<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number:
busybox.com, inc.
(Exact name of registrant as specified in its charter)
Delaware 94-3233035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 Avenue of the Stars, Suite 680, Century City, CA 90067
(Address of principal executive offices) (Zip Code)
(310) 556-4616
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former 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 Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the last
90 days.
YES X NO
--- ---
The number of shares of the Registrant's common stock, $.01 par value per share,
outstanding as of November 6, 2000, was 8,710,000.
Transition small business disclosure format (check one):
YES NO X
--- ---
The exhibit index appears in sequentially page:
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheet as of September 30, 2000 3
Condensed Statements of Operations for the three months ended September 30, 2000 and 1999 4
Condensed Statements of Operations for the nine months ended September 30, 2000 and 1999 5
Condensed Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 15
</TABLE>
2
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busybox.com, inc.
CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30,
2000
------------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,169,785
Accounts receivable 113,037
Inventory 792,357
Other current assets 156,300
---------------
Total current assets 2,231,479
PROPERTY AND EQUIPMENT, net 240,220
SOFTWARE, net 773,314
---------------
$ 3,245,013
===============
LIABILITIES
AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 779,162
Accrued liabilities 269,989
Capital lease payable, current 5,122
---------------
Total current liabilities 1,054,273
STOCKHOLDERS' EQUITY
Common stock 87,100
Additional paid-in capital 19,213,826
Accumulated deficit (13,581,716)
----------------
5,719,209
Less: Notes and interest receivable from stockholders (3,528,469)
----------------
Total stockholders' equity 2,190,740
----------------
$ 3,245,013
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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busybox.com, inc.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30
-------------------------------------------
1999 2000
--------------------- ---------------------
<S> <C> <C>
Net revenue $ 108,819 $ 12,210
Cost of revenue 8,927 1174
--------------- ---------------
Gross profit 99,891 11,036
Operating expenses
Selling, general and administrative expenses 1,414,293 743,189
Marketing and promotion 900,666 115,414
Research and development 140,608 205,389
--------------- ---------------
Total operating expenses 2,455,567 1,063,992
--------------- ---------------
Operating loss (2,355,676) (1,052,956)
Other income (expense)
Settlement of vendor dispute -- 497,552
Interest income on stockholders' notes
Receivable 48,424 85,018
Interest expense (3,778) (4,496)
---------------- ----------------
Total other income (expense) 44,464 578,074
NET LOSS $ (2,311,211) $ (474,882)
================ ================
Basic and diluted net loss per share $ (0.44) $ (0.05)
================ ================
Shares used in calculation of net loss per share 5,271,957 8,710,000
=============== ===============
</TABLE>
The accompanying notes are an integral part these statements.
4
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busybox.com, inc.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30
---------------------------------------
1999 2000
------------------- -------------------
<S> <C> <C>
Net revenue $ 332,706 $ 85,569
Cost of revenue 127,073 21,155
--------------- ---------------
Gross profit 205,633 64,414
Operating expenses
Selling, general and administrative expenses 2,431,869 3,580,412
Marketing and promotion 1,289,027 515,284
Research and development 358,242 666,025
--------------- ---------------
Total operating expenses 4,079,138 4,761,722
--------------- ---------------
Operating loss (3,873,505) (4,697,307)
Other income (expense)
Settlement of vendor dispute -- 497,552
Interest income on stockholders' notes
Receivable 146,265 210,388
Interest expense (6,751) (103,397)
Amortization of financing costs and
discounts on promissory notes -- (2,956,250)
--------------- ----------------
Total other income (expense) 139,514 (2,351,707)
--------------- ----------------
Net loss before income taxes (3,733,991) (7,049,014)
Income taxes -- 800
--------------- ----------------
NET LOSS $ (3,733,991) $ (7,049,814)
================ ================
Basic and diluted net loss per share $ (0.79) $ (0.99)
================ ================
Shares used in calculation of net loss per share 4,743,150 7,095,036
=============== ===============
</TABLE>
The accompanying notes are an integral part these statements.
