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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
AMENDMENT #1
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
AUCTIONANYTHING.COM, INC.
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(Name of Small Business Issuer in its charter, as amended)
Delaware 13-2640971
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 West Pine Street, Suite 211, Orlando, Florida 32801
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(Address of principal executive offices) (Zip code)
(407) 481-2140
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(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered each class is to be registered
N/A N/A
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Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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(Title of class)
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AUCTIONANYTHING.COM, INC.
FORM 10-SB
TABLE OF CONTENTS
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Page
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PART I.................................................................................................... 3
ITEM 1- DESCRIPTION OF BUSINESS........................................................................... 3
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS............... 9
ITEM 3 - DESCRIPTION OF PROPERTY.......................................................................... 13
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................... 13
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS..................................... 14
ITEM 6 - EXECUTIVE COMPENSATION........................................................................... 16
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS............................................. 16
ITEM 8 - DESCRIPTION OF SECURITIES........................................................................ 16
PART II................................................................................................... 17
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.. 17
ITEM 2 - LEGAL PROCEEDINGS................................................................................ 17
ITEM 3 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS..................................................... 18
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES.......................................................... 18
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS........................................................ 18
PART F/S.................................................................................................. 19
FINANCIAL STATEMENTS...................................................................................... 19
PART III.................................................................................................. 32
ITEM 1- INDEX TO EXHIBITS................................................................................. 32
ITEM 2- DESCRIPTION OF EXHIBITS........................................................................... 33
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PART I
ITEM 1- DESCRIPTION OF BUSINESS
Corporate History
AuctionAnything.com, Inc. ("UBUY" or the "Company") is a publicly
traded company (OTC BB: UBUY). The Company was originally incorporated in
Delaware under the name "Mediplex Corporation" on February 25, 1969. According
to documents filed in the State of Delaware, Mediplex Corporation forfeited its
Certificate of Incorporation on December 3, 1973, as a result of not having
named a registered agent as required by Delaware law; however, the Company was
renewed and revived pursuant to a Certificate of Renewal and Revival filed on
June 4, 1974. On June 5, 1974, the Company changed its name to "The Lawton-York
Corporation." On January 31, 1975, the Company merged into it a New York
corporation of identical name, which had been incorporated on February 10, 1966.
The Company was the surviving corporation of that merger.
The Company was, for many years, a wholesaler of custom one-, two-,
three- and four-color processed commercial printing, as well as disposable and
durable office equipment including stock paper, fax paper, fax and copy
machines, computers, file cabinets and safes. The Company conducted its
business throughout the United States of America and Puerto Rico from its
headquarters in New York.
On March 10, 1999, the Company changed the focus of its business and
closed a transaction by which it acquired 100% of the outstanding capital stock
of North Orlando Sports Promotions, Inc., a privately held Florida corporation
("NOSP"), from the shareholders of NOSP. As consideration for that acquisition,
the Company issued 24,003,133 shares of its common stock, $0.001 par value (the
"Common Stock"), which amounted to approximately 85% of the Company's
outstanding Common Stock, to the three former shareholders of NOSP. In
connection with the transaction, the Company adopted the name,
"AuctionAnything.com, Inc.," in order to more accurately reflect its new core
business. Also, prior to the closing of the acquisition transaction, the Company
sold substantially all of its assets to its major shareholder, director and
president, Joel E. Cavalier, in exchange for his assignment to the Company of
747,116 shares of Common Stock and his assumption of all of the Company's
liabilities. At the Closing of the acquisition transaction, the Company's
directors and officers resigned, and the Company elected a new management team
consisting of the three former shareholders of NOSP, who are experienced in
providing Internet auctions.
Business and Properties
Industry Overview
Growth of the Internet and Online Commerce
------------------------------------------
The Internet has emerged as a global medium enabling millions of
people worldwide to share information, communicate and conduct business
electronically. An estimated 25% of U.S. households now use the Internet, which
is projected to rise to 33% in 1999 and to 66% by 2003/1/. Some 55% of the U.S.
adult population (108 million) accessed the Internet during the final three
months of 1998, up from 40% in the first three months of the year/2/.
