As Filed with the Securities and Exchange Commission on May 22, 2000
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-QSB
(Mark One)
[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
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 001-15241
YELLOWBUBBLE.COM, INC.
(Exact name of Small Business Issuer as Specified in its Charter)
NEVADA
(State or Other Jurisdiction of Incorporation or Organization)
33-0786959
(IRS Employer Identification No.)
118 Piccadilly, Mayfair, London, England W1V9FJ
(Address of Principal Executive Offices)
011-44-20-7569-6782
Issuer's Telephone Number. Including Area Code
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 period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ___ No X
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of May 18, 2000 the registrant had
13,365,600 shares of Common Stock outstanding.
<PAGE>
YELLOW BUBBLE.COM, INC. AND SUBSIDIARIES
(A Development Stage Company)
FORM 10-Q - MARCH 31, 2000
INDEX
PART I FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999 .......................... 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2000 and cumulative
from September 2, 1999 ...................................... 2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2000 and cumulative
from September 2, 1999 ...................................... 3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ............ 4 - 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
YELLOWBUBBLE.COM, INC. AND SUBSIDIARIES
(A Developmental Stage Company)
FORM 10-Q - MARCH 31, 2000
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 921,154 $ 18
Prepaid expenses 136,681 1,901
----------- ----------
Total current assets 1,057,835 1,919
Property and equipment, net 141,874 -
Website development costs, net 330,389 -
----------- ----------
$ 1,530,098 $ 1,919
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 635,917 $ 243,918
Accrued wages 43,376 -
Current maturities of capitalized lease obligations 29,415 -
Due to Directors 10,324 -
----------- ----------
Total current liabilities 719,032 243,918
----------- ----------
Capitalized lease obligations, net of currrent
maturities 58,830 -
----------- ----------
Total liabilities 777,862 243,918
----------- ----------
Shareholders' equity (deficit)
Common stock, $.001 par value; 50,000,000 shares
authorized; 13,365,600 and 8,163,000 shares issued
and outstanding 13,366 8,163
Additional paid-in capital 1,500,422 -
Accumulated deficit ($728,686 accumulated during the
development stage) (761,552) (250,162)
----------- ----------
Total shareholders' equity (deficit) 752,236 (241,999)
----------- ----------
$ 1,530,098 $ 1,919
=========== ==========
</TABLE>
See notes to the accompanying condensed
consolidated financial statements.
<PAGE>
YELLOWBUBBLE.COM, INC. AND SUBSIDIARIES
(A Developmental Stage Company)
FORM 10-Q - MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months Cumulative from
ended March 31, September 2,
2000 1999
---- ----
<S> <C> <C>
Revenue
Interest income $ 1,967 $ 1,985
---------- -----------
Costs and expenses
Business development 154,162 216,829
General and administrative 181,631 279,831
Legal and professional fees 126,886 208,038
Transfer taxes 25,973 25,973
---------- -----------
488,652 730,671
---------- -----------
Net loss $ (486,685) $ (728,686)
========== ===========
Basic and diluted net loss per share $ (0.05)
==========
Weighted average number of common shares outstanding 9,820,971
==========
</TABLE>
See notes to the accompanying condensed
consolidated financial statements.
<PAGE>
YELLOWBUBBLE.COM, INC. AND SUBSIDIARIES
(A Developmental Stage Company)
FORM 10-Q - MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months Cumulative from
ended March 31, September 2,
2000 1999
----- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net loss $ (486,685) $ (728,686)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 29,472 29,472
Changes in operating assets and liabilities
Prepaid expenses (134,780) (136,681)
Accounts payable and accrued expenses 254,338 498,256
Accrued wages 43,376 43,376
Due to Directors 10,324 10,324
----------- -----------
Net cash used in operating activities (283,955) (283,939)
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (83,101) (83,101)
Website development costs paid (212,333) (212,333)
----------- -----------
Net cash used in investing activities (295,434) (295,434)
----------- -----------
Cash flows from financing activities
Proceeds from sale of common stock 1,500,525 1,500,527
----------- -----------
Net increase in cash and cash equivalents 921,136 921,154
Cash and cash equivalents, beginning of period 18 -
----------- -----------
Cash and cash equivalents, end of period $ 921,154 $ 921,154
=========== ===========
</TABLE>
See notes to the accompanying condensed
consolidated financial statements.
