemental schedule of noncash investing
and financing activities:
Issuance of common shares in payment of
preferred stock dividend $ 160,127 -
Issuance of options in connection with
consulting agreement 213,994 -
Accrual of dividend payable on preferred stock 79,781 -
Capital expenditures financed with
capital lease obligation 7,750 -
See accompanying notes
5
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1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB of
Regulation S-B. Accordingly, they do not include all the
information and footnotes necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion, however, that all material
adjustments (consisting of normal recurring accruals) have been
made which are necessary for a fair financial statement
presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the
year.
For further information, refer to the consolidated financial
statements and footnotes included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1999.
2. Stock Options
During the quarter ended March 31, 2000 and subsequent thereto,
the Company granted 894,542 options to purchase common stock at
a weighted average exercise price of $3.42 per share. The
options were granted primarily to employees hired during 2000.
The options vest ratably over periods of one to five years
after the date of hire, and expire five years after the vesting
date.
3. Subsequent Private Placement of Preferred Stock
The Company is negotiating with First Level Capital, the
placement agent for the Company's private placement of Series A
Convertible Preferred Stock, the terms of a new private
placement of additional shares of preferred stock of the
Company. The purpose of the private placement is primarily to
provide capital to implement the Company's Internet and
marketing programs. In order to provide bridge financing for
operations, in May 2000 the Company issued $525,000 of
promissory notes due June 30, 2001, bearing interest at 8% per
annum. The Company also issued warrants to purchase 131,250
shares of common stock (which may be increased to 262,500
shares in certain circumstances) at an exercise price of $2.50
per share. The warrants expire after five years.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
BuyersOnline is engaged in the business of selling to
consumers and small businesses services and products. The
marketing strategy of BuyersOnline is based on a membership
concept under which members of BuyersOnline are entitled to
receive the services and products offered at lower prices than
can be obtained elsewhere. BuyersOnline uses the purchasing
power of its membership to negotiate lower prices or rebates from
producers and resellers of the services and products. Lower
pricing allows BuyersOnline to attract and retain members, and
makes it possible for BuyersOnline to offer rebate incentive
programs to its members for referring to BuyersOnline new
prospective members. BuyersOnline's goal is to build a national
consumer membership organization. Its strategy for achieving
this goal is to focus on its member referral and rebate program,
expand service and product offerings, and develop and promote a
television advertising program to attract new members.
BuyersOnline provides services and products that it believes
are perceived by consumers and businesses as essential or are
compatible with their normal annual expenditures. Since its
inception in January 1996, BuyersOnline focused on selling long
distance service. This focus has enabled BuyersOnline to build
the size of its membership base. With the recent explosion in
Internet commerce, especially among small businesses,
BuyersOnline is now offering low cost Internet access to its
members.
We are now expanding our selection to include a broader
range of consumer products and services., including clothing and
accessories, books and music, health and beauty products, sports
and recreation products, office supplies, toys and games, home
and garden products, computer products, travel service, specialty
food products, and specialty gift items. In the second half of
2000, BuyersOnline intends to launch its new web site that will
enable members to purchase these products online and receive from
BuyersOnline a rebate on each product and service purchase.
By expanding its service and product offerings, BuyersOnline
believes that membership will be attractive to a larger number of
prospective members and existing members will have added
incentive for staying with BuyersOnline.
BuyersOnline has over 16,000 members located in 48 states.
Its target market includes networking professionals, small
businesses, and middle-class families with an annual household
income between $36,000 and $80,000, as these are the most likely
to respond actively to the savings opportunity offered by
BuyersOnline. Members reside mostly in high population centers
and they tend to spend more than the average on long distance
services. Approximately one-third of the present membership
consists of small businesses and entrepreneurs who operate home-
based businesses.
Results of Operations
Total revenues from telecommunications and other services
increased 19% to $1.42 million for the three months ended March
31, 2000 as compared to $1.19 million for the same period in
1999. The change is due to an increase in membership
resulting from the Company's ongoing promotional efforts. Costs
of revenue for the three-month period ended March 31, 2000 was $873,444,
a 9% increase as compared to $800,528 incurred during the
comparable three-month period for the prior year. Such costs as
a percentage of sales were 61% during the first quarter of 2000 as
compared to 67% during the comparable 1999 period.
During the latter part of 1999, the Company
increased the number of its wholesale telecommunications services
vendors and in
7
<PAGE>
the process negotiated lower rates. The Company plans to
continue its efforts in further attempts to lower wholesale rates
during 2000.
Total operating expenses other than costs of revenues
increased 146% during the first quarter of 2000 compared to
the same period in 1999. General and administrative costs in
the 2000 period were $745,732 compared to $455,599 in 1999, an increase of
64%. Selling and promotion costs rose 432% to $692,097 during the first
quarter of 2000 from $130,045 during the same period in
1999. The increases in both areas result from the Company's
ongoing efforts to expand its business. In late
1999, the Company began to increase spending in strategic
areas to prepare for significant revenue growth during
2000. During the current year, the Company has started to expand
existing sales channels, and develop new channels in addition to
continuing development efforts of an infomercial marketing tool.
