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 September 30, 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) 495-0909
(Issuer's telephone number)
(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: 3,988,940 shares of common stock as of
October 31, 2000.
Transitional Small Business Format: Yes [ ] No [ X ]
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FORM 10-QSB
BUYERSONLINE.COM, INC.
INDEX
Page
PART I. Financial Information
Condensed Consolidated Balance Sheets as 3
of September 30, 2000 and December 31, 1999
Condensed Consolidated Statements of 4
Operations for the Three Months Ended
September 30, 2000 and 1999
Condensed Consolidated Statements of 5
Operations for the Nine Months Ended
September 30, 2000 and 1999
Condensed Consolidated Statements of Cash 6
Flows for the Nine Months Ended September
30, 2000 and 1999
Notes to Condensed Consolidated Financial 7
Statements
Management's Discussion and Analysis of 9
Financial Condition
PART II. Other Information 12
Changes in Securities and Use of Proceeds 12
Submission of Matters to a Vote of Security 13
Holders
Exhibits and Reports on Form 8-K 14
Signatures 15
2
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BUYERSONLINE.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
2000 1999
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . $ 453,067 $ 1,088,707
Restricted cash . . . . . . . . . . . . 52,177 170,687
Accounts receivable . . . . . . . . . . 1,229,527 889,897
Other current assets . . . . . . . . . . 267,452 47,443
Total current assets. . . . . . .. . 2,002,223 2,196,734
Property and equipment, net. . . . . . . . . 1,083,690 352,581
Other assets . . . . . . . . . . . . . . . . 44,210 -
Total assets. . . . . . . . . . . . $ 3,130,123 $ 2,549,315
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable . . . . . . . . . . . . . $ 2,622,088 $ -
Current portion of capital lease
obligation . . . . . . . . . . . . . . 118,117 81,133
Accounts payable . . . . . . . . . . . . 2,486,796 721,828
Accrued liabilities. . . . . . . . . . . 678,318 226,059
Accrued dividends payable on preferred
stock . . . . . . . . . . . . . . . . 73,909 160,127
Accrued rebates. . . . . . . . . . . . . 78,600 105,410
Total current liabilities. . . . . . 6,057,828 1,294,557
Note payable . . . . . . . . . . . . . . . . - 1,050,000
Capital lease obligation, net of current
portion. . . . . . . . . . . . . . . . . . 119,108 74,063
Total liabilities. . . . . . . . . . 6,176,936 2,418,620
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock . . . . . . . . . . . . 188 200
Common stock . . . . . . . . . . .. . . 399 351
Additional paid-in capital .. . . . . . 7,559,792 7,146,175
Warrants and options outstanding . . . 2,287,441 179,500
Deferred consulting fees. . . . . . . . (300,747) -
Accumulated deficit . . . . . . . . . . (12,593,886) (7,195,531)
Total stockholders' equity (deficit). (3,046,813) 130,695
Total liabilities and stockholders'
equity (deficit). . . . . . . . . $3,130,123 $ 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 September 30,
2000 1999
(As restated)
Revenues:
Telecommunications services . . . . . . $ 1,889,049 $ 1,189,171
Other . . . . . . . . . . . . . . . . . - 4,404
Total revenues . . . . . . . . . . . . 1,889,049 1,193,575
Operating expenses:
Costs of revenues . . . . . . . . . . . 1,161,136 765,801
General and administrative . . . . . . 1,461,476 612,907
Selling and promotion. . . . . . . . . 1,528,400 295,548
Total operating expenses. . . . . . 4,151,012 1,674,256
Loss from operations. . . . . . . . (2,261,963) (480,681)
Other income (expense):
Interest income . . . . . . . . . . . 3,424 26,535
Interest expense. . . . . . . . . . . . (618,270) (24,713)
Total other income (expense). . . . (614,846) 1,822
Net loss . . . . . . . . . . . $(2,876,809) $ (478,859)
Series A preferred stock dividends. . . . . 77,324 75,937
Net loss applicable to common stockholders . $(2,954,133) $ (554,796)
Net loss per common share:
Basic and diluted . . . . . . . . . . $ (0.79) $ (0.16)
Weighted average common shares outstanding:
Basic and diluted. . . . . . . . . . . 3,748,344 3,514,365
See accompanying notes
4
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BUYERSONLINE.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended September 30,
2000 1999
(As restated)
Revenues:
Telecommunications services . . . . . . $ 4,974,253 $ 3,486,944
Other. . . . . . . . . . . . . . . . . . - 31,536
Total revenues . . . . . . . . . . . 4,974,253 3,518,480
Operating expenses:
Costs of revenues. . . . . . . . . . . . 2,989,671 2,227,191
General and administrative . . . . . . . 3,395,631 1,513,036
Selling and promotion. . . . . . . . . . 3,033,777 614,773
Total operating expenses . . . . . . 9,419,079 4,355,000
Loss from operations . . . . . . . . (4,444,826) (836,520)
Other income (expense):
Interest income . . . . . . . . . . . . 16,326 28,054
Interest expense . . . . . . . . . . . . (732,969) (90,256)
Other. . . . . . . . . . . . . . . . . . - (24,000)
Total other income (expense) . . . . (716,643) (86,202)
Net loss . . . . . . . . $(5,161,469) $ (922,722)
Series A preferred stock dividends . . . . . 236,886 78,677
Net loss applicable to common stockholders . $(5,398,355) $(1,001,399)
Net loss per common share:
Basic and diluted . . . . . . . . . . . $ (1.48) $ (0.32)
Weighted average common shares outstanding:
Basic and diluted. . . . . . . . . . . . 3,635,938 3,175,516
See accompanying notes
5
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BUYERSONLINE.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended September 30,
2000 1999
(As restated)
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . $(5,161,469) $ (922,722)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization. . . . . 188,925 58,993
Amortization of discount on notes
payable . . . . . . . . . . . . . . . 548,971 -
Services rendered in exchange for
shares of common stock. . . . . . . . 12,319 -
Expense related to the grant of
options to purchase common shares . . 172,956 126,971
Changes in operating assets and
liabilities:
Restricted cash . . . . . . . . . . 118,510 1,888
Accounts receivable . . . . . . . . (339,630) (72,351)
Other current assets. . . . . . . . (110,684) (23,241)
Accounts payable. . . . . . . . . . 1,761,553 (181,166)
Accrued rebates . . . . . . . . . . (26,810) -
Accrued founders settlement . . . . - (9,000)
Accrued liabilities . . . . . . . . 452,259 (50,059)
Net cash used in operating activities. (2,383,100) (1,070,687)
Cash flows from investing activities:
Increase in other assets. . . . . . . . . . (44,210) -
Purchases of property and equipment . . . . (769,913) (80,633)
Net cash used in investing activities. . (814,123) (80,633)
Cash flows from financing activities:
Proceeds from borrowings under notes
payable, net of debt issue costs . . . . . 2,539,000 49,000
Principal payments on notes payable . . . . (150,000) (427,810)
Principal payments on capital lease
obligation . . . . . . . . . . . . . . . . (127,417) -
Issuance of preferred shares for cash,
net of offering costs. . . . . . . . . . . - 3,381,045
Issuance of common shares for cash,
net of offering costs. . . . . . . . . . . 300,000 164,250
Net cash provided by
financing activities . . . . . . . 2,561,583 3,166,485
Net increase (decrease) in cash. . . . . . . (635,640) 2,015,165
Cash at the beginning of the year. . . . . 1,088,707 22,690
Cash at the end of the year. . . . . . . . . $ 453,067 $ 2,037,855
Supplemental cash flow information:
Cash paid for interest. . . . . . . . . $ 180,498 $ 32,776
Supplemental schedule of noncash investing
and financing activities:
Issuance of common shares in payment of
preferred stock dividend. . . . . . . . . $ 319,689 $ -
Issuance of common shares in payment of
deferred services . . . . . . . . . . . . 50,000 -
Issuance of common shares upon conversion
of debt . . . . . . . . . . . . . . . . . - 125,000
Exercise of stock options with settlement
of Founders' Agreements . . . . . . . . . - 34,522
Warrants issued in connection with
promissory notes. . . . . . . . . . . . . 1,365,883 -
Issuance of options in connection with
deferred consulting agreements. . . . . . 403,495 -
Issuance of options in payment of
deferred sales commissions. . . . . . . . 25,574 -
Accrual of dividend payable on preferred
stock . . . . . . . . . . . . . . . . . . 236,886 78,677
Capital expenditures financed with
capital lease obligation. . . . . . . . . 150,121 -
See accompanying notes
6
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BUYERSONLINE.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements of BuyersOnline.com, Inc. ("the Company" or
"BuyersOnline") 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.
