<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 2000
REGISTRATION NO. 333-88511
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
B2BSTORES.COM INC.
(NAME OF ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7389 11-3500746
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE) IDENTIFICATION NUMBER)
</TABLE>
------------------------
<TABLE>
<S> <C>
249 EAST OCEAN BOULEVARD WOO JIN KIM, CEO
LONG BEACH, CALIFORNIA 90802 B2BSTORES.COM INC.
562/491-7180 249 EAST OCEAN BOULEVARD
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S LONG BEACH, CALIFORNIA 90802
PRINCIPAL EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS) 562/491-7180
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
</TABLE>
------------------------
Copies to:
<TABLE>
<S> <C>
DAVID ALAN MILLER, ESQ. LAWRENCE FISHER, ESQ.
GRAUBARD MOLLEN & MILLER ORRICK, HERRINGTON & SUTCLIFFE LLP
600 THIRD AVENUE 666 FIFTH AVENUE
NEW YORK, NEW YORK 10016 NEW YORK, NEW YORK 10103
TELEPHONE: (212) 818-8800 TELEPHONE: (212) 506-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
possible after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement of the earlier effective registration
statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common stock, par value $0.01........................ 3,500,000 $10.00 $35,000,000 $ 9,730.00
Common stock(2)...................................... 525,000 10.00 5,250,000 1,460.00
Representatives' warrants to purchase shares of
common stock(3)...................................... 350,000 .0001 -- --
Common stock(4)...................................... 350,000 12.00 4,200,000 1,168.00
Total................................................ $12,358.00*
</TABLE>
* Previously paid.
(1) Estimated solely for the purpose of calculating the registration fee under
Rule 457 of the Securities Act of 1933.
(2) Represents the shares of our common stock that may be purchased by the
underwriters solely to cover over-allotments, if any.
(3) No registration fee is required under Rule 457(g) under the Securities Act.
(4) Represents the shares of our common stock purchasable by the representatives
upon exercise of warrants being issued to them in connection with this
offering.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THAT DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JANUARY 13, 2000
PROSPECTUS
3,500,000 SHARES
B2BSTORES.COM INC.
COMMON STOCK
------------------------
[LOGO]
This is the initial public offering of shares of our common stock. In
considering this offering, you should know that:
o no public market exists for our shares prior to this offering;
o we have applied to have the shares quoted on the Nasdaq SmallCap
Market under the symbol "BTBC;"
o we anticipate that the per-share price will be $10.00;
o this offering is made on a firm-commitment basis; and
o we have granted the underwriters a 45-day option to purchase up to
525,000 additional shares of our common stock solely to cover
over-allotments, if any.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price............................................................. $ $
Underwriting discount and commissions............................................. $ $
Proceeds to b2bstores.com Inc..................................................... $ $
</TABLE>
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
Gaines, Berland Inc. on behalf of the underwriters, expects to deliver the
shares on or about January , 2000.
GAINES, BERLAND INC. NOLAN SECURITIES CORP.
------------------------
The date of this prospectus is , 2000
<PAGE>
[THIS PAGE IS THE INSIDE COVER OF THE PROSPECTUS AND CONTAINS ARTWORK DEPICTING
EXAMPLES OF WEB PAGES AVAILABLE AT WWW.B2BSTORES.COM]
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 7
Use of Proceeds............................................................................................ 9
Dilution................................................................................................... 11
Capitalization............................................................................................. 12
Plan of Operations......................................................................................... 13
Business................................................................................................... 24
Management................................................................................................. 36
Principal Stockholders..................................................................................... 43
Certain Transactions....................................................................................... 46
Description of Securities.................................................................................. 48
Underwriting............................................................................................... 51
Where You Can Find More Information........................................................................ 54
Legal Matters.............................................................................................. 54
Experts.................................................................................................... 54
Index to Financial Statements.............................................................................. F-1
</TABLE>
---------------------------------------------
UNTIL , 2000, ALL DEALERS SELLING SHARES OF THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
3
<PAGE>
PROSPECTUS SUMMARY
GENERAL
b2bstores.com(Trademark) is an Internet web site specifically designed to
assist business customers in the operation and development of their businesses.
b2bstores.com provides user-friendly online access to business products and
supplies. We are currently expanding our web site to provide access to business
services, auctions and business-related information and content. Our objective
is to become a leading, one-stop Internet destination for business customers--a
place where they conduct their business-to-business transactions, build
relationships with customers, suppliers and colleagues, and conduct their
business-related research.
CORPORATE BACKGROUND
b2bstores.com Inc. was formed under the laws of the State of Delaware in
June 1999. Our principal offices are located at 249 East Ocean Boulevard,
Suite 620, Long Beach, California 90802. Our phone number is 562-491-7180. Our
web site is available at http://www.b2bstores.com. Information contained in our
web site is not part of this prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... 3,500,000 shares
Common stock outstanding prior to the
offering.................................. 4,021,643 shares
Common stock to be outstanding after the
offering.................................. 7,521,643 shares
Use of proceeds.............................. We intend to use the net proceeds of this offering:
o for sales and marketing activities, including brand promotion;
o to fund the development of our web site and customer support
operations;
o to repay loans made to us by Enviro-Clean of America, Inc.;
o to pay cash bonuses to some of our officers; and
o for working capital and general corporate purposes.
Nasdaq SmallCap Market symbol................ BTBC
Boston Stock Exchange symbol................. BTB
</TABLE>
If the underwriters fully exercise their over-allotment option to purchase
additional shares, the total number of shares to be offered in this offering
will be 4,025,000 and the total number of shares outstanding after this offering
will be 8,046,643.
Enviro-Clean is a principal stockholder of b2bstores.com Inc. Richard
Kandel, our founder and chairman of the board, is also the chairman of the
board, chief executive officer and principal stockholder of Enviro-Clean.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
This summary financial information should be read in conjunction with the
section of this prospectus entitled "Plan of Operations" and our audited
financial statements and related notes included elsewhere in this prospectus.
The financial information as of August 31, 1999 and for the period from our
inception on June 28, 1999 to August 31, 1999 has been derived from our audited
financial statements. The historical results presented in this prospectus are
not necessarily indicative of our future financial position or results of
operations.
We began our commercial operations in September 1999 and have generated no
revenues to date.
<TABLE>
<CAPTION>
JUNE 28, 1999
(INCEPTION) TO
AUGUST 31, 1999
---------------
<S> <C>
STATEMENT OF OPERATIONS DATA
Revenues........................................................................................ $ --
-----------
Operating expenses:
General and administrative................................................................... 31,875
Sales and marketing.......................................................................... 23,060
Start-up costs............................................................................... 130,431
Stock-based compensation..................................................................... 1,901,500
-----------
Total operating expenses.................................................................. 2,086,866
-----------
Net loss........................................................................................ $(2,086,866)
-----------
-----------
Basic and diluted loss per share................................................................ $ (0.56)
-----------
-----------
Weighted average common shares outstanding...................................................... 3,712,820
-----------
-----------
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AUGUST 31, 1999
------------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Working capital................................................................ $365,849 $30,905,685
Total assets................................................................... 753,906 31,061,455
Total liabilities.............................................................. 303,272 123,436
Stockholders' equity........................................................... 450,634 30,990,470
</TABLE>
The information presented in this table under the "As Adjusted" column
assumes:
o an offering price of $10.00 per share;
o the sale of 3,500,000 shares of our common stock in this offering;
o that we will receive net proceeds of $30,675,000 in this offering;
and
o that we will immediately apply a portion of the net proceeds to repay
loans made to us by Enviro-Clean and to pay cash bonuses due to some
of our officers upon completion of this offering.
Subsequent to August 31, 1999, we have continued to fund our operations
with proceeds from loans from Enviro-Clean. As of January 12, 2000, we had
borrowed an aggregate of $975,000 from Enviro-Clean. The repayment of the
principal and related interest under these loans as of the consummation date of
this offering will be made from the net proceeds of the offering. Our working
capital and total assets will be reduced by this same amount.
6
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making a
decision to invest in b2bstores.com. Our business, financial condition and
results of operations could be adversely affected by these risks. You should be
able to bear a complete loss of your investment.
RISKS RELATING TO OUR FINANCIAL CONDITION
BECAUSE WE HAVE A VERY SHORT OPERATING HISTORY, WE MAY NOT BE ABLE TO
SUCCESSFULLY MANAGE OUR BUSINESS OR ACHIEVE PROFITABILITY.
We may not be able to grow our business as planned or ever become a
profitable business. We began our commercial operations in September 1999.
Because of this very limited operating history, there are no meaningful
financial results which you can use to evaluate the merits of making an
investment in us. Accordingly, investment decisions must be made based on our
business prospects. Our business prospects are subject to all the risks,
expenses and uncertainties encountered by any new company. We also face the
risks inherent in operating in the rapidly evolving markets for Internet
products and services. If we are unable to successfully address these risks or
grow our business as planned, the value of our common stock will be diminished.
BECAUSE OUR OPERATING EXPENSES AND CAPITAL EXPENDITURES WILL OUTPACE OUR
REVENUES, WE WILL INCUR SIGNIFICANT LOSSES IN THE NEAR TERM.
We expect to incur significant operating expenses and make relatively high
capital expenditures as we develop our Internet business. These operating
expenses and capital expenditures will initially outpace revenues and result in
significant losses in the near term. We may never be able to reduce these
losses. We have generated only nominal revenues to date and have incurred an
aggregate net loss of $2,086,866 during the period from inception to August 31,
1999.
THE REPORT OF OUR INDEPENDENT ACCOUNTANTS CONTAINS A GOING CONCERN QUALIFICATION
WHICH STATES THAT WE MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS IF WE DO NOT
RECEIVE THE PROCEEDS OF THIS OFFERING.
Our independent certified public accountants' report for the period from
our inception on June 28, 1999 through August 31, 1999 contains an explanatory
paragraph. This paragraph states that our limited working capital position prior
to our receipt of the net proceeds of this offering raises substantial doubt
about our ability to continue as a going concern. Accordingly, if we do not
consummate this offering, we may not be able to continue our operations.
7
<PAGE>
RISKS RELATING TO OUR OPERATIONS
BECAUSE ONE OF OUR OPERATING AGREEMENTS REQUIRES US TO SHARE A SIGNIFICANT
PORTION OF THE REVENUES WE GENERATE WITH A THIRD-PARTY, IT WILL BE MORE
DIFFICULT FOR US TO BECOME A PROFITABLE BUSINESS.
We will not retain all revenues generated through our web site, which
will make it more difficult for us to become a profitable business. We have an
agreement with Netgateway, Inc. through February 2001, under which it provides
us with e-commerce processing and other technology services integral to our
business. During the term of this agreement, we are obligated to share equally
with Netgateway all advertising and "click-through" revenues generated through
our web site. We also pay Netgateway a small percentage of all revenues
generated through sales of products through our web site.
BECAUSE OUR EXECUTIVE OFFICERS LACK SIGNIFICANT MANAGEMENT EXPERIENCE, WE MAY
NOT BE ABLE TO EFFECTIVELY MANAGE OUR GROWTH.
The growth of our business may place a significant strain on our management
team and we may not be able to effectively manage our growth. None of our
executive officers has significant experience in managing a company or
overseeing a company's rapid growth.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. THESE STATEMENTS MAY PROVE
TO BE INACCURATE.
Some of the statements in this prospectus are forward-looking statements
that involve risks and uncertainties. These forward-looking statements include
statements about our plans, objectives, expectations, intentions and assumptions
that are not statements of historical fact. You can identify these statements by
the following words:
o "may," o "plans,"
o "will," o "expects,"
o "should," o "believes,"
o "estimates," o "intends"
and similar expressions. We cannot guarantee our future results, performance or
achievements. Our actual results and the timing of corporate events may differ
significantly from the expectations discussed in the forward-looking statements.
You are cautioned not to place undue reliance on any forward-looking statements.
8
<PAGE>
USE OF PROCEEDS
Assuming an offering price of $10.00 per share, we estimate that we will
receive net proceeds from this offering of approximately $30,675,000. If the
underwriters exercise their over-allotment option in full, the net proceeds will
be approximately $35,373,750. In either case, the net proceeds will reflect
underwriting discounts and commissions and other expenses payable by us. We
estimate that these discounts, commissions and expenses will be an aggregate of
approximately $4,325,000 or $4,876,250, if the over-allotment option is fully
exercised.
We intend to use the net proceeds as set forth below. The information
regarding our use of the proceeds assumes no exercise of the over-allotment
option.
<TABLE>
<CAPTION>
APPLICATION OF PROCEEDS AMOUNT PERCENT
----------------------- ------ -------
<S> <C> <C>
Sales and marketing....................................................... $18,000,000 58.7%
Development of our web site and customer support operations............... 2,500,000 8.1
Repayment of debt to principal stockholder................................ 1,000,000 3.3
Payment of bonuses to officers............................................ 130,000 0.4
Working capital and general corporate purposes............................ 9,045,000 29.5
----------- -----
Total.................................................................. $30,675,000 100%
----------- -----
----------- -----
</TABLE>
We intend to use approximately $18,000,000 of the net proceeds for sales
and marketing activities and operations. An important part of these activities
will be the development of the "b2bstores.com" brand and promotion of our web
site and product and service offerings. These activities include:
o the advertising of our web site in trade journals and
magazines,
o direct mailings to businesses,
o online marketing initiatives,
o the appointment of one or more advertising agencies,
o the hiring of sales and marketing personnel, and
o the making of up-front payments that may be required by
fulfillment agents prior to their actual delivery of products
to our customers.
We intend to use approximately $2,500,000 of the proceeds for the continued
technological development of our web site, including:
o the in-house development of software and related technologies,
o the hiring of design and technology personnel,
o the purchase or leasing of hardware and third-party
technologies that we believe will enhance our web site's ease
of use and sense of community,
o the expansion of our customer support operations, including our
24-hour customer service telephone operations and live, online
customer service chat area, and
o the commercial launch and expansion of our auction capabilities
and offerings, business referral services and business content
offerings.
9
<PAGE>
We will use approximately $1,000,000 of the net proceeds to repay loans
made to us by Enviro-Clean, one of our principal stockholders. These loans were
made in the aggregate principal amount of approximately $975,000 in June, July,
November and December 1999 and January 2000. They bear interest at the annual
rate of 8%. All principal and interest is payable by us on the earlier of (a)
January 31, 2000, and (b) the date this offering is consummated.
We will use approximately $130,000 of the net proceeds to pay cash bonuses
to some of our officers. These payments are required under their employment
agreements.
We intend to use the remaining net proceeds for working capital and general
corporate purposes. These purposes may include:
o the payment of salaries of additional management and
back-office personnel,
o expenditures of capital for the expansion of our financial and
accounting infrastructure; and
o consideration paid for acquisitions, investments or strategic
alliances domestically or abroad which have not yet been
identified.
Our management will have broad discretion in allocating the proceeds to be
applied for working capital and general corporate purposes. If the underwriters
exercise their over-allotment option in full, we intend to use the net proceeds
from the sale of the shares sold under of the over-allotment option for working
capital and general corporate purposes.
Pending application of the net proceeds as described above, we intend to
invest the net proceeds in:
o short-term, interest-bearing investment grade securities,
o money market accounts,
o certificates of deposit, or
o direct or guaranteed obligations of the United States
government.
10
<PAGE>
DILUTION
A company's net tangible book value is equal to its total tangible assets,
minus its total liabilities. A company's net tangible book value per share is
calculated by dividing its net tangible book value, by the total number of
shares of common stock outstanding. As of August 31, 1999, we had a net tangible
book value of $398,183, or approximately $.10 per share of common stock.
As of August 31, 1999, after adjusting for the issuance of 3,500,000 shares
of our common stock in this offering, our as adjusted net tangible book value
would have been approximately $30,990,470, or approximately $4.13 per share of
common stock. This adjustment assumes a per-share offering price of $10.00. Upon
completion of this offering, there will be an immediate increase in our net
tangible book value of approximately $4.03 per share of common stock to existing
stockholders and an immediate dilution of approximately $5.87 per share, or
approximately 59%, to new investors.
The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................................. $ 10.00
Net tangible book value per share as of August 31, 1999................ .10
Increase per share attributable to sale of shares in this offering..... 4.03
---------
As adjusted net tangible book value per share of common stock after this
offering..................................................................... 4.13
---------
Dilution per share of common stock to investors in this offering................ $ 5.87
---------
---------
</TABLE>
Assuming the exercise in full of the underwriters' over allotment option,
our adjusted net tangible book value at August 31, 1999 would have been
approximately $4.45 per share. This represents an immediate increase in net
tangible book value of $4.35 per share to our existing stockholders and an
immediate dilution in net tangible book value of $5.55 per share to new
investors.