International Data Corporation ("IDC") estimates that the number of Internet
users will grow from approximately 69 million worldwide in 1997 to approximately
320 million worldwide by the end of 2002. This growth is expected to be driven
by the large and growing number of personal computers ("PCs") installed in homes
and offices, the decreasing cost of PCs, easier, faster and cheaper access to
the Internet, improvements in network infrastructure, the proliferation of
Internet content and the increasing familiarity and acceptance of the Internet
by businesses and consumers. The Internet possesses a number of unique
characteristics that differentiate it from traditional media: users communicate
or access information without geographic or temporal limitations; users access
dynamic and interactive content on a real-time basis; and users communicate and
interact instantaneously with a single individual or with entire groups of
individuals. As a result of these characteristics, Internet usage is expected
____________________________
/1/ Yankee Group survey, March, 1999.
/2/ INTECO Corp. survey, January, 1999.
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to continue to grow rapidly. The growing acceptance of the Internet represents
an enormous opportunity for businesses to conduct commerce over the Internet.
IDC estimates that commerce over the Internet will increase from approximately
$32 billion worldwide in 1998 to approximately $130 billion worldwide in 2000.
While companies initially focused on facilitating and conducting
transactions between businesses over the Internet, a number of companies more
recently have focused on facilitating a wide variety of business-to-consumer
transactions. These companies typically use the Internet to offer standard
products and services that can be easily described with graphics and text and do
not necessarily require physical presence for purchase, such as books, CDs,
videocassettes, automobiles, home loans, airline tickets and on-line banking and
stock trading. The Internet gives these companies the opportunity to develop
one-to-one relationships with customers worldwide from a central location
without having to make the significant investments required to build a number of
local retail presences, manage a worldwide distribution infrastructure or
develop the printing and mailing infrastructure associated with traditional
direct marketing activities. While companies have generally focused on applying
these benefits in business-to-business and business-to-consumer transactions, a
significant market opportunity exists to apply these same advantages to
facilitate person-to-person trading over the Internet.
In addition, the Internet offers advertisers the ability to target
their messages and to make changes quickly and frequently in response to market
factors, current events and consumer feedback. Ad effectiveness is measured by
the number of "impressions" delivered to customers and the "click-through" rate
to advertisers' web sites. This level of targetability, flexibility, and
measurability is not available through traditional print or broadcast media.
Online advertising revenue was estimated at $266.9 million in 1996, $907 million
in 1997/3/, and $2.1 billion in 1998. Internet ad revenue of $5.5 billion is
predicted for 1999, which represents a 161.9% increase over last year/4/. Online
ad spending is expected to reach $7.1 billion by 2002/5/, and will climb to an
estimated $15 billion by 2003/6/. Online advertising is showing significantly
stronger yearly growth than television advertising/7/, has proven to be
efficacious/8/, and continues to gain ground on print advertising, as people
move from the newspaper to the Internet for news and information. Its 240%
projected growth rate has dwarfed cable television's 15.5% growth rate/9/.
The Person-to-Person Trading Market
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The exchange of goods between individuals--person-to-person trading--
has traditionally been conducted through trading forums such as classified
advertisements, collectibles shows, garage sales and flea markets or through
intermediaries, such as auction houses and local dealer shops. These markets are
highly inefficient, making person-to-person trading difficult for buyers and
sellers. Their fragmented, regional nature makes it difficult and expensive for
buyers and sellers to meet, exchange information and complete transactions. The
localized nature of these markets also results in a limited variety and breadth
of goods available in any one location. Buyers are limited to searching through
local classified ads or to traveling to numerous geographically-dispersed flea
markets, trade shows or dealer shops in order to find items of interest. These
markets often have high transaction costs because intermediaries either mark up
goods for resale or charge a commission. Because these markets are information
inefficient, buyers and sellers lack a reliable and convenient means of setting
prices for sales or purchases. Despite
_____________________________
/3/ Fox Market Wire: "1997 - a Breakthrough Year of Online Advertising", April
8, 1998, citing figures compiled by Coopers and Lybrand.
/4/ Simba Information report: "Web Advertising 1998-1999 Market Analysis and
Forecast", February, 1999 (including $2.1 billion figure for 1998); earlier
reports predicted $3.8 billion in ad revenues by the year 2000 (6/th/ E Overview
Report of eMarketer, August, 1998). Another study by eMarketer estimates ad
revenues as follows: 1998: $1.5 billion, 1999: $2.61 billion, 2000: $4.2
billion, 2001: $6.7 billion, 2002: $8.9 billion. (CyberAtlas: Advertising:
"Increase in Ad Spending Predicted" March 25, 1999).
