<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2000
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission file number 0-27757
-------
AcuBid.com, Inc.
----------------
(Exact Name of registrant as specified in its charter)
Delaware 33-0529299
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1947 Camino Vida Roble, Suite 102, Carlsbad, California 92008
-------------------------------------------------------------
(Address of principal executive offices)
(760) 804-0023
--------------
(Registrant's telephone number, including area code)
------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number os shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 8,790,408
Transitional Small Business Disclosure Format (Check one) : Yes [ ] No [X]
<PAGE>
ACUBID.COM, INC.
FORM 10-QSB
Table of Contents
ITEM No.
- --------
PART I FINANCIAL INFORMATION
1. Financial Statements .................................................2
Balance Sheet as of February 29, 2000 (unaudited)
and August 31, 1999........................................F-1
Statement of Operations for the Six and Three Months Ended
February 29, 2000 and February 28, 1999 (Unaudited)........F-2
Statement of Shareholders' Equity for the Six Months
Ended February 29, 2000 (Unaudited)........................F-3
Statement of Cash Flows for the Six Months Ended
February 29, 2000 and February 28, 1999 (Unaudited)........F-4
Notes to the Financial Statements (Unaudited).......................F-6
2. Management's Discussion and Analysis or Plan of Operation.............4
PART II OTHER INFORMATION
1. Legal Proceedings....................................................12
2. Changes in Securities................................................12
3. Defaults Upon Senior Securities......................................16
4. Submission of Matters to a Vote of Security Holders..................16
5. Other Information....................................................16
6. Exhibits and Reports on Form 8-K.....................................16
SIGNATURES....................................................................17
2
<PAGE>
PART I FINANCIAL INFORMATION
3
<PAGE>
ACUBID.COM INC.
CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
<PAGE>
CONTENTS
Page
----
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheet - February 29, 2000 and August 31, 1999 1
Statements of Operations
For the Six and Three Months Ended February 29, 2000
and February 28, 1999 2
Statements of Shareholders' Equity
For the Six Months Ended February 29, 2000 3
Statements of Cash Flows
For the Six and Three Months Ended February 29, 2000
and February 28, 1999 4-5
Notes to Financial Statements 6-13
<PAGE>
<TABLE>
ACUBID.COM INC.
CONDENSED BALANCE SHEET
FEBRUARY 29, 2000 AND AUGUST 31, 1999
ASSETS
<CAPTION>
February 29, August 31,
2000 1999
---------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 192,101 $ 4,093,919
Short-term investments (Note 1) 3,094,465 -
Inventory (Note 1) 213,389 188,953
Prepaid expenses and other 71,768 60,000
Due from officers and directors 42,000 -
---------------- ----------------
Total current assets 3,613,723 4,342,872
PROPERTY AND EQUIPMENT, net of accumulated
depreciation (Note 1) 200,842 196,487
OTHER ASSETS 13,268 14,742
---------------- ----------------
TOTAL ASSETS $ 3,827,833 $ 4,554,101
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 45,536 $ 121,602
Accrued liabilities (Note 1) 44,610 88,962
Due to related parties 13,290 13,290
---------------- ----------------
Total current liabilities 103,436 223,854
---------------- ----------------
OTHER PAYABLE (Note 4) - 53,437
---------------- ----------------
COMMITMENTS AND CONTINGENCIES (Note 2)
6% REDEEMABLE CUMULATIVE CONVERTIBLE
PREFERRED STOCK; par value $.001; 10,000,000
shares authorized; no shares issued and outstanding
at February 29, 2000, 3,800,000 Series A shares issued
and outstanding at August 31, 1999 (Note 2) - 3,800,000
---------------- ----------------
SHAREHOLDERS' EQUITY (Notes 2, 3 and 4)
Common stock; par value of $0.001 per share;
50,000,000 shares authorized; 8,778,160 and
5,738,151 shares issued and outstanding at
February 29, 2000 and August 31, 1999, respectively 8,780 5,739
Additional paid-in capital 13,552,718 9,300,786
Accumulated deficit (9,837,101) (8,829,715)
---------------- ----------------
Total shareholders' equity 3,724,397 476,810
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,827,833 $ 4,554,101
================ ================
</TABLE>
See accompanying notes to financial statements.
F-1
<PAGE>
<TABLE>
ACUBID.COM INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX AND THREE MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
<CAPTION>
Six Months Ended Three Months Ended
February 29/28, February 29/28,
------------------------------- --------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 17,464 $ - $ 3,093 $ -
Cost of revenues 95,829 - 92,829 -
--------------- --------------- --------------- ---------------
Gross profit (loss) (78,365) - (89,736) -
--------------- --------------- --------------- ---------------
Operating Costs and Expenses
Selling, general and administrative,
excluding depreciation, including
$232,000 and $225,000 in the form of
common stock issued to employees and
others for services provided in the six
and three month periods ended February
29, 2000, respectively 957,824 53,758 632,812 29,913
Depreciation 45,204 926 22,602 926
--------------- --------------- --------------- ---------------
Total operating costs and expenses 1,003,028 54,684 655,414 30,839
--------------- --------------- --------------- ---------------
Loss from Operations (1,081,393) (54,684) (745,150) (30,839)
--------------- --------------- --------------- ---------------
Other Income
Interest and dividend income 74,007 199 30,015 76
--------------- --------------- --------------- ---------------
Total other expenses (income) 74,007 199 30,015 76
--------------- --------------- --------------- ---------------
Loss before provision for income taxes (1,007,386) (54,485) (715,135) (30,763)
Provision for income taxes - - - -
--------------- --------------- --------------- ---------------
Net loss (1,007,386) (54,485) (715,135) (30,763)
Distribution to converting preferred
shareholders in form of common stock 788,960 - 788,960 -
--------------- --------------- --------------- ---------------
Net loss applicable to common
shareholders $ (1,796,346) $ (54,485) $ (1,504,095) $ (30,763)
=============== =============== =============== ===============
Net loss applicable to common shares -
basic and diluted
Net loss $ (0.31) $ (0.01) $ (0.25) $ (0.01)
=============== =============== =============== ===============
Weight average number of common shares 5,827,358 2,639,301 5,982,360 2,639,301
=============== =============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
<TABLE>
ACUBID.COM INC.