The unaudited interim results of operations and cash flows for
the periods ended September 30, 1999 have been restated as a
result of adjustments recorded at year-end.
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 and Warrants
During the nine months ended September 30, 2000 the Company has
granted a total of 1,450,582 options and warrants to purchase
common stock at a weighted average exercise price of $3.02 per
share. The options were granted primarily to employees hired
since the first of the year. The options generally vest
ratably over a period from one to five years after the date of
hire, and expire five years thereafter.
3. Bridge Financing - Related Parties
During the nine months ended September 30, 2000, the Company
has sought private placement funding to provide capital to
implement its Internet and infomercial marketing programs.
While continuing negotiations with various parties, as bridge
financing the Company entered into borrowing arrangements with
three of its directors and with First Level Capital, the
placement agent for the Company's 1999 private placement of
preferred stock. A total of $2,695,000 was raised by issuing
14% and 18% promissory notes, of which $1,020,000 came from the
three directors. Maturity dates on the notes range from July
31, 2000 to June 30, 2001, and some notes have terms providing
for earlier maturity when the Company obtains private placement
funding, whichever comes first. Notes still outstanding on
October 19, 2000 were converted into shares of preferred stock
and warrants as described in Note 4.
As additional consideration for the bridge loans, the Company
issued 1,465,000 warrants. The warrants entitle the note
holders to purchase shares of common stock at prices between
$2.00 and $2.50 per share until June 30, 2005. Using the Black-
Scholes pricing model, the warrants were valued so as to
allocate a discount on the carrying value of the notes in
accordance with APB No. 14, "Accounting for Convertible Debt
and Debt Issued with Stock Purchase Warrants." A total value
of $1,365,882 was recorded as warrants outstanding with a
corresponding discount to the promissory notes when the
warrants were issued. During the nine months ended September
30, 2000, a total of $548,971 of the discount had been
amortized and included in interest expense.
7
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BUYERSONLINE.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
(Continued)
September 30, 2000
4. Subsequent Events
In August 2000, the Company entered into an agreement with a
financing company. The arrangement would have provided up to
$6,000,000 in debt financing and would have been secured by
13,715,000 shares of the Company's common stock. In late
August it became apparent that the financing company would not
be able to comply with the agreed-upon terms, and BuyersOnline
canceled the arrangement.
In September, the Company entered into financing agreement with
First Level Capital. Terms of the agreement provide that First
Level will raise between $2 million and $11 million on a best-
efforts basis by issuing shares of 8% Series B convertible
preferred stock, along with common stock purchase warrants. An
initial amount of $1.5 million, less offering costs of
$265,000, was received by the Company on October 19, 2000. As
part of the arrangement, all of the unpaid promissory notes
discussed in Note 3 were also converted into preferred stock
and warrants at that time.
8
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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.