/5/ Supra
/6/ PC World: "Online Advertising to Increase Tenfold", August 21, 1998, citing
Forrester Research, Inc. report.
/7/ Internet Advertising Bureau, press release, April 8, 1998, citing figures
compiled by Coopers & Lybrand.
/8/ The Ipsos-ASI/AOL study of February 1999 shows that consumers are as likely
to remember an online banner ad as a television commercial; the Netratings
survey of October, 1998, concludes that "Web banner ads significantly increase
the audience reach of a product", and the February, 1999 study of online brand
loyalty by Cyber Dialogue, found that one third of consumers have changed their
perception of a brand because of online advertising.
/9/ Coopers and Lybrand report, April 1998.
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these inefficiencies, the Company believes that the market for traditional
person-to-person trading in the U.S. through auctions and classified ads
exceeded $50 billion in goods sold in 1997.
The Internet offers, for the first time, the opportunity to create a
compelling global marketplace that overcomes the inefficiencies associated with
traditional person-to-person trading while offering the benefits of Internet-
based commerce to the person-to-person trading market. An Internet-based,
centralized trading place facilitates buyers' and sellers' meeting, listing
items for sale, exchanging information, interacting with each other and,
ultimately, consummating transactions. It allows buyers and sellers to trade
directly, bypassing traditional intermediaries and lowering costs for both
parties. This trading place is global in reach, offering buyers a significantly
broader selection of goods to purchase and providing sellers the opportunity to
sell their goods efficiently to a broader base of buyers. It offers significant
convenience, allowing trading at all hours and providing continually-updated
information. By leveraging the interactive nature of the Internet, this trading
place also facilitates a sense of community through direct buyer and seller
communication, thereby enabling the interaction between individuals with mutual
interests. As a result, there exists a significant market opportunity for an
Internet-based, centralized trading place that applies the unique attributes of
the Internet to facilitate person-to-person trading.
General Business
AuctionAnything.Com, Inc., operates a variety of Internet-related
services. Currently, the Company has three operations: (i) an online person-to-
person trading service, known as the AuctionAnything.com person-to-person
network; (ii) a service that establishes and hosts auctions for other
businesses, known as Auction Business Solutions (ABS); and (iii) an Internet
service provider (ISP) service, known as Tish.net. The Company remains committed
to pursuing all commercial opportunities in the online person-to-person,
business-to-consumer and business-to-business trading service areas.
AuctionAnything.com
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The Company owns and operates the AuctionAnything.com person-to-person
network, an online person-to-person trading website. The website is located at
http://www.auctionanything.com. This site serves as a centralized trading place
for buyers and sellers to meet, negotiate sales, and finally consummate
transactions directly, thereby bypassing the time and expense of intermediaries.
Sales are conducted by auction hosted by the Company. Although users are
required to register, the Company does not currently charge for these services
in order to attract potential customers for its other products, such as its ABS
program (see below).
Currently, the Company has consolidated all person-to-person trading
services into one centralized site with an expanding list of categories. The
site is available at http://Auctions.AuctionAnything.com.
The Company sells Gold Memberships to AuctionAnything.com person-to-
person sites. The membership includes free listings for one year, no commissions
on items sold for one year, free Internet service via a third-party vendor known
as WebCombo and a discounted long distance telephone service via another third-
party vendor known as StarTouch.
Auction Business Solutions
--------------------------
Auction Business Solutions (ABS) is a business-to-consumer service
whereby the Company establishes and then hosts auctions for other businesses.
This service was designed for businesses whose product inventory has a
relatively high-turnover rate, particularly businesses that sell bulk-items that
are easily shipped. The Company provides the milieu and the technical support,
while the customer is responsible for all listed items, content, delivery,
collections, and other incidentals. The Company charges an initial installation
fee, then a flat monthly fee plus a percentage of the successful sales
thereafter.