<PAGE>
YELLOWBUBBLE.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1 The Company
A Organization
Yellowbubble.com, Inc. (the "Company") was incorporated under the laws
of Nevada on February 5, 1998 under the name of Mall of Fame, Inc. On
September 15, 1998, the Company changed its name to Famous Internet
Mall, Inc. and effective February 2000, to Yellowbubble.com Inc.
B Reverse acquisition
On March 2, 2000, in accordance with the terms of a Share Exchange
Agreement dated February 16, 2000 (the "Agreement"), the Company
consummated a share exchange with the shareholders of Yellowbubble.com
Holdings Limited ("Holdings"), a British corporation, whereby the
shareholders of Holdings exchanged all of their shares in Holdings for
8,163,000 newly issued voting common shares of the Company's $0.001 par
value common stock. In addition, in accordance with the Agreement, the
Company purchased from existing shareholders 7,400,000 voting common
shares of the Company and returned those shares to treasury. The
issuance represented approximately 61.5% of the post-merger issued and
outstanding common stock of the Company. For accounting purposes, this
transaction has been treated as an acquisition of the Company by
Holdings and as a re-capitalization of Holdings. The acquisition of the
Company by Holdings has been recorded based on the fair value of the
Company's net liabilities of approximately $20,000. The Company, prior
to acquisition, was an inactive shell company. The historical financial
statements prior to March 2, 2000 are those of Holdings and its
wholly-owned subsidiary, Yellowbubble.com Limited ("Yellowbubble"), a
British corporation. Since this transaction is in substance a
recapitalization of Holdings and not a business combination, pro forma
information is not presented. All costs associated with this
transaction have been expensed.
Under the Agreement, the Company was required to raise additional
capital and on March 2, 2000, the Company entered into a subscription
agreement with an investor ("Purchaser"). The Purchaser agreed to
purchase a total of 342,000 shares of the Company's common stock at
$14.625 per share as follows:
On the Closing Date, the Company issued to Purchaser 102,600
shares of common stock raising a total of $1,500,525 (the
"Closing Financing"). The proceeds of this private placement were
deposited into escrow for the benefit of a creditor of
Yellowbubble in repayment of a $473,000 bridge loan pending
completion of the Share Exchange. These funds have since been
released from escrow to such creditor. The balance has been
released to the Company and will be used for working capital
purposes.
On the Closing Date, Purchaser deposited into escrow an
additional amount of $1,500,525 in payment of the purchase of
102,600 shares of common stock. These funds are to be released to
the Company provided that Yellowbubble reaches certain milestones
(the "First Milestone") set forth in the Agreement on or before
June 30, 2000 by the Milestone Date. These milestones relate
primarily to the registration of new members, implementation of
Yellowbubble's marketing plan, the recruitment of additional
personnel and the engagement of professional consultants.
<PAGE>
The Company (continued)
B Reverse acquisition (continued)
If the First Milestones are reached on or before the Milestone
Date, Purchaser will pay a further $2,000,700 for the issuance of
136,800 shares of common stock by the Milestone Date if
Yellowbubble reaches certain additional milestones relating
primarily to the registration of additional new members, the
implementation of Yellowbubble's business plan and the
commissioning of a consumer research program.
C Business
Yellowbubble is engaged in developing new forms of on-line shopping for
the consumer by creating a Membership Organization. Its initial
principal markets for its services are expected to be located in the
United Kingdom and Germany. The Company has not yet generated any
revenue from operations and is considered to be in the development
stage.
2 Significant accounting policies
A Interim financial information
The condensed consolidated balance sheet as of March 31, 2000, and the
condensed consolidated statements of operations and cash flows for the
three months ended March 31, 2000 and cumulative from September 2,
1999, have been prepared by the Company without audit. These interim
financial statements include all adjustments, consisting only of normal
recurring accruals, which management considers necessary for a fair
presentation of the financial statements for the above periods. The
results of operations for the three months ended March 31, 2000, are
not necessarily indicative of results that may be expected for any
other interim periods or for the full year.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
thereto for the year ended December 31, 1999. The accounting policies
used in preparing the condensed consolidated financial statements are
consistent with those described in the December 31, 1999 consolidated
financial statements.
