<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 26, 2000
YELLOWBUBBLE.COM, INC.
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(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Nevada 001-15241 33-0786959
--------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
</TABLE>
<TABLE>
<S> <C>
104-106 The Chambers, Chelsea Harbour, London, England SW10 OXF
-------------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-44-7871-0000
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</TABLE>
118 Piccadilly, Mayfair, London, England, W1V 9FJ
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(Former name or former address, if changed since last report)
<PAGE> 2
YELLOWBUBBLE.COM, INC.
This Current Report on Form 8-K/A (Amendment No. 1) amends the Current Report on
Form 8-K filed by YellowBubble.com, Inc. ("Registrant") on August 9, 2000,
solely to add the financial statements of the business acquired as required by
Item 7(a) and the pro forma financial information required by Item 7(b), along
with two exhibits as set forth in Item 7(c).
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 26, 2000, the Registrant consummated a share exchange (the
"Share Exchange") with the shareholders (the "Shareholders") of Zareeba Limited,
a company incorporated under the laws of England ("Zareeba"). Under the terms of
the Agreement dated July 26, 2000 (the "Agreement"), the Shareholders
transferred to Registrant all of their shares of Zareeba in consideration for
Pound Sterling 100,000 or approximately $151,000 in cash and the issuance to
them of 169,737 shares of Registrant's common stock, par value $.001 per share
(the "Common Stock").
Pursuant to a Registration Rights Agreement between Registrant and
the Shareholders, Registrant also granted to the Shareholders the right to
include their shares of Common Stock received pursuant to the Agreement in any
registration statement (other than in connection with a merger or other
reorganization or pursuant to Form S-8) it may file within two years from the
closing date of the Share Exchange.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The audited financial statements of Zareeba Limited, an
acquired business. (F-1 to F-6)
(b) PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined balance sheet
and statement of operations, with notes attached thereto.
(F-7 to F-11)
(c) EXHIBITS
2.2 Agreement dated July 26, 2000, between
Registrant, Zareeba Limited and the
Shareholders (in accordance with the rules and
regulations promulgated by the Securities and
Exchange Commission, most other schedules to
the agreement have been omitted)
4.1. Registration Rights Agreement dated as of July
26, 2000 between Registrant and the
Shareholders
1
<PAGE> 3
ZAREEBA LIMITED
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2000
INDEX
INDEPENDENT AUDITOR'S REPORT .......................................... F-1
BALANCE SHEET .......................................................... F-2
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS ......................... F-3
STATEMENT OF CASH FLOWS ................................................ F-4
NOTES TO FINANCIAL STATEMENTS .......................................... F-5-6
<PAGE> 4
Board of Directors and Shareholders
Zareeba Limited
London, England
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Zareeba Limited (the
"Company") as of June 30, 2000, and the related statements of operations and
comprehensive loss and cash flows for the year then ended. 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 Zareeba Limited as of June 30,
2000 and the results of their operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
s/Hays & Company
September 22, 2000
New York, NY
F-1
<PAGE> 5
ZAREEBA LIMITED
BALANCE SHEET
JUNE 30, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 40,127
Accounts receivable 26,130
Prepaid expenses 16,777
----------
Total current assets 83,034
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $4,720 18,888
WEBSITE DEVELOPMENT COSTS, net of
accumulated amortization of $34,728 34,728
----------
$ 136,650
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 241,684
----------
SHAREHOLDERS' DEFICIT
Ordinary shares, $.015 par value; 10,000,000 shares
authorized, 133,812 issued and outstanding 2,033
Additional paid-in capital 482,888
Accumulated deficit (595,080)
Accumulated other comprehensive income 5,125
----------
Total shareholders' deficit (105,034)
----------
$ 136,650
==========
</TABLE>
See notes to financial statements. F-2
<PAGE> 6
ZAREEBA LIMITED
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
YEAR ENDED JUNE 30, 2000
<TABLE>
<S> <C>
REVENUE
Services $ 30,069
Interest income 1,900
-----------
31,969
-----------
EXPENSES
Salaries 105,290
Employee benefits 7,087
Website development costs 196,464
Advertising and marketing 102,001
Professional fees 112,801
Depreciation and amortization 41,374
Rent 14,013
Office 19,514
Travel and entertainment 34,198
Foreign exchange gain (5,693)
-----------
627,049
-----------
NET LOSS (595,080)
-----------
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment 5,125
-----------
COMPREHENSIVE LOSS $ (589,955)
===========
</TABLE>
See notes to financial statements. F-3
<PAGE> 7
ZAREEBA LIMITED
STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (595,080)
Adjustment to reconcile net loss to net cash used in operating activities
Depreciation and amortization 41,374
Changes in operating assets and liabilities
Accounts receivable (27,405)
Prepaid expenses (17,596)
Accounts payable and accrued expenses 253,477
-----------
Net cash used in operating activities (345,230)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (24,760)
Cash paid for website development costs (72,845)
-----------
Net cash used in investing activities (97,605)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of ordinary shares 484,921
-----------
42,086
Effect on exchange rate changes on cash (1,959)
-----------
NET INCREASE IN CASH 40,127
CASH, BEGINNING OF YEAR -
-----------
CASH, END OF YEAR $ 40,127
===========
</TABLE>
See notes to financial statements. F-4
<PAGE> 8
ZAREEBA LIMITED
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2000
1 THE COMPANY
Zareeba Limited, a company incorporated under the laws of England
("Zareeba"), was incorporated on June 22, 1999 as Sharkhunt.com
Limited and on May 18, 2000 changed its name to Zareeba Limited.