In addition, BuyersOnline has also increased its capacity in
both internally and externally developed information technology.
This will allow BuyersOnline to leverage its membership base as
it pursues its "buyersonline.com" marketing strategy.
Interest income during the first quarter of 2000 was $8,583 as
compared to $156 earned in the 1999 comparable period due to the funds on
hand from the Series A preferred stock offering completed during the
third quarter of 1999. Interest expense increased 6% during the first
quarter of 2000 to $35,677 compared to $33,640 during the same period in 1999.
The change resulted from increased debt levels during the first quarter
of 2000.
As a result of the above factors, net loss before
the Series A Preferred Stock dividend increased 264% to $916,936
for the three months ended March 31, 2000 as compared to $252,110
for the three months ended March 31, 1999.
Liquidity and Capital Resources
The Company's current ratio during the first quarter of 2000
declined to 1:1 from 1.7:1 at the end of 1999. The primary
reason for the decline was the cash used to fund operations
during the quarter. In addition to cash, the elements of
working capital which changed significantly were accrued
liabilities and the accrued dividend payable on common stock.
Accrued liabilities increased due to higher accrued payroll costs
resulting from an increase in the number of employees
during the quarter. The accrued dividends payable decreased during the
quarter due to the payment of the accumulated preferred stock dividend
declared in 1999, partially offset by the accrual of dividends for the current
period.
The Company is currently experiencing a period of
significant expansion and growth. As a result, the Company has
suffered losses during the first quarter of 2000, and projects
the need for additional capital to fund operations throughout the
rest of the year. At present, the Company is negotiating with
First Level Capital, the placement agent for the Company's previous private
placement of Series A Convertible Preferred Stock, the terms of a
new private placement of additional shares of preferred stock of
the Company. The purpose of the private placement is primarily to
provide capital to implement the Company's internet and marketing
programs. In order to provide bridge financing for operations, in
May 2000 the Company issued $525,000 of promissory notes due June
30, 2001, bearing interest at 8% per annum. The Company also
issued warrants to purchase 131,250 shares of common stock (which
may be increased to 262,500 shares in certain circumstances) at
an exercise price of $2.50 per share. The warrants expire after
five years. However, there can be no assurance that the Company
will successfully complete its efforts to attain additional
funding or, if completed, that the amounts will be sufficient for
the Company to achieve profitable results in the long term.
8
<PAGE>
In March 2000, BuyersOnline reached an agreement to extend
repayment of an outstanding note payable in the amount of
$1,050,000 to April 15, 2001. Under the terms of the extension,
the Company agreed to increase the interest rate on the note to
18% per annum beginning April 15, 2000, to grant the holder the
right to convert the note to common stock at the rate of $3.00 of
principal per share, or a total of 350,000 shares, and to grant
the holder the right to register the shares of common stock for
resale under the Securities Act of 1933 under certain
circumstances.
Year 2000 Compliance
BuyersOnline did not experience any problems in its own
critical business operations or in any of its significant third
party relationships related to Year 2000 compliance.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements made by
BuyersOnline, except where such statements are made in connection
with an initial public offering. All statements, other than
statements of historical fact, which address activities, actions,
goals, prospects, or new developments that BuyersOnline expects
or anticipates will or may occur in the future, including such
things as expansion and growth of its operations and other such
matters are forward-looking statements. Any one or a combination
of factors could materially affect BuyersOnline's operations and
financial condition. These factors include competitive
pressures, success or failure of marketing programs, changes in
pricing and availability of services and products offered to
members, legal and regulatory initiatives affecting member
marketing and rebate programs or long distance service, and
conditions in the capital markets. Forward-looking statements
made by BuyersOnline are based on knowledge of its business and
the environment in which it operates as of the date of this
report. Because of the factors listed above, as well as other
factors beyond its control, actual results may differ from those
in the forward-looking statements.
9
<PAGE>
PART II. OTHER INFORMATION
Changes in Securities and Use of Proceeds
In the first quarter of 2000, the Company issued 98,573
shares of common stock valued at $160,127, as payment of the
mandatory dividend on its outstanding shares of Series A
Convertible Preferred Stock. As the shares were issued as a
dividend, no sale of securities was involved in the transaction.
Exhibits and Reports on Form 8-K.
Reports on Form 8-K: No reports on Form 8-K were filed by
the Company during the quarter ended March 31, 2000.
Exhibits: Included only with the electronic filing of this
report is the Financial Data Schedule for the three month period
ended March 31, 2000 (Exhibit ref. No. 27).
SIGNATURES
In accordance with the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BUYERSONLINE.COM, INC.
Date: May 12, 2000 By: /s/ Rod Smith, President
Date: May 12, 2000 By: /s/ Paul Jarman, Treasurer
10
<PAGE>
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
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<RECEIVABLES> 755,975
<ALLOWANCES> 222,907
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<PP&E> 377,850
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