The next table summarizes, as of August 31, 1999:
o the number and percentage of shares of common stock purchased from
b2bstores.com,
o the amount and percentage of the cash consideration paid for those
shares, and
o the average price per share paid by existing stockholders and by new
investors in this offering.
The information in the table assumes an initial public offering price of
$10.00 per share. It does not give effect to underwriting discounts and offering
expenses that we will pay in connection with the offering or the exercise of the
underwriters' over-allotment option.
<TABLE>
<CAPTION>
TOTAL CASH
SHARES PURCHASED CONSIDERATION AVERAGE
----------------------- ----------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 4,000,000 53.3% $ 636,000 1.8% $ 0.16
New investors............. 3,500,000 46.7% 35,000,000 98.2% 10.00
----------- ----- ----------- -----
Total.................. 7,500,000 100.0% $35,636,000 100.0%
----------- ----- ----------- -----
----------- ----- ----------- -----
</TABLE>
11
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of August 31, 1999 on
an actual and as adjusted basis. The "As Adjusted" column shows our
capitalization adjusted to reflect:
o the issuance of 3,500,000 shares in this offering at an assumed
public offering price of $10.00 per share,
o the repayment of all of our short-term debt.
o the payment of cash bonuses to some of our executive officers that
will be due upon completion of this offering.
Subsequent to August 31, 1999, we have continued to fund our operations
with proceeds from loans from Enviro-Clean. As of January 12, 2000, we had
borrowed an aggregate of $975,000 from Enviro-Clean. The repayment of the
principal and related interest under these loans as of the consummation date of
this offering will be made from the net proceeds of the offering.
<TABLE>
<CAPTION>
AUGUST 31, 1999
---------------------------
ACTUAL AS ADJUSTED
---------- --------------
<S> <C> <C>
Short-term debt................................................................. $ 179,836 $ --
---------- ------------
---------- ------------
Stockholders' equity:
Preferred stock, par value $0.01 per share, 5,000,000 shares authorized; no
shares issued, actual and as adjusted..................................... $ -- $ --
Common stock, par value $0.01 per share, 25,000,000 shares authorized;
4,000,000 issued and outstanding, actual; and 7,500,000 shares issued and
outstanding, as adjusted.................................................. 40,000 75,000
Additional paid-in capital................................................... 2,497,500 33,137,500
Deficit accumulated during development stage................................. (2,086,866) (2,222,030)
---------- ------------
Total stockholders' equity................................................ 450,634 30,990,470
---------- ------------
Total capitalization...................................................... $ 450,634 $ 30,990,470
---------- ------------
---------- ------------
</TABLE>
12
<PAGE>
PLAN OF OPERATIONS
OVERVIEW
We commercially introduced our web site, b2bstores.com, in September 1999.
Since its introduction, our web site has provided our customers with the ability
to purchase online business products and supplies in a growing number of
categories.
In addition to regularly adding new categories of available products, we
are currently in the process of expanding our web site to provide our customers
with access to:
o online auctions;
o business referral services; and
o business information and content.
We expect to be providing commercial access to each of these areas through our
web site by the end of the first quarter of 2000. We may, however, encounter
problems or unexpected costs in connection with the introduction of any of these
areas as described below.
EXPANSION OF OUR PRODUCT CATEGORIES
We regularly seek to expand our product categories by establishing
relationships with additional fulfillment agents. These fulfillment agents are
vendors that actually supply the products purchased by our customers through our
web site. The terms of any agreement governing a relationship with a new
fulfillment agent must be negotiated and will vary on a case-by-case basis. If
we cannot negotiate agreements on commercially reasonable terms, we will not be
able to expand our product offerings. Further, in each instance where we are
able to establish a relationship with a new fulfillment agent, we must integrate
that agent's electronic inventory and ordering system with the e-commerce system
used by our web site. To successfully integrate our respective systems, we must
work closely with the personnel of technology suppliers to the fulfillment
agent. This integration can be time consuming. Although we are not required to
make any advance payments under our existing fulfillment arrangements, these
type of payments could be required under future arrangements.
IMPLEMENTATION OF AUCTION FUNCTIONS
We are currently integrating the necessary technology to provide online
auctions at our web site. The technology we are using for the auction functions
is being developed internally. Although basic auction functions are currently
available at our website, we are expanding these functions. We deem our auction
area to be in the development phase. Further, we have not marketed our auctions.
Accordingly, there are only a few products currently up for auction at our web
site. Once commercially launched, our auction functions will provide our
customers with utility only to the extent other customers place items up for
auction. Accordingly, we will have to spend material amounts of time and capital
to market and promote our web site's auction functions. Our expanded auction
functions are scheduled for commercial launch during the first quarter of 2000.
The anticipated costs associated with the implementation of our expanded auction
functions is approximately $120,000. We will use a portion of the proceeds of
this offering to fund
13
<PAGE>
these costs. We will face intense competition from established web sites that
provide auction access to users.
INTRODUCTION OF BUSINESS SERVICE REFERRALS
We are currently negotiating with providers of financial services,
accounting services, legal services and other services to serve as service
providers to customers at our web site. We are spending significant time in
connection with our efforts to assemble a group of service providers willing to
utilize our web site for the promotion of their services. For each provider, we
must negotiate the terms of our referral relationship, including the amount of
commission to be paid to us for each customer we refer. Some industries may have
stringent guidelines relating to the payment of commissions for referral
services. We must ensure in each instance that we are in compliance with these
guidelines. It is our current intention to not engage in any business referals
that would require us to become licensed or regulated by any agency.
In each case, we must design and integrate into our web site a link to the
web site of the service provider. This will require us to expend significant
time and capital. The anticipated costs for implementing our business service
referral functions include one-time expenses of approximately $60,000 during the
first quarter of 2000. These costs will relate to the development and
integration of approximately ten complex service-provider projects and 20 simple
links to service providers. These costs will be funded by a portion of the
proceeds of this offering.
PROVISION OF BUSINESS INFORMATION AND CONTENT
We have already begun to provide business information and other content to
our customers, including:
o computer product reviews,
o news,
o stock market information, and
o downloadable driving directions.
This information is supplied by third-party content providers. We are required
to pay a fee for the content we make available through our web site. We intend
to expand our roster of content providers and the information available through
our web site. The arrangement we have with each content provider varies on a
case-by-case basis.
The anticipated cost for our business content and information functions
will be approximately $12,000 per month on an ongoing basis for licensing of
content and a one-time cost of $15,000 for the development and integration of
our functions. We anticipate that these costs will be partially covered by
corporate sponsorships at our web site. The remaining costs will be funded by a
portion of the proceeds of this offering.
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SOURCES OF REVENUE
We believe that we will derive our revenues from the following sources:
o product sales;
o service referral fees and commissions;
o advertising;
o "click through" fees; and
o vendor management fees.
We will recognize revenues according to:
o the type of product or service being sold,
o the structure of the contract negotiated with the individual vendor,
and
o the substantive nature of the risks of ownership we incur in
connection with the sale and shipment of the product.
For product sales involving substantive risk of ownership, we will
generally recognize revenue at the gross transaction value. For service and
referral sales where risk of loss is minimal, we will generally recognize
revenue on a net fee or commission basis. For auction sales where we incur risk
of loss in the transactions, we will recognize gross revenues. For auction sales
where we act as auctioneer and have little risk of loss, we will recognize
revenue on a net basis or transaction fee basis.
Currently policy setting groups of the Emerging Issues Task Force and the
Financial Accounting Standards Board are reviewing the guidelines under which
revenue is recognized on a gross basis versus a net basis. As we currently
recognize certain of our revenue on a gross basis, there is a risk that future
guidelines may require us to change, retroactively, our revenue recognition
policy. This could cause us to report markedly lower revenues than currently
anticipated. Although such a change would cause us to report markedly lower
revenues and costs of products, it would not change our reporting with respect
to other expenses, net revenue or earnings before and after tax.
PRODUCT SALES
We sell products from our expanding catalog of products -- from cleaning
products to office supplies to computers. We also intend to provide our business
customers with the ability to purchase flowers, collectibles, vacation packages
and other ancillary products. We expect a substantial majority of our revenue to
come from the online sale of products.
Enviro-Clean is our fulfillment agent for janitorial and sanitary
maintenance products offered through our web site. All Enviro-Clean products
purchased through our web site are distributed directly to our customers by
Enviro-Clean through this fulfilment relationship. Enviro-Clean charges us a
price for each product equal to its cost for the product. Enviro-Clean also is
entitled to receive a payment from us equal to 2% to 5% percentage of all
revenues generated by us through the sale of products supplied by Enviro-Clean.
In connection with our auctions, we list products for sale by vendors. In
these auctions, we will either take physical possession of the product or the
vendor will retain
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possession of the product. We also will act as an auctioneer, conducting
auctions on behalf of web site users who place items up for auction. When acting
as an auctioneer, we will receive a commission on the sale of the product at the
conclusion of the auction. When acting as an auctioneer, we will not take title
to or possession of the product and the person or entity placing the product up
for auction will bear the risk of credit card charge backs and fraud.
SERVICE REFERRAL FEES
We will provide our business customers with access to a broad range of
business services. Subject to regulation in applicable industries, we will
generate revenues from our service referral activities through the collection of
commissions and referral fees from the service providers to which we direct our
business customers.
ADVERTISING REVENUE
Revenue from advertising on the Internet is driven by the size and quality
of a web site's audience. We believe that our target audience -- business
customers -- will give us the ability to structure attractive transactions with
advertisers. Advertising revenue, if any, will be earned from:
o the sale of advertising banners,
o the placement of pop-up windows and
o the sale of other sponsorship or promotional rights placed on our web
site. We believe that advertising on our web site will be an
important source of our revenue in the future.
In order to effectively sell advertising on our web site, we believe we
will need to consistently achieve more than 1,000,000 hits per month. As of
November 30, 1999, our monthly run rate for hits is approximately 40,000.
The rates that we charge our advertisers for the placement of the
advertisements at our web site will range from $0.005 to $0.02 per hit, based
upon the amount of advertising purchased and the relative placement of
advertising within our web site. During the term of our agreement with
Netgateway, we are obligated to share equally with Netgateway all advertising
revenue generated through our web site.
"CLICK-THROUGH" REVENUE
We will participate in affiliate programs with online retail partners by
placing "click-through" tags in our web site. When a business customer points
his or her mouse to one of these click-through tags and clicks the mouse, he or
she will be brought to the e-commerce web site of one of our retail partners.
Our click-through tags will allow us to generate revenues through the collection
of sales commissions from our click-through retail partners. Commissions from
our click-through initiatives will vary. During the term of our agreement with
Netgateway, we are obligated to share equally with Netgateway all revenues
generated through our "click-through" arrangements. Our agreement with
Netgateway is through February 2001.
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VENDOR MANAGEMENT FEES
Enviro-Clean operates its own product web site at www.b2bgoods.com. This
web site offers janitorial and sanitary maintenance products, along with
products in a limited number of other categories. All of those products are also
available at our web site. Enviro-Clean's web site also offers hyperlink access
to our web site. Under our agreement with Enviro-Clean, Enviro-Clean has agreed
that, until it owns less than 10% of our outstanding common stock, it will
refrain from selling its own products through any web sites other than its own
or ours. It will also refrain from offering any other types of products at its
own web site.
We provide Enviro-Clean with access to web site transaction processing and
e-commerce services for its b2bgoods.com web site through our e-commerce
backbone. For these services we receive from Enviro-Clean a fee equal to the
greater of (a) 10% of Enviro-Clean's revenues generated through e-commerce
activities conducted through www.b2bgoods.com and (b) 50% of Enviro-Clean's
gross profits generated through e-commerce activities conducted at
www.b2bgoods.com.
EXPENSES
Our expenses are composed of:
o salaries;
o sales and marketing costs;
o costs of products;
o web site and technology development costs;
o customer satisfaction operations; and
o general and administrative costs.
SALARIES
We believe that there are four key components to our success. They are:
o effective marketing of our web site to vendors, advertisers and
business customers;
o efficient management of fulfillment agents, which are the entities
that will supply and distribute products purchased at our web site;
o availability of useful and attractive web site features and
leading-edge technology; and
o effective execution of our operations.
In order to excel in all of these areas, we must hire talented personnel.
Competition for qualified, experienced personnel in the high-tech market is
intense. In order to compete effectively in this labor market, we must provide
generous compensation plans. Accordingly, we will incur significant expense in
hiring and retaining the personnel we need to grow our business.
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SALES AND MARKETING COSTS
We will use a significant portion of the proceeds of this offering for our
sales and marketing activities. These activities will be extremely important to:
o the development of our brand name,
o the creation of traffic to our web site, and
o the promotion of our business, products and services.
We will incur significant expenses in connection with:
o advertising,
o promotional and public relations activities,
o merchandising,
o market research and consultancy, and
o customer database management.
COSTS OF PRODUCTS
Product orders are actually fulfilled by one of our fulfillment agents,
which charges us a negotiated price for the product. Generally, upon shipment of
a product from one of our fulfillment agent's premises, we assume title to the
product. Accordingly, risk of loss is assumed by us until the product is
received by our customer. The amounts we are charged by our fulfillment agents
for the products we purchase from them are expensed by us as part of our cost of
sales.
WEB SITE AND TECHNOLOGY DEVELOPMENT COSTS
Competition for user traffic among business-related web sites is intense.
Web sites can differentiate themselves from others by providing users with an
online experience that is easy, efficient and useful. By providing an online
experience that is also informative and entertaining and visually pleasing, web
sites can increase the percentage of first time users that return to the web
site again. The quality of the online experience is directly related to the
underlying technologies utilized by the web site. This technology includes:
o web site content,
o design,
o operational software,
o transaction processing systems, and
o telecommunications infrastructure.
We will be required to consistently update our hardware and software systems in
order to deliver leading-edge technical solutions on our web site and provide
users with an online experience superior to that provided by competitors.
Accordingly, we will incur significant ongoing expense with respect to our
technology.
Currently, we rely heavily on Netgateway for our technical infrastructure
and to host and deliver our web site. For these services we paid Netgateway an
up-front fee, with additional nominal operating fees payable to Netgateway based
on the number of hits on
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our web site. We also are required to pay Netgateway a small percentage of all
revenues generated from sales processed through our e-commerce backbone. The
percentage we must pay varies according to sales volume. We must pay this
percentage for sales of products by us and sales by other web sites to which we
provide vendor management or processing services. Our agreement with Netgateway
is through February 2001.
We believe that by initially outsourcing a large portion of our technology
infrastructure, we will be able to reduce the up-front costs associated with
constructing and expanding a complex e-commerce and business information
community, pay for a large portion of the services provided by third-party
technology providers only as we generate revenues from our web site, and harness
the proven experience of these technology providers. Over time, as our web site
and operations mature, we intend to internally develop or otherwise internalize
a significant portion of the technology used to operate our business.
CUSTOMER SATISFACTION OPERATIONS
In order to effectively compete with traditional retailers, as well as
overcome any hesitancy potential customers may have in purchasing products over
the Internet, we have implemented a customer satisfaction program. We believe
that most e-commerce companies do not provide users with real customer service.
We intend to differentiate our web site from other business web sites by
providing live, attentive customer service. Our customer satisfaction system
manages customer service issues 24 hours a day, seven days a week both in person
and online. We will incur substantial ongoing costs in connection with the
operation of this system, including fees payable to companies to which we
outsource parts of our customer satisfaction program.
As part of our customer satisfaction program, we plan to offer customers
the guarantee that they will get the products they ordered, in a timely fashion,
and in working order. If our customers are dissatisfied with a product, they
will have 30 days to return it, and we will refund their money. Accordingly, we
may be required to make significant reserves for returns and to defer
recognition of revenues for periods of time.
GENERAL AND ADMINISTRATIVE COSTS
We will incur significant expense in connection with the salary, benefits
and staff costs for general management and administrative employees, costs
relating to our facilities and professional services.
RESULTS OF OPERATIONS
We have a very limited operating history and our activities to date have
been limited to launching our service, establishing relationships with
e-commerce partners and refining our product presentation. As a result, our
historical financial information is not necessarily indicative of our future
financial performance.
Since our inception on June 28, 1999 through August 31, 1999 we have
incurred $2,086,866 of total operating expenses which were comprised of the
following:
o $31,875 of general and administrative expenses, primarily comprised of
payroll and related expenses.
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o $23,060 for sales and marketing, virtually all of which was installation
costs associated with of our phone system to support customer service.
o Start up costs of $130,431, which includes development costs associated
with the Netgateway agreement, legal fees, and identity design expenses.
o $1,901,500 of non-cash compensation charges relating to the issuance of
common stock at a price determined to be below fair market value.
Since inception through August 31, 1999, we have incurred an aggregate net
loss of $2,086,866.
We have cash commitments of approximately $897,000 during 2000 and $972,000
during 2001. These commitments arise under:
o our agreements with our officers; and
o operating leases.