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000
(UNAUDITED)
<CAPTION>
Common Stock Additional
------------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, September 1, 1999 5,738,151 $ 5,739 $ 9,300,786 $ (8,829,715) $ 476,810
Net loss for the period - - - (1,007,386) (1,007,386)
Settlement of liabilities by the
issuance of common stock 57,739 58 60,879 - 60,937
Issuance of shares of common
stock for services 88,500 89 224,947 - 225,036
Preferred stock dividends - - (54,250) - (54,250)
Exchange of series A preferred
shares for common stock 2,893,770 2,894 4,020,356 - 4,023,250
------------- ------------- ------------- ------------- -------------
Balance, February 29, 2000
(Unaudited) 8,778,160 $ 8,780 $ 13,552,718 $ (9,837,101) $ 3,724,397
============== ============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<TABLE>
ACUBID.COM INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
<CAPTION>
February 29/28
------------------------------------
2000 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,007,386) $ (54,485)
---------------- ----------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 45,204 926
Shares issued for services 232,536 -
Changes in assets and liabilities:
Inventory (24,436) -
Prepaid expenses and other (11,768) -
Accounts payable (76,066) -
Accrued liabilities (25,352) -
Due from (to) related parties (42,000) -
Other 1,474 3,606
---------------- ----------------
Total adjustments 99,592 4,532
---------------- ----------------
Net cash used in operating activities (907,794) (49,953)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment (49,559) -
Increase in short-term investments (3,094,465) -
---------------- ----------------
Cash used in investing activities (3,144,024) -
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - 5,827
Proceeds from issuance of redeemable preferred
stock in a private placement 150,000 -
Increase in due to related parties - 35,123
---------------- ----------------
Cash provided by financing activities 150,000 40,950
---------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENT (3,901,818) (9,003)
CASH AND CASH EQUIVALENTS - beginning 4,093,919 9,871
---------------- ----------------
CASH AND CASH EQUIVALENTS - end $ 192,101 $ 868
================ ================
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ACUBID.COM INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
February 29/28
----------------------------------
2000 1999
--------------- ---------------
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued for settlement of liabilities:
Common stock $ 53,385 -
Additional paid in capital $ 52 -
Long-term liability $ 53,437 -
Common stock issued in exchange for
preferred stock and accrued dividends $ 4,023,250 -
See accompanying notes to financial statements.
F-5
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF COMPANY'S BUSINESS
AcuBid.Com Inc. (formerly International AcuVision Systems, Inc.) (the
"Company") was formed in Canada in 1983. It was subsequently incorporated
under the laws of the state of Delaware in September 1993. Through August
31, 1998, the Company was in the business of developing, marketing and
selling vision training equipment (the "AcuVision Product Line"). The
Company owns a patent regarding the above equipment and software and has
expensed all costs in developing the patent and prototypes.
Subsequent to August 31, 1999, management made a determination to
substantively discontinue the Company's AcuVision Product Line. In
addition, during fiscal 1999, the Company changed its name from
International AcuVision Systems, Inc. to AcuBid.Com Inc. and expanded its
business objective to include the development of a premier website to
facilitate the buying and selling of high-end collectibles. The Company
has started to accumulate an inventory of rare and hard to find items,
which it has begun to auction to the public over its website. In
addition, the Company has developed and implemented the technological
requirements needed to act as a broker to provide a venue for sellers and
dealers to display their collectibles to potential purchasers throughout
the world via the AcuBid.Com website.
BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments, except as noted elsewhere in the notes to the
condensed financial statements) necessary to present fairly its financial
position as of February 29, 2000 and the results of its operations and
cash flows for the three and six months ended February 29, 2000 and
February 28, 1999. These statements are condensed and therefore do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
statements should be read in conjunction with the financial statement and
footnotes included in the Company's annual report on Form 10-KSB for the
year ended August 31, 1999. The results of operations for the three and
six months ended February 29, 2000 are not necessarily indicative of the
results to be expected for the full year.
REVENUE RECOGNITION
Revenues derived from placement fees charged for the listing of items on
the Company's on-line auction site, and success fees calculated as a
percentage of the final sales transaction value are recognized at the
time an item is listed, while those related to success fees are
recognized at the time the auction is successfully concluded.
PRODUCT DEVELOPMENT COSTS
Product development costs include expenses incurred by the Company to
develop, enhance, manage, monitor and operate the Company's website.
Product development costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term, highly liquid investments
with original maturities of three months or less. The Company has no
requirements for compensating balances. At February 29, 2000, cash
balances in excess of federally insured limits amounted to approximately
$92,000.
F-6
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES
Approximately $3,094,000 is maintained in a liquid asset management
account which invests primarily in investment grade short-term commercial
paper, corporate bonds and taxable auction rate notes.
The Company accounts for its marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS
115). The Company has classified all investment securities as trading
securities which are measured at fair value in the financial statements
with unrealized gains and losses included in results of operations. Net
unrealized holding gains of approximately $10,129 have been included in
results of operations for the six months ended February 29, 2000. All
investment securities have a maturity date which is less than one year
from February 29, 2000.
INVENTORY
Inventory, consisting of sports memorabilia and other collectibles is
stated at the lower of cost or market. Inventory cost is determined by
using the first-in, first-out method. Substantially all inventory
consists of goods held for sale. The Company's management monitors
inventory for slow moving items and makes necessary valuation adjustments
when required. During the six and three months ended February 29, 2000,
the Company recorded valuation adjustments of approximately $83,000 with
respect to such items.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the expected lives, which range from three to
five years. Expenditures for normal maintenance and repairs are charged
to operations. Renewals and betterments that materially extend the life
of the assets are capitalized.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates its long-lived assets for potential impairment
whenever circum-stances indicate that the carrying amount of an asset is
not recoverable. The estimated undiscounted cash flows associated with
the assets are compared to the carrying amounts to determine if a
write-down to fair value is required. The Company has determined that
there was no such impairment present at February 29, 2000.
INCOME TAXES
The Company accounts for current and deferred income taxes using the
liability method. Under this method deferred income tax liabilities and
assets are computed based on the tax liability or benefit in future years
of the reversal of temporary differences in the recognition of income or
deduction of expenses between financial and tax reporting. Deferred tax
assets and/or liabilities are classified as current and noncurrent based
on the classification of the related asset or liability for financial
reporting purposes, or based on the expected reversal date for deferred
taxes that are not related to an asset or liability. Valuation allowances
are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
F-7
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company accounts for the value of financial instruments using the
fair value method.
The estimated fair value amounts of all financial instruments have been
determined by the Company using available market information and
appropriate valuation methodologies. Fair value is described as the
amount at which the instrument could be exchanged in a current
transaction between informed willing parties, other than in a forced
liquidation. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amount that the Company could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have material effect on the estimated fair
value amounts. The Company is not a party to any derivative instruments.