B Principles of consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Yellowbubble.com Holdings
Limited and Yellowbubble.com Limited. All significant intercompany
transactions and balances have been eliminated in consolidation.
C 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.
<PAGE>
Significant accounting policies (continued)
D 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.
E Estimates
In preparing condensed consolidated financial statements, in conformity
with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the condensed consolidated financial statements, as well as
the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Overview
The Company is in the development stage and was organized in February
1998. The Company has never generated any revenues from operations.
On March 2, 2000, the Company completed a share exchange with the five
shareholders of YellowBubble.com Holdings Limited ("Holdings"), a company
incorporated under the laws of England. Under the terms of the Share Exchange
Agreement, the Holdings shareholders transferred to the Company all of their
shares in consideration for the issuance to them of 8,163,000 shares of Common
Stock, representing in the aggregate approximately 61.5% of the then issued and
outstanding shares of Common Stock. In connection with this transaction,
effective February 2000, the Company changed its name to YellowBubble.com., Inc.
For accounting purposes, this transaction has been treated as an
acquisition of the Company by Holdings and as a re-capitalization of Holdings.
Therefore, the historical financial statements prior to March 2, 2000 are those
of Holdings and its wholly-owned subsidiary, Yellowbubble.com Limited
("Yellowbubble"), a company incorporated under the laws of England.
Holdings, through its wholly owned subsidiary, Yellowbubble, is engaged
in developing new forms of on-line shopping for the consumer by creating a
membership organization. Its initial principal markets are expected to be
located in Great Britain and Germany. By combining with Holdings, the Company
intends to take advantage of the electronic advertising opportunities presented
by the Internet and the proliferation of technology enabling individuals and
businesses to access the world wide web. The Company's strategy will be to
enable consumers who access the Company's web site to share in advertising
revenues and to pay lower prices for their merchandise and services as a result
of collective and direct buying.
Results of Operations
As a result of the reverse acquisition discussed above, for accounting
purposes, the Company is deemed to have commenced operations on September 2,
1999. Therefore no comparison can be made between the three-month period ended
March 31, 2000 (the "First quarter") and the corresponding quarter during the
previous fiscal year.
Revenues in the three-month period ended March 31, 2000 (the "First
quarter") were approximately $1,967 and expenses were approximately $488,652
resulting in a net loss for the 2000 First Quarter of approximately $486,685.
Expenses for the First Quarter consisted primarily of $181,631 in general and
adminstrative expenses which includes salaries, and approximately $154,162 in
website development costs. In addition, the Company spent approximately $126,886
in legal and professional fees in connection with the share exchange completed
in March 2000 and fees associated with being a publicly traded company. For the
period from September 1 through March 31, 2000 ("Period Since Inception")
revenues were approximately $1,985 resulting in a cumulative loss for the Period
Since Inception of approximately $728,686. To date, revenues have been derived
exclusively from interest income. The Company expects operating losses to
continue for the foreseeable future as it intends to significantly increase its
operating expenses to implement its business plan.
Liquidity and Capital Resources
As of March 31, 2000 the Company's principal sources of liquidity
consisted of cash of $921,154 and prepaid expenses of $136,681.
<PAGE>
In connection with the share exchange completed in March 2000, the
Company effected a three phase private placement of its Common Stock to an
unaffiliated purchaser (the "Purchaser") that provided the Company initially
with $1,500,525, of which approximately $473,000 was used for the repayment of a
bridge loan. The balance of approximately $1,026,000 will be used for working
capital purposes. The Company is expected to receive an additional $1,500,525
that was deposited into escrow by the Purchaser on the date of the closing of
the share exchange. Such funds are to be released to the Company, provided that
it achieves certain milestones by June 30, 2000. Purchaser has verbally
indicated its agreement that these milestones have been reached and that the
$1,500,525 will be released. If the Company achieves certain additional
milestones by June 30, 2000, it is expected to receive a further $2,000,700 in
proceeds from the sale of shares to the Purchaser. The Company believes that if
it receives all of the funds in connection with the aforementioned private
placement it will be able to fund its operations for the next twelve months.
