<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 November 30, 1999
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
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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: 5,813,138
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 ................................................ 1
Balance Sheet as of November 30, 1999 (unaudited)
and August 31, 1999......................................... 1
Statement of Operations for the Three Months Ended
November 30, 1999 and 1998 (Unaudited)...................... 2
Statement of Shareholders' Equity for the Three Months
Ended November 30, 1999 and 1998 (Unaudited)................ 3
Statement of Cash Flows for the Three Months Ended
November 30, 1999 and 1998 (Unaudited)...................... 4
Supplemental Disclosure of Cash Flow Information .................... 5
Notes to the Financial Statements (Unaudited)........................ 6
2. Management's Discussion and Analysis or Plan of Operation............14
PART II OTHER INFORMATION
1. Legal Proceedings....................................................19
2. Changes in Securities................................................19
3. Defaults Upon Senior Securities......................................21
-i-
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4. Submission of Matters to a Vote of Security Holders..................21
5. Other Information....................................................21
6. Exhibits and Reports on Form 8-K.....................................21
SIGNATURES....................................................................22
-ii-
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
ACUBID.COM INC.
BALANCE SHEET
NOVEMBER 30, 1999 AND AUGUST 31, 1999
ASSETS
<CAPTION>
November 30, August 31,
1999 1999
-------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 316,601 $ 4,093,919
Short-term investments (Note 1) 3,429,318 -
Inventory (Note 1) 275,458 188,953
Prepaid expenses 64,723 60,000
Due from officers 20,000 -
-------------- --------------
Total current assets 4,106,100 4,342,872
PROPERTY AND EQUIPMENT, net of accumulated
depreciation (Note 1) 216,164 196,487
OTHER ASSETS 12,045 14,742
-------------- --------------
TOTAL ASSETS $ 4,334,309 $ 4,554,101
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 56,050 $ 121,602
Accrued liabilities (Note 1) 128,723 88,962
Due to related parties 13,290 13,290
-------------- --------------
Total current liabilities 198,063 223,854
-------------- --------------
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; 3,950,000 and 3,800,000 Series A
shares issued and outstanding at November 30, 1999
and August 31, 1999, respectively (Note 3) 3,950,000 3,800,000
-------------- --------------
SHAREHOLDERS' EQUITY (Notes 4)
Common stock; par value of $0.001 per share;
50,000,000 shares authorized; 5,810,890 and 5,738,151
shares issued and outstanding at November 30, 1999
and August 31, 1999, respectively 5,812 5,739
Additional paid-in capital 9,322,350 9,300,786
Accumulated deficit (9,141,916) (8,829,715)
-------------- --------------
Total shareholders' equity 186,246 476,810
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,334,309 $ 4,554,101
============== ==============
See accompanying notes to financial statements.
1
</TABLE>
<PAGE>
<TABLE>
ACUBID.COM INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
November 30
----------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Revenues $ 14,371 $ -
Cost of revenues 3,000 -
-------------- --------------
Gross profit 11,371 -
-------------- --------------
Operating Costs and Expenses
Selling, general and administrative, excluding depreciation
(including $27,450 in 1999 in the form of common stock issued) 344,962 23,845
Depreciation 22,602 -
-------------- --------------
Total operating costs and expenses 367,564 23,845
-------------- --------------
Loss from Operations (356,193) (23,845)
-------------- --------------
Other Income
Interest and dividend income 43,992 123
-------------- --------------
Total other expenses (income) 43,992 123
-------------- --------------
Loss from continuing operations before
provision for income taxes (312,201) (23,722)
Provision for income taxes - -
-------------- --------------
Loss from continuing operations (312,201) (29,906)
Discontinued Operations
Loss from operations - (6,184)
-------------- --------------
Net loss (312,201) (29,906)
Preferred dividend requirement 59,250 -
-------------- --------------
Net loss applicable to common shareholders $ (371,451) $ (29,906)
============== ==============
Net loss applicable to common shares - basic and diluted
Loss from continuing operations $ (0.06) $ (0.01)
Loss from discontinued operations - -
-------------- --------------
Net loss $ (0.06) $ (0.01)
============== ==============
Weight average number of common shares 5,767,021 2,639,301
============== ==============
See accompanying notes to financial statements.