5
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busybox.com, inc.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------------------
1999 2000
-------------------- ---------------------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (3,733,991) $ (7,049,815)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 35,860 2,993,538
Common stock issued for services 500,000 --
Changes in operating assets and liabilities:
Accounts receivable, net (51,157) (45,694)
Inventory (338,915) (430,050)
Other current assets (43,350) (131,404)
Interest receivable (146,265) (188,055)
Accounts payable 1,484,632 1,210,145
Income taxes payable -- (800)
Other accrued liabilities 223,642 (515,693)
--------------- ----------------
Net cash used in operating activities (2,069,544) (6,578,117)
---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (76,209) (156,735)
Purchase of software systems -- (729,576)
--------------- ----------------
Net cash used in investing activities (76,209) (886,311)
---------------- ----------------
Cash flows from financing activities:
Repayment of capital leases (5,485) (6,428)
Proceeds from promissory notes -- 1,513,250
Repayment of promissory notes -- (2,807,950)
Borrowings (repayments) on line of credit 99,172 (99,172)
Proceeds from stockholders' accounts receivable 12,250 --
Prepaid costs associated with initial public
offering of securities (257,875) (53,000)
Net proceeds from initial public offering -- 9,725,819
Net proceeds from private placement transaction 2,207,432 --
Net cash provided by financing activities 2,055,494 8,272,519
--------------- ---------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (90,259) 808,091
Cash and cash equivalents at beginning of period 130,771 361,694
--------------- ---------------
Cash and cash equivalents at end of period $ 40,512 $ 1,169,785
=============== ===============
Supplemental cash flow disclosures
Cash paid for
Interest $ 5,321 $ 105,176
Income taxes $ -- $ 800
Noncash transactions
Shares of common stock issued in exchange for services $ 500,000 $ --
</TABLE>
The accompanying notes are an integral part of these statements.
6
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busybox.com, inc.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
busybox.com, inc. ("Company") designs, develops, maintains, services,
markets, sells and distributes digital imagery, including black and white and
color still photographs, film footage and video, as well as the sale and
licensing of Company developed software over the Internet to its customers in
the technology, media, entertainment, government, corporate and sports
industries.
In December 1998, the Company amended its Certificate of Incorporation to
change its name from "Get Smart, Inc." to "Busy Box, Inc." In March 1999, the
Company further amended and restated its Certificate of Incorporation to change
its name to "busybox.com, inc."
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and pursuant to rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statement presentation. In the opinion
of management, such unaudited interim information reflects all necessary
adjustments, consisting of only normal recurring adjustments, necessary to
present the Company's financial position and results of operations for the
periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full fiscal year.
These statements should be read in conjunction with the financial statements and
related notes included in the Company's SB-2 for the year ended December 31,
1999.
Revenue Recognition
Revenues are derived from digital video sales, digital image processing and
services, Web site hosting, maintenance and support, on-line sales of software
and licensing of Company developed software. Revenue from sales of digital video
is recognized upon delivery. Web site service revenues are recognized as
services are provided. The Company recognizes revenue allocable to perpetual
software licenses upon delivery of the software product to the end-user, unless
the fee is not fixed or determinable or collectibility is not probable. The
Company considers all arrangements with payment terms extending beyond twelve
months not to be fixed or determinable. If the fee is not fixed or determinable,
revenue is recognized when payments become due from the customer. If
collectibility is not considered probable, revenue is recognized when the fee is
collected. The Company recognizes revenue allocable to fixed-term software
licenses ratably over the license term.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and reported amounts of revenue and
expenses during the reported period. Actual results could differ from those
estimates.
Basic and Diluted Loss per Share
Basic loss per share is calculated by dividing net loss by the weighted
average shares outstanding. Dilutive common stock equivalent shares reflects the
potential dilution that could occur if securities to issue stock were exercised
or converted into common stock, unless the effect of such securities would be
anti-dilutive. At September 30, 2000, potentially dilutive securities were
comprised of warrants entitling holders to purchase up to 2,500,000 shares of
common stock (see Note 3).
7
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busybox.com, inc.