Nevertheless, if the growth of the Company exceeds its current projections, it
may be required to raise additional equity or debt financing. In addition, if
the Company does not receive all funds from the private placement, it will be
required to raise additional equity or debt financing. Any equity financing
would be expected to result in dilution to the holders of the Company's Common
Stock. Any debt financing obtained by the Company would be likely to include
restrictive covenants limiting the Company's ability to obtain additional
capital, whether through additional debt or equity financings, as well as
restrictive covenants limiting the Company with respect to various operational
and financial matters. There can be no assurance that the Company will be able
to find such sources of financing on terms acceptable to the Company, if at all.
If the Company is unable to find such additional financing, it may have to
curtail its operations.
Forward Looking Statements
This Form 10-QSB and other reports filed by the Company from time to
time with the Securities and Exchange Commission (collectively the "Filings")
contain or may contain forward looking statements and information that are based
upon beliefs of, and information currently available to, the Company's
management as well as estimates and assumptions made by the Company's
management.
When used in the filings the words "anticipate", "believe", "estimate",
"expect", "future", "intend", "plan" and similar expressions as they relate to
the Company or the Company's management identify forward looking statements.
Such statements reflect the current view of the Company with respect to future
events and are subject to risks, uncertainties and assumptions relating to the
Company's operations and results of operations and any businesses that may be
acquired by the Company. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual
results may differ significantly from those anticipated, believed, estimated,
intended or planned.
<PAGE>
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
Davidson & Company ("Davidson") were previously the
principal accountants for Registrant. Baker Tilly ("Baker") were
previously the principal accountants for YellowBubble.com Holdings
Limited, Registrant's wholly owned subsidiary ("Holdings"), prior to
the completion of the business combination between Registrant and
Holdings.
On March 15, 2000, the engagement of Davidson was
terminated by Registrant's board of directors. On April 25, 2000, the
engagement of Baker was terminated by Registrant's board of directors.
In connection with the audit by Davidson of Registrant for
the fiscal year ended December 31, 1999 (and for the statements of
operations, stockholders' equity and cash flows for the period of
incorporation on February 5, 1998 through December 31, 1999), there
were no disagreements with Davidson on any matter of accounting
principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements if not resolved to their
satisfaction would have caused Davidson to make reference in connection
with their opinion to the subject matter of the disagreement. Davidson
has not issued any opinion with respect to the financial statements of
Registrant for the fiscal year ended December 31, 1998.
Baker has not issued any opinions on Holdings' financial
statements, and, therefore, there have been no adverse opinions,
disclaimers of opinion, qualifications or modifications as to audit
scope or accounting principles regarding any report of Baker on the
Holdings' financial statements. There were no disagreements with Baker
on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures leading to their
termination.
None of the matters described in Item 304(a)(v) of
Regulation S-B are applicable.
On April 27, 2000, Hays & Company was engaged to be
Registrant's independent auditor. Hays & Company had not previously
provided any services to Registrant or to Holdings.
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
16.1 Letter from Davidson & Company
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities
Exchange Act of 1934 the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized
YELLOWBUBBLE.COM, INC.
Date May 22, 2000 By: /S/ David Frank Henderson Scroggie
------------------------------------
David Frank Henderson Scroggie
Chief Financial & Accounting Officer
Exhibit 16.1
Davidson & Company-Chartered Accountants
May 17, 2000
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street
Washington, D.C. 20549
Dear Sirs:
We have read the comments attached as an exhibit concerning the
disclosure of the change of accountants in Yellowbubble.com, Inc.'s filing of
its Form 10-QSB and are in agreement with the statements contained therein.
Yours very truly,
/s/ Davidson & Company
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
FINANCIAL DATA SCHEDULE
Exhibit (27.1): Financial Data Schedule for the Three Months Ended March 31,
2000
</LEGEND>
<CIK> 0001090503
<NAME> YELLOWBUBBLE.COM, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 921,154
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,057,835
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,530,098
<CURRENT-LIABILITIES> 719,032
<BONDS> 0
0
0
<COMMON> 13,366
<OTHER-SE> 1,500,422
<TOTAL-LIABILITY-AND-EQUITY> 1,530,098
<SALES> 0
<TOTAL-REVENUES> 1,967
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 488,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (486,685)
<INCOME-TAX> 0
<INCOME-CONTINUING> (486,685)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (486,685)
<EPS-BASIC> -
<EPS-DILUTED> 0
</TABLE>