The Company does not have any off balance sheet financial instruments.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
Cash and equivalents, accounts receivable, inventory, other
current assets, accounts payable, and certain other current
liability amounts are reported in the balance sheet at approximate
fair value due to the short-term maturities of these 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 disclosure 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.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ("SFAS") No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION, established accounting and disclosure
requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. SFAS No. 123 allows the use of
Accounting Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, which is the intrinsic value method of accounting as
described below, for options granted to employees, provided the pro forma
discloses requirements of SFAS No. 123 are adopted.
The Company accounts for stock-based compensation using the intrinsic
value method prescribed in APB No. 25. Compensation cost for stock
options granted employees, if any, is measured as the excess of the
quoted market price of the Company's stock at the date of grant over the
amount an employee must pay to acquire the stock. Restricted stock is
recorded as compensation cost over the requisite vesting periods based on
the market value on the date of grant. The Company accounts for stock and
stock options issued and granted to non-employees in accordance with the
provisions of SFAS No. 123 and records compensation as the fair value of
the underlying security issued.
F-8
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMMON SHARES AND PER SHARE AMOUNTS
In March 1999, the Company effected a one-for-two reverse stock split.
All common shares and per share amounts have been adjusted to give effect
to that stock split.
LOSS PER COMMON SHARE
The Company adopted the Financial Accounting Standards Board SFAS No.
128, EARNINGS PER SHARE. This pronouncement replaced the previously
reported primary and fully dilutive earnings per share with basic and
diluted earnings per share. Loss per common share has been calculated in
accordance with the requirements of this statement for the six and three
month periods February 29, 2000 and February 28, 1999.
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding
for the year. Diluted earnings per share reflects the potential dilution
that could occur if dilutive securities and other contracts to issue
common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the Company's earnings.
Diluted loss per share does not consider the potentially dilutive
securities on an "as if converted" basis, as the effect of their
inclusion would be anti-dilutive.
ADVERTISING COSTS
Advertising costs are charged to operations as they are incurred.
2. PRIVATE PLACEMENT OF 6% CUMULATIVE CONVERTIBLE REDEEMABLE
PREFERRED STOCK
In July 1999, the Company initiated a private placement to sell 400 units
at $10,000 per unit. Each unit consisted of 10,000 shares of 6%
cumulative convertible preferred stock and warrants to purchase 5,000
shares of the Company's common stock. Dividends are payable
semi-annually. Each preferred share was convertible into .666 common
shares in the first year, .4 shares in the second year, and .285 shares
thereafter. No preferred shares could utilize the conversion feature
until six months after the offering had been concluded. The warrants to
purchase common shares are exercisable at $2.00 per share in the first
year and $3.00 per share thereafter. The warrants expire five years from
the date of issue. The Company raised approximately $3,950,000 from this
offering, of which $3,800,000 had been subscribed and received as of
August 31, 1999 and $150,000 was received during the six months ended
February 29, 2000. Pursuant to the terms of the preferred stock, the
Company was not permitted to declare or pay any dividends on its common
stock unless all preferred dividends due have been paid.
In January 2000, the Company commenced an exchange offer with its
preferred share-holders. Pursuant thereto, the Company agreed to exchange
each outstanding preferred share for common stock in the ratio set forth
in the preferred stock purchase agreement, .666 common shares for each
outstanding preferred share. Additionally, as an incentive to the
preferred shareholders, the Company agreed to issue one additional common
share for every 10 common shares issued in the exchange.
As of February 29, 2000, all 3,950,000 preferred shares which had been
outstanding were exchanged, which resulted in the issuance of 2,893,770
common shares. The number of shares issued as "incentive" shares amounted
to 263,070. For accounting purposes, these shares have been recorded as a
distribution to the preferred shareholders (net of accrued dividends due
the preferred shareholders which were cancelled in connection with
exchange offer).
F-9
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
3. STOCKHOLDERS' EQUITY
COMMON SHARES ISSUED FOR SETTLEMENT OF DEBT
During the six months ended February 29, 2000, the Company issued 104,500
shares of its common stock for services provided to the Company. The
shares were valued at the market value of the Company's common stock on
the date that they were issued.
In October 1999, the Company agreed to issue a total of 41,739 shares of
its common stock to a consultant as settlement of an amount due.
WARRANTS
In November 1997, the Company issued debentures with detachable,
non-transferable warrants to purchase 87,500 shares of its common stock.
These warrants were immediately exercisable on issuance and expired in
November 1999.
The Company issued 1,975,000 common stock purchase warrants in connection
with the issuance of its 6% convertible redeemable preferred stock (Note
2). The warrants, which expire five years from the date of the preferred
stock offering, can be exercised commencing six months after the offering
for a period of twelve months for $2.00 per share. Thereafter, until they
expire, the warrants can be exercised for $3.00 per share.
The following summarizes information about warrants granted and
outstanding at February 29, 2000 and February 28, 1999, and changes
during each of the related six month periods.
<TABLE>
<CAPTION>
Six Months Ended
February 29/28,
2000 1999
--------------------------------- ----------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Warrants Price Warrants Price
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Outstanding,
beginning of period 1,935,000 $ 1.97 100,000 $ 1.18
Granted 75,000 2.00 87,500 0.56
Exercised - - - -
Cancelled/expired (35,000) - - -
----------------- ---------- ----------------- ----------
Outstanding, end of period 1,975,000 $ 2.00 187,500 $ 0.89
================= ========== ================= ==========
</TABLE>
4. STOCK OPTIONS AND INCENTIVE EQUITY PLANS
STOCK OPTIONS
The Company granted options to purchase shares of its common stock as
indicated below. The options were fully vested on the dates of grant.
During 1999, the Company granted options to certain employees, directors
and consultants to purchase 735,000 shares of common stock at exercise
prices ranging from $.45 to $2.50 per share. The options expire between
two and three years from the time of the grant. As of August 31, 1999,
100,000 options had been exercised. No options were exercised during the
six months ended February 29, 2000.
F-10
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
4. STOCK OPTIONS AND INCENTIVE EQUITY PLANS (CONTINUED)
STOCK OPTIONS (CONTINUED)
The following summarizes information about stock options granted and
outstanding at February 29, 2000 and February 28, 1999, and changes
during each of the related six month periods.