The Company is now expanding it's 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 August of 2000,
BuyersOnline launched 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 18,000 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 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 58% to $1.89 million for the three months ended
September 30, 2000 as compared to $1.19 million for the same
period in 1999. Revenues year-to-date increased 41% to $4.97
million as compared to $3.49 million for the comparative period
of 1999. The increases are due to higher membership in general
resulting from the Company's ongoing promotional efforts. Costs
of revenue for the three-month period ended September 30, 2000
were $1.16 million, a 52% increase as compared to $765,801
incurred during the comparable three-month period for the prior
year. Such costs as a percentage of revenue were 61% during 2000
as compared to 64% during 1999. Costs of revenues during the
nine months ended September 30, 2000 rose 34% to $2.99 million
over the same period last year from $2.23 million. As a
percentage of revenue, costs of revenues year-to-
9
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date were 60%, compared to 63% during the comparable period of
1999. During the latter part of 1999, the Company increased the
number of its wholesale telecommunications services vendors and
in the process negotiated lower overall rates. The Company has
continued its efforts in lowering wholesale rates during 2000 as
well.
Total operating expenses other than costs of revenues increased
229% during the three months ended September 30, 2000 compared to
the same period in 1999. General and administrative costs in
2000 increased 138% to $1.46 million compared to $612,907 in
1999. Selling and promotion costs rose 417% to $1.53 million
during 2000's third quarter from $295,548 during the same period
in 1999. During the nine-month periods, general and
administrative expenses for 2000 were $3.40 million, versus $1.51
million for 1999, a 124% increase. Selling and promotion costs
increased 393% during 2000, from $614,773 to $3.03 million. The
increases in both areas stem from the Company's ongoing efforts
in significantly expanding it's business. Toward the end of
1999, the Company began to increase spending in strategic areas
to prepare for revenue growth during the year 2000. In the sales
and promotion area, increases during 2000 stem in part from
higher commissions paid in proportion to higher revenue amounts.
In addition, the Company has continued to expand existing, and
develop new sales channels, in addition to continuing development
efforts on the infomercial marketing tool. BuyersOnline has also
begun increased 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 for the first nine months of 2000 was $16,326 as
compared to $28,054 earned in 1999. The difference is
attributable to the funds on hand during 1999, primarily as a
result of the Series A preferred stock offering completed during
1999's third quarter. Interest expense for the three months
ended September 30, 2000 included $527,229 of amortization of the
discount allocated to the bridge financing. Not including such
amortization, interest expense rose 268% partly as a result of
extending a note, along with increasing the interest rate (see
below). The difference in interest expense also resulted from
having less debt outstanding during the 1999's second quarter as
a result of debt payoffs, coupled with the fact that the Company
increased its debt during the nine months ended September 30,
2000 in the form of bridge loans. These factors were also the
reasons why interest expense year-to-date in 2000, other than
note discount amortization, was 95% higher than 1999's comparable
period.
As a result of the above factors, the overall net loss before the
Series A Preferred Stock dividend increased 501% to $2.88 million
for the three months ended September 30, 2000 as compared to
$478,859 for the three months ended September 30, 1999. Year-to-
date, the loss increased 459% over the same period last year,
rising to $5.16 million as compared to $922,722.
Liquidity and Capital Resources
The Company's current ratio during the nine months ended
September 30, 2000 declined to 0.3:1 from 1.7:1 at the end of
1999. The primary reasons for the decline was the cash used to
fund operations during the quarter (see the discussion of the
increase in operating expenses above), and the related issuance
of short-term debt. In addition, the $1,050,000 note still owing
from an earlier year was reclassified as a short-term obligation
rather than long-term. In addition to cash and note payable, the
elements of working capital which changed significantly were
accounts payable and accrued liabilities. Accrued liabilities
rose due to higher accrued payroll and commission costs resulting
from the overall increases in employees during the year and the
higher revenue amounts, respectively. Accounts payable rose
during the year due to the higher overall level of costs attained
during the year, along with proportionately higher revenue-
related excise taxes billed and owing at the end of the
respective periods.
10
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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,
we agreed to increase the interest rate on the note to 18% per
annum beginning April 15, 2000, 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 grant the
holder the right to register the shares of common stock for
resale under the Securities Act of 1933 under certain
circumstances.
The Company is currently experiencing a period of significant
expansion and growth. As a result, the Company has suffered
losses during 2000, and projects the need for additional capital
to fund operations through the rest of the year. In August 2000,
the Company entered into an agreement with a financing company.