</TABLE>
2
<PAGE>
<TABLE>
ACUBID.COM INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
Common Stock Additional
----------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------------- ------------- ------------- ------------- -------------
<S> <C>
Balance, September 1, 1999 5,738,151 $ 5,739 $ 9,300,786 $ (8,829,715) $ 476,810
Net loss for the period - - - (312,201) (312,201)
Compensation in the form of common
stock issued 15,000 15 19,935 - 19,950
Settlement of liabilities by the
issuance of common stock 57,739 58 60,879 - 60,937
Preferred dividend
requirements - - (59,250) - (59,250)
------------- ------------- ------------- ------------- -------------
Balance, November 30, 1999
(Unaudited) 5,810,890 $ 5,812 $ 9,322,350 $ (9,141,916) $ 186,246
============= ============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
3
<PAGE>
<TABLE>
ACUBID.COM INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
November 30
----------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (312,201) $ (29,906)
-------------- --------------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss from discontinued operations - 6,184
Depreciation 22,602 463
Shares issued for marketing fees 27,450 -
Changes in assets and liabilities:
Inventory (86,505) -
Prepaid expenses and other (4,723) -
Accounts payable (65,552) -
Accrued liabilities (19,489) -
Due from (to) related parties (20,000) 16,500
Other 2,697 10,275
-------------- --------------
Total adjustments (143,520) 33,422
-------------- --------------
Cash (used in) provided by continuing operations (455,721) 3,516
Cash used in discontinued operations - (6,184)
-------------- --------------
Net cash used in operating activities (455,721) (2,668)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment (42,279) -
Increase in short-term investments (3,429,318) -
-------------- --------------
Cash used in investing activities (3,471,597) -
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - 2,929
Proceeds from issuance of redeemable preferred
stock in a private placement 150,000 -
-------------- --------------
Cash provided by financing activities 150,000 2,929
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENT (3,777,318) 261
CASH AND CASH EQUIVALENTS - beginning 4,093,919 9,871
-------------- --------------
CASH AND CASH EQUIVALENTS - end $ 316,601 $ 10,132
============== ==============
See accompanying notes to financial statements.
</TABLE>
4
<PAGE>
ACUBID.COM INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
November 30
-----------------------------
1999 1998
------------- -------------
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Common shares issued for settlement of liabilities:
Common stock $ 53,385 $ --
Additional paid in capital $ 52 $ --
Long-term liability $ 53,437 $ --
See accompanying notes to financial statements.
5
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(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.
REVENUE RECOGNITION
Revenues are anticipated to be derived from placement fees charged for
the listing of items and success fees calculated as a percentage of the
final sales transaction value. Revenues related to placement fees will be
recognized at the time an item is listed, while those related to success
fees will be recognized at the time that 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 November 30, 1999, cash
balances in excess of federally insured limits amounted to approximately
$172,000.
MARKETABLE SECURITIES
Approximately $3,429,000 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.
6
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES (continued)
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 three months ended November 30, 1999. All
investment securities have a maturity date which is less than one year
from November 30, 1999.
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.
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 November 30, 1999.
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.
7
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(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.
8
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(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 three month
periods November 30, 1999 and 1998.
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. CONTINGENCIES
Year 2000 Disclosure
The Company has conducted a comprehensive review of its computer
operations to identify the systems that could be adversely affected by
the Year 2000 Issue and has developed and implemented a plan that it
believes has resolved the issue. The Year 2000 Issue is a result of
computer programs being written using two digits rather than four to
define the applicable year. Any of the Company's programs that have
time-sensitive software might have recognized a date using "00" as the
year 1900 rather than the 2000. This could have resulted in a major
system failure or miscalculations. The Company presently believes that,
with modifications already made to existing software and conversion to
new software, the Year 2000 problem will not pose significant operations
problems for the Company's computer systems as so modified and converted.