<TABLE>
<CAPTION>
Six Months Ended
February 29/28,
2000 1999
--------------------------------- ----------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
----------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Outstanding,
beginning of period 635,000 $ .75 - $ -
Granted 50,000 1.44 - -
Exercised - - - -
Cancelled/expired 65,000 2.88 - -
----------------- ---------- ----------------- ----------
Outstanding, end of period 620,000(a) $ 0.58 - $ -
================= ========== ================= ==========
(a) Options with respect to 200,000 exercisable at $.45 per share were
cancelled by the Company for failure of consideration and breach of
contract. The cancellation has been disputed and the matter is the
subject of litigation.
</TABLE>
INCENTIVE EQUITY PLANS
During August 1999, the Company adopted its 1999 Incentive Equity Plan
("Incentive Plan") and the 1999 Stock Option Plan for Non-Employee
Directors ("Directors Plan").
Officers, including officers who are members of the Board of Directors,
and other key employees of and consultants to the Company may be selected
by the Committee to receive benefits under the Incentive Plan.
The Incentive Plan authorizes the granting of options to purchase shares
of common stock ("Option Rights"), stock appreciation rights
("Appreciation Rights"), restricted shares ("Restricted Shares"),
deferred shares ("Deferred Shares"), performance shares ("Performance
Shares") and performance units ("Performance Units").
Subject to adjustment as provided in the Incentive Plan, the number of
shares of common stock that may be issued or transferred, plus the amount
of shares of common stock covered by outstanding awards granted under the
Incentive plan, shall not in the aggregate exceed 1,500,000 shares. The
number of Performance Units granted under the Incentive plan shall not in
the aggregate exceed 100,000. The number of shares of common stock
granted under the Incentive Plan to any individual in any calendar year
shall not in the aggregate exceed 100,000. As of February 29, 2000 no
options have been granted pursuant to the incentive equity plans.
F-11
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
4. STOCK OPTIONS AND INCENTIVE EQUITY PLANS (CONTINUED)
OPTION RIGHTS
The Company may grant Option Rights that entitle the optionee to purchase
shares of common stock at a price less than, equal to or greater than
market value on the date of grant.
The exercise price for nonqualified stock options granted may not be less
than 85% of the fair market value per share of common stock on the date
of grant. The exercise price for ISOs may not be less than the fair
market value per share of common stock on the date, and ISOs granted to
persons owning more than 10% of the Company's voting stock must have an
exercise price of not less than 110% of the fair market value per share
of common stock on the date of grant. All options granted must be
exercised within ten years of grant, except that ISOs granted to 10% or
more stockholders must be exercised within five years of grant. The
aggregate market value (as determined as of the date of grant) of the
common stock for which any optionee may be awarded ISOs which are first
exercisable by such optionee during any calendar year may not exceed
$100,000.
APPRECIATION RIGHTS
Appreciation Rights granted under the Incentive Plan may be either
free-standing or granted in tandem with Option Rights. An Appreciation
Right represents the right to receive from the Company the difference
("Spread"), or a percentage thereof not in excess of 100 percent, between
the base price per share of common stock in the case of a free-standing
Appreciation Right, or the option price of the related Option Right in
the case of a tandem.
Appreciation Right, and the market value of the common stock on the date
of exercise of the Appreciation Right. Tandem Appreciation Rights may
only be exercised at a time when the related Option Right is exercisable
and the Spread is positive, and the exercise of a tandem Appreciation
Right requires the surrender of the related Option Right for
cancellation.
A free-standing Appreciation Right must have a base price that is at
least equal to the fair market value of a share of common stock on the
date of grant must specify certain other criteria that are necessary
before the Appreciation Right becomes exercisable and may not be
exercised more than 10 years from the date of grant.
RESTRICTED SHARES
An award of Restricted Shares involves the immediate transfer by the
Company to a participant of ownership of a specific number of shares of
common stock in consideration of the performance of services, or, as and
to the extent determined by the Company, the achievement of certain
objectives. The participant is entitled immediately to voting, dividend
and other ownership rights in the shares. The transfer may be made
without additional consideration from the participant or in consideration
of a payment by the participant that is less than the market value of the
shares on the date of grant, as the Committee may determine.
F-12
<PAGE>
ACUBID.COM INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
4. STOCK OPTIONS AND INCENTIVE EQUITY PLANS (CONTINUED)
DEFERRED SHARES
An award of Deferred Shares constitutes an agreement by the Company to
deliver shares of common stock to the participant in the future in
consideration of the performance of services, subject to the fulfillment
of such conditions during the deferral period (as defined in the
Incentive Plan) as the Company may specify.
THE DIRECTORS PLAN
The Directors Plan will be administered by a committee ("Committee") of
the Board of Directors, consisting of no less than two members of the
Board. Only members of the Board of Directors who are not employees of
the Company (each a "Director") will be eligible to participate in the
Directors Plan.
Subject to adjustment as described below, the number of shares issued or
transferred, plus the number of shares covered by outstanding options
under the Director Plan shall not exceed 250,000 shares of common stock.
Shares of common stock covered by an option, which is cancelled or
terminated, will again be available to be issued or to be the subject of
a stock option granted under the Directors Plan.
The exercise price of the options granted is equal to the fair market
value per share of common stock on the date of grant. Options granted
under the Directors Plan shall become exercisable to the extent of 20% of
the common shares subject thereto on the Date of Grant and to the extent
of an additional 20% of the common shares subject thereto after each of
the first four anniversaries of such date, for so long as the Optionee
continues to serve as a member of the Board.
F-13
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following "Management's Discussion and Analysis or Plan of
Operation" includes "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. This Act provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this Form 10-Q are forward- looking. In particular, any statements that
we make in this Form 10-Q regarding industry prospects or our future results of
operations or financial position are forward-looking statements. Forward-looking
statements reflect our current expectations and are inherently uncertain. Our
actual results may differ significantly from our expectations.
Plan of Operation: Overview
AcuBid.com Inc. is currently an online auction house. The
business plan, conceived in February 1999, has the Company competing for a share
of the online auction business dominated presently by EBAY, Amazon.com and
Yahoo. Online auctions enable buyers and sellers of specified items to come
together on an informal and entertaining manner and to conduct their business.
To date, the Company's revenues have been derived from listing fees, commissions
received from the sale of items on its site and sales of items for its own
account. Transactions for the Company's account or inventory transactions may
also result in losses rather than gains due to acquisition costs, inventory
management costs, and fulfillment cost.