The arrangement would have provided up to $6,000,000 in debt
financing and would have been secured by 13,715,000 shares of the
Company's common stock. In late August it became apparent that
the financing company would not be able to comply with the agreed-
upon terms, and BuyersOnline canceled the arrangement. In
September, the Company entered into a financing agreement with
First Level Capital. Terms of the agreement provide that First
Level will raise between $2 million and $11 million by issuing
shares of 8% Series B convertible preferred stock, along with
common stock purchase warrants. An initial amount of $1.5
million, less offering costs of $265,000, was received by the
Company on October 19, 2000. As part of the arrangement, all of
the unpaid promissory notes were also converted into preferred
stock and warrants at that time. The Company has also begun
efforts to secure additional financing in order to begin
significant infomercial broadcasting during the first part of
2001. However, there can be no assurance that the Company will
successfully complete its efforts to reach the maximum amount of
the current private placement or, if completed, that the amounts,
in addition to amounts sought in 2001, will be sufficient for the
Company to achieve profitable results in the long term.
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 1985 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.
11
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PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
From July through September 2000, the Company issued 125,000
shares of common stock on conversion of 125,000 shares of
previously outstanding Series A Convertible Preferred Stock
("Series A Stock"). No consideration was given to the Company on
the conversion other than surrender of the Series A Stock.
In August 2000, the Company issued to the holders of the
Company's Series A Stock 77,782 shares of common stock valued at
$159,658 in payment of mandatory dividends on the outstanding
shares of Series A Stock.
In August 2000, the Company issued 150,000 shares of common
stock for $300,000 in cash to Jack M. Harrison. The Company
relied upon Section 4(2) of the Securities Act of 1933 to issue
the shares without registration, as the transaction did not
involve any public offering and Mr. Harrison is an accredited
investor who had access to all material information pertaining to
the Company. No underwriter was involved in the transaction and
no commissions were paid to any person.
In July and August 2000, the Company sold $620,000 in
principal amount of promissory notes and 395,000 common stock
purchase warrants to a limited group of investors in reliance on
the exemption from registration set forth in Section 4(2) of the
Securities Act of 1933. Based on information provided by the
investors, the Company believes each investor is an accredited
investor and each investor had access to information that would
enable it to make an informed decision regarding an investment in
the Company. The common stock purchase warrants are exercisable
over a term of five years at an exercise price equal to the
lesser of $2.00 per share or the fair market value per share of
the Company's common stock on the last trading day immediately
preceding the date on which the promissory note issued with the
warrant is paid in full. No underwriter was involved in the
transaction and no commissions were paid to any person. The
following is a list of the purchasers of the promissory notes and
warrants:
Name Promissory Notes ($) Warrants (#)
Ilene Mirman 50,000 25,000
Eric Rand 100,000 50,000
Edward Dallin Bagley 75,000 37,500
Bomoseen Associates, LP (1) 395,000 282,500
(1) Theodore Stern is the general partner of Bomoseen
Associates, LP, so he may be deemed to have voting and investment
control over the securities held by that limited partnership.
In September 2000, the Company issued promissory notes in
the principal amount of $1,200,000 and 600,000 common stock
purchase warrants to a limited group of accredited investors in
reliance on the exemptions from registration set forth in Section
4(2) of the Securities Act of 1933 and Rule 506 of Regulation D.