Our near-term losses will be increased as a result of charges to earnings
that we must recognize. Specifically, we have an obligation to grant options to
some of our officers on the effective date of this prospectus. We will incur
non-cash compensation charges as a result of these option grants. These charges
will be recognized as the options vest. The amount of the charges will be equal
to the number of shares purchasable under the options multiplied by (a) the
aggregate market value on the effective date of the shares of common stock
purchasable under the options, less (b) the aggregate exercise price of the
options. Based on an assumed market price of $10.00 per share, these charges
will be:
o $400,000 in 1999;
o $750,000 in 2000;
o $425,000 in 2001; and
o $425,000 in 2002.
Our loss in 1999 also will be increased as a result of our issuance of
21,643 shares of common stock to consultants and directors in September 1999.
For these issuances, we will incur a non-cash compensation charge of $216,430.
In addition, upon consummation of this offering, we will be required to pay cash
bonuses aggregating $130,000 to some of our officers. These payments will
further increase our losses during 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, our working capital requirements have been satisfied
through:
o capital contributions by our current stockholders, including Richard
Kandel, our chairman of the board, and Enviro-Clean of America Corp.,
a principal stockholder of b2bstores.com and
o loans made to us by Enviro-Clean.
In June 1999, we sold 3,666,667 shares of our common stock to Mr. Kandel,
Enviro-Clean and others for $27,500 in the form of $11,000 cash and the transfer
to us of the web address, www.b2bstores.com.
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In June, July, November and December 1999 and January 2000, Enviro-Clean
made loans to us in the aggregate principal amount of approximately $975,000.
These loans bear interest at the rate of 8% per annum and are repayable on the
earlier of (a) January 31, 2000 and (b) the date this offering is consummated.
All of the proceeds of these loans have been, or will be, used to fund operating
losses and development and operating costs.
In August 1999, we raised proceeds of $625,000 through the sale of 333,333
shares of our common stock to Mr. Kandel, and other persons, some of whom are
affiliated with Enviro-Clean. The purchase price was $1.88 per share.
In September 1999, we issued:
o an aggregate of 16,643 shares of our common stock to various persons
in consideration of accounting services rendered by them to us during
our start-up phase.
o 2,500 shares of our common stock to each of John Higgins and Philip
Ellett in consideration of their becoming directors of b2bstores.com.
Our working capital at August 31, 1999 was $365,849. Our independent
certified public accountants' report for the period from our inception on
June 28, 1999 through August 31, 1999 states that our limited working capital
position prior to our receipt of the net proceeds of this offering raises
substantial doubt about our ability to continue as a going concern. Accordingly,
the continuation of our operations is dependent upon our receipt of the net
proceeds of this offering.
We anticipate that the net proceeds of this offering will satisfy our
capital requirements for at least the 18-month period following the consummation
of this offering. Thereafter, we must either generate cash from our operations
sufficient to fund our continued growth, or access sufficient capital from
external sources. These sources could include the public or private markets for
our equity or debt securities. However, external sources of capital may not be
available when or in the amounts needed.
Any issuance of equity securities would dilute the interest of our
stockholders. If we incur debt, our cash flow may be insufficient to pay the
principal and interest on that debt. Further, the instruments governing any debt
we incur will typically contain extensive covenants restricting our activities.
These restrictions could have important consequences for our business,
including:
o limiting our ability to access the additional capital we will need to
sustain and grow our business;
o limiting our flexibility in planning for, or reacting to, changes in
our business; and
o placing us at a competitive disadvantage to less leveraged
competitors, which could have more capital to invest in their
operations.
RECENT DEVELOPMENTS
During the period from September 1, 1999 through January 12, 2000, we have
continued to expand our operating infrastructure, expand our product offerings
and hire personnel. As we will be dependent on the proceeds of this offering to
implement our
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marketing plan, to date we have not conducted any meaningful marketing
activities. Accordingly, we generated only limited revenues during the period
beginning September 1, 1999 through January 12, 2000. Our revenues for this
period were approximately $4,000.
Our sales, general and administrative and start-up expenses over the period
from September 1, 1999 through January 12, 2000, were approximately $603,000. In
addition, during this period, we incurred stock-based compensation charges of
approximately $216,000. During this same period, we capitalized software costs
and internally developed software costs totaling $238,000.
SEASONALITY
Although we have a limited operating history, we expect to experience
seasonal variations in our e-commerce and advertising revenue, especially during
the summer period, when user traffic levels are expected to decline. Our
e-commerce revenue may be affected by stronger consumer goods sales during the
fourth calendar quarter of the year. In addition, our advertising revenue may
experience the same seasonal and cyclical patterns as those in traditional
media, where advertising increases ahead of the year-end holiday buying season.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. We utilize software, computer technology and other services internally
developed and provided by third-party vendors that may fail due to the year 2000
problem. We also depend on telecommunications providers to maintain network
reliability.
Our year 2000 compliance program covers proprietary and internal systems as
well as third party systems.
PROPRIETARY AND INTERNAL SYSTEMS
Our program involves the following phases:
Systems Review. We have completed a comprehensive review of all internal
financial, informational and operational systems. To date, we have not found or
experienced any year 2000 problems.
Testing. We created a test environment and performed testing. These tests
indicate that our internal systems will continue to function properly during
2000 and beyond.
Contingency Planning. We believe that we would be able to produce a
minimum acceptable level of service in the event of internal or external
critical systems failure.
THIRD PARTY SYSTEMS
Third parties provide and support much of our service. A large part of our
year 2000 program involves confirming that these third party systems are year
2000 compliant. In particular, we depend on telecommunications providers to
maintain network reliability and Netgateway to manage the computer servers for
our web site. Netgateway has informed us
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that it has completed the evaluation of its own internal year 2000 compliance
and that it believes it is year 2000 compliant.
YEAR 2000 COMPLIANCE COSTS
We have not incurred any costs to date in connection with revising our
systems to ensure that they are year 2000 compliant. We do not expect to incur
any significant costs in connection with our ongoing efforts to ensure that our
systems and the systems of our third-party technology suppliers are year 2000
compliant.
YEAR 2000 RISKS
An extended year 2000-related disruption could cause our business customers
to seek alternative web sites or cause an unmanageable burden on our technical
and customer support services. This could materially and adversely affect our
business, financial condition and results of operations.
In addition, there can be no assurance that governmental bodies, utility
companies, Internet access companies and others outside of our control will be
year 2000 compliant. The failure by any of these entities to be year 2000
compliant could result in prolonged Internet, telecommunications or electrical
failure. This could prevent us from delivering our services to our customers and
decrease the use of the Internet or prevent users from accessing web sites. This
could materially and adversely affect our business, financial condition and
results of operations.
It is likely that the computer equipment used by some of our business
customers may not be year 2000 compliant. As a result, some of our business
customers may not be able to access our service for some time during the
beginning of 2000 which may result in a decrease in the number of our active
registered accounts and in our revenue generally.
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BUSINESS
GENERAL
b2bstores.com is an Internet web site specifically designed to assist
business customers in the operation and development of their businesses. Our
objective is to become a leading, one-stop Internet destination that enables
business customers to conduct e-commerce, communications and other online
interaction with their customers, suppliers and colleagues.
The concept for b2bstores.com was created by Richard Kandel. Mr. Kandel
offered the "b2bstores.com" concept to Enviro-Clean. However, the board of
directors of Enviro-Clean determined that Enviro-Clean would not focus its
business operations on the concept. In turn, Mr. Kandel was given permission by
Enviro-Clean to form b2bstores.com. b2bstores.com was formed in June 1999.
After the formation of b2bstores.com, 2,000,000 shares of common stock were
issued to Enviro-Clean in consideration of:
o a nominal contribution to the capital of b2bstores.com;
o the transfer of the web address, www.b2bstores.com, which had
previously been applied for by Mr. Kandel in the name of
Enviro-Clean; and
o the waiver of any other rights Enviro-Clean might have in the
"b2bstores.com" concept.
Concurrently, an aggregate of 1,666,667 additional shares of common stock
were issued to Mr. Kandel and other persons for nominal capital contributions to
b2bstores.com. Some of these persons are affiliated with Enviro-Clean.
At the time of the issuance of the shares to Enviro-Clean and the other
persons described above, b2bstores.com had only nominal assets and needed to
assemble a management team and hire an employee staff. The number of shares
issued to Enviro-Clean and these other persons were determined through
arm's-length negotiations. These transactions between b2bstores.com and
Enviro-Clean were unanimously approved by their respective board of directors.
OUR OPPORTUNITY
THE GROWTH OF THE INTERNET
The Internet is a mass communications medium, enabling millions of people
worldwide to share information and interact with one another. This ability to
interact serves to create community among individuals with similar interests and
objectives. In August 1999, Jupiter Communications projected that the number of
Internet users in the United States will grow from 100 million in 1999 to
150 million in 2003.
The interactive nature of the Internet allows online merchants to
communicate effectively with one another, and with customers, and allows
advertisers to target customer bases having specific demographic characteristics
and interests. As a result, the Internet is emerging as an attractive, and in
many cases, preferred medium for the transaction of business, including
e-commerce activities. In November 1998, Forrester Research projected
business-to-business e-commerce to grow from $100 billion in 1999 to
$1.3 trillion in 2003.
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THE ADVENT OF BUSINESS WEB SITES
We believe that businesses have historically had to go to a number of
separate, traditional sources to obtain the products, supplies, services and
information necessary for their operations. Similarly, they have used a variety
of traditional channels, such as trade magazine, trade shows, buyer's guides,
direct mail initiatives and trade journals for the advertising and marketing of
their products and services.
Businesses are now increasingly utilizing the Internet as a valuable tool
to access customers and suppliers, to communicate with partners and to operate
more efficiently. Currently, the vast majority of business web sites focus on
the offering of one of the following three types of solutions:
o Product sites. These web sites focus primarily on the online sale
of products.
o Service referral sites. These web sites focus primarily on the
referral of business customers to services provided by other
companies.
o Business content sites. These web sites primarily offer business
customers access to a wide array of articles, information and news
services that are aimed at the business customer. These web sites
seek to generate revenues through the sale of business information
and by attracting high-volume traffic and then leveraging this
traffic into advertising revenue.
We believe that b2bstores.com will provide business customers with the
combined abilities to purchase a broad range of quality products, access a wide
variety of business-related services and research comprehensive business
information, all at a single, user-friendly web site.
OUR OBJECTIVE AND STRATEGY
We are creating an easy-to-use Internet web site that provides our business
customers with access to quality products and supplies, a premier network of
business services and a broad menu of business content. The key elements of our
strategy include:
CREATING AWARENESS OF THE B2BSTORES.COM BRAND. It is imperative that we
create awareness of the b2bstores.com brand in order to attract business
customers to our web site, garner advertisers for our web pages and place
b2bstores.com in a favorable position when creating our relationships with
vendors and other fulfillment partners. We intend to conduct extensive marketing
activities, including the placement of advertisements online and in trade
journals and other print publications, in order to create and enhance awareness
of the b2bstores.com brand. Our marketing efforts strive to present
b2bstores.com as an enjoyable, easy-to-use Internet web site that helps
businesses work more efficiently and cost effectively. We intend to use a
significant portion of the proceeds of this offering for extensive marketing
activities to build awareness of our brand and drive traffic to our web site.
EXPANDING OUR PRODUCT OFFERINGS. We regularly seek to expand our product
offering categories and the breadth of products available in these categories
through the creation of relationships with vendors and distributors. We also
will be commercially introducing auction capabilities in the first quarter of
2000. Auctions will allow us to increase the types of products available at
b2bstores.com and provide our business customers with the
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opportunity to transact business directly with one another. We believe that one
of b2bstores.com's competitive strengths will be our highly diverse product mix,
allowing us to offer low margin commodity products as well as higher-margin
specialty goods.
CREATING AND EXPANDING OUR BUSINESS REFERRAL SERVICES. In the first
quarter of 2000, we will begin to offer our business customers access to many
business services on a referral basis. It is currently anticipated that these
service will include 401(k) consulting; accounting; insurance; advertising;
leasing services; legal services; and telecommunications services. Our customers
will be able to research service providers and interact with them and, in many
cases, engage their services without leaving our web site.
CREATING MARKETING AND DISTRIBUTION ALLIANCES. In order to increase the
number of business customers that visit our web site, and to enhance our product
and service offerings and e-commerce infrastructure, we are actively pursuing
relationships with:
o providers of business, business related and ancillary products;
o suppliers of industry specific raw materials and raw goods;
o providers of business and professional services;
o proprietary online services;
o operators of leading Internet portals; and
o producers of Internet content.
ENHANCING WEB SITE UTILITY THROUGH THE CREATION OF COMMUNITY AND THE
PROVISION OF BUSINESS CONTENT. Our web site strives to create community among
our business customers and their customers, suppliers and colleagues. Our web
site's community and business information functions are designed to provide easy
interaction between the business customer and the web site, and the business
customer and other business customers. Our web site also will provide our
business customers with access to highly specific information.
CREATING AND EXPLOITING ADVERTISING REVENUE OPPORTUNITIES. We believe
that a concentrated user base of business customers will possess characteristics
highly desirable to business-to-business advertisers, and will differentiate our
web site from most other e-commerce web sites.
ACQUIRING COMPLEMENTARY CONTENT AND TECHNOLOGY. We will regularly seek to
acquire business content and e-commerce technologies that are complementary to
our business focus and community objective. We may acquire content and/or
technologies through the purchase of assets or the acquisition of companies
possessing these assets. We may pay for any asset purchase or acquisition in
cash, through the issuance of our securities or a combination of cash and
securities.
THE B2BSTORES.COM WEB SITE
Our web site moves business-to-business transactions and other business
operations away from traditional modes to the Internet. Our web site is designed
as a community mall--a place where business customers can visit a "virtual
storefront" or product category of their choice, seek out services from
professionals, research issues important to their business and meet and
communicate with customers, suppliers, colleagues and
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competitors. We strive to make our web site user friendly and to create an
experience that is highly useful, efficient, enjoyable and informative for the
business customer.
PRODUCT CATEGORIES
Our business customers have access to a growing number of product
categories online. The products in these categories are sold by us. All product
fulfillment will be done through our vendors and other third parties. We believe
that there are numerous sources of products for each of our product categories.
The various product catalogs available at our web site are designed to be
visually attractive, informative and easy to use. Our online product catalogs
provide our vendors with the ability to monitor and evaluate e-commerce
activity, and provide our web site advertisers with the ability to track the
number of visitors and leads generated from a particular catalog, product
category or banner advertisement.
We currently offer business and business-related products in the following
categories:
o office supplies o safety and industrial supplies
o janitorial supplies o desktop computer systems
o computer supplies o computer peripherals, including
o notebook computer systems monitors and disk drives
o software o office furniture
During 2000, we intend to expand our product offerings to include the
following additional categories:
o books o music
o printing supplies o pre-paid calling cards
o promotional products o executive travel accessories
o time management products o fitness products
o videos o stationery
o travel o magazine subscriptions
Enviro-Clean is our fulfillment agent for janitorial and sanitary
maintenance products offered through our web site. All Enviro-Clean products
purchased through our web site are distributed directly to our customers by
Enviro-Clean through this fulfilment relationship.
SERVICE REFERRALS
The operation of a business requires not only the purchase of supplies and
business products, but also the use of professional services. In the first
quarter of 2000, we will begin to offer our business customers online access to
business and professional services on a referral basis. The service categories
will include, among others, the following:
o 401(k) consulting and products o event planning services
o accounting services o human resources consulting
o advertising agencies o insurance brokerage services
o leasing services o Internet service providers
o legal services o executive recruiters
o commercial real estate brokerages o telecommunications services
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o computer networking services o marketing agencies and services
o e-commerce merchant hosting o computer repair services
services through which businesses o payroll services
can have their e-commerce initiatives
handled by third-party providers
BUSINESS CONTENT AND COMMUNITY
We believe that the creation of an active online community at our web site
and the provision of valuable business information will create loyalty among our
business customers and promote repeat visitation and web site use. We are
designing our web site to provide business customers with access to:
o information and reviews relating to products and services offered
through our web site;
o industry specific news and publications;
o chat rooms and bulletin boards, where industry specific and general
topics relevant to the community interest are discussed;
o an events calendar, which publishes the dates, time and other
relevant information relating to events that are important to web
site users;
o a personal calendar, which is a customizable interactive calendar
that allows the business customer to schedule and keep track of
important dates, times and other information and receive e-mail
reminders;
o classified advertisements, where job listings and other business
relevant advertising may be placed and reviewed;
o educational resource centers;
o up to the minute national and regional news;
o stock quotes;
o yellow and white page directory services;
o franchise and other business opportunities; and
o trade association newsletters and information.
SALES AND MARKETING
SALES AND DISTRIBUTION
When an order is placed at our web site, the order is electronically
processed by our systems and then forwarded to the inventory management system
of one of our fulfillment agents. Our fulfillment agent then packages and
delivers the order to the business customer. We bill the business customer
directly and collect the purchase price. We pay our fulfillment agents directly
for their services and supplies.