In the latter part of 1999, certain assumptions related to the
Company's ability to gain a significant portion of the online auction business
proved to be incorrect. The first incorrect assumption was the makeup of the
industry itself. As of October 1999, 80% of the sales on the eBay auction site
were made by approximately 4% of the sellers. This indicates that most of the
online auction business is conducted by dealers rather than the general
population. Most of the models used to predict the Company's growth were based
on the general population selling items over the Internet rather than just a
smaller number of dealers.
The second incorrect assumption , was the Internet community's
willingness to purchase collectibles over the Internet. In the fall of 1999, an
FBI sting operation uncovered dealers that had been auctioning counterfeit
sports memorabilia on the Internet. This led to a decline in consumer confidence
over the authenticity of collectibles bought over the Internet.
Management believes that this added another barrier between buyers and sellers
and will lead to a decline in the auction market.
-4-
<PAGE>
The third incorrect assumption, was the level of success the
Company would experience by using celebrities to promote the site. Management
believed, that through the use of celebrities, such as Hall of Fame members
Johnny Bench and Joe Morgan, it could attract a significant number of Internet
users to its site with little or no additional marketing. This proved not to be
the case and, although certain guerilla tactics have shown promising results
during this quarter, none of the Company's marketing efforts have had a
significant impact on attracting buyers and sellers to its auction site. In
general it was decided that the cost of advertising required to develop name
recognition and to attract buyers and sellers to the Company's auction site was
much larger than expected. More importantly, the cost was estimated to be larger
than the revenue that could be derived from those buyers and sellers. As of
March 30, 2000, only 1820 Internet users had registered to buy or sell on the
Company's auction web site.
Because of these issues, the Company began to explore business
relationships that would provide the Company a venue to use its Internet
expertise in a profitable manner while at the same time building customer
support for its online auction business. This led to a plan to expand the
Company's operations into the following areas:
a) To enter into emerging Internet markets through acquisitions
and strategic alliances with Internet corporations from those
markets that focus on Internet subscriptions and/or content
development. It is expected that the acquisitions themselves
will be profitable, or stand a strong probability of becoming
profitable, through some combination of Internet subscriber
premium service, web hosting fees, and web development fees,
as well as through advertising revenue. These acquisitions and
strategic alliances are collectively referred to as
"partners."
b) To expand and evolve the Company's auction technologies into
reusable e-commerce technologies that can be offered to these
Internet corporations. In addition, the Company would provide
technical and managerial support to these Internet
corporations. The Company's ability to attract Internet
corporations in the emerging Internet markets relies heavily
on its ability to assist those corporations.
c) To leverage off these new markets to increase the traffic to
the Company's online auction site as well as other developed
e-commerce and information sites. Each relationship that the
Company forges with another Internet corporation increases the
number of viewers that the Company can reach worldwide. This
provides the Company with access to new viewers that can be
driven to its auction and e-commerce sites without a
significant investment in advertising.
-5-
<PAGE>
Continuing Involvement in Online Auctions and E-commerce
With the exception of salaries for a technical staff of three,
the Company has incurred no research and development costs in the three months
ending February 29, 2000. The Company expects to incur no additional costs over
the next twelve months except for additional research and development costs
related to (b) above. It is expected that any software or web site development
undertaken over that period will be accomplished using the same level of
personnel as was used during this quarter. The company will require no
additional equipment to meet user demand at foreseeable levels of operation. At
some point, additional servers and equipment will be required. At present levels
of operation, management does not believe that the number of key employees will
change significantly within the next twelve months.
The Company had organized an Advisory Board, which consists of
a combination of celebrities and experts in various fields in which the Company
is engaged. Each member of the Advisory Board received a different compensation
packages based on the individual's perceived value to the Company. In exchange
for the compensation, the celebrities and other Advisory Board members grant the
Company the right to use their name in promotions, advertising, and marketing,
as well as their endorsement of the Company. The celebrities also agreed to be
available for promotions for the Company. Additionally, members of the Advisory
Board agreed to assist the Company in acquiring, creating and evaluating
memorabilia in their respective fields.
The Company commenced operation of its online auction house,
AcuBid.com, on August 2, 1999. From that time until January 2000, the Company
has focused on establishing commercial relationships with sellers of
collectibles. In that time period, the Company had not realized any significant
operating revenue.
Management believed that once enough items are registered for
sale, buyers would be attracted to the site. Unfortunately, management has
determined that the advertising costs necessary to attract sufficient sellers to
the site to create a sustainable buyer/seller community are cost prohibitive at
this time. Management believes that e-commerce related Internet sites will be an
integral part of the business and can be made profitable in the future, but it
is not anticipated that any significant revenue will be realized in the next
year from the present site. Management believed that, only after increasing the
Company's access to Internet users through its plan of acquisition and strategic
alliances in emerging Internet markets will the Company's e-commerce sites,
including its online auction site, become profitable. Since the Company has only
begun to expand into those markets, it is not possible to predict when this will
occur.
Contemplated Acquisitions and Strategic Alliances
Until a few years ago, the majority of Internet users have
been North Americans. This is however changing as more of the global population
gets connected. Asia-Pacific potentially presents the largest Internet market
given that it accounts for more than three billion of the world's population of
about six billion. Given its late entry into the Internet industry, Asia-
Pacific is expected to experience a faster growth rate than the United States or
Western Europe.
-6-
<PAGE>
The Company believes that these emerging Internet markets
provide a unique opportunity for the Company. Management believes that, through
acquisition and strategic alliances with Internet corporations in these emerging
markets, a synergy can be created that benefits the Company as well as those
corporations.
Because of its experience in the online auction site, the
Company had demonstrated an ability to create and manage an enterprise level
Internet site. The Company can provide managerial and technical support to
Internet companies in newly formed markets, giving them access to experienced
expertise that might not be readily available in those markets. Additionally,
certain technologies develop by the Company might prove useful in establishing
e- commerce and online auctions in those markets.
In return for the technology and support provided to its
partners, the Company expects to benefit in two ways. First, the Company
benefits from revenues generated by any acquired corporations. Although the
Company expects its acquisitions to become profitable, due to the preliminary
nature of this part of its operations, the Company cannot predict the date when
this will occur. Second, as the subscriber basis of these partners increases,
the Company will have direct access to this subscriber base in order to expand
the Company's own e-commerce and online auction business.
Change in Operations for the Quarter Ending February 29, 2000:
Online Auctions and E-commerce
During this quarter, the Company added additional
functionality to its auction site. Features such as Auction Editing, Auction
Cancellation, and Auction Re-listing were added to enhance a seller's ability to
administer an auction.
Also, during this quarter, different forms of marketing were
used in order to increase the traffic to the AcuBid.com auction site.