9
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
3. 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 consists 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 is convertible into .666 common shares in the first year,
.4 shares in the second year, and .285 shares thereafter. No preferred
shares can utilize the conversion feature until six months after the
offering has 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 three months ended November 30, 1999.
Pursuant to the terms of the preferred stock, the Company is not
permitted to declare or pay any dividends on its common stock unless all
preferred dividends due have been paid.
RIGHT TO REDEMPTION
At any time on or after the fifth anniversary of the issuance of the
Series A Preferred, the holders of the Series A Preferred may elect to
require the Company to redeem such holders' shares of Series A Preferred
at a price equal to $1 per share plus all accrued and unpaid dividends
accrued as of such date. The holders of Series A Preferred may require
the Company to effect such a redemption by giving written notice to the
Company of such election.
4. STOCKHOLDERS' EQUITY
COMMON SHARES ISSUED FOR SETTLEMENT OF DEBT
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.
During the three months ended November 30, 1999 15,000 shares of common
stock were issued to consultants resulting in a charge to operations of
$19,950 and 6,000 shares of common stock was issued to a supplier
resulting in a non-cash charge of $7,500.
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 1,900,000 common stock purchase warrants in connection
with the issuance of its 6% convertible redeemable preferred stock (Note
3). 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.
10
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
4. STOCKHOLDERS' EQUITY (CONTINUED)
The following summarizes information about warrants granted and
outstanding at November 30, 1999 and 1998, and changes during the each of
the related three month periods.
<TABLE>
<CAPTION>
Three Months Ended
November 30,
---------------------------------------------------------------------
1999 1998
-------------------------------- -------------------------------
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 - - 87,500 0.56
Exercised - - - -
Cancelled/expired (35,000) - - -
-------------- ---------- -------------- -----------
Outstanding, end of period 1,900,000 $ 2.00 187,500 $ 0.89
============== ========== ============== ===========
</TABLE>
5. 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
three months ended November 30, 1999.
The following summarizes information about stock options granted and
outstanding at November 30, 1999 and 1998, and changes during each of the
related three month periods.
<TABLE>
<CAPTION>
Three Months Ended
November 30,
---------------------------------------------------------------------
1999 1998
------------------------------- -------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
-------------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Outstanding,
beginning of period 635,000 $ .75 - $ -
Granted - 0.00 - -
Exercised - 0.00 - -
Cancelled/expired - - - -
-------------- ---------- -------------- -----------
Outstanding, end of period 635,000 $ 0.75 - $ -
============== ========== ============== ===========
</TABLE>
11
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
5. STOCK OPTIONS AND INCENTIVE EQUITY PLANS (CONTINUED)
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 (as defined below) 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 August 31, 1999, no
options have been granted pursuant to the incentive equity plans.
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
12
<PAGE>
ACUBID.COM INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999 AND 1998
(UNAUDITED)
5. STOCK OPTIONS AND INCENTIVE EQUITY PLANS (CONTINUED)
APPRECIATION RIGHTS (CONTINUED)
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.
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.
13
<PAGE>
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. AcuBid.com Inc., online auction house, is
the new business direction of the Company. The business plan, conceived in
February 1999, has the company competing for a share of the very exciting on
line auction business dominated presently by EBAY, Amazon.com and Yahoo. On line
auctions enable buyers and sellers of specified items to come together on an
informal and entertaining manner and to conduct their business.
The Company derives revenue from listing fees, commissions
received from the sale of items on its site and sales of items for its own
account. The Company estimates that it will take at least one operating year
before enough items are listed in the various categories to generate enough
revenues to meet operating costs. While the Company believes that it should also
profit from the purchase and sale of inventory items (items purchased for the
account of AcuBid.com, Inc.), there is however no way to project profits from
these transactions at this point. It is also possible that inventory
transactions may result in losses rather than gains due to acquisition costs,
inventory management costs, and fulfillment cost.
14
<PAGE>
The Company has incurred no research and development costs in
the three months ended November 30, 1999 and expects to incur none over the next
nine months of operations. The company will require no significant 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
operations, management does not believe that the number of key employees will
change significantly within the next nine months.