Zareeba is an internet company that provides on-line discount
shopping to its members through its bargain shopping channel. In
addition, it allows members to advertise goods and services for free
on its auction channel. Zareeba attempts to attract members by paying
users for downloading and displaying advertising bars on their
browsers and for referring new members.
2 SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company receives advertising revenue generated by its members
shopping on-line.
PROPERTY AND EQUIPMENT
Property and equipment, which consists of computer equipment, are
stated at cost and depreciated on a straight-line basis over the
estimated useful lives of five years. Expenditures for maintenance
and repairs are charged to operations at the time the expense is
incurred. Expenditures determined to represent additions are
capitalized.
START-UP AND ORGANIZATION COSTS
The Company accounts for start-up costs in accordance with Statement
of Position 98-5, "Reporting on the Costs of Start-up Activities"
("SOP 98-5"), issued by the American Institute of Certified Public
Accountants. SOP 98-5 requires the cost of start-up activities,
including organization costs, to be expensed as incurred.
FOREIGN CURRENCY
The functional currency of the Company is the British pound sterling.
Assets and liabilities are translated into U.S. Dollars at year-end
exchange rates and income statement items are translated at average
exchange rates during the period. Gains and losses resulting from
translation are recorded as accumulated other comprehensive income in
shareholders' deficit. Transaction gains and losses are recognized as
incurred.
WEBSITE DEVELOPMENT COSTS
Costs incurred in the development of the core software for the
Company's website infrastructure are capitalized in accordance with
Statement of Position 98-1 "Accounting for the Costs of Software
Developed or Obtained for Internal Use" and are amortized over the
expected useful life of the developed software ranging from 1 - 3
years. Costs incurred in the development of content for the Company's
website and maintenance are expensed as incurred
INCOME TAXES
No provision for income taxes has been made due to the existence of
net operating losses since inception and no deferred tax assets have
been recognized due to the uncertainty of their realization.
F-5
<PAGE> 9
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
ADVERTISING
Advertising, which is conducted principally through electronic media
and direct mail marketing, is expensed as incurred or at the time the
advertising first takes place.
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 amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting periods. Actual results
could differ from those estimates.
3 SUBSEQUENT EVENT
On July 26, 2000, Yellowbubble.com, Inc. ("Registrant") consummated a
share exchange with the shareholders (the "Shareholders") of Zareeba.
Under the terms of the share exchange agreement, the Shareholders
transferred to Registrant all of their shares of Zareeba in
consideration for the issuance of 169,737 shares of common stock of
Yellowbubble.com, Inc. valued at $848,684, or $5.00 per share, and
the assumption of liabilities in the amount of approximately
$151,316.
F-6
<PAGE> 10
YELLOWBUBBLE.COM, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On July 26, 2000, Yellowbubble.com, Inc. ("Registrant") consummated a share
exchange with the shareholders (the "Shareholders") of Zareeba Limited
("Zareeba"). Under the terms of the share exchange agreement, the Shareholders
transferred to Registrant all of their shares of Zareeba in consideration for
the issuance of 169,737 shares of common stock of Yellowbubble.com, Inc. valued
at $848,684, or $5.00 per share, and the assumption of liabilities in the amount
of approximately $151,316. This transaction will be accounted for as a purchase
business combination in accordance with Accounting Principles Board ("APB")
Opinion No. 16, Business Combinations.