Advertisements were placed in Antique Trader, Comic Book Marketplace, Linns
Stamp News, New England Antiques, New York Antique Almanac, Sports Collectors
Digest, and Warmans Today's Collector ; targeted email campaigns were used to
attract EBAY customers to the AcuBid.com auction site; and mass email based
mailings were undertaken. In addition, starting in January 2000, the "Collect
This" radio show began to air on KOGO AM 600. The aim of this show was to
generate an interest both in the collectibles market and in the AcuBid.com
auction site. The radio show was canceled due to the change in business focus
and other business reasons.
During this quarter, the Company also explored the possibility
of expanding its online auction site to include different types of auctions and
also the possibility of creating an e- commerce site for collectibles that would
allow direct sales of collectible items as an alternative to an auction. At this
time, the Company has not decided whether or not to develop these sites as
originally explored, but believes that the development of such sites or related
e-commerce sites will benefit both the Company and its strategic partners.
-7-
<PAGE>
Change in Operations for the Quarter Ending February 29, 2000:
Acquisitions and Partnerships
On January 24, 2000, the Company entered into a Memorandum of
Understanding with PT Jaring Data Interaktif (JDI), an Indonesian corporation,
to acquire 90% of JDI in exchange for up to 44 million shares of the Company's
Common Stock (the "Acquisition"). Subsequently, a formal agreement was signed on
March 13, 2000 and amended on March 27, 2000. Copies of these agreements are
attached, as exhibits, to the Company's Form 8-K filed on March 29, 2000.
Established in January 1999, JDI is an Indonesian- based
Internet and multi-media company. JDI and its affiliates have extensive licenses
in satellite, wireless broadband and other areas that relate to Internet service
and content.
JDI presently provides dial-up Internet services and beginning
in June 2000, will provide broadband Internet services for Indonesian customers.
It plans to extend those services through Southeast Asia and has long range
plans to target the larger global community. JDI also has licenses and contracts
to market a wide range of content from media sources, including TV stations,
radio stations, cable TV and newspapers.
In addition, JDI owns PT Medialintas Antarbuana, a start-up
Internet Service Provider ("ISP") and is affiliated to PT Mesana Investama Utama
(securities) and PT Mesana Transforex Internasional (brokerage). A web site
devoted to the Jakarta stock market, as well as other web sites, is currently
under development, which will further increase focus on the content market for
Indonesia.
In February 2000, the Company started providing direct
technical support to JDI. Technical personnel from the Company have been working
with JDI personnel in support of the development of their network infrastructure
and web portal development. It is anticipated that this technical support will
continue and is expected to expand following the Acquisition. This support is
key to the success of JDI and validates the Company's role in the emerging
Indonesia Internet market.
Change in Operations for the Quarter Ending February 29, 2000: Personnel
During this quarter there were several changes in the Board of
Directors, in key personnel, and on the Advisory Board. In January 2000, Norman
Schwartz resigned from the Board of Directors and as Chief Financial Officer.
However, Norman Schwartz still works for the Company on a consulting basis until
such time as a new Chief Financial Officer can be selected. It should be noted
that since the end of this quarter, John Irvine also resigned from the Board of
Directors. As of March 31, 2000, the Board of Directors consists of Michael
Schaffer, Lawrence Schaffer, and Waddy Stephenson. Pursuant to the Amended and
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<PAGE>
Restated Stock Purchase Agreement, the Board of Directors has amended its bylaws
to increase the maximum number of directors that the Company may have from seven
to eight. The Company expects to accept the resignation of one current director
and will nominate six additional directors selected by JDI. All eight directors
will be presented for election at the Annual Meeting of Stockholders currently
scheduled to be held on May 22, 2000.
In December 1999, Johnny Bench resigned from the Advisory
Board. In February 2000, Kurt Bevacqua and Gary Carter were removed from the
Advisory Board. At this time it is not known when or if new members will be
added to the Advisory Board.
In December 1999, Richard Schwartz also resigned as the Vice
President of Marketing. It is not expect that this position be filled at this
time.
Results of Operations- for the Six and Three Months Ended
February 29, 2000 Compared to the Six and Three Months Ended February 28, 1999:
Revenues:
Auctions were commenced in August of 1999 and in the three and
the six months ended February 29, 2000, $3,093 and $ 17,464, respectively, of
revenue was derived from these operations. There were no revenues in the Three
and Six Month Period ended February 28, 1999.
Operating Costs and Expenses:
Selling General and Administrative, Excluding Depreciation-
Selling, general and administrative costs and expenses,
excluding depreciation were $632,812 and $ 957,824, respectively, in the three
months and six months ended February 29, 2000 compared to $29,913 and $53,758,
respectively in the three and six months ended February 28, 1999. Thus, selling,
general, and administration costs increased by $602,899 and 904,066 for the
three months and six months ended February 29,2000 as compared to the three and
six months ended February 28, 1998, respectively. The primary factors related to
the higher costs were costs associated with the technical development of the
Company's Web site, increased salaries, rent for larger facilities, increased
marketing and increases in all other administrative costs, such as phone,
postage, mail and other items, including the items discussed below.
-9-
<PAGE>
Common Stock issued and Stock Options Granted as Compensation,
Included in Selling, General and Administrative Expenses.
Common Stock and Stock Options were granted to officers,
directors, Advisory Board members and other consultants in the three and six
months ended February 29, 2000. The Company accounted for options granted in
accordance with SFAS No. 123 and APB No. 25, as appropriate. Charges related to
the stock issuances and options granted were $225,500 and $232,000 during the
three and six months ended February 29, 2000. There were no such items in the
comparable 1999 period.
Depreciation Expense-
Depreciation expense was $ 22,602 and $45,204 in the three and
six months, ended February 29, 2000, respectively, as compared to the three and
six months ended February 28, 1999. Accordingly, depreciation expense increased
by $21,676 and $44,278 during the three and six months periods ended February
29, 2000 as compared to the relevant 1999 periods. The increases are as a result
of depreciation related to the Company's acquisition of equipment related to the
development of its web site.
Investment Income-
Investment income the three and six months ended February 29,
2000 in the amount of $30,015 and $74,007 was derived from interest earned on
bank deposits and earnings on short term investments. Such amounts for the
comparable 1999 period were negligible. The Company derived most of the
investment income in 2000 due to its investment in high yield funds.