The Company has 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 has 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 have also agreed to
be available for two hours per month for on-line chats or other promotions for
the Company. Additionally, members of the Advisory Board have agreed to assist
the Company in acquiring, creating and evaluating memorabilia in their
respective fields. Other than the "signing" fees, none of the members of the
Advisory Board receive any cash or other compensation. For further information
on the "signing" fees for the Advisory Board, see the Company's registration
statement on Form 10-SB/A filed on December 15, 1999.
The Company commenced operation of its online auction house,
AcuBid.com, on August 2, 1999. Since that time the company has focused on
establishing commercial relationships with sellers of collectibles. Management
believes that once enough items are registered for sale, buyers will be
attracted to the site. When that occurs, levels of commissions and profits from
Company owned inventory will grow.
It is still premature to estimate operating margins at this
early stage of operations. Although there are some industry figures available
(eBay) since the Company is engaged in Company to Person transactions as well as
Person to Person transactions, management does not believe that there are
meaningful comparisons available.
The Company's initial thrust has been in stamps and sports
memorabilia. This trend may change and management still believes that antiques
may well ultimately dominate the number of items for sale and the potential
buyers, since there are more antique items available for collection than any
other.
15
<PAGE>
The Company has not realized any significant operating revenue
to date. Since the Company has no historical operating revenues to gauge future
operating revenues upon, it is uncertain as to what level of revenue the Company
may achieve in the next year.
CHANGES IN THE COMPANY'S OPERATIONS IN THE QUARTER ENDED
NOVEMBER 30, 1999:
During this quarter, the Company redesigned its online auction
Web site to make it more aesthetically pleasing and easier to use. As part of
the redesign, new functions were added to the site. The Company modified and
changed some of the categories of its listed items. The auction categories now
include Antiques, Art, Books, Coins, Collectibles, Comic Books/sci-fi,
Entertainment, Jewelry, Sports Memorabilia, Stamps, Toys and Miscellaneous. As
of the date of this filing, since inception of the site, the Company has
completed approximately 5,489 auctions. Also as of the date of this filing, the
Company had 769 items listed for sale.
One of the new functions is automatic cross-referencing of a
single item in multiple categories. Sellers, in both Company to Person and
Person to Person transactions, can list an item in 3 sub-categories as well as
in the main category. Additionally, the Company has eliminated the Premier
Option feature which charged a seller premium listing fees for its item to
appear on the site's home page. The Company has instituted a Random Home Page
Feature in which 25 items per day, in groups of five, will appear on the Home
Page. Further, the Company has instituted celebrity Email, enabling user of the
site to send Email to member of the Advisory Board. The Company also improved
and expanded its search engine capability, enabling users to search by product,
category, or seller.
The Company is currently working on other new auction
features, including Bid Retraction, Auction Editing, and Auction Canceling. The
Company is also currently considering opportunities to expand further into E
Commerce.
During the quarter, the Company conducted live online chats
with Hall of Famers Yogi Berra, Johnny Bench and Gale Sayers.
It cannot be emphasized enough that E Commerce, Internet
Auctions and all business associated with the rapidly expanding Internet is
subject to rapid changes and modifications in order to stay abreast with the
changing market. Accordingly, the Company anticipates that its business and web
site may go through a variety of subtle and not so subtle changes in order to
remain competitive and hopefully achieve profitability.
16
<PAGE>
RESULTS OF OPERATIONS- THREE MONTHS ENDED NOVEMBER 30, 1999 TO
THREE MONTHS ENDED NOVEMBER 30, 1998:
Revenues:
Auctions were commenced in August of 1999 and in the quarter
ended November 30, 1999, $14,371 of revenue was derived from these operations.
There were no revenues in the Three Month Period ended November 30, 1998.
Operating Costs and Expenses:
Selling general and administrative, excluding
depreciation-
Selling, general and administrative costs and expenses,
excluding depreciation were $344,962 in the three months ended November 30, 1999
compared to $23,845 in the three months ended November 30, 1998, or an increase
of $321,117. The primary factors related to the higher costs in 1999 were costs
associated with the technical development of the 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.