The accompanying unaudited pro forma condensed combined balance sheet combines
the unaudited consolidated balance sheet of Yellowbubble.com, Inc. as of June
30, 2000 with the audited balance sheet of Zareeba as of the same date, and
gives effect to the acquisition of Zareeba as if it occurred on such date.
The accompanying unaudited pro forma condensed combined statements of operations
combine Yellowbubble.com, Inc. consolidated statements of operations for the
period from September 2, 1999 (Inception) to December 31, 1999, and for the six
months ended June 30, 2000 with the statements of operations of Zareeba for the
same periods (on an annualized basis) and gives effect to the acquisition as if
it occurred on September 2, 1999 (Inception).
These unaudited pro forma condensed combined financial statements are presented
for illustrative purposes only and are not necessarily indicative of the
combined financial position or results of operations in future periods or the
results that actually would have been realized had Yellowbubble.com, Inc. and
Zareeba been a combined company during the periods presented. The unaudited pro
forma combined financial statements should be read in conjunction with the
unaudited consolidated financial statements of Yellowbubble.com, Inc. included
in their quarterly report on Form 10-QSB for the quarter ended June 30, 2000,
the audited consolidated financial statements of Yellowbubble.com, Inc. included
in their Annual Report on Form 10-KSB for the period ended December 31, 1999 and
the audited financial statements of Zareeba contained elsewhere in this Form
8-K.
F-7
<PAGE> 11
YELLOWBUBBLE.COM, INC.
AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2000
<TABLE>
<CAPTION>
YELLOWBUBBLE.COM, ZAREEBA PRO FORMA PRO FORMA
INC LIMITED ADJUSTMENTS COMBINED
----------------- ----------- ------------- -----------
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 551,826 $ 40,127 $ - $ 591,953
Receivables 207,940 26,130 - 234,070
Prepaid expenses 219,773 16,777 - 236,550
----------- ----------- ----------- -----------
Total current assets 979,539 83,034 - 1,062,573
Property and equipment, net 327,911 18,888 - 346,799
Website development costs, net 460,837 34,728 690,680 (1) 1,186,245
Customer base, net 86,335 (1) 86,335
Goodwill, net - - 86,335 (1) 86,335
----------- ----------- ----------- -----------
$ 1,768,287 $ 136,650 $ 863,350 $ 2,768,287
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payables and accrued expenses $ 631,677 $ 241,684 $ (90,368) (1) $ 782,993
Accrued wages 14,406 - - 14,406
Current maturities of capitalized lease obligations 24,568 - - 24,568
----------- ----------- ----------- -----------
Total current liabilities 670,651 241,684 (90,368) 821,967
Capitalized lease obligations, net of currrent maturities 49,137 - - 49,137
----------- ----------- ----------- -----------
Total liabilities 719,788 241,684 (90,368) 871,104
----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock 13,469 2,033 (1,863) (1) 13,639
Additional paid-in capital 3,000,844 482,888 365,626 (1) 3,849,358
Accumulated deficit (1,965,814) (595,080) 595,080 (1) (1,965,814)
Accumulated other comprehensive income - 5,125 (5,125) (1) -
----------- ----------- ----------- -----------
Total shareholders' equity (deficit) 1,048,499 (105,034) 953,718 1,897,183
----------- ----------- ----------- -----------
$ 1,768,287 $ 136,650 $ 863,350 $ 2,768,287
=========== =========== =========== ===========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements. F-8
<PAGE> 12
YELLOWBUBBLE.COM, INC.
AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the period September 2, 1999 (Inception) to December 31, 1999
<TABLE>
<CAPTION>
YELLOWBUBBLE.COM, ZAREEBA PRO FORMA PRO FORMA
INC. LIMITED ADJUSTMENTS COMBINED
----------------- ----------- ----------- -----------
REVENUE
<S> <C> <C> <C> <C> <C>
Services $ - $ 10,023 - $ 10,023
Interest income 18 633 - 651
----------- ----------- ----------- -----------
18 10,656 - 10,674
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Business development - 136,947 - 136,947
General and administrative 242,019 34,469 - 276,488
Legal and professional fees - 37,600 - 37,600
Amortization of intangible assets - - 96,790 (2) 96,790
----------- ----------- ----------- -----------
242,019 209,016 96,790 547,825
----------- ----------- ----------- -----------
NET LOSS $ (242,001) $ (198,360) $ (96,790) $ (537,151)
=========== =========== =========== ===========
Basic and diluted net loss per share $ (0.03) $ (0.06)
=========== ===========
Weighted average number of
common shares outstanding 8,163,000 169,737 (3) 8,332,737
=========== =========== ===========
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements. F-9
<PAGE> 13
YELLOWBUBBLE.COM, INC.
AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Six months ended June 30, 2000
<TABLE>
<CAPTION>
YELLOWBUBBLE.COM, ZAREEBA PRO FORMA PRO FORMA
INC. LIMITED ADJUSTMENTS COMBINED
----------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Services $ - $ 15,035 - $ 15,035
Interest income 6,646 950 - 7,596
------------ ------------ ------------ ------------
6,646 15,985 - 22,631
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Business development 686,673 205,421 - 892,094
General and administrative 771,318 51,703 - 823,021
Legal and professional fees 213,629 56,401 - 270,030
Transfer taxes 25,973 - - 25,973
Amortization of intangible assets - - 145,331 (2) 145,331
------------ ------------ ------------ ------------
1,697,593 313,525 145,331 2,156,449
------------ ------------ ------------ ------------
NET LOSS $ (1,690,947) $ (297,540) $ (145,331) $ (2,133,818)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.15) $ (0.18)
============ ============
Weighted average number of
common shares outstanding 11,614,144 169,737 (3) 11,783,881
============ ============ ============
</TABLE>
See notes to Unaudited Pro Forma Condensed Combined Financial Statements. F-10
<PAGE> 14
YELLOWBUBBLE.COM, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1 PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
The unaudited pro forma condensed combined financial statements have been
prepared on the basis of assumptions relating to the allocation of consideration
paid for the assets and liabilities based upon primarily estimates of their fair
value. The actual allocation of the consideration for the acquisition to the
tangible and identifiable intangible assets acquired and liabilities assumed
will be based on the basis of their estimated fair values on the effective date
of the acquisition and may differ from those assumptions reflected in the
unaudited combined financial statements after final valuations have been
completed. Assuming that the acquisition of Zareeba had occurred on June 30,
2000, the purchase price allocation would have been as follows:
Fair value of net liabilities assumed $ (14,666)
Customer base 86,335
In-place technology 690,680
Goodwill 86,335
-----------
$ 848,684
===========
Tangible assets of Zareeba acquired principally include cash, accounts
receivable, property and equipment and other assets. Liabilities of Zareeba
assumed principally include accounts payables and accrued expenses. The value of
the customer base was estimated based upon the current cost to acquire
approximately 130,000 customers and will be amortized to operations over an
estimated life of two years. The value of the in-place technology was determined
by estimating the projected net cash flows related to the product, determined
based upon Yellowbubble.com, Inc.'s estimates of the future revenue to be earned
from the products. The cash flows were then discounted back to their net present
value. The in-place technology will be amortized to operations over an estimated
life of three years. The excess of purchase price over tangible and identifiable
intangible assets acquired and liabilities assumed will be recorded as goodwill
and amortized to operations over an estimated life of five years.
The following adjustments have been reflected in the unaudited pro forma
condensed combined financial statements:
1) To reflect the issuance of common stock and assumption of
liabilities for the acquisition of Zareeba by
Yellowbubble.com, Inc. as if the acquisition occurred on
June 30, 2000 and to eliminate the historical
shareholder's deficit of Zareeba and record the estimated
allocation of the purchase price.
2) To record the amortization expense associated with
intangible assets over their estimated useful lives as if
the acquisition had occurred on September 2, 1999.
3) Pro forma weighted average number of shares includes
common stock issued by Yellowbubble.com, Inc. to acquire
Zareeba as if the acquisition had occurred on September 2,
1999.
F-11
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
YELLOWBUBBLE.COM, INC.
By: /s/ D.F.H. Scroggie
----------------------
D.F.H. Scroggie
Secretary
Date: October 11th, 2000
2