LIQUIDITY AND CAPITAL RESOURCES: The Company has raised
$5,025,471 since the change in business direction in February 1999. The
Company's balance sheet at February 29, 2000 reflects cash of approximately
$192,000, marketable securities of approximately $3,094,000 and other current
receivables from related parties in the amount of $42,000.
Cash on the balance sheet declined by approximately $3,901,000
during the six months ended February 29, 2000 due, in part, to redeployment into
short term investments. Cash used in operating activities amounted to
approximately $908,000 during this period. Cash was used to fund the Company's
net loss for the period, partially offset by operating charges not requiring the
use of cash, including charges related to the issuance of shares of common stock
for services received and depreciation. Increasing the use of cash in the period
were reductions in accounts payable and accrued expenses, offset partially by
decreases in inventory and prepaid expenses.
Financing activities provided $150,000 during the six months
ended February 29, 2000 as the Company completed and received the final proceeds
related to the issuance of its Series A preferred stock in September 1999.
Investing activities consumed $3,144,000 as the Company sought
to increase the investment yield of its excess funds by investing such amounts
in higher yielding bond funds.
-10-
<PAGE>
During February 2000, the Company exchanged all of its issued
and outstanding preferred shares (3,950,000) for 2,893,770 shares of the
Company's common stock pursuant to an exchange offer with the preferred
stockholders. In connection therewith, the preferred shareholders agreed to
exchange their shares and forgive the unpaid (accrued) dividends due. Pursuant
to the terms of the exchange offer, the Company issued 1 additional common share
for every ten common shares issued pursuant to the original terms of the
exchange contained in the 1999 agreement with the preferred shareholders. This
resulted in the issuance of 263,070 additional common shares. The fair value of
the additional shares issued has been accounted for as a preferred distribution
in the accompanying financial statements.
Without regard to the JDI acquisition, discussed above, and
only as to the Company as it is presently operating, at current operating rates
the Company believes that it can satisfy its cash requirements over the next
twelve months. However, the Company's longer term capital requirements beyond
the next 12 months will depend on many factors, including, but not limited to,
the rate of market acceptance of the Company's services, the Company's ability
to develop, maintain and expand its user base, the level of resources required
to expand the Company's business model and other factors, some of which may be
beyond the Company's control. A slower than expected rate of acceptance of the
Company's business model or lower than expected revenues generated from such
business model would materially adversely affect the Company's liquidity. The
Company has no commitments for additional financing, and there can be no
assurances that any such additional financing would be available in a timely
manner, or, if available, would be on terms acceptable to the Company.
YEAR 2000 ISSUES Many current installed computer systems and
software products are coded to accept only two digit entries in the date code
field and cannot reliably distinguish dates beginning on January 1, 2000 from
dated prior to the year 2000. Many companies' software and computer systems may
need to be upgrade or replaced in order to correctly process dates beginning in
2000 and to comply with the "Year 2000" requirements. The Company has reviewed
its internal programs and has determined that there are no significant Year 2000
issues within the Company's systems or services. However, the Company utilizes
third-party equipment and software that may not be Year 2000 compliant although
the Company believes that the third-party systems that are material to its
business are Year 2000 compliant based on representations made by these
suppliers. Failure of such third-party equipment or software to process properly
dates to the year 2000 and thereafter could require the Company to incur
unanticipated expenses to remedy any problems, which could have a materially
adverse effect on the Company's business, results of operations and financial
condition.
-11-
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS.
As of the date of this filing, there are no material legal
proceedings pending, other than the matter of Kurt Bevaqua vs. AcuBid.com, Inc.,
San Diego Superior Court Case No. 744718. In this matter, Mr. Bevaqua is seeking
to re-instate his options to purchase 200,000 shares of the Company's Common
Stock at $0.45 per share, which options were canceled by the Company due to
failure of consideration and breach of contract. If Mr. Bevaqua were completely
successful in this litigation, he would have the right to purchase 200,000
shares of the Company's Common Stock at $0.45 per share.
ITEM 2. CHANGES IN SECURITIES.
(a) The Company's Articles of Incorporation authorize the
issuance of 10,000,000 shares of preferred stock, $0.001 par value. The
Company's Board of Directors has authority, without action by the shareholders,
to issue all or any portion of the authorized but unissued preferred stock in
one or more series and to determine the voting rights, preferences as to
dividends and liquidation, conversion rights, and other rights of such series.
As of February 1, 2000, Company currently had outstanding
3,950,000 shares of Series A Preferred Stock with a stated value of $1.00 per
share. The Series A Preferred Stock was to pay interest at the rate of 6% per
annum calculated on the $1.00 per share stated value. The interest was payable
on the first of each of August and February commencing February1, 2000. Holders
of the Series A Preferred were not be entitled to vote at meetings of
shareholders.
According to the Certificate of Designation creating the
Series A Preferred Stock, commencing on February 1, 2000, holders of the Series
A Preferred Stock could convert all or part of the preferred shares into Common
Stock, in accordance with the following timetable and the following amounts:
<TABLE>
<CAPTION>
Time of Conversion Number of Common Shares to be Issued
------------------ ------------------------------------
<S> <C>
During the Period February 2, 2000 up to and including 0.666 Common Shares for each Preferred Share
January 31, 2001
During the period February 1, 2001 up to and including 0.40 Common Shares for each Preferred Share
January 31, 2002
During the period February 1, 2002 up to and including 0.285 Common Shares for each Preferred Share
January 31, 2003
During the period February 1, 2003 up to and including 0.20 Common Shares for each Preferred Share
January 31, 2004
</TABLE>
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<PAGE>
After August 1, 2004, the holders of the Series A Preferred
Stock had the right to require the Company to redeem any or all of the Series A
Preferred shares by paying the holder of the Preferred $1.00 per share together
with any unpaid cumulative dividends.
Pursuant to a formula, the conversion price of the Series A
Preferred shares was to be adjusted in the event of a Common Share
reorganization defined as: i) a Common Stock dividend; ii) a distribution of
Common Stock to holders of Common Stock; iii) a stock split; or, iv) a reverse
stock split. In the event of such Common Stock reorganization, the Conversion
Price for the Series A Preferred will be proportionately adjusted by multiplying
the Conversion Price by the quotient of the number of shares outstanding before
the Common Stock reorganization divided by the number of Common Shares
outstanding after the Common Stock reorganization .
Additionally, the Series A Preferred shareholders were to
receive one common share purchase warrant for each two Series A Preferred shares
purchased. On and after February 2, 2000, each common share purchase warrant
entitled the shareholder to purchase one Common Share ("Warrant Share") at an
exercise price of $2.00 per Warrant Share from and including February 1, 2000,
and up to and including February 1, 2001. Thereafter, until the warrants expire
at the close of business July 31, 2004 a Warrant Share can be purchased for
$3.00 per share.