Based on information provided by the investors, the Company
believes each investor is an accredited investor and each
investor had access to information that would enable it to make
an informed decision regarding an investment in the Company. The
promissory notes are automatically exchanged for Series B
Convertible Preferred Stock of the Company ("Series B Stock") in
the event the Company is able to obtain in a subsequent offering
subscriptions for Series B Stock and warrants with a total
purchase price of at least $2,000,000. The common stock purchase
warrants issued to the promissory note investors are exercisable
through December 31, 2005 at an exercise price of $2.50 per
share. First Level Capital, Inc., the sales agent for the
offering, received a commission of $120,000, a non-accountable
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expense allowance of $36,000, and a warrant to purchase 120,000
shares of the Company's common stock at an exercise price of
$2.50 per share. The following is a list of the purchasers of
the promissory notes and warrants:
Name Promissory Warrants (#)
Notes ($)
New Amsterdam Investment Trust 25,000 12,500
Philip J. Schiller 25,000 12,500
Richard G. David 50,000 25,000
Bennie C. Gatewood, Trustee 50,000 25,000
Bennie C. Gatewood Revocable Trust
James R. Adametz, Trustee 20,000 10,000
James R. Adametz Revocable Trust
Chris Gordon 80,000 40,000
The Mulkey II Limited Partnership 50,000 25,000
Leonard Schiller 25,000 12,500
Bill and Pamela Hickey, JTWROS 50,000 25,000
David E. Dickerson, Trustee 50,000 25,000
Dickerson Family Living Trust
William Joe Jackson and 50,000 25,000
Ann Street Jackson, JTWROS
Mario Novogrodzki 25,000 12,500
H. Eugene Graves 50,000 25,000
George L. Smith 25,000 12,500
Henry G. Herzing, Trustee 100,000 50,000
Henry G. Herzing Revocable
Living Trust
Joel A. Stone 50,000 25,000
Michel and Rosamond Janis, JTWROS 25,000 12,500
Marc Siegel 25,000 12,500
Mark Alloy 50,000 25,000
Wilfred and Margaret Huse, JTWROS 75,000 37,500
Nunley Investments LLC 25,000 12,500
Robert B. Kimball, III 25,000 12,500
Steven B. Dritz, Trustee 50,000 25,000
Steven B. Dritz Trust
Daniel R. Lee 50,000 25,000
Stephen D. Tanner 25,000 12,500
Eleanor L. Carrigan 50,000 25,000
Austin Gleason 25,000 12,500
C/F Orthopedic Specialists
Pension Plan
Kim Hickey 50,000 25,000
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Special Meeting of stockholders held on October 4,
2000, the stockholders voted on the following matters:
(1) The election of Theodore Stern, Rod Smith, Gary Smith,
Edward Dallin Bagley, Steve Barnett, Harold C. McCray,
and Steven Scott as Directors of BuyersOnline to serve
for a term of one year and until their successors are
duly elected and qualified;
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(2) Approval of an amendment to the Certificate of
Incorporation of the Company increasing the number of
authorized shares of common stock, par value $0.0001,
to 100,000,000;
(3) Approval of an amendment to the Long Term Incentive
Stock Plan of the Company increasing the number of
shares of common stock authorized for granting awards
under the Plan; and
(4) Ratification of the appointment of Arthur Andersen LLP
as independent auditors of the Company for 2000.
Prior to the Special Meeting, Harold C. McCray tendered his
resignation as a director and did not stand for re-election.
Each of the foregoing matters was approved or ratified by the
stockholders. The number of votes cast on the foregoing matters
is as follows:
For Against Abstain
Election of Directors
Theodore Stern 2,296,897 1,072 0
Rod Smith 2,105,376 192,593 0
Gary Smith 2,296,896 1,073 0
Edward Dallin Bagley 2,296,897 1,071 0
Steve Barnett 2,293,804 4,165 0
Steven Scott 2,293,784 4,185 0
Increasing authorized 2,255,967 30,823 11,179
common stock to
100,000,000 shares
Amendment to Long Term 1,708,947 42,252 10,917
Incentive Stock Plan
Appointment of Arthur 2,276,648 116 3,135
Andersen LLP
Following the Special Meeting, Rod Smith resigned as a
director of the Company. Consequently, the persons now serving
as directors of the Company are Theodore Stern, Gary Smith,
Edward Dallin Bagley, Steve Barnett, and Steven Scott
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 September 30, 2000.
Exhibits: Included only with the electronic filing of this
report is the Financial Data Schedule for the nine month period
ended September 30, 2000 (Exhibit ref. No. 27).
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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: November 14, 2000 By: /s/ G. Douglas Smith
Vice President
Date: November 14, 2000 By: /s/ Paul Jarman
Treasurer
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