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The ABS auctions appear on and are accessed through the
AuctionAnything.com website. Also, AuctionAnything.com registered users are
automatically registered to participate in all ABS sites. Currently, there are
six ABS auction sites found at the AuctionAnything.com website:
(i) Sportsauction.com (www.SportsAuction.com) is an ABS site wholly
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owned by the Company. In addition to being the main site for the
Company, it has served as a test site for all technical
components. At this site, the Company auctions off sports and
celebrity material, all of which are owned by the Company. The
auctions are conducted weekly, beginning every Monday and
concluding every Sunday. The Company typically runs between 500
and 3000 lots per week. These weekly lots are combined with
occasional daily lots, which begin and end on the same day. The
daily lots are designed to attract buyers to the site on off
days. The Company offers a weekly auction giveaway to that
week's bidders. Each time a person bids, they are entered into a
drawing; thus, people are encouraged to bid more in order to
increase their chances of winning.
(ii) Autographauctions.com (www.AutographAuctions.com) is also an ABS
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site wholly owned by the Company. The site eventually feeds the
visitor to the sportsauction.com site. This site was established
to eliminate confusion concerning the large amount of non-sports
celebrity autographs offered in the sportsauction.com site, and
also to facilitate advertising in celebrity autograph magazines.
(iii) Stogiesauction.com (www.StogiesAuction.com) is an ABS site
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established for a customer based in Boca Raton, Florida. They
auction off cigar and related merchandise.
(iv) TCI Industries (www.TCIIndustries.com) is an ABS site
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established for a customer based in Columbia, South Carolina.
They auction off computer equipment.
(v) Showcases USA (www.UniqueMemorabilia.com) is an ABS site
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established for a customer in Tampa, Florida. They auction off
sports and celebrity memorabilia.
(vi) Christian Help (www.AuctionsForCharity.com) is an ABS site
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established for a charitable service based in Orlando, Florida.
The auction, to be held in November of 1999, will serve as a
fundraiser. This client will only be charged a percentage of the
successful sales.
The Company's current plan is to aggressively market its ABS program
to businesses that could potentially thrive in the online business-to person
field. The Company is committed to expanding its marketing and advertising of
the ABS program via media, personal contacts, and trade shows.
ISP Services
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Tish.net is an ISP that provides Internet service for the Company and
for other customers. Currently, Tish.net provides ISP services for approximately
50 clients. There are no immediate plans to solicit new clients for these
services.
Revenue Sources
Tish.net
Tish.net offers ISP services to approximately 50 clients. There are no
immediate plans to solicit new clients for these services. Services provided
include dial-up through high-speed Internet access and design and hosting of
Internet web and e-mail services. Customer costs range from $16 per month to
$1,500 per month for access and hosting services, and other services are
provided based on hourly rates.
Auction Business Solutions
Auction Business Solutions (ABS) is a service whereby the Company
establishes and hosts auctions for other businesses. Currently, the Company has
established six ABS sites, four of which were established for customers.
Typically, the Company charges each customer an initial set up charge of
$5,000.00, and then $250.00
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per month, plus two percent of their successful sales. The Company expects to
increase the successful sales percentage fee from two percent to three percent.
The Company is actively seeking more customers for this service.
SportsAuction.com
SportsAuction.com and AutographAuction.com are ABS sites owned by the
Company. The Company auctions off sports and celebrity material weekly via the
web site, SportsAuction.com, a/k/a AutographAuction.com. All of the items
offered for sale by auction on this web site are owned by the Company. The
Company runs between 500 and 3000 lots per week. These weekly lots are combined
with occasional daily lots. All auctions are non-reserve auctions and subject to
a $1.00 minimum bid. Currently, the Company generates approximately $10,000 per
week in gross sales from SportsAuction.com.
Gold Memberships
The Company sells Gold Membership to AuctionAnything.com to customers
at a rate of $99. The membership includes free listings for one year, no
commission charges on items sold for one year, free Internet service and a
discounted long distance telephone service.
Commissions
The Company receives a five percent commission on all usage of the
long distance carrier, StarTouch, by any customer who signs up for long distance
telephone service through the Company.
Banner Advertising
The Company plans on selling banner advertising on its website in the
near future. The competition for advertising dollars is intense, but the dollars
available are growing. Jupiter Communications, a leading Internet research firm,
estimates that Web advertising in the U.S. will grow from $940 million in 1997
to over $7.6 billion by the year 2002. Ad rates for many web sites have remained
stable at $10 to $50 per 1,000 pages viewed, but significant discounting is
prevalent in the market. Initially, the Company may discount its rates in order
to establish itself in the market.