The Preferred Shares were only be transferable to another
holder with the consent of the Company's Board of Directors.
On February 1, 2000, the Company contacted each holder of the
Series A Preferred Shares and advised them that, with the impending acquisition
of JDI, that the Company deemed it to be in the best interest of all, if the
holders of the Series A Preferred Stock would convert to Common Stock, in
advance of the above timetable. As consideration for the early conversion and
waiving the accrued dividend and future dividends, the Company offered on
additional share of Common Stock for every ten shares of Common Stock received
upon conversion of the Preferred Shares. For example, a holder of 100,000 shares
of Preferred Stock would convert into 66,600 shares of Common with a bonus of
6,660 shares of common stock for the early conversion and dividend waiver. At
the time that the early conversion offer was made, the closing price of the
Company's Common Stock on February 1, 2000 was 3 1/4 and the value, as a class,
of the 3% dividend due was approximately $118,000. The bonus to the class of
Series A holders was 263,070 shares of Common Stock which, if freely tradeable
would be valued at $855,000. Since the stock was not freely tradeable, the
Company believes that the value of the bonus shares was closer to $1.00 per
share or $263,070 for the entire bonus, as a class.
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<PAGE>
As of February 29, 2000 all holders of the Series A Preferred
Shares elected the early conversion and bonus shares in consideration for the
early conversion and dividend waiver.
(b) Not applicable.
(c) During the three month period ending February 29,
2000, the Company has sold the following securities
without registering them under the Securities Act of
1933 (the "Securities Act"):
(1) On December 30, 1999, the Company issued
25,000 shares of its Common Stock to counsel
for the Company for services rendered. This
offering was deemed exempt under the Section
4(2) of Securities Act.
On February 24, 2000, the Company issued
2,500 shares of its Common Stock for
services rendered. This offering was deemed
exempt under the Section 4(2) of Securities
Act.
On February 29, 2000, the Company issued
1,000 shares of its Common Stock for
services rendered. This offering was deemed
exempt under the Section 4(2) of Securities
Act.
On February 29, 2000, the Company issued
10,000 shares of its Common Stock for
services rendered. This offering was deemed
exempt under the Section 4(2) of Securities
Act.
On February 29, 2000, the Company issued
25,000 shares of its Common Stock to counsel
for the Company for services rendered. This
offering was deemed exempt under the Section
4(2) of Securities Act.
On February 29, 2000, the Company issued
25,000 shares of its Common Stock to counsel
for the Company for services rendered. This
offering was deemed exempt under the Section
4(2) of Securities Act.
The securities were valued at fair market which was determined
by the trading value of the company stock on or about the date the agreements
were entered into, not the dates of issuance.
(2) On February 22, 2000, the Company issued
36,630 shares of Common Stock to a holder of
its Preferred Shares in exchange for 50,000
Preferred Shares.
On February 22, 2000, the Company issued
109,890 shares of Common Stock to a holder
of its Preferred Shares in exchange for
150,000 Preferred Shares.
-14-
<PAGE>
On February 22, 2000, the Company issued
54,945 shares of Common Stock to a holder of
its Preferred Shares in exchange for 75,000
Preferred Shares.
On February 22, 2000, the Company issued
54,945 shares of Common Stock to a holder of
its Preferred Shares in exchange for 75,000
Preferred Shares.
On February 22, 2000, the Company issued
73,260 shares of Common Stock to a holder of
its Preferred Shares in exchange for 100,000
Preferred Shares.
On February 22, 2000, the Company issued
109,890 shares of Common Stock to a holder
of its Preferred Shares in exchange for
150,000 Preferred Shares.
On February 25, 2000, the Company issued
549,450 shares of Common Stock to a holder
of its Preferred Shares in exchange for
750,000 Preferred Shares.
On February 25, 2000, the Company issued
109,890 shares of Common Stock to a holder
of its Preferred Shares in exchange for
150,000 Preferred Shares.
On February 25, 2000, the Company issued
36,630 shares of Common Stock to a holder of
its Preferred Shares in exchange for 50,000
Preferred Shares.
On February 25, 2000, the Company issued
366,300 shares of Common Stock to a holder
of its Preferred Shares in exchange for
500,000 Preferred Shares.
On February 25, 2000, the Company issued
109,890 shares of Common Stock to a holder
of its Preferred Shares in exchange for
150,000 Preferred Shares.
On February 25, 2000, the Company issued
36,630 shares of Common Stock to a holder of
its Preferred Shares in exchange for 50,000
Preferred Shares.
On February 25, 2000, the Company issued
54,945 shares of Common Stock to a holder of
its Preferred Shares in exchange for 75,000
Preferred Shares.
-15-
<PAGE>
On February 25, 2000, the Company issued
54,945 shares of Common Stock to a holder of
its Preferred Shares in exchange for 75,000
Preferred Shares.
On February 29, 2000, the Company issued
915,750 shares of Common Stock to a holder
of its Preferred Shares in exchange for
1,250,000 Preferred Shares.
On February 29, 2000, the Company issued
54,945 shares of Common Stock to a holder of
its Preferred Shares in exchange for 75,000
Preferred Shares.
On February 29, 2000, the Company issued
54,945 shares of Common Stock to a holder of
its Preferred Shares in exchange for 75,000
Preferred Shares.
On February 29, 2000, the Company issued
36,630 shares of Common Stock to a holder of
its Preferred Shares in exchange for 50,000
Preferred Shares.
On February 29, 2000, the Company issued
36,630 shares of Common Stock to a holder of
its Preferred Shares in exchange for 50,000
Preferred Shares.
On February 29, 2000, the Company issued
36,630 shares of Common Stock to a holder of
its Preferred Shares in exchange for 50,000
Preferred Shares.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) On March 29, 2000 the Company filed a report on Form
8-K reporting the signing of a definitive agreement
to acquire 90% of the outstanding stock Jaring Data
Interaktif, an Indonesian corporation in exchange for
44,000,000 of the Company's Common Stock.
-16-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AcuBid.com, Inc.
April 12, 2000 /s/ Lawrence Schaffer
-------------------------------------
By: Lawrence Schaffer
Its: Acting Chief Financial Officer
/s/ Lawrence Schaffer
-------------------------------------
By: Lawrence Schaffer
Its: President
-17-
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<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> FEB-29-2000
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0
0
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