Business services accessible through our web site will be provided to our
business customers by third-party professionals and other businesses. Subject to
regulation in applicable industries, we will generate revenues from our service
referral activities through
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the collection of commissions and referral fees from the service providers to
which we direct our business customers.
As is the case with most web sites, we also will place "click-through" tags
in our web site. When a business customer points his or her mouse to one of
these click-through tags and clicks the mouse, he or she will be brought to the
e-commerce web site of one of our retail partners. These click-through tags will
allow b2bstores.com to generate revenues through the collection of sales
commissions from our click-through retail partners.
MARKETING
We will use a variety of marketing programs to increase awareness of the
"b2bstores.com" brand and to drive traffic to our web site. Our marketing
strategy contains a mix of print advertising, outbound e-mail, telemarketing,
new media banner campaigns, trade shows and direct mail. We also will
participate in industry specific events, industry association activities and
partnerships with interactive services companies.
Users of our web site are referred to as "members." Our members are able to
purchase products through our web site at "member prices." Member prices are
simply our every day lowest price on the products we sell. These prices are
available to any user of our web site. The use of the terms "members" and
"member prices" are therefore strictly marketing tools which are designed to
promote a sense of community at our web site.
An important part of our strategy to drive traffic to our web site is to
market our web site through online advertising and hyperlinks maintained by
other Internet companies. If we cannot secure or maintain marketing agreements
with other Internet companies, our business will be harmed. We may not be able
to enter into marketing agreements with these companies on favorable terms or at
all. Web sites that also seek to sell products and services to businesses may be
unwilling to advertise our web site. In addition, other e-commerce companies
that advertise on popular web sites may have exclusive advertising relationships
with these web sites or may otherwise object to our attempts to enter into
marketing agreements with these web sites.
We must be able to develop new products and services that address the
increasingly sophisticated and varied needs of our customers and prospective
customers. If we are unable to expand our systems and introduce new products and
services in a timely manner, our financial results will be harmed. Numerous
factors could prevent us from responding effectively to changes in our markets,
including:
o our lack of control over a substantial portion of the technology we
use in our business, which could limit our ability to effectively
adapt new technologies into our business;
o our limited operating history and our limited number of personnel,
which could compromise our ability to recognize changes in consumer
preferences and translate them into the development of new products
and services; and
o the nonacceptance by the market of any new products and services we
introduce.
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TECHNOLOGY
We have entered, and continue to seek to enter, into relationships with
technology providers in connection with the development, operation and
maintenance of our web site. We rely on Netgateway for the design, development,
maintenance and hosting of our web site. As part of this relationship, we also
have use of Netgateway's state-of-the-art data center and its experienced staff
of software and e-commerce technology developers.
In conjunction with our original agreement with Netgateway, we recently
entered into a development agreement with Netgateway. Under this ancillary
agreement, our internal technology personnel are able to customize the
Netgateway technology we currently use for applications relating to our web site
and related business. All customization and improvements created in connection
with this agreement will be owned by Netgateway. Upon the termination of our
agreements with Netgateway, we will retain a perpetual license to utilize the
modifications we develop in the operation of our web site and business. Our
agreements with Netgateway are through February 2001.
We are assembling a staff of in-house designers and programers to
continually add functionality to our site. Our technology staff updates our
site's look and feel, and ensures that all content stays current and useful. We
believe that an internal technology staff will enable us to address specific
customer requirements for functionality, as well as handle custom integration
issues which may arise from large vendor partners or business customers.
In structuring our technology backbone, we ensure that the resulting
platform has the following characteristics:
SCALABILITY. We require our backbone to be scalable for the rapid
deployment of functions, features and content as required to meet the demand of
our business customers while maintaining desired performance standards. In the
rapidly changing Internet environment, the ability to update an application to
stay current with new technologies is important. Our site system and related
technologies allow for the addition, modification, or replacement of web site
based applications in a cost-efficient and expeditious manner.
RELIABILITY AND SECURITY. We use leading-edge software to protect our web
servers. The majority of our hardware and software is maintained by Netgateway,
which provides us with professional data center hosting facilities and redundant
high-speed Internet connectivity. Netgateway monitors and supports our systems
24 hours a day, seven days a week. We also are currently developing our own
content and web site management tools to facilitate the maintenance and updating
of our web site.
We must ensure that our business customers do not experience significant or
frequent disruptions in their access to our web site. Web site failures could
result in loss of existing customers and opportunities to garner additional
customers. Our business also is highly dependent on our systems to process, on a
daily basis, transactions across numerous and diverse markets. We rely heavily
on our data processing systems, as well as our telecommunications systems. If
any of these systems do not operate properly or are unavailable due to problems
with our physical infrastructure, we could suffer disruptions to our business.
These disruptions could expose us to liabilities to clients, regulatory
interventions or damage to our reputation and the development of our brand name.
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The need to securely transmit confidential information over the Internet
has been a significant barrier to e-commerce and communications. We are
potentially vulnerable to attempts by unauthorized computer users to penetrate
our network security. If successful, those individuals could cause serious
interruptions in our services. We may be required to expend significant capital
and resources to protect against the threat of security breaches or to alleviate
resulting problems. Despite efforts we make to maintain network security, we may
not be successful.
If third parties are able to successfully penetrate our network security
and misappropriate our business customer's personal or credit card information,
we could be subject to liability. This could include claims for unauthorized
purchases with credit card information, impersonation or other similar fraud
claims. We also could be subject to claims for violation of data protection
rights. Any of these claims could result in litigation. Publicized acts of
misappropriation of our customers' information would also likely harm our
reputation.
PROPRIETARY RIGHTS
We regard the protection of our intellectual property, including our URL
"www.b2bstores.com" and our "b2bstores.com" trademark, as critical to our
success. A URL is a website's address, which when entered by a user into a web
browser, takes the user to the desired web site. We also rely on the proprietary
technology of third parties, including Netgateway. Unauthorized use of the
intellectual property used in our business by third parties may damage our brand
and our reputation. We rely on intellectual property laws and confidentiality
and license agreements with our employees, customers, partners and others to
protect our intellectual property rights.
If we are unable to protect our "b2bstores.com" domain name our business
could be harmed. We may be unable to prevent third parties from acquiring
Internet domain names that are similar to ours. We anticipate that many web
sites will use the term "b2b" as part of their URL or brand name. Creating brand
awareness for a brand containing the term "b2b" may prove difficult if the
markets confuse, or are unable to differentiate among, the numerous web sites
branded with the term "b2b."
VENDOR MANAGEMENT SERVICES
We intend to utilize our capabilities in the management of vendor
relationships to provide commerce management services to other web sites. We
will allow other business-related web sites to access our product offerings and
offer these products to their own users. Product orders placed through these web
sites will be processed through our systems, and fulfilled by our fulfillment
agents. We will charge our e-commerce web site partners negotiated commissions
based on sales of our product offerings generated through their web sites.
Enviro-Clean operates its own product web site at www.b2bgoods.com. This
web site offers janitorial, sanitary maintenance and products in a limited
number of other categories. We provide Enviro-Clean with access to web site
transaction processing and e-commerce services for its b2bgoods.com web site
through our e-commerce backbone. See section of this prospectus entitled
"Certain Transactions" for a description of this relationship.
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GOVERNMENT REGULATION
We are subject to various laws and regulations relating to our business.
Few laws or regulations are currently directly applicable to access to the
Internet. However, because of the Internet's popularity and increasing use, new
laws and regulations may be adopted. These laws and regulations may cover issues
that include:
o user privacy;
o pricing;
o tax;
o content;
o copyrights;
o distribution; and
o characteristics and quality of products and services.
In addition, the growth of the Internet and e-commerce, coupled with
publicity regarding Internet fraud, may lead to the enactment of more stringent
consumer protection laws. These laws may impose additional burdens on our
business. The enactment of any additional laws or regulations may impede the
growth of the Internet, which could decrease our potential revenues from
electronic commerce or otherwise adversely affect our business, financial
condition and operating results.
Our ability to generate revenues from the sale of advertising on our web
site depends on demonstrating to advertisers that our web site traffic is
comprised of users that are attractive to these advertisers. Advertisers focus
their efforts on reaching particular demographic groups, which are groups of
users having common characteristics, including similar buying habits and similar
income levels, or which reside in the same geographic locations. If we are not
able to legally share information regarding our customers with potential
advertisers, our ability to generate advertising revenues will suffer. The
public is becoming increasingly concerned about issues relating to privacy on
the Internet. This increased sensitivity could result in the adoption of
stringent legislation that prevents or limits our ability to use personal and
other data about our customers.
Laws and regulations directly applicable to e-commerce or Internet
communications are becoming more prevalent. The most recent session of Congress
enacted Internet laws regarding online copyright infringement. Although not yet
enacted, Congress also is considering laws regarding Internet taxation. These
are all recent enactments, and there is uncertainty regarding their marketplace
impact. In addition, various jurisdictions already have enacted laws that are
not specifically directed to e-commerce but that could affect our business. The
applicability of many of these laws to the Internet is uncertain and could
expose us to substantial liability.
Any new legislation or regulation regarding the Internet, or the
application of existing laws and regulations to the Internet, could materially
adversely affect us. If we were alleged to violate federal, state or foreign,
civil or criminal law, even if we could successfully defend the claims, it could
materially adversely affect us.
We believe that our use of third-party material on our web site is
permitted under current provisions of copyright law. However, because legal
rights relating to Internet
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content and commerce are not clearly settled, our ability to rely upon
exemptions or defenses under copyright law is uncertain.
Several telecommunications carriers are seeking to have telecommunications
over the Internet regulated by the Federal Communications Commission in the same
manner as other telecommunications services. Additionally, local telephone
carriers have petitioned the Federal Communications Commission to regulate
Internet providers and online service providers in a manner similar to long
distance telephone carriers and to impose access fees on these providers. If
either of these petitions is granted, the costs of communicating on the Internet
could increase substantially. This, in turn, could slow the growth of use of the
Internet. Any legislation or regulation of this type could materially adversely
affect our business, financial condition and operating results.
COMPETITION
Our web site competes with numerous other web sites that offer any
combination of e-commerce capabilities, business content and online community
access. Our competitors vary in size and in the scope and breadth of the
services they offer. In addition to competition from several e-commerce trade
communities, we primarily encounter competition from:
o business related e-commerce web sites, including PurchasePro.com,
VerticalNet and OnVia.com,
o enterprise software purchasing systems providers, including Ariba,
Commerce One and TRADE'ex,
o large Internet companies, including Yahoo.com, E-Bay and AOL, and
o traditional business product vendors, including Office Depot and
Staples, who are establishing their own Internet presence.
Virtually all of our current and potential competitors have longer
operating histories, larger customer bases and greater brand recognition in the
business products and Internet markets. They also have significantly greater
financial, marketing, technical and other resources. These superior resources
could allow competitors to:
o devote significantly greater resources to marketing and promotional
campaigns than we can,
o adopt pricing policies that are more aggressive than ours,
o attract greater numbers of users than we can by offering services for
free,
o devote substantially more resources to the development of their
products and services than we can.
E-COMMERCE
The markets for business products and services offered through traditional
channels and Internet channels are intensely competitive. We expect competition
in these markets to increase.
There are few barriers to the business e-commerce market. The rapid growth
of the Internet in general, and online e-commerce activity specifically, has
attracted the attention
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of numerous companies, including business product manufacturers and suppliers
who have historically operated through traditional channels. Competitors could
enter into exclusive distribution arrangements with our vendors and deny us
access to their products. Increased competition also could result in pricing
pressures, increased marketing expenditures and loss of market share, and could
have a material adverse effect on b2bstores.com.
COMMUNITY SERVICES
The market for community services is highly competitive, and we expect
competition to continue to increase significantly. There are no substantial
barriers to entry in these markets. We compete with many providers of community
services, including companies that attempt, as we do, to target business
consumers. We believe that to successfully compete, our communities must be
structured around themes that are important to our users. Further, our community
functions must be easily accessible at our web site through simple mouse clicks.
Ultimately, our communities must provide users with utility. This utility can
only be provided if meaningful dialog and user interaction develops within the
communities.
CONTENT AND INFORMATION
A large number of web sites and online services offer information features
and content, including news, stock quotes, industry specific content, yellow
pages, e-mail listings, job listing and other content and features that are
competitive with the content we plan to offer.
ADVERTISING OPPORTUNITIES
We compete with all types of online companies for advertisers. We also
compete with traditional media, including television, radio and print, for a
share of advertisers' total advertising budgets. We believe the number of
companies selling web-based advertising and the available inventory of
advertising space have increased substantially during recent periods.
We believe that the principal competitive factors in our markets are:
o brand recognition;
o ease of use;
o comprehensiveness;
o breadth and quality of products, services and content offered;
o access to customers; and
o with respect to advertisers and sponsors, the number of users,
duration and frequency of visits and user demographics.
Many of our competitors in all of our target markets have significantly
greater financial, technical, marketing and distribution resources. In addition,
providers of Internet tools and services may be acquired by, receive investments
from, or enter into other commercial relationships with larger, well-established
and well-financed companies.
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EMPLOYEES
As of December 31, 1999, we had six full-time employees and one part-time
employee. We also use six to eight independent contractors on a
project-to-project basis. We consider our relationships with our employees to be
good. None of our employees are covered by collective bargaining agreements.
PROPERTIES
Our corporate headquarters are located in approximately 4,000 square feet
of space at 249 East Ocean Boulevard, Long Beach, California. We lease these
premises at a monthly rental of $6,381. Currently all servers utilized in the
operation of our site are managed by Netgateway and housed at an Exodus
Communications data center in Irvine, California. Our server location is
monitored 24 hours a day, seven days per week, and connected to multiple,
redundant Internet access points and power sources.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard Kandel................................. 47 Chairman of the board and director
Woo Jin Kim.................................... 32 Chief executive officer, president and director
Jeffrey Crandell............................... 32 Chief technology officer
Mark Voorhis................................... 52 Chief financial officer and chief operating
officer
Shannon Jessup................................. 29 Executive vice president of business
development
Brian Wharton.................................. 32 Executive vice president of development
John Higgins................................... 53 Director
Philip Ellett.................................. 45 Director
</TABLE>
Richard Kandel founded b2bstores.com in June 1999 and has been our chairman
of the board since inception. He also was our president from inception until
August 1999. From 1974 through 1998, Mr. Kandel was the owner and president of
Kandel and Son, Inc., a sanitary supply distributor in the New York metropolitan
region. In January 1999, Mr. Kandel sold Kandel and Son to Enviro-Clean, a
distributor of janitorial and sanitary maintenance supplies and a principal
stockholder of b2bstores.com. Mr. Kandel served as president of Enviro-Clean
from January 1999 through September 1999. In September 1999, Mr. Kandel became
the chairman of the board and chief executive officer of Enviro-Clean. He
received his Bachelor of Science degree from Michigan State University.
Woo Jin Kim has served as our chief executive officer, president and a
director since August 1999. From December 1998 until joining b2bstores.com in
August 1999, Mr. Kim was the senior vice president of channel development at
Netgateway, Inc., a provider of e-commerce, web design and web hosting services.
From June 1998 to December 1998, Mr. Kim was the director of channel sales for
Admor Memory Corporation, a supplier of third-party memory products. From
November 1996 to May 1998, Mr. Kim served as the director of distribution sales
for TechWorks, Inc., a manufacturer of third-party computer memory products.
From November 1994 to November 1996, Mr. Kim was a senior product manager for
Merisel, Inc., a distributor of computer products. From December 1992 to
November 1994, Mr. Kim served as the director of marketing for MIC Systems and
Software Corp, a provider of dealership automation systems to the automotive,
motorcycle and marine industries.
Jeffrey Crandell has served as our chief technology officer since August
1999. From June 1998 until joining b2bstores.com in August 1999, he was senior
vice president of e-commerce for Netgateway. From June 1996 to June 1998, he
served as the chief operating officer of Digital Genesis, Inc., a provider of
e-commerce services. From October 1994 to June 1996, Mr. Crandell was the
manager of application systems at Mattel Toys, a toy and games manufacturer.
From June 1992 to October 1994, he was a systems engineer for Fabrik
Communications, an Internet e-mail service provider. From January 1990 to June
1992, he was a systems operator for Dresser Industries Inc., a supplier of
equipment and services for the energy industry. Mr. Crandell received his
Bachelor of Science degree in computer science from the University of Maryland.