Common Stock issued and Stock Options granted as
compensation-
Common Stock and Stock Options were granted to officers,
directors, Advisory Board members, consultants and other suppliers in the three
months ended November 30, 1999. 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 $27,450 during the three months
ended November 30, 1999.
17
<PAGE>
Depreciation Expense-
Depreciation expense increased significantly (from $463 to
$22,602) in the three months ended November 30, 1999 as compared to the three
months ended November 30, 1998 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 in the three months ended November 30, 1999,
in the amount of $43,992, was derived from interest earned on bank deposits and
earnings on short term investments.
Discontinued operations:
On December 2, 1999 pursuant to an action by the Board of
Directors, the Company formalized its intentions to discontinue the AcuVision
operations. There were no significant operations for AcuVision in the three
months ended November 30, 1999 Results for the three months ended November 30,
1998 were as follows:
Net Sales $ -----
Operating Expenses 6,184
----------
Loss from discontinued operations $ (6,184)
==========
LIQUIDITY AND CAPITAL RESOURCES: The Company has raised
$5,025,471 since the change in business direction in February 1999. The Company
has invested approximately $272,000 in fixed assets, $278,000 in inventory and,
as of November 30, 1999 has spent approximately $840,631 in cash on general
administration and overhead since the change in business direction. As of
November 30, 1999, the Company had approximately $317,000 in cash on deposit and
has invested approximately $3,429,000 in short term investments.
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 service, the Company's ability to develop, maintain and expand its
user base, the level of resources required to expand the Company's marketing and
sales organization and other factors, some of which may be beyond the Company's
control. A slower than expected rate of acceptance of the Company's service or
lower than expected revenues generated from the service, extra-ordinary costs
associated with Company to Person transactions, 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.
18
<PAGE>
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.
PART II
ITEM 1. LEGAL PROCEEDINGS.
As of the date of this filing, there are no material legal
proceedings pending.
ITEM 2. CHANGES IN SECURITIES.
(a) Not applicable.
(b) Not applicable.
(c) During the last three years, the Company has sold the
following securities without registering them under
the Securities Act of 1933 (the "Securities Act"):
On October 26, 1999, the Company issued 5,000 shares of its
Common Stock to a member of the Advisory Board. This offering was deemed exempt
under the Section 4(2) of Securities Act.
19
<PAGE>
On October 26, 1999, the Company issued 10,000 shares of its
Common Stock to a member of the Advisory Board. This offering was deemed exempt
under the Section 4(2) of Securities Act.
On October 26, 1999, the Company issued 10,000 shares of its
Common Stock to a member of the Advisory Board. This offering was deemed exempt
under the Section 4(2) of Securities Act.
On October 26, 1999, the Company issued 30,000 shares of its
Common Stock to a member of the Advisory Board. This offering was deemed exempt
under the Section 4(2) of Securities Act.
On October 26, 1999, the Company issued 5,000 shares of its
Common Stock to an officer of the Company pursuant to his employment contract.
This offering was deemed exempt under the Section 4(2) of Securities Act.
On November 4, 1999, the Company issued 6,000 shares of its
Common Stock to an outside consulting firm providing advertising services for
services rendered. This offering was deemed exempt under the Section 4(2) of
Securities Act.
On November 10, 1999, the Company issued 1,500 shares of its
Common Stock for services rendered. This offering was deemed exempt under the
Section 4(2) of Securities Act.
On November 10, 1999, the Company issued 41,739 shares of its
Common Stock for services rendered. This offering was deemed exempt under the
Section 4(2) of Securities Act.
On November 30, 1999, the Company issued 10,000 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's stock on or about the date the agreements
were entered into, not the dates of issuance.
(d) Not applicable.
20
<PAGE>
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) There were no reports filed on Form 8-K for the
period covered by this report.
21
<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.
January 11, 2000 /s/ Norman Schwartz
-------------------------------
By: Norman Schwartz
Its: Chief Financial Officer
/s/ Lawrence Schaffer
-------------------------------
By: Lawrence Schaffer
Its: President
22
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<FISCAL-YEAR-END> AUG-31-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 316,601
<SECURITIES> 3,429,318
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<COMMON> 5,812
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<SALES> 14,371
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