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
NOTE 2 - COMMON STOCK
The Company's IPO became effective on June 26, 2000 whereby the Company
issued 2,500,000 shares of common stock and 2,500,000 warrants for $5.00 and
$0.125, respectively. Each warrant entitles the holder to purchase one share of
common stock, and is exercisable at a price of $5.50 per share, subject to
certain conditions. The warrants may be exercised at any time from the effective
date of the IPO and continuing thereafter for five years. The warrants are
redeemable by the Company at a price of $0.05 per warrant if the closing bid
price for the common stock equals or exceeds $10 per share during a 30
consecutive trading day period, and, subject to certain other conditions.
Gross proceeds from the IPO were $12,812,500. Net proceeds to the Company
after underwriting discounts and commissions and other expenses, including
printing costs, legal fees, and registration fees, totaled $9,725,819.
NOTE 3 - SETTLEMENT OF DISPUTE
In January 2000, the Company was named a defendant in a breach of contract
dispute with an advertising vendor alleging damages of $150,000 per month since
June 1999 up to a maximum of $1,800,000 under a contract for services, plus
costs and attorneys' fees. Subsequently, the parties in the suit agreed to a
stay of legal proceedings and agreed to settle the dispute through binding
arbitration. In July 2000, the parties reached an agreement outside of binding
arbitration to settle the dispute and satisfy all claims of the vendor for
$1,150,000. This amount was paid in July 2000. The Company had previously
accrued approximately $1,650,000 in accounts payable for this vendor and costs
in connection with this dispute. The difference between the amount included in
accounts payable and the settlement amount was taken into income in July 2000.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATIONS
This document includes "forward-looking statements" within the meaning of
Section 27A of the Securities and Exchange Act of 1934, as amended, based on
current management expectations. The Company's actual results could differ
materially from those management expectations. Factors that could cause future
results to vary from current management expectations include, but are not
limited to, general economic conditions, legislative and regulatory changes,
rates and regulations of federal and state tax authorities, industry
competition, changes in accounting principles, policies and guidelines, and
other economic, competitive, governmental and technological factors affecting
the Company's operations, markets, products, services and prices. Further
description of the risks and uncertainties to the business are included in
detail in the Company's registration statement on Form SB-2, as amended, filed
with the Securities and Exchange Commission on May 24, 2000.
Management's Discussion and Analysis or Plan of Operations should be read
in conjunction with the information set forth in the Company's condensed
unaudited financial statements and notes thereto and other financial information
included herein.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
For the three months ended September 30, 2000, the Company reported revenue
of $12,210 from the sale of its products, systems, and services, a decrease of
$96,609, or 89%, compared to the corresponding period ended September 30, 1999,
for which the Company reported revenue of $108,819 from the sale of its
products, systems, and services. The Company realized sales of $7,470 during the
three months ended September 30, 2000, from its digital stock video line of
business. The balance of sales, or $4,740, was attributable to Internet
services, a decrease of $104,079 from the corresponding period ended September
30, 1999. The decrease in Internet services resulted from the Company's shift in
business focus to the production and sale of wholly owned, royalty-free digital
stock video.
The Company's gross margin on sales for the three months ended September
30, 2000, decreased to 90% as compared to 92% for the three months ended
September 30, 1999. This decrease is attributable to the high margins
realized for the three months ended September 30, 1999, when the Company
incurred lower than normal costs in connection with its stock photography
Internet services business which was being phased out at that time.
Selling, general and administrative expenses decreased to $743,189 for the
three months ended September 30, 2000, from $1,414,294 for the three months
ended September 30, 1999, a decrease of $671,105, or 47%. Significant areas of
change between years in this expense category included the following:
o The Company issued $500,000 of stock in exchange for business advisory
services during the three months ended September 30, 1999. This expense
was not repeated in the corresponding period in 2000.
o The Company reduced the use of outside consultants during the three
months ended September 30, 2000, by approximately $152,000 as compared
to the corresponding period for 1999.
o Professional fees increased by $78,000 for the three months ended
September 30, 2000, as compared to the corresponding period in 1999 due
primarily to: 1) legal fees incurred by the Company in connection with
litigation with one of the Company's vendors, which was settled in July
2000, and 2) legal and accounting fees related to regulatory reporting
requirements of a publicly traded company.