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Mark Voorhis has served as our chief financial officer and chief operating
officer since September 1999. In March 1999, Mr. Voorhis founded PC HouseCalls,
Inc., an Internet-based computer service company, where he served as chairman
and chief financial officer until joining b2bstores.com in September 1999. From
November 1997 until February 1999, he served as chief financial officer and
chief operating officer for Admor. From October 1994 until November 1997,
Mr. Voorhis was an independent consultant. From November 1983 until September
1994, Mr. Voorhis worked with Montano Securities Corporation in several
different capacities, including as chief operating officer and chief financial
officer. Mr. Voorhis has a Bachelor of Arts degree in business administration
from California State University.
Shannon Jessup has served as our executive vice president of business
development since August 1999. From January 1999 until joining b2bstores.com in
August 1999, Ms. Jessup was the vice president of channel marketing for
Netgateway. From August 1994 to January 1999, Ms. Jessup held several executive
positions at Merisel, including director of product marketing from June 1998 to
January 1999 and director of North American strategic operations from January
1998 to June 1998. Prior to joining Merisel, from February 1992 to August 1994,
Ms. Jessup was the manager of sales and marketing for ADAM systems, a value
added reseller and software solutions provider in the health care industry.
Ms. Jessup received her Bachelor of Arts degree in economics from the University
of California.
Brian Wharton has served as our executive vice president of technology
development since August 1999. Mr. Wharton is also currently a member of
Microsoft's Internet advisory board. From June 1998 until joining b2bstores.com
in August 1999, Mr. Wharton was the senior vice president of development at
Netgateway. From June 1996 to June 1998, Mr. Wharton was the chief technology
officer at Digital Genesis, a provider of e-commerce services, which was
acquired by Netgateway in June 1998. From May 1992 to June 1996, Mr. Wharton was
the lead developer at Mattel Toys. From May 1990 to May 1992, Mr. Wharton was
the manager of research and development at Tarp Information Systems Inc., a
software development company. Mr. Wharton received his Bachelor of Science
degree in geography from the University of Maryland.
John Higgins has served as a director of b2bstores.com since September
1999. Since May 1998, Mr. Higgins has been an executive vice president and a
partner at Reliant Innovations, a corporate reseller of computer products. From
March 1997 to April 1998, Mr. Higgins served as the executive vice president of
sales and marketing for TechWorks. From February 1996 to February 1997,
Mr. Higgins was the senior vice president of Sales for Bell Microproducts Inc.,
an industrial distributor of storage products to high-end value added and
corporate resellers. From June 1993 to January 1996, he was senior vice
president of sales and marketing at NCD Inc., a computer distributor, which was
acquired by Ameriquest Corp. during his tenure.
Philip Ellett has served as a director of b2bstores.com since September
1999. Mr. Ellett is currently an executive vice president and president of the
Americas division for Ingram Micro Inc., a wholesale distributor of computer
equipment, for which Mr. Ellett has worked since January 1996. From September
1989 to December 1995, Mr. Ellett held several positions with Gates/Arrow,
including as president of Gates/Arrow and chief executive officer. Mr. Ellett
received his HNC in electrical engineering from the Upper Thames College of
Technology in England.
Because we are a small company, we are currently dependent on the efforts
of a limited number of management personnel. We believe that, given the
development stage of our business and the large amount of responsibility being
placed on each member of our
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management team, the loss of the services of any member of this team at the
present time would harm our business. Each member of our management team
supervises the operation and growth of one or more integral parts of our
business.
BOARD OF DIRECTORS AND COMMITTEES
Our board of directors is divided into three classes, each of which
generally serves for a term of three years, with only one class of directors
being elected in each year. The term of office of the first class of directors,
currently consisting of Mr. Kandel, will expire in 2002, the term of office of
the second class of directors, currently consisting of Mr. Kim, will expire in
2001, and the term of office of the third class of directors, currently
consisting of Messrs. Higgins and Ellett, will expire in 2000. In each case,
each director will hold office until the next annual meeting of stockholders at
which his class of directors is to be elected, or until his successor is duly
qualified and appointed.
The board maintains an audit committee, currently composed of Messrs.
Higgins, Ellett and Kandel. The board also maintains a compensation committee
composed of Messrs. Higgins, Ellett and Kandel.
The responsibilities of the audit committee include, in addition to other
duties that the board may specify:
o recommending to the board the appointment of independent certified
public accountants;
o reviewing the timing, scope and results of the independent certified
public accountants' audit examination and the related fees;
o reviewing periodic comments and recommendations by our independent
certified public accountants and our responses to those comments;
o reviewing the scope and adequacy of internal accounting controls and
internal auditing activities; and
o making recommendations to the board with respect to significant
changes in accounting policies and procedures.
The responsibilities of the compensation committee include, in addition to
other duties that the board may specify:
o reviewing and recommending to the board the salaries, compensation
and benefits of our executive officers and key employees;
o reviewing any related party transactions on an ongoing basis for
potential conflicts of interest; and
o administering our stock option plans, if not administered by the full
board.
COMPENSATION OF DIRECTORS
Non-employee directors will be reimbursed for reasonable travel and lodging
expenses incurred in attending meetings of the board of directors and any
committee on which they may serve. Each non-employee director also will receive
$500 for each board or committee meeting he attends. Each director also will be
eligible to receive grants of options at the discretion of the compensation
committee. In September 1999, we issued 2,500 shares of our common stock to each
of Messrs. Higgins and Ellett in consideration of their becoming directors of
b2bstores.com.
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EXECUTIVE COMPENSATION
We have entered into employment agreements with each of our officers. Each
of our officers are full-time employees of b2bstores.com, except Richard Kandel,
our chairman of the board. Under his employment agreement with us, Mr. Kandel is
required to devote only 50% of his business time to b2bstores.com.
The basic terms of each employment agreement are as follows:
<TABLE>
<CAPTION>
TERM OF
NAME OF OFFICER AGREEMENT ANNUAL SALARY BONUS OPTIONS
- --------------- --------- ------------------- -------- ---------
<S> <C> <C> <C> <C>
Richard Kandel 11/1/99 1st Year: $150,000 -- --
Chairman of the board to 2nd Year: 200,000
10/31/02 3rd Year: 250,000
Woo Jin Kim 08/1/99 $175,000 $ 75,000 300,000
Chief executive officer to shares
07/31/02
Jeffrey Crandell 08/15/99 $130,000 $ 70,000 175,000
Chief technology officer to shares
08/14/02
Mark Voorhis 09/15/99 $140,000 $ 70,000 175,000
Chief financial officer to shares
09/14/02
Shannon Jessup 08/15/99 $130,000 $ 70,000 175,000
Executive vice president to shares
08/14/02
Brian Wharton 08/15/99 $130,000 $ 70,000 175,000
Executive vice president to shares
08/14/02
</TABLE>
The bonuses payable to Mr. Kim are due in installments upon the attainment
by b2bstores.com of performance objectives as follows:
o $25,000 upon the hiring of qualified persons to fill key management
positions. This has been accomplished.
o $25,000 upon the introduction of 25 or more product categories at our
web site.
o $25,000 upon consummation of this offering.
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<PAGE>
The bonuses payable to the other officers set forth above include a payment
of $20,000 to each officer upon consummation of this offering. For each officer,
the remaining bonus amounts represent up to $12,500 payable after each quarter
in 2000 that performance objectives are achieved by b2bstores.com. The
objectives are as follows:
GOALS FOR CASH BONUSES
<TABLE>
<CAPTION>
Q1-2000 Q2-2000 Q3-2000 Q4-2000
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue................................ $626,000 $1,867,500 $4,252,000 $7,280,000
Margin................................. 6.00% 6.00% 7.00% 7.00%
Avg. hits per month.................... 333,333 750,000 1,300,000 2,083,333
</TABLE>
Each of Mr. Crandell, Mr. Voorhis, Ms. Jessup and Mr. Wharton will be
granted options upon the effective date of this prospectus with an exercise
price equal to 80% of the offering price in this offering. These options will
vest as follows:
o Mr. Kim's options vest with respect to 150,000 shares upon completion
of this offering. Options to purchase an additional 50,000 shares
will vest in each of August 2000, 2001 and 2002.
o Each of Mr. Crandell's and Mr. Wharton's options vest with respect to
87,500 shares, 43,750 shares and 43,750 shares in August 2000, 2001
and 2002, respectively.
o Mr. Voorhis' options vest with respect to 87,500 shares, 43,750
shares and 43,750 shares in September 2000, 2001 and 2002,
respectively.
o Ms. Jessup's options with respect to 50,000 shares vest upon
consummation of this offering. Options to purchase an additional
62,500 shares, 31,250 shares and 31,250 shares will vest in August
2000, 2001 and 2002, respectively.
In addition, each of Mr. Crandell, Mr. Voorhis, Ms. Jessup and Mr. Wharton
will also be entitled to receive options to purchase up to 12,500 additional
shares at fair market value on the date the option is granted after each quarter
in 2000 upon the attainment by b2bstores.com of performance objectives. These
objectives are as follows:
GOALS FOR STOCK BONUSES
<TABLE>
<CAPTION>
Q1-2000 Q2-2000 Q3-2000 Q4-2000
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue................................ $688,600 $2,054,250 $4,677,200 $8,008,000
Margin................................. 6.60% 6.60% 7.70% 7.70%
Avg. hits per month.................... 366,666 825,000 1,430,000 2,291,666
</TABLE>
Our employment agreement with each of these officers contains provisions
prohibiting competition with us during their employment with us and for
prescribed periods of time after termination of employment. However, some state
courts may not enforce one or more of these provisions as a matter of public
policy. In these circumstances, we may not be able to prevent an officer from
competing with us, which could have an adverse impact on our business.
40
<PAGE>
POTENTIAL CONFLICTS OF INTEREST
Mr. Kandel's position as a director, officer and stockholder of each of
b2bstores.com and Enviro-Clean may create or appear to create potential
conflicts of interest when he is faced with decisions that could have different
implications for b2bstores.com and Enviro-Clean. These decisions may relate to:
o potential acquisitions of businesses,
o intercompany agreements,
o the establishment of e-commerce marketing arrangements and other
areas of competition,
o the issuance or disposition of securities, and
o the election of directors.
We have an intercompany agreement with Enviro-Clean relating to, among
other things, its provision to us of fulfillment services for some of our
products, and our provision to it of various e-commerce services. This
agreement, as well as other aspects of our relationship with Enviro-Clean are
described under the section of this prospectus entitled "Certain Transactions."
We believe that the terms of this agreement are no less favorable to us than
could have been obtained from an unaffiliated third party.
Our by-laws provide that we will not enter into new material agreements
with Enviro-Clean or any other affiliate unless those agreements are approved by
a majority of our directors who are not affiliated with that affiliate. This
provision of our by-laws can only be amended by a majority of our directors who
are not affiliated with Enviro-Clean.
It is our policy that future transactions with affiliates, if any, will be
on terms no less favorable to us than we could have obtained from third-party
businesses.
1999 PERFORMANCE EQUITY PLAN
In September 1999, the board of directors adopted, and the stockholders
approved our 1999 Performance Equity Plan. The plan authorizes the granting of
awards of up to 2,000,000 shares of common stock to our key employees, officers,
directors and consultants. Awards consist of nonqualified options and options
intended to qualify as "incentive" stock options under Section 422 of the
Internal Revenue Code of 1986, restricted stock awards, deferred stock awards,
stock appreciation rights and other stock-based awards, as described in the
plan. As of the date of this prospectus, no options are outstanding under the
plan. We are obligated to grant options to purchase up to an aggregate of
200,000 shares of common stock under our plan to some of our officers in 2000 if
we achieve defined operating objectives. All of these grants would be at the
fair market value of our common stock at the date of grant. No person may be
awarded options to purchase more than 200,000 shares of common stock under the
plan in any year.
The plan is administered by the board of directors which determines the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms of each grant, including the vesting of the options, subject
to the provisions of the plan.
In connection with incentive stock options, the exercise price of each
option may not generally be less than 100% of the fair market value of the
common stock on the date of grant. With respect to a grantee holding more than
10% of our outstanding stock the exercise price of each option may not be less
than 110% of that fair market value. The aggregate fair market value of shares
for which incentive stock options are exercisable for
41
<PAGE>
the first time by an employee during any calendar year may not exceed $100,000.
Nonqualified stock options granted under the plan may be granted at a price
determined by the board of directors, not to be less than the fair market value
of the common stock on the date of grant.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our by-laws include provisions permitted under Delaware law by which our
officers and directors are to be indemnified against various liabilities. These
provisions of the by-laws have no effect on any director's liability under
federal securities laws or the availability of equitable remedies, including
injunction or recission, for breach of fiduciary duty. We believe that these
provisions will facilitate our ability to continue to attract and retain
qualified individuals to serve as our directors and officers.
With respect to indemnification for liabilities arising under the
Securities Act of 1933 we have been advised that in the opinion of the
Securities and Exchange Commission this type of indemnification is against
public policy as expressed in the Securities Act and is unenforceable.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this prospectus, the
number of shares of our outstanding common stock beneficially owned by:
o each of our directors;
o each person who is known by us to beneficially own 5% or more of our
common stock; and
o all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING SHARES
AMOUNT AND NATURE OWNED
OF BENEFICIAL --------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP BEFORE OFFERING AFTER OFFERING
- ------------------------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Richard Kandel.......................................... 3,233,333 80.4% 43.0%
Woo Jin Kim............................................. 150,000 3.7% 2.0%
Enviro-Clean of America, Inc.
211 Park Avenue
Hicksville, New York 11802........................... 2,000,000 49.7% 26.6%
Randall Davis
c/o Enviro-Clean of America, Inc.
211 Park Avenue
Hicksville, New York 11802........................... 2,333,333 58.0% 31.0%
Steven Etra
c/o Enviro-Clean of America, Inc.
211 Park Avenue
Hicksville, New York 11802........................... 2,169,334 53.9% 28.8%
John Higgins............................................ 2,500 -- --
Philip Ellett........................................... 2,500 -- --
All executive officers and directors as a group......... 3,438,333 81.4% 44.5%
</TABLE>
The address for each specified person, if not included under each person's
name, is c/o b2bstores.com Inc., at 249 East Ocean Boulevard, Suite 620, Long
Beach, California 90802.
A person is deemed to beneficially own voting securities that can be
acquired by that person within 60 days from the date of this prospectus upon the
exercise of options. Each beneficial owner's percentage ownership is determined
by assuming that the options held by that person, but not those held by any
other person, and which are exercisable within 60 days of the date of this
prospectus have been exercised. Unless otherwise noted, we believe that all
persons named in the table have sole voting and investment power with respect to
all shares of common stock beneficially owned by them.
Richard Kandel, Randall Davis and Steven Etra are principals of
Enviro-Clean.
43
<PAGE>
The information for Mr. Kandel represents:
o 1,066,666 shares owned directly by Mr. Kandel,
o 100,000 shares owned by a profit sharing plan controlled by
Mr. Kandel on behalf of Kandel & Sons, another company owned by him,
o 66,667 shares owned by Mint Corp. of N.Y., an entity controlled by
Mr. Kandel, and
o 2,000,000 shares owned by Enviro-Clean.
Because our chairman of the board, Richard Kandel, will continue to
control b2bstores.com after the offering, your ability as a stockholder to
influence the management of b2bstores.com will be extremely limited. Mr. Kandel
beneficially owns approximately 80.4% of our outstanding common stock prior to
this offering, and will own approximately 43.0% upon completion of this
offering. He will be in a position to significantly influence any matter put to
a vote of our stockholders, including with respect to the election of our
directors.
Given his positions with both b2bstores.com and Enviro-Clean, Mr. Kandel's
interests, at times, could conflict with the interest of b2bstores.com and our
stockholders. Enviro-Clean maintains an online presence at www.b2bgoods.com and
through this web site sells products related to its janitorial and sanitary
maintenance operations. All of these products are also available through our web
site. In this regard, Enviro-Clean could be deemed a competitor of ours.
The information for Mr. Kim represents shares issuable upon exercise of
options that will vest upon consummation of this offering. It does not include
150,000 shares issuable upon exercise of options that will vest in three equal
annual installments commencing in August 2000.
The information for Mr. Davis represents (a) 333,333 shares owned directly
by Mr. Davis and (b) 2,000,000 shares owned by Enviro-Clean, a company of which
Mr. Davis is president and a principal stockholder.
The information for Mr. Etra represents:
o 158,667 shares owned directly by Mr. Etra;
o 10,667 shares owned by SRK Associates, a company of which Mr. Etra is
an owner; and
o 2,000,000 shares owned by Enviro-Clean, of which Mr. Etra is a
stockholder and director.
Our executive officer and director group is comprised of the following
eight persons:
o Richard Kandel
o Woo Jin Kim
o Mark Voorhis
o Jeffrey Crandell
o Shannon Jessup
o Brian Wharton
o John Higgins
o Philip Ellett
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<PAGE>
The information for the group includes:
o all the shares beneficially owned by Messrs. Kandel, Kim, Higgins and
Ellett; and
o includes 50,000 shares issuable to Ms. Jessup upon exercise of the
options that will vest upon consummation of this offering.