Sales Through Other Auction Sites
The Company also generates modest revenue through sales of its own
inventory through other Internet auction sites, such as eBay. Gross sales from
these activities are approximately $1,000 per week.
Competition
The market for person-to-person and business-to-customer trading over
the Internet is relatively new, rapidly evolving and intensely competitive, and
the Company expects competition to intensify further in the future. Barriers to
entry are relatively low, and current and new competitors can launch new sites
at a relatively low cost using commercially available software. The Company
currently or potentially competes with a number of other companies. The
Company's direct competitors include various online person-to-person auction
services, including Onsale Exchange, Auction Universe, Excite, eBay, Ubid, and a
number of other services, including those that serve specialty markets. Also,
the Company will compete directly with emerging networks of online person-to-
person and business-to-customer auction services, such as the FairMarket
network, which combine the services of competing auction sites, thereby exposing
items to a larger number of buyers. The Company also competes indirectly with
business-to-consumer online auction services such as Onsale, First Auction,
ZAuction and Surplus Auction. The Company potentially faces competition from a
number of large online communities and services that have expertise in
developing online commerce and in facilitating online person-to-person
interaction. Certain of these potential competitors, including Amazon.com, AOL,
Microsoft and Yahoo! currently offer a variety of business-to-consumer trading
services and classified ad services, and certain of these companies may
introduce person-to-person trading to their large user populations. Other large
companies with strong brand recognition and experience in online commerce, such
as Cendant Corporation, QVC and large newspaper or media companies may also seek
to compete in the online auction market. Competitive pressures created by any
one of these companies, or by the Company's
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competitors collectively, could have a material adverse effect on the Company's
business, results of operations and financial condition.
The Company believes that the principal competitive factors in its
market are volume and selection of goods, population of buyers and sellers,
customer service, reliability of delivery and payment by users, brand
recognition, Web site convenience and accessibility, price, quality of search
tools and system reliability. Many of the Company's current and potential
competitors have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing, technical and
other resources than the Company. In addition, other online trading services may
be acquired by, receive investments from or enter into other commercial
relationships with larger, well-established and well-financed companies as use
of Internet and other online services increases. Therefore, certain of the
Company's competitors may be able to devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing policies or may try to
attract traffic by offering services for free and devote substantially more
resources to Web site and systems development than the Company. Increased
competition may result in reduced operating margins, loss of market share and
diminished value in the Company's brand. There can be no assurance that the
Company will be able to compete successfully against current and future
competitors. Further, as a strategic response to changes in the competitive
environment, the Company may, from time to time, make certain pricing, service
or marketing decisions or acquisitions that could have a material adverse effect
on its business, results of operations and financial condition. New technologies
and the expansion of existing technologies may increase the competitive
pressures on the Company by enabling the Company's competitors to offer a lower-
cost service. Certain Web-based applications that direct Internet traffic to
certain Web sites may channel users to trading services that compete with the
Company. Although the Company has established Internet traffic arrangements with
several large online services and search engine companies, there can be no
assurance that these arrangements will be renewed on commercially reasonable
terms or that they will otherwise continue to result in increased users of the
Company's service. In addition, companies that control access to transactions
through network access or Web browsers could promote the Company's competitors
or charge the Company substantial fees for inclusion. Any and all of these
events could have a material adverse effect on the Company's business, results
of operations and financial condition.
Government Approval and Regulation
The Company is not currently subject to direct federal, state or local
regulation, and laws or regulations applicable to access to or commerce on the
Internet, other than regulations applicable to businesses generally. However,
due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be adopted
with respect to the Internet or other online services covering issues such as
user privacy, freedom of expression, pricing, content and quality of products
and services, taxation, advertising, intellectual property rights and
information security. Although the laws that, among other things, proposed to
impose criminal penalties on anyone distributing "indecent" material to minors
over the Internet, were held to be unconstitutional by the U.S. Supreme Court,
there can be no assurance that similar laws will not be proposed and adopted.
Certain members of Congress have recently discussed proposing legislation that
would regulate the distribution of "indecent" material over the Internet in a
manner that they believe would withstand challenge on constitutional grounds.