9
<PAGE>
Marketing and promotion expenses decreased to $115,414 for the three months
ended September 30, 2000, from $900,666 for the three months ended September 30,
1999. This decrease of $785,252, or 87%, results from the completion of market
and media planning and research activities in 1999 and a change in the Company's
marketing strategy from brand building to private label. This resulted in a
substantial decrease in consulting fees incurred by the Company for the three
months ended September 30, 2000, as compared to the corresponding period in
1999. Marketing and promotion costs now primarily result from media placement
and direct marketing campaigns.
Research and development expenses increased to $205,389 for the three
months ended September 30, 2000, from $140,608 for the three months ended
September 30, 1999. This increase of $64,782, or 46%, resulted from the use
of consultants to hasten the completion of the development and enhancement of
the Company's next generation "Busybox Pro" technology products. Consultants
were not used to the same degree in the corresponding period in 1999. The
Company expects to significantly reduce the use of consultants by bringing
future development work in-house.
Other income for the three months ended September 30, 2000, included
$497,552 related to settlement of the Company's dispute with a vendor. This
amount represents marketing and advertising expenses accrued in excess of the
final settlement amount paid in July 2000.
Net loss, and basic and diluted net loss per share for the three months
ended September 30, 2000, decreased to $474,882 and $0.05, respectively, from
$2,311,211 and $0.44, respectively, for the corresponding period in 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
For the nine months ended September 30, 2000, the Company reported revenue
of $85,569 from the sale of its products, systems, and services, a decrease of
$247,137, or 74%, compared to the corresponding period ended September 30, 1999,
where the Company reported revenue of $332,706 from the sale of its products,
systems, and services. The Company realized sales of $46,689 during the nine
months ended September 30, 2000, from its digital stock video line of business.
The balance of sales, or $38,880, was attributable to Internet services, a
decrease of $293,826 from the corresponding period ended September 30, 1999. The
decrease in Internet services resulted from the Company's shift in business
focus to the production and sale of wholly owned, royalty-free digital stock
video.
The Company's gross margin on sales for the nine months ended September 30,
2000 increased to 92% as compared to 62% for the nine months ended September 30,
1999. This increase is due to the Company's focus on the royalty-free digital
video market that generates significantly higher margins than technology
services, licensing and online software sales, the primary sources of revenue in
the 1999 period. These higher margins are the result of decreased costs
associated with sales of digital stock video products and services as compared
to costs incurred in sales of technology services, licensing and online software
due to the ability to sell a single video multiple times to multiple customers.
Selling, general and administrative expenses increased to $3,580,412 in the
nine months ended September 30, 2000, from $2,431,869 for the nine months ended
September 30, 1999, an increase of $1,148,543, or 47%. Significant areas of
increase and decrease within this expense category included the following:
o On June 30, 2000, the Company completed its initial public offering of
2,500,000 shares of common stock at $5.00 per share and 2,500,000
warrants at $.125 per warrant. In order to complete the IPO, management
of the Company agreed to acquire an aggregate of 243,000 shares of
common stock and 243,000 warrants worth an aggregate of $1,245,375 in
lieu of annual bonuses that were to be awarded to such management of
the Company for the fiscal year 2000 and annual bonuses that were owed
to management for the fiscal year 1999, pursuant to employment
10
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agreements. Of the selling, general and administrative expenses for the
nine months ended September 30, 2000, $1,025,096 represents the
aggregate amount of annual and discretionary bonuses paid to management
pursuant to employment agreements of the Company in the second quarter
of the year 2000 for the year 2000;
o The Company also incurred increased payroll and general administrative
and operating costs for the nine months ended September 30, 2000, as
compared to the corresponding period of 1999, due to the re-launch and
continued development of its digital stock video line of business, the
addition of key management and industry personnel and its efforts to
enhance the Company's capability to manage any future growth in sales
volume and expansion of business operations, including but not limited
to the Company's in-house video production and editing capability. The
Company also invested significant effort to improve its digital library
through color correction and other enhancements, to extend the
capability of its technology platforms, and to develop digital encoding
systems for its digital media libraries and customers' users;
o The company issued $500,000 of stock in exchange for business advisory
services during the three months ended September 30, 1999. This expense
was not repeated in the corresponding period in 2000.