The information for the group does not include:
o the shares specifically excluded from each person's ownership as
described above;
o 125,000 shares issuable to Ms. Jessup upon exercise of options that
will vest in annual installments commencing in August 2000;
o 175,000 shares issuable to Mr. Wharton upon exercise of options that
will vest in annual installments commencing in August 2000;
o 175,000 shares issuable to Mr. Crandell upon exercise of options that
will vest in annual installments commencing in August 2000; and
o 175,000 shares issuable to Mr. Voorhis upon exercise of options that
will vest in annual installments commencing in September 2000.
45
<PAGE>
CERTAIN TRANSACTIONS
Enviro-Clean is a supplier of janitorial and maintenance products and
services. It is a principal stockholder of b2bstores.com. There are aspects of
our relationship with Enviro-Clean of which you should be aware, including the
following:
o Richard Kandel, our chairman of the board is also the chairman of the
board, chief executive officer and principal stockholder of
Enviro-Clean;
o Enviro-Clean sells through the Internet many of the same janitorial
and maintenance products that we sell, and may be deemed a competitor
of ours in this regard;
o Given Mr. Kandel's roles with both b2bstores.com and Enviro-Clean and
the potentially competitive position of each business, he may not
always be able to align his interest with the interests of both
businesses. The manner in which any conflict of interest in any
situation is resolved may not be the manner that would be most
beneficial to the interests of the stockholders of b2bstores.com;
o Under an agreement we have with Enviro-Clean, it is prohibited from
selling other types of products through its own web site until it
owns less than 10% of our outstanding common stock;
o Under an agreement we have with Enviro-Clean, it is prohibited from
selling its products through any web site other than its own and ours
until it owns less than 10% of our outstanding common stock;
o Randall Davis, a principal stockholder of our b2bstores.com, is also
president and a principal stockholder of Enviro-Clean. Steven Etra, a
stockholder of b2bstores.com, also is a director and stockholder of
Enviro-Clean.
o Mr. Kandel is the founder and promoter of b2bstores.com.
The relationship between Enviro-Clean and b2bstores.com and their
affiliates is more fully described below. All transactions between b2bstores.com
and Enviro-Clean have been on terms no less favorable to b2bstores.com than
could have been obtained from third parties. Each transaction has been
unanimously approved by the respective board of directors of b2bstores.com and
Enviro-Clean.
EARLY FINANCING OF B2BSTORES.COM.
Since our inception in June 1999, our working capital requirements had been
satisfied through:
o capital contributions made by our current stockholders, including
Mr. Kandel, Mr. Davis, Mr. Etra and Enviro-Clean, and
o loans made to us by Enviro-Clean.
In June 1999, we issued an aggregate of 3,666,667 shares of our common
stock for $27,500 in the form of $11,000 in cash and the transfer to us of the
web address, www.b2bstores.com. These shares were issued as follows:
o 1,000,000 shares to Mr. Kandel;
o 2,000,000 shares to Enviro-Clean;
o 66,667 shares to Mint Corp. of NY, a company owned by Mr. Kandel;
46
<PAGE>
o 66,667 shares to Steven Etra, a director and stockholder of
Enviro-Clean;
o 333,333 to Randall Davis, a director and officer of Enviro-Clean; and
o an aggregate of 200,000 shares to other persons not affiliated with
Enviro-Clean of b2bstores.com.
In June, July, November and December 1999 and January 2000, Enviro-Clean
made loans to us in the aggregate principal amount of approximately $975,000.
These loans bear interest at the rate of 8% per annum and are repayable on the
earlier of (a) January 31, 2000 and (b) the date this offering is consummated. A
portion of the proceeds of this offering will be used to repay these loans,
together with interest.
At the time of the issuance of the shares to Enviro-Clean and the other
persons described above, b2bstores.com had only nominal assets and needed to
assemble a management team and hire an employee staff. The number of shares
issued to Enviro-Clean and these other persons were determined through
arm's-length negotiations. These transactions between b2bstores.com and
Enviro-Clean were unanimously approved by their respective board of directors.
In August 1999, we consummated a financing in which we raised proceeds of
$625,000 through the sale of 333,333 shares of our common stock as follows:
o 66,666 shares to Mr. Kandel;
o 100,000 shares to K&S PSP, a profit sharing plan of which Mr. Kandel
is a trustee;
o 92,000 shares to Steven Etra;
o 26,667 shares to Richard Etra, Steven Etra's cousin;
o 37,333 shares to Kenneth Etra, Steven Etra's cousin and brother of
Richard Etra;
o 10,667 shares to SRK Associates, a company owned by Steven, Richard
and Kenneth Etra.
In September 1999, we issued an aggregate of 16,643 shares of our common
stock to various persons in consideration of services rendered by them to
b2bstores.com. These persons also render services to or are employed by
Enviro-Clean. We also issued 2,500 shares of our common stock to each of John
Higgins and Philip Ellett in consideration of their becoming directors of
b2bstores.com.
ENVIRO-CLEAN HAS GUARANTEED SOME OF OUR OBLIGATIONS
Enviro-Clean has furnished some of our vendors with guarantees with respect
to our obligations to them as part of our early stage development. Although we
anticipate that our receipt of the net proceeds of this offering will eliminate
our need to supply similar guarantees to vendors in the future, if additional
guarantees should be necessary, Enviro-Clean has no obligation, and may not have
the financial ability, to provide them.
During its formation, b2bstores.com used the offices of Enviro-Clean as a
mailing and contact address. No commercial operations were ever conducted from
the offices of Enviro-Clean and no rent, fees or other consideration was paid to
Enviro-Clean in this regard. Shortly after its formation, b2bstores.com obtained
the office space described in the "Business" section under the subsection
entitled "Properties." Because we are a development stage enterprise without an
operating history, the owner of the premises required a guarantor for the lease.
Enviro-Clean signed the lease as the guarantor. Enviro-Clean received no
compensation or other consideration for acting as our guarantor.
We will seek to have Enviro-Clean released from these guarantees upon
completion of the offering.
47
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
Our authorized capital stock consists of 25,000,000 shares of common stock,
$.01 par value per share, and 5,000,000 shares of preferred stock, $.01 par
value per share. Upon consummation of this offering, there will be outstanding
7,521,643 shares of common stock and no shares of preferred stock.
COMMON STOCK
The holders of our common stock are entitled to one vote per share on all
matters to be voted upon by our stockholders. The holders of common stock do not
have cumulative voting rights, which means that the holders of more than 50% of
the outstanding shares can elect all of our directors. The holders of our common
stock are entitled to receive dividends, if any, as may be declared from time to
time by the board of directors out of legally available funds. In the event we
are liquidated or dissolved, the holders of our common stock are entitled to
receive all assets available for distribution to the stockholders. The holders
of common stock have no preemptive or other subscription rights, and there are
no conversion rights or redemption or sinking fund provisions with respect to
the common stock. All outstanding shares of common stock are, and the shares to
be issued in this offering will be, validly issued, fully paid and
nonassessable.
Prior to this offering, there has been no public market for our shares.
Although we have applied for quotation of our common stock on the Nasdaq
SmallCap Market, there can be no assurance that this application will be
approved. It is anticipated that this offering will not be completed until and
unless our common stock is approved for quotation on the Nasdaq SmallCap Market.
Even if our application to the Nasdaq SmallCap Market is approved, an active
trading market for our shares may not develop. If an active trading market is
not developed or maintained, the liquidity and trading price of our common stock
could be adversely affected. The per-share price in this offering was determined
by negotiations between us and the underwriters. It may bear no relationship to
the price at which the shares will trade upon completion of this offering. It
also is not indicative of the future market performance of our common stock.
PREFERRED STOCK
We are authorized to issue preferred stock, which may be issued from time
to time in one or more series upon authorization by the board of directors. The
board of directors, without further approval of the stockholders, is authorized
to fix the dividend rights, voting rights, redemption rights and any other
rights, preferences, privileges and restrictions applicable to each series of
preferred stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes could, among
other things, adversely affect the voting power of the holders of common stock
and, in some circumstances, make it more difficult for a third party to gain
control of b2bstores.com, discourage bids for our common stock at a premium or
otherwise adversely affect the market price of the common stock.
48
<PAGE>
SHARES AVAILABLE FOR FUTURE SALE
Substantially all of the 4,021,643 shares of our common stock outstanding
prior to this offering will become saleable under Rule 144 of the Securities Act
in June 2000, with the balance becoming saleable in August and September 2000.
Although the holders of these shares of common stock have signed agreements with
the underwriters under which they are restricted from selling our common stock
during the 12-months period following consummation of this offering, sales or
the expectation of sales of a substantial number of shares of our common stock
in the public market could adversely affect the prevailing market price of our
common stock.
In general, under Rule 144 as currently in effect, a person who has owned
restricted shares of common stock beneficially for at least one year is entitled
to sell, within any three-month period, a number of shares that does not exceed
the greater of the then average weekly trading volume and 1% of the total number
of outstanding shares of the same class. Sales under Rule 144 are also subject
to manner of sale provisions, notice requirements and the availability of
current public information about us. A person who has not been one of our
affiliates for at least the three months immediately preceding the sale and who
has beneficially owned shares of common stock for at least two years is entitled
to sell the shares under Rule 144 without regard to any of the limitations
described above.
The exercise of options and other securities to purchase our common stock
may also adversely affect the market price for our common stock and will dilute
the percentage ownership of our other stockholders. The dilutive effect upon the
exercise of these securities might also adversely affect our ability to obtain
additional capital. The holders of these securities may be expected to exercise
them when we would be able to obtain additional equity capital on terms more
favorable than these securities.
At the date of consummation of this offering, there will be outstanding
options to purchase 1,000,000 shares of our common stock. We also have
obligations under existing employment agreements which may cause us to grant
additional options to purchase up to 200,000 shares of our common stock under
our 1999 Performance Equity Plan during 2000. We also may grant options to
purchase up to an additional 1,800,000 shares of common stock under our plan and
other options and warrants to purchase common stock outside of the plan. We will
also issue warrants to the representatives to purchase up to 350,000 shares of
our common stock in connection with this offering.
TRANSFER AGENT
American Stock Transfer & Trust Company, 40 Wall Street, New York, New York
10005, acts as transfer agent for our common stock.
DIVIDENDS
We expect to retain all earnings generated by our operation for the
development and growth of our business, and do not anticipate paying any cash
dividends to our stockholders in the foreseeable future. The payment of future
dividends on the common stock and the rate of those dividends, if any, will be
determined by our board of directors in light of our earnings, financial
condition, capital requirements and other factors.
49
<PAGE>
We have agreed with the representatives that we will not declare a dividend
during the eighteen-month period beginning on the effective date of this
prospectus without their prior written consent.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS
Provisions in our certificate of incorporation and bylaws may have the
effect of delaying or preventing a change of control or changes in our
management that a stockholder might consider favorable. These provisions
include, among others:
o the division of the board of directors into three separate classes;
o the right of the board to elect a director to fill a space created by
the expansion of the board;
o the ability of the board to alter our bylaws; and
o the ability of the board to issue series of preferred stock without
stockholder approval.
Further, because we are incorporated in Delaware, we are subject to the
provisions of Section 203 of the Delaware General Corporation Law. These
provisions prohibit some stockholders, including those owning 15% or more of the
outstanding voting stock, from consummating a merger or combination with a
corporation unless:
o 66 2/3% of the shares of voting stock not owned by the significant
stockholder approve the merger or combination; or
o our board of directors approves the merger or combination or the
transaction which resulted in the significant stockholder owning 15%
or more of our outstanding voting stock.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement, b2bstores.com Inc. has agreed to sell to each of the underwriters
named below, and each of the underwriters, for which Gaines, Berland Inc. and
Nolan Securities Corp. are acting as representatives, has severally, and not
jointly, agreed to purchase on a firm commitment basis the number of shares
offered in this offering set forth opposite their respective names below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---- ---------
<S> <C>
Gaines, Berland Inc....................................................................
Nolan Securities Corp..................................................................
---------
Total 3,500,000
---------
---------
</TABLE>
A copy of the underwriting agreement has been filed as an exhibit to this
registration statement.
The representatives have advised us that the underwriters propose to offer
the shares to the public at the initial public offering price on the cover page
of this prospectus. They may allow some dealers who are members of the NASD, and
some foreign dealers, concessions not in excess of $ per share and the
dealers who receive concessions may reallow a sum not in excess of $ per
share to other dealers who are members of the NASD and to some foreign dealers.
Upon completion of this offering, the offering price, the concession to selected
dealers, and the reallowance to other dealers may be changed by the
representatives. The representatives have informed us that they do not expect
discretionary sales by the underwriters to exceed five percent of the shares
offered by this prospectus.
We have agreed to pay to the representatives an expense allowance on a non-
accountable basis, equal to 2.0% of the gross proceeds derived from the sale of
shares offered in this offering. We paid an advance on this allowance in the
amount of $50,000.
We have also granted to the underwriters an option, exercisable during the
45-day period commencing on the date of this prospectus, to purchase at the
public offering price per share, less the underwriting discount and commissions
and the non-accountable expense allowance, up to an aggregate of 525,000 shares
of common stock. The underwriters may exercise that option if the underwriters
sell more shares than the total number set forth in the table above. If any
shares are purchased pursuant to this option, the underwriters will severally
purchase shares in approximately the same proportion as set forth in the table
above. The underwriters may exercise this right of purchase only for the purpose
of covering over-allotments, if any, made in connection with the sale of shares.
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<PAGE>
The following table provides information regarding the amount of the
discount to be paid to the underwriters by b2bstores.com:
<TABLE>
<CAPTION>
TOTAL WITHOUT TOTAL WITH
EXERCISE OF EXERCISE OF
DISCOUNT OVER-ALLOTMENT OVER-ALLOTMENT
PER SHARE OPTION OPTION
--------- -------------- --------------
<S> <C> <C> <C>
b2bstores.com.................................................... $ $ $
</TABLE>
We have also agreed to sell to the representatives for nominal
consideration, the representatives' warrants to purchase up to 350,000 shares of
common stock. The representatives' warrants are exercisable for a period of four
years commencing one year after the date of this prospectus at an exercise price
per share equal to $ .
The representatives' warrants may not be sold, transferred, assigned,
pledged, or hypothecated for a period of 12 months from the date of this
prospectus, except to officers or partners of the members of the selling group.
b2bstores.com has granted to the representatives one demand registration right
at b2bstores.com's expense for a period of five years from the effective date of
this offering and piggyback registration rights for a period of five years from
the effective date of this offering with respect to registration under the
Securities Act of the securities directly or indirectly issuable upon exercise
of the representatives' warrants.
The representatives' warrants contain anti-dilution provisions providing
for adjustments of the exercise price and number of shares issuable on exercise
of the representatives' warrants, upon the occurrence of some events, including
stock dividends, stock splits, and recapitalizations. The holders of the
representatives' warrants have no voting, dividend, or other rights as a
stockholder with respect to shares of common stock underlying the
representatives' warrants, unless the representatives' warrants shall have been
exercised.
In connection with this offering, we have granted the representatives the
right to designate one person for election to our board of directors for the
three-year period commencing on the closing date of this offering. In the event
the representatives elect not to exercise this right, then they may appoint an
observer to attend all meetings of our board of directors. This designee has the
right to notice of all meetings of the board of directors and to receive
reimbursement for all out-of-pocket expenses incurred to attend these meetings.
In addition, the designee will be entitled to indemnification to the same extent
as our directors.
We, and each of our officers, directors, and stockholders, have entered
into lock-up agreements under which we and they have agreed not to offer,
assign, issue, sell, hypothecate, or otherwise dispose of any shares of common
stock or securities of b2bstores.com convertible into, or exercisable or
exchangeable for, shares of common stock, without the prior written consent of
the representatives for a period of at least twelve months after the date of
this prospectus. Each securityholder may transfer securities of b2bstores.com,
or a beneficial interest in those securities, in a private transaction under an
exemption from registration provided that the transferee agrees in writing to be
bound by the terms of the lock-up agreement. The representatives may, at any
time and without notice, waive the terms of the lock-up agreements.
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<PAGE>
Before this offering, there has been no public market for the common stock
of b2bstores.com. The public offering price, negotiated between b2bstores.com
and the representatives, is based upon b2bstores.com's financial and operating
history and condition, its prospects, the prospects for the industry we are in
and prevailing market conditions.
Rules of the Securities and Exchange Commission may limit the ability of
the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities in accordance with the rules:
o Stabilizing transactions. The underwriters may make bids or purchases for
the purpose of pegging, fixing or maintaining the price of the shares, so
long as stabilizing bids do not exceed a specified maximum.
o Over-allotments and syndicate coverage transactions. The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage
in syndicate covering transactions by purchasing shares in the open
market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option.
o Penalty bids. If the representatives purchase shares in the open market
in a stabilizing transaction or syndicate coverage transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of these transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither we nor the underwriters makes any representation or prediction as
to the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq SmallCap Market, in the
over-the-counter market or on any trading market. If any of these transactions
are commenced, they may be discontinued without notice at any time.