The nature of such similar legislation and the manner in which it may be
interpreted and enforced cannot be fully determined and, therefore, such
legislation could subject the Company and/or its customers to potential
liability, which in turn could have an adverse effect on the Company's business,
results of operations and financial condition. The adoption of any such laws or
regulations might also decrease the rate of growth of Internet use, which in
turn could decrease the demand for the Company's service or increase the cost of
doing business or in some other manner have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
applicability to the Internet of existing laws governing issues such as property
ownership, copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy is uncertain. The vast majority of such laws
were adopted prior to the advent of the Internet and related technologies and,
as a result, do not contemplate or address the unique issues of the Internet and
related technologies.
In addition, numerous states have regulations regarding the manner in
which "auctions" may be conducted and the liability of "auctioneers" in
conducting such auctions. The Company does not believe that such regulations,
which were adopted prior to the advent of the Internet, govern the operations of
the Company's business nor have any claims been filed by any state implying that
the Company is subject to such legislation. There can be no assurance, however,
that a state will not attempt to impose these regulations upon the Company in
the future or that
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such imposition will not have a material adverse effect on the Company's
business, results of operations and financial condition. Several states have
also proposed legislation that would limit the uses of personal user information
gathered online or require online services to establish privacy policies. The
Federal Trade Commission has also initiated action against at least one online
service regarding the manner in which personal information is collected from
users and provided to third parties. Changes to existing laws or the passage of
new laws intended to address these issues, including some recently proposed
changes, could create uncertainty in the marketplace that could reduce demand
for the services of the Company or increase the cost of doing business as a
result of litigation costs or increased service delivery costs, or could in some
other manner have a material adverse effect on the Company's business, results
of operations and financial condition. In addition, because the Company's
services are accessible worldwide and the Company facilitates sales of goods to
users worldwide, other jurisdictions may claim that the Company is required to
qualify to do business as a foreign corporation in a particular state or foreign
country. Failure by the Company to qualify as a foreign corporation in a
jurisdiction where it is required to do so could subject the Company to taxes
and penalties for the failure to qualify and could result in the inability of
the Company to enforce contracts in such jurisdictions. Any such new legislation
or regulation, or the application of laws or regulations from jurisdictions
whose laws do not currently apply to the Company's business, could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Research and Development Expenses
The Company does not presently budget or isolate all its research and
development costs. These costs are generally included in overhead as they are
attributed principally to salary and other expenses associated with maintaining
programming personnel who spend varying amounts of time dedicated to both
research and development of new online features and applications and to the
administration and maintenance of those sites and applications.
Costs and Effects of Compliance with Environmental Law
The Company is not aware of any significant present or future impact on its
business due to compliance with environmental laws.
Employees
As of October 20, 1999, the Company had fourteen employees, including six
in customer support, three in product development, one in sales and marketing,
and four in administration and business development. The Company has never had a
work stoppage, and no employees are represented under collective bargaining
agreements. The Company considers its relations with its employees to be good.
The Company believes that its future success will depend in part on its
continued ability to attract, integrate, retain and motivate highly qualified
technical and managerial personnel, and upon the continued service of its senior
management and key technical personnel. Competition for qualified personnel in
the Company's industry and geographical location is intense, and there can be no
assurance that the Company will be successful in attracting, integrating,
retaining and motivating a sufficient numbers of qualified personnel to conduct
its business in the future.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATIONS
Important Considerations Related to Forward-Looking Statements
The statements contained in this report that are not historical facts are
forward-looking statements that involve certain risks and uncertainties. These
forward-looking statements include the plans and objectives of management for
future operations relating to the products and future economic performance of
the Company.
The forward-looking statements are based on assumptions that the Company
will continue to market its products and services competitively. The forward-
looking statements are also based upon assumptions that (i) competitive
conditions within the Internet auction business will not change materially or
adversely; (ii) demand for sports and celebrity memorabilia will remain strong;
and (iii) the market will accept the Company's new products
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and services. Assumptions relating to the foregoing are difficult or impossible
to predict accurately and many are beyond the control of the Company. In light
of the significant uncertainties inherent in the forward-looking information
included herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.
General
The Company's primary source of revenues is through a variety of Internet
related services. Currently, the Company has three main operations: (i) an on-
line, person-to-person trading service, known as AuctionAnything.com; (ii) a
service that establishes and hosts auctions for