o In January 2000, the Company relocated its corporate offices and
principal operations from San Francisco, California, to Century City,
California. The needed larger offices in Century City resulted in an
approximately $120,000 increase in rent for the nine months ended
September 30, 2000, as compared to the same period in 1999. The Company
also incurred $30,000 in relocation costs in the nine months ended
September 30, 2000; and,
o Professional fees increased by $185,000 for the nine months ended
September 30, 2000, as compared to the corresponding period in 1999 due
primarily to: 1) legal fees incurred by the Company in connection with
litigation with one of the Company's vendors, which was settled in July
2000, and 2) legal and accounting fees related to regulatory reporting
requirements of a publicly traded company.
Marketing and promotion expenses were $515,284 for the nine months ended
September 30, 2000, a decrease of $773,743, or 60%, from $1,289,027 for the nine
months ended September 30, 1999. This decrease resulted from the completion of
market and media planning and research activities in 1999 and a change in the
Company's marketing strategy from brand building to private label. This resulted
in a substantial decrease in consulting fees incurred by the Company for the
three months ended September 30, 2000, as compared to the corresponding period
in 1999. Marketing and promotion costs now primarily result from media placement
and direct marketing campaigns.
Research and development expenses increased to $666,025 for the nine months
ended September 30, 2000, from $358,242 for the nine months ended September 30,
1999. This increase of $307,783, or 86%, resulted from the use of consultants to
hasten the completion of the development and enhancement of the Company's next
generation "Busybox Pro" technology product offering. The Company expects to
significantly reduce the use of consultants by bringing future development work
in-house.
Other expenses for the nine months ended September 30, 2000, included
$103,397 of interest incurred primarily on the Company's eight percent
promissory notes, and $2,956,250 of amortization of financing costs and
discounts on the promissory notes. As of September 30, 2000, capitalized
financing costs and discounts on the promissory notes were fully amortized. The
notes, totaling $2,750,000, were issued in December 1999 and February 2000, and
were repaid in June 2000. Accordingly, there were no similar expenses for the
corresponding period in 1999.
Other income for the nine months ended September 30, 2000, included
$497,552 related to settlement of the Company's dispute with a vendor. This
amount represents marketing and advertising expenses accrued in excess of the
final settlement amount paid in July 2000.
11
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Net loss, and basic and diluted net loss per share for the nine months
ended September 30, 2000, increased to $7,049,815 and $0.99, respectively, from
$3,733,991 and $0.79, respectively, for the corresponding period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 2000, net cash used in
operations was $6,578,117 as a result of the $7,049,814 net loss for the
period. The net loss included non-cash expenses for amortization and
depreciation of $2,993,538. Most of this represents amortization of
capitalized financing costs and discounts on promissory notes that were
repaid in June 2000. The Company incurred costs of $430,050 in the
development and production of its digital video inventory that is related to
its on-line stock video products and services. Digital video inventory
consists of capitalized digital video production costs including costs for
production, acquisition and preparation for on-line distribution. These costs
are amortized by specific video subject category based upon actual future
sales of products using the gross profit method. Accounts payable and accrued
liabilities increased $1,725,838 during the nine months ended September 30,
2000, due to deferral of payments to vendors, suppliers, and employees
pending closing of its IPO in June 2000.
During the nine months ended September 30, 2000, the Company invested
$156,734 in new property and equipment and an additional $729,576 in its digital
media platform systems.
The Company has historically financed its activities with cash flows
generated from operations, cash proceeds from the private placement of its
common stock, and financing through short-term obligations. Cash provided by
financing activities for the nine months ended September 30, 2000, was
$8,272,519. This amount includes $1,513,250 of proceeds collected from eight
percent promissory notes issued in December 1999 and February 2000. On June
30, 2000, the Company completed the issuance of 2,500,000 shares of its
common stock at $5.00 per share and 2,500,000 warrants at $.125 per warrant
in an initial public offering. Net proceeds to the Company after underwriter
commissions, and legal and other fees totaled $9,725,819. The Company repaid
its eight percent promissory notes totaling $2,750,000 with proceeds from the
Company's initial public offering. The Company also repaid its line of credit
totaling $99,172.
The Company's available cash and cash equivalents as of September 30,
2000, equal $1,169,785. In November 2000, the Company arranged additional
equity financing in the form of a $5,000,000 equity line of credit. In
connection with this line of credit and pursuant to a Registration Rights
Agreement, the Company has agreed to file a registration statement to cover
the resale of the shares issuable under the financing contract. Upon the
effectiveness of the Registration Statement, and for 30-months thereafter, the
Company may, at its discretion, sell or "put" shares of the Company's common
stock at a price per share equal to 91% of the lowest bid price for the
common stock over a 20-day trading period, that begins on the date the
Company elects to draw on the equity line. The maximum aggregate sales price
to be paid to the Company for shares, which may be sold by the Company to the
investor at any one time, is limited to between $100,000 and $2,000,000,
depending on the volume of trading in the common stock over a 20-day trading
period preceding the draw. In addition, the ability to draw upon the equity
line of credit is contingent upon meeting and/or continuing to meet certain
conditions including maintenance of NASDAQ stock market listing conditions.
The Company believes that the equity line of credit financing together with
its cash and cash equivalents provide sufficient working capital to meet
the Company's cash requirements for the 12 month period following September
30, 2000. The execution of the Company's business plan, especially as it
pertains to pruduct distribution relationships and opportunities, is
dependent upon the equity line of credit financing. If the Company is unable
to draw upon the equity line of credit it may need to reevaluate the
business plan, concentrate revenue opportunities within certain operating
cost parameters, or curtail certain cost components in order to meet the
Company's cash requirements for the 12-month period following September 30,
2000.
12
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about September 27, 2000, binding arbitration proceedings were
commenced against the Company by Rosanne Esposito, a founder and former
Executive Vice President of the Company, before JAMS in San Francisco,
California. The dispute is based on Ms. Esposito's allegation that the Company
breached her employment contract by, among other things, failing to pay her 1999
bonus. Ms. Esposito is seeking monetary damages in the amount of approximately
$375,000. Settlement discussions between the parties are ongoing and the
arbitration proceeding is not presently scheduled.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Amended and Restated Certificate of Incorporation**
3.2 Bylaws, as amended**
4.1 Specimen of Common Stock Certificate*
4.2 Form of Warrant Certificate*
4.3 Form of Underwriter's Warrant Agreement**
10.1 Employment Agreement, Patrick A. Grotto, dated January 1999**
10.2 Employment Agreement, Todd L. Carter, dated January 1999**
10.3 Employment Agreement, Jon M. Bloodworth, dated January 1999**
10.4 Employment Agreement, Mark B. Leffers, dated January 1999**
10.5 Equity Line of Credit Agreement
10.6 Placement Agent Agreement
10.7 Registration Rights Agreement
10.8 Employment Agreement, Robert S. Sherman, dated October 1999
11.0 Statement re: computation of per share earnings***
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None.
-------------------------------
* Incorporated by reference to Amendment No. 1 to the Company's registration
statement on Form SB-2, as amended, filed with the Securities and Exchange
Commission on October 28, 1999 [File No. 333-80315]
13
<PAGE>
** Incorporated by reference to the Company's registration statement on Form
SB-2, as amended, filed with the Securities and Exchange Commission on June 9,
1999 [File No. 333-80315]
*** Incorporated by reference to the notes to financial statements included
herein.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report on Form 10-Q to be signed on its behalf
by the undersigned thereunto duly authorized, this 14th day of November, 2000.
busybox.com, inc.
By: /s/ Patrick A. Grotto
------------------------
Patrick A. Grotto
Chairman of the Board and
Chief Executive Officer
By: /s/ Mark B. Leffers
-----------------------
Mark B. Leffers
Vice President, Treasurer, Controller, Chief Financial Officer
(Principal and Accounting Officer)
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