We have agreed to indemnify the underwriters against some liabilities,
including civil liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in this respect.
53
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We will file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings will be available to the public
over the Internet at the SEC's web site at http://www.sec.gov. You may also read
and copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. These documents are also available at the
public reference rooms at the SEC's regional offices in New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms.
We have filed a registration statement on Form SB-2 under the Securities
Act of 1933 with the SEC. This prospectus is part of that registration statement
and, as permitted by the SEC's rules, does not contain all of the information
included in the registration statement. For further information about us and our
common stock, you may refer to the registration statement and its exhibits and
schedules. You can review and copy these documents at the public reference
facilities maintained by the SEC or on the SEC's web site as described above.
This prospectus may contain summaries of contracts or other documents. If
you would like complete information about a contract or other document, you
should read the copy filed as an exhibit to the registration statement.
LEGAL MATTERS
Legal matters in connection with this offering are being passed upon by the
law firm of Graubard Mollen & Miller, New York, New York. Orrick, Herrington &
Sutcliffe LLP is acting as counsel for the underwriters in connection with the
offering.
EXPERTS
The financial statements included in this prospectus and in the
registration statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the period set forth in
their report appearing elsewhere herein and in the registration statement, and
are included in reliance upon this report, given upon the authority of BDO
Seidman, LLP, as experts in auditing and accounting. This report contains an
explanatory paragraph indicating substantial doubt about our ability to continue
as a going concern.
54
<PAGE>
B2BSTORES.COM INC.
<TABLE>
<CAPTION>
INDEX
-----
<S> <C>
Report of Independent Certified Public Accountants........................................................ F-2
Financial Statements:
Balance Sheet.......................................................................................... F-3
Statement of Loss...................................................................................... F-4
Statement of Stockholders' Equity...................................................................... F-5
Statement of Cash Flows................................................................................ F-6
Summary of Business and Significant Accounting Policies................................................ F-7
Notes to Financial Statements.......................................................................... F-10
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders
b2bstores.com Inc.
Long Beach, California
We have audited the accompanying balance sheet of b2bstores.com Inc., a company
in the development stage, as of August 31, 1999, and the related statements of
loss, stockholders' equity and cash flows for the period from June 28, 1999
(inception) to August 31, 1999. 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 b2bstores.com Inc. at August
31, 1999, and the results of its operations and its cash flows for the period
from June 28, 1999 (inception) to August 31, 1999, in conformity with generally
accepted accounting principles.
As discussed in Note 1, the accompanying financial statements have been prepared
assuming b2bstores.com Inc. will continue as a going concern. The Company is in
the development stage and has had no revenues from operations and will require
substantial additional funds for development and marketing of its products.
These matters raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. The Company is pursuing sources of
additional financing (see Note 6) and there can be no assurance that any such
financing will be available to the Company on commercially reasonable terms, or
at all. Any inability to obtain additional financing will have a material effect
on the Company, including possibly requiring the Company to significantly
curtail or cease operations.
/s/ BDO Seidman, LLP
New York, New York
September 30, 1999, except for
Note 2 which is as of November 15, 1999
F-2
<PAGE>
B2BSTORES.COM INC.
BALANCE SHEET
AUGUST 31, 1999
<TABLE>
<S> <C>
ASSETS
Current:
Cash......................................................................................... $ 669,121
Security deposit................................................................................ 25,525
Deferred offering costs (Note 5)................................................................ 52,451
Property and equipment.......................................................................... 6,809
-----------
$ 753,906
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued expenses............................................................................. $ 123,436
Due to principal stockholder (Note 2)........................................................ 179,836
-----------
Total current liabilities....................................................................... 303,272
-----------
Commitments (Note 3)
Stockholders' equity (Notes 4 and 6):
Preferred stock, $.01 par value--shares authorized 5,000,000; none issued.................... --
Common stock, $.01 par value--shares authorized 25,000,000; issued 4,000,000................. 40,000
Additional paid-in capital................................................................... 2,497,500
Deficit accumulated during the development stage............................................. (2,086,866)
-----------
Total stockholders' equity...................................................................... 450,634
-----------
$ 753,906
-----------
-----------
</TABLE>
See accompanying summary of business and significant accounting policies and
notes to financial statements.
F-3
<PAGE>
B2BSTORES.COM INC.
STATEMENT OF LOSS
PERIOD FROM JUNE 28, 1999 (INCEPTION) TO AUGUST 31, 1999
<TABLE>
<S> <C>
Operating expenses:
General and administrative........................................................ $ 31,875
Sales and marketing............................................................... 23,060
Start-up costs.................................................................... 130,431
Stock-based compensation relating to start-up
activities (Note 4)............................................................ 1,901,500
-----------
Total operating expenses.......................................................... 2,086,866
-----------
Net loss............................................................................. $(2,086,866)
-----------
-----------
Loss per share (basic and diluted)................................................... $ (.56)
-----------
-----------
Weighted average common shares outstanding (basic and diluted)....................... 3,712,820
-----------
-----------
</TABLE>
See accompanying summary of business and significant accounting policies and
notes to financial statements.
F-4
<PAGE>
B2BSTORES.COM INC.
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM JUNE 28, 1999 (INCEPTION) TO AUGUST 31, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE TOTAL
------------------- PAID-IN DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY
--------- ------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock to
founding and other stockholders:
June 29, 1999................... 3,666,667 $36,667 $ -- $ -- $ 36,667
August 23, 1999................. 333,333 3,333 2,497,500 -- 2,500,833
Net loss........................... -- -- -- (2,086,866) (2,086,866)
--------- ------- ---------- ----------- -----------
Balance, August 31, 1999........... 4,000,000 $40,000 $2,497,500 $(2,086,866) $ 450,634
--------- ------- ---------- ----------- -----------
--------- ------- ---------- ----------- -----------
</TABLE>
See accompanying summary of business and significant accounting policies and
notes to financial statements.
F-5
<PAGE>
B2BSTORES.COM INC.
STATEMENT OF CASH FLOWS
PERIOD FROM JUNE 28, 1999 (INCEPTION) TO AUGUST 31, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss...................................................................................... $(2,086,866)
-----------
Adjustments to reconcile net loss to net cash used in operating activities:
Expense recognized in connection with issuance of common stock at a price below the
estimated fair value relating to start-up activities.................................. 1,901,500
Changes in assets and liabilities:
Increase in security deposit......................................................... (25,525)
Increase in accrued expenses......................................................... 123,436
-----------
Total adjustments.................................................................... 1,999,411
-----------
Net cash used in operating activities................................................ (87,455)
-----------
Cash flows from investing activities:
Capital expenditures.......................................................................... (6,809)
-----------
Cash flows from financing activities:
Deferred offering costs....................................................................... (52,451)
Loans from principal stockholders............................................................. 179,836
Proceeds from issuance of common stock to founding and other stockholders..................... 636,000
-----------
Net cash provided by financing activities........................................................ 763,385
-----------
Net increase in cash............................................................................. 669,121
Cash, beginning of period........................................................................ --
-----------
Cash, end of period.............................................................................. $ 669,121
-----------
-----------
</TABLE>
See accompanying summary of business and significant accounting policies and
notes to financial statements.
F-6
<PAGE>
B2BSTORES.COM INC.
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business
b2bstores.com Inc. ("b2bstores" or the "Company"), a development stage
enterprise, was incorporated on June 28, 1999 under the laws of the State of
Delaware. b2bstores is a branded Internet web site specifically designed to
assist business customers in the operation and development of their businesses.
The Company currently provides user-friendly online access to business products
and supplies, and will be expanded to provide access to business services,
auctions and business-related information and content.
Basis of Presentation
The financial statements have been prepared in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 7,
"Accounting and Reporting by Development Stage Enterprises," which requires
development stage enterprises to employ the same accounting principles as
operating companies.
Property and Equipment
Property and equipment are stated at cost. Depreciation will be computed
using the straight-line method over the estimated useful lives of the assets,
which range from two to five years.
Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash and due to
principal stockholder, approximated fair value as of August 31, 1999 because of
the relatively short maturity of the instruments.
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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-7
<PAGE>
B2BSTORES.COM INC.
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Fiscal Year End
The Company's fiscal year end is December 31.
Revenue Recognition
To date, the Company has not generated any revenues. b2bstore.com
anticipates that its revenue will primarily be comprised of sales of merchandise
either purchased by b2bstores.com or placed on consignment with b2bstores.com,
commissions, advertising and other revenue.
The Company will recognize revenues according to:
o the type of product or service being sold,
o the structure of the contract negotiated with the individual vendor, and
o the substantive nature of the risks of ownership we incur in connection
with the sale and shipment of the product.
For product sales involving substantive risk of ownership, the Company will
generally recognize revenue at the gross transaction value. For service and
referral sales where risk of loss is minimal, the Company will generally
recognize revenue on a net fee or commission basis. For auction sales where the
Company incurs risk of loss in the transactions, it will recognize gross
revenues. For auction sales where the Company acts as auctioneer and have little
risk of loss, it will recognize revenue on a net basis or transaction fee basis.
Currently policy setting groups of the Emerging Issues Task Force and the
Financial Accounting Standards Board are reviewing the guidelines under which
revenue is recognized on a gross basis versus a net basis. As the Company
currently recognizes certain of its revenue on a gross basis, there is a risk
that future guidelines may require the Company to change, retroactively, its
revenue recognition policy. This could cause the Company to report markedly
lower revenues than currently anticipated. Although such a change would cause
the Company to report markedly lower revenues and costs of products, it would
not change the Company's reporting with respect to other expenses, net revenue
or earnings before and after tax.
The Company will allow customers to return merchandise in certain
circumstances, accordingly, the Company will not recognize revenue from the sale
of those products covered by the return policy until the return policy period
has expired or the customers right of return has expired. The Company will
recognize the sales amount as deferred revenue upon verification of the credit
card transaction authorization and shipment of the merchandise.
F-8
<PAGE>
B2BSTORES.COM INC.
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Advertising Revenue
The Company will also earn revenue from the sale of advertising on its web
site. These revenues will be recognized as the advertisement is displayed.
Comprehensive Income
The Company is required to report comprehensive income under SFAS No. 130,
"Reporting Comprehensive Income", which establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. There were no
items of comprehensive income during the period presented.
Income Taxes
The Company uses the liability method of accounting for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes". Deferred income tax
assets and liabilities are recognized based on the temporary differences between
the financial statement and income tax bases of assets, liabilities and
carryforwards using enacted tax rates. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amount expected to be
realized.
The Company has net operating losses ("NOL") of approximately $60,000 which
expire in 2019. The deferred tax asset resulting from this NOL has been offset
with a valuation allowance.
Loss Per Share
Basic loss per share is based only on the average number of common shares
outstanding for the period. Diluted loss per share is similar to basic loss per
share except that the weighted average number of common shares outstanding is
increased to include the weighted average number of additional common shares
that would have been outstanding if dilutive potential common shares, such as
options and warrants, had been issued. Dilutive potential common shares are
excluded from the computation if their effect is antidilutive.
Stock-Based Compensation
The Company accounts for its stock option awards under the intrinsic value
based method of accounting prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees". Under the intrinsic value
based method, compensation cost is the excess, if any, of the fair market value
of the stock at grant date or other measurement date over the amount an employee
must pay to acquire the stock. The Company will make pro forma disclosures of
net income and earnings per share as if the fair value based method of
accounting had been applied, as required by SFAS No. 123, "Accounting for
Stock-Based Compensation."
F-9
<PAGE>
B2BSTORES.COM INC.
NOTES TO FINANCIAL STATEMENTS
1. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in the development
stage and has had no revenues from operations since inception. There can be no
assurance that the Company will be able to obtain the substantial additional
capital resources necessary to pursue its business plan or that any assumptions
relating to its business plan will prove to be accurate. The Company is pursuing
sources of additional financing (see Note 6) and there can be no assurance that
any such financing will be available to the Company on commercially reasonable
terms, or at all. Any inability to obtain additional financing will have a
material adverse effect on the Company, including possibly requiring the Company
to significantly curtail or cease operations.
These factors raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
2. DUE TO PRINCIPAL STOCKHOLDER
At August 31, 1999, the Company had a promissory note payable to one
stockholder of $179,836 that bears interest at the rate of 8% per year.
Principal and interest are due and payable on the earlier of (i) December 31,
1999 and (ii) the date the Company consummates an offering of its equity
securities yielding gross proceeds of at least $2,000,000. On November 15, 1999
the Company and the stockholder amended and restated the promissory note to
provide for borrowings of up to $1,000,000 with principal and interest at the
rate of 8% due upon the earlier of (i) February 1, 2000 and (ii) the date the
Company consummates an offering of its equity securities yielding gross proceeds
of at least $2,000,000.
3. COMMITMENTS
Employment Agreements
In August and September 1999, the Company entered into employment
agreements with certain employees providing for future minimum annual
compensation as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
- ----------------------
<S> <C>
2000.............................................................................................. $ 820,000
2001.............................................................................................. 895,000
2002.............................................................................................. 945,000
----------
$2,660,000
----------
----------
</TABLE>
Certain of these employees are entitled to receive aggregate bonuses of up
to $355,000 upon the attainment by the Company of certain objectives, including
the hiring of certain employees and the consummation of an initial public
offering ("IPO") of the Company's common stock. Of this amount, $25,000 has been
subsequently earned and
F-10
<PAGE>
B2BSTORES.COM INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. COMMITMENTS--(CONTINUED)
$105,000 will be earned upon consummation of the IPO. These amounts will be paid
out of the proceeds of the IPO.
These employees will also be granted on the effective date of the
registration statement for the Company's IPO (the "Effective Date") stock
options to purchase 1,000,000 shares of the Company's common stock at an
exercise price equal to 80% of the market price established on the Effective
Date. The options will have a contractual life of approximately 10 years. Of
these options, 200,000 will vest at the time of grant. The remaining options
will vest over a period of three years. In connection with the issuance of these
options, the Company will record compensation expense based on the excess of the
fair market value on the Effective Date and the exercise price of such options.
The agreements also provide for certain key employees, for each calendar
quarter during calendar year 2000, to be granted options under the 1999
Performance Equity Plan (the "Plan") (See Note 6) (if they are still employed)
to purchase 50,000 shares of common stock at a per share price equal to the last
sales price of the Company's common stock on the last trading day prior to the
date of grant, assuming the successful completion of the IPO, or fair value.
Lease Commitments
The Company leases office space for its corporate headquarters in Long
Beach, California under an operating lease through August 2001. The minimum
lease payments required under the noncancellable operating lease for the years
subsequent to August 31, 1999 are:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
- ----------------------
<S> <C>
2000................................................................................................ $ 77,000
2001................................................................................................ 77,000
--------
$154,000
--------
--------
</TABLE>
Total rent expense for the period ending August 31, 1999 was $3,000.
Service Agreement
During July 1999, the Company entered into an e-commerce system service
agreement with Netgateway pursuant to which Netgateway designs, develops,
maintains and houses the Company's web site. For these services the Company has
paid an up-front fee with additional nominal operating fees payable to
Netgateway based on the number of hits on the web site. Netgateway will also be
entitled to a small percentage of all revenues generated from sales (varying
according to sales volume) processed through the Company's e-commerce
infrastructure, whether as a result of sales of products by the Company or sales
by other web sites to which the Company provides vendor management or processing
services. The Company is also obligated to share equally with Netgateway all
advertising and "click-through" revenues generated through the Company's web
site. This service
F-11
<PAGE>
B2BSTORES.COM INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. COMMITMENTS--(CONTINUED)
agreement extends through February 2001 and is subject to automatic renewals for
successive one-year terms unless terminated by either party with six months
notice prior to the lapse of the initial term or any renewal term thereafter.
4. STOCKHOLDERS' EQUITY
Capital Stock
On June 28, 1999, the Company's Board of Directors authorized capital stock
consisting of 25,000,000 shares of common stock, $.01 par value per share, and
5,000,000 shares of preferred stock, $.01 par value per share.
Issuance of Common Stock
On June 29, 1999, the founding stockholder and other investors of the
Company purchased 3,666,667 shares of common stock with an original par value of
$27,500 for $11,000 in cash. The difference between the cash paid and the par
value of the stock of $16,500, which represented the value of the web address
b2bstores.com contributed by the principal stockholder, was recorded as a
non-cash compensation charge to operations. In connection with the stock split
of the Company's common stock (see Note 6), the Company recorded an additional
non-cash compensation charge to operations of $9,000.
On August 23, 1999, the Company sold 333,333 shares of its common stock for
$625,000 to certain investors including its chairman of the board and certain
affiliates. In connection with the August 23, 1999 issuance, the Company
recorded a non-cash compensation charge to operations of $1,875,000,
representing the difference between the selling price of the stock and its
estimated fair value. In connection with the stock split of the Company's common
stock (see Note 6), the Company recorded an additional non-cash compensation
charge to operations of $1,000.
5. DEFERRED OFFERING COSTS
The Company has incurred costs of $52,451, in connection with the IPO (see
Note 6). Upon consummation of the IPO, the deferred offering costs will be
charged to equity. Should the IPO prove to be unsuccessful, these deferred
costs, as well as additional expenses to be incurred, will be charged to
operations.
6. SUBSEQUENT EVENTS
Initial Public Offering
On September 27, 1999, the Board of Directors authorized the management of
the Company to file a registration statement for the IPO of the Company's common
stock. The Company plans to raise gross proceeds of $35,000,000. There can be no
assurance that the financing will occur. The Company plans to issue 350,000
common stock purchase warrants to representatives of the underwriters in
connection with the IPO.
F-12
<PAGE>
B2BSTORES.COM INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. SUBSEQUENT EVENTS--(CONTINUED)
Stock Split
The Company's Board of Directors authorized a 4 for 3 split of its common
stock in the form of a stock dividend, effective September 28, 1999. All shares
and per-share amounts in the accompanying financial statements have been
restated to give effect to the stock split.
Issuance of Common Stock
In September 1999, the Company issued an aggregate of 16,643 shares of
common stock to consultants in connection with services rendered to the Company
and 5,000 shares to directors. The shares were valued at $10 per share.
1999 Performance Equity Plan
On September 30, 1999, the Board of Directors and stockholders approved the
Plan. The Plan authorizes the granting of awards up to 2,000,000 shares of
common stock to key employees, officers, directors and consultants. Awards
consist of stock options (both nonqualified options and options intended to
qualify as "Incentive" stock options under Section 422 of the Internal Revenue
Code of 1986, as amended), registered stock awards, deferred stock awards, stock
appreciation rights and other stock-based awards, as described in the Plan. No
options have been granted under the Plan.
F-13
<PAGE>
3,500,000 SHARES
COMMON STOCK
[LOGO]
b2bstores.com
------------------------
PROSPECTUS
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF COMMON STOCK.
GAINES, BERLAND INC. NOLAN SECURITIES CORP.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended, authorizes
the Registrant to indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorneys' fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Registrant if it is determined that such
person acted in accordance with the applicable standard of conduct set forth in
such statutory provisions. Article IV of the Registrant's By-Laws extends such
indemnities to the full extent permitted by Delaware law.
The Registrant may also purchase and maintain insurance for the benefit of
any director or officer which may cover claims for which the Registrant could
not indemnify such persons.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated expenses in connection
with the offering described in the Registration Statement, all of which will be
borne by the Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee................... $ 12,358
Nasdaq Filing Fees.............................................. 69,375
Boston Stock Exchange Fees...................................... 15,000
NASD Filing Fees................................................ 4,945
Accountants' Fees............................................... 100,000
Legal Fees...................................................... 175,000
Printing and engraving.......................................... 200,000
Transfer Agent.................................................. 10,000
Blue Sky Fees................................................... 50,000
Miscellaneous................................................... 13,322
--------
Total..................................................... $650,000
--------
--------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
We were formed in June 1999. In our initial round of capitalization on
June 28, 1999, we sold an aggregate of 3,666,667 shares of common stock to
sophisticated purchasers for $27,500 in the form of $11,000 cash and the
transfer to us of any right, title and interest they otherwise might have had in
the web address www.b2bstores.com, in reliance on the exemption under
Section 4(2) of the Securities Act of 1933. These persons were given the
opportunity to speak with our executive officers and ask questions about our
business and plans. No placement agent was engaged and no commissions were paid.
The shares were issued as follows:
II-1
<PAGE>
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
------ ----------------
<S> <C>
Richard Kandel................................ 1,000,000
Randall Davis................................. 333,333
Steven Etra................................... 66,667
Enviro-Clean.................................. 2,000,000
C. Walter Stursburg........................... 66,667
HOM Advisors.................................. 133,333
Mint Corp. of NY.............................. 66,667
----------
Total................................... 3,666,667
----------
----------
</TABLE>
The principal of Mint Corp. of NY is Mr. Kandel. The principal of HOM
Advisors is Robert Ocko.
In August 1999, we raised additional capital of $625,000 through the
issuance of 333,333 shares of common stock to sophisticated purchasers for $1.88
per share in reliance on the exemption under Section 4(2). These persons were
given the opportunity to speak with our executive officers and ask questions
about our business and plans. No placement agent was engaged and no commissions
were paid. The shares were issued as follows:
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
------ ----------------
<S> <C>
Richard Kandel................................ 66,666
K&S PSP....................................... 100,000
SRK Associates................................ 10,667
Steven Etra................................... 92,000
Richard Etra.................................. 26,667
Kenneth Etra.................................. 37,333
----------
333,333
----------
----------
</TABLE>
The principal of K&S PSP is Mr. Kandel. The principals of SRK Associates
are Steven Etra, Richard Etra and Kenneth Etra.
In September 1999, we issued 21,643 shares of our common stock to
sophisticated individuals in reliance on the exemption under Section 4(2).
16,643 of these shares were issued in consideration of professional services
rendered to us, including accounting services. The remaining 5,000 shares were
issued to two persons upon becoming directors of b2bstores.com. These shares
were valued at $216,430. Each person had the opportunity to meet with and ask
questions of our executive officers about our business and plans. No placement
agent was engaged and no commissions were paid. The shares were issued as
follows:
<TABLE>
<CAPTION>
HOLDER NUMBER OF SHARES
------ ----------------
<S> <C>
Jan Pasternack................................ 10,000
Stephen Kirschner............................. 3,000
Irwin Gorelick................................ 1,143
Neil Koenig................................... 2,500
Philip Ellett................................. 2,500
John Higgins.................................. 2,500
----------
21,643
----------
----------
</TABLE>
II-2
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Certificate of Incorporation*
3.1(a) -- Amendment to Certificate of Incorporation*
3.2 -- By-Laws*
3.2(a) -- Amended Bylaws*
4.1 -- Specimen Common Stock Certificate*
4.2 -- Form of Representatives' Warrant Agreement, including form of Repesentatives' Warrant*
5.1 -- Opinion of Graubard Mollen & Miller*
10.1 -- Employment Agreement with Woo Jin Kim*
10.2 -- Amended Employment Agreement with Richard Kandel*
10.3 -- Employment Agreement with Shannon Jessup*
10.4 -- Employment Agreement with Brian Wharton*
10.5 -- Employment Agreement with Jeffrey Crandell*
10.6 -- Employment Agreement with Mark Voorhis*
10.7 -- Form of Stock Option Agreement with Woo Jin Kim*
10.8 -- Form of Stock Option Agreement with Shannon Jessup*
10.9 -- Form of Stock Option Agreement with Brian Wharton*
10.10 -- Form of Stock Option Agreement with Jeffrey Crandell*
10.11 -- Form of Stock Option Agreement with Mark Voorhis*
10.12 -- Services Agreement with Netgateway*(1)
10.13 -- Lease for 249 East Ocean Boulevard, Long Beach, California*
10.14 -- Web Site Services Agreement between b2bstores.com and Enviro-Clean*
10.15 -- 1999 Performance Equity Plan*
10.16 -- Promissory Note with Enviro-Clean*
10.16(a) -- Amended and Restated Promissory Note with Enviro-Clean with updated schedule+
23.1 -- Consent of Graubard Mollen & Miller
(included in the Opinion filed as Exhibit 5.1)*
23.2 -- Consent of BDO Seidman, LLP+
27.1 -- Financial Data Schedule*
</TABLE>
- ------------------
* Previously filed
+ Filed herewith.
(1) We have requested confidential treatment from the SEC for certain
portions of these agreements.
II-3
<PAGE>
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) Include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the registration statement is on Form S-3,
Form S-8 or Form F-3, and the information required to be included in
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(iv) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
(5) "Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable."
II-4
<PAGE>
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred
or paid by a director, officer or controlling person of the small business
issuer in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
(6) If the issuer relies on Rule 430A under the Securities Act, the
small business issuer will:
(1) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the small business issuer under
Rule 424(b)(1), or (4), or 497(h) under the Securities Act as part of
this registration statement as of the time the Commission declared it
effective.
(2) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the
registration statement, and that offering of the securities at that
time as the initial bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS OF FILING ON FORM SB-2 AND HAS AUTHORIZED THIS REGISTRATION
STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, IN THE
CITY OF NEW YORK ON THE 12TH DAY OF JANUARY 2000.
b2bstores.com Inc.
By: /s/ WOO JIN KIM
----------------------------------
Woo Jin Kim
Chief Executive Officer
In accordance with the requirements of the Securities Act, this
registration statement or amendment was signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and January 12, 2000
- ---------------------------------------- Director
Richard Kandel
/s/ WOO JIN KIM Chief Executive Officer, January 12, 2000
- ---------------------------------------- President and Director
Woo Jin Kim
* Chief Financial Officer and January 12, 2000
- ---------------------------------------- Chief Operating Officer
Mark Voorhis
- ---------------------------------------- Director
John Higgins
* Director January 12, 2000
- ----------------------------------------
Philip Ellett
</TABLE>
- ------------------
* By power of attorney
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Certificate of Incorporation*
3.1(a) -- Amendment to Certificate of Incorporation*
3.2 -- By-Laws*
3.2(a) -- Amended Bylaws*
4.1 -- Specimen Common Stock Certificate*
4.2 -- Form of Representatives' Warrant Agreement, including form of Repesentatives' Warrant*
5.1 -- Opinion of Graubard Mollen & Miller*
10.1 -- Employment Agreement with Woo Jin Kim*
10.2 -- Amended Employment Agreement with Richard Kandel*
10.3 -- Employment Agreement with Shannon Jessup*
10.4 -- Employment Agreement with Brian Wharton*
10.5 -- Employment Agreement with Jeffrey Crandell*
10.6 -- Employment Agreement with Mark Voorhis*
10.7 -- Form of Stock Option Agreement with Woo Jin Kim*
10.8 -- Form of Stock Option Agreement with Shannon Jessup*
10.9 -- Form of Stock Option Agreement with Brian Wharton*
10.10 -- Form of Stock Option Agreement with Jeffrey Crandell*
10.11 -- Form of Stock Option Agreement with Mark Voorhis*
10.12 -- Services Agreement with Netgateway*(1)
10.13 -- Lease for 249 East Ocean Boulevard, Long Beach, California*
10.14 -- Web Site Services Agreement between b2bstores.com and Enviro-Clean*
10.15 -- 1999 Performance Equity Plan*
10.16 -- Promissory Note with Enviro-Clean*
10.16(a) -- Amended and Restated Promissory Note with Enviro-Clean with updated schedule*
23.1 -- Consent of Graubard Mollen & Miller
(included in the Opinion filed as Exhibit 5.1)*
23.2 -- Consent of BDO Seidman, LLP+
27.1 -- Financial Data Schedule*
</TABLE>
- ------------------
* Previously filed
+ Filed herewith.
(1) We have requested confidential treatment from the SEC for certain
portions of these agreements.
<PAGE>
AMENDED AND RESTATED
PROMISSORY NOTE
Dated: November 15, 1999
The Promissory Note dated July 1, 1999 is hereby amended and restated to read as
follows:
FOR VALUE RECEIVED, b2bstores.com Inc., a Delaware corporation (the
"Maker"), hereby promises to pay to the order of Enviro-Clean of America, Inc.
(the "Payee"), at 211 Park Avenue, Hicksville, New York 11801, or such other
place as may from time to time be designated by notice thereof from the Payee
hereof to the Maker, the principal sum as shall have been advanced from time to
time from Payee to Maker (as set forth on the schedule to this Note ("Grid")),
together with interest on the unpaid principal sum outstanding at a rate equal
to eight percent per annum. Principal and interest shall be due and payable on
the earlier of (i) January 31, 2000 and (ii) the date the Maker consummates an
offering of its equity securities yielding gross proceeds of at least
$2,000,000.
Interest shall be payable on any installment of principal and interest not
paid to the Payee on its due date as set forth above at a per annum rate equal
to the lesser of (i) 18%, or (ii) the highest rate permitted by law, from the
date such installment was due and payable to the Payee until the date such
installment is fully paid.
If any of the following events shall occur:
(i) the Maker shall default in the payment of principal of, or interest on,
this Note or any indebtedness for borrowed money in excess of $50,000, or shall
default in the performance or observance of the terms of any instrument pursuant
to which such indebtedness was created or is secured, the effect of which
default is to cause or permit any holder of any such indebtedness to cause the
same to become due prior to its stated maturity;
(ii) any judgment against the Maker or any attachment, levy or execution
against any of its properties for any amount shall remain unpaid, or shall not
be released, discharged, dismissed, stayed or fully bonded for a period of 10
days or more after its entry, issue or levy, as the case may be; or
(iii) the Maker shall make an assignment for the benefit of creditors, or a
trustee, receiver or liquidator shall be appointed for the Maker or for any of
its property, or the commencement of any proceedings by the Maker under any
bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of
debt, receivership, liquidation or dissolution law or statute, or the
commencement of any such proceedings without the consent of the Maker and such
proceedings shall continue undischarged for a period of 10 days;
<PAGE>
then, in any such event, the Payee may declare the entire unpaid principal
amount of this Note, and all interest accrued and unpaid hereon, to be forthwith
due and payable, whereupon the same shall become and be forthwith due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived by the Maker.
No failure on the part of the Payee to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by Payee of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
In the event this Note is turned over to an attorney for collection or
Payee otherwise seeks advice of an attorney in connection with exercise or
enforcement of its rights hereunder, the Maker agrees to pay all costs of
collection, including reasonable attorneys' fees and expenses, which amounts
may, at the Payee's option, be added to the principal hereof.
No amendment, modification or waiver of any provision of this Note, nor
consent to any departure by the Payee therefrom, shall be effective unless the
same shall be in writing and signed by the Payee, and then such waiver or
consent shell be effective only in the specific instance and for the specific
purpose for which it is given.
This Note has been executed and delivered in the State of New York and the
construction, validity and performance hereof shall be governed by the internal
laws of the State of New York without regard to the principles of conflict of
laws. Any action, suit or proceeding in respect of or arising out of this Note
may be brought by Payee in federal or state court located in Nassau County. In
any such action, suit or proceeding, Maker waives trial by jury, and Maker also
waives (i) the right to interpose any setoff or counterclaim of any nature or
description; (ii) any objection based on forum non-conveniens or venue; and
(iii) any claim for consequential, punitive, or special damages.
This Note shall be binding upon the Maker and its successors and assigns,
and the terms hereof shall inure to the benefit of the Payee and its successors
and assigns, including subsequent holders hereof.
All notices hereunder from the Payee to the Maker shall be in writing and
mailed to the Maker at the above address by registered or certified mail, return
receipt requested. All such notice shall be deemed given when mailed.
2
<PAGE>
Maker hereby authorizes Payee to complete and revise the Grid and to
reflect thereon the making of any loan made to Maker hereunder. Payee shall send
a copy of the Grid to Maker promptly after any revision thereto. The Grid, as
completed and/or revised by Payee, shall be final and binding on Maker in the
absence of fraud or mathematical error.
IN WITNESS WHEREOF, the undersigned has duly executed this instrument on
the date set forth above.
b2bstores.com Inc.
By: /s/ Richard Kandel, Chairman
-----------------------------
Richard Kandel
3
<PAGE>
SCHEDULE TO PROMISSORY NOTE
Maker: b2bstores.com Inc. Date of Amended and Restated Note:
November 15, 1999
<TABLE>
<CAPTION>
NAME OF PERSON
DATE AMOUNT OF ADVANCE MAKING NOTATION
---- ----------------- ---------------
<S> <C> <C>
June 10, 1999 25,000 Richard Kandel
July 15, 1999 2,586 Richard Kandel
July 19, 1999 25,000 Richard Kandel
July 26, 1999 27,250 Richard Kandel
July 30, 1999 100,000 Richard Kandel
November 5, 1999 50,000 Mark Voorhis
November 10, 1999 100,000 Mark Voorhis
November 24, 1999 200,000 Mark Voorhis
December 10, 1999 170,000 Mark Voorhis
December 23, 1999 125,000 Mark Voorhis
January 6, 2000 150,000 Mark Voorhis
</TABLE>
4
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
b2bstores.com Inc.
Long Beach, CA
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated September 30, 1999, except for note 2
which is as of November 15, 1999 relating to the financial statements of
b2bstores.com Inc. (a development stage company), which is contained in that
Prospectus. Our report contains an explanatory paragraph regarding the Company's
ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO Seidman, LLP
New York, New York
January 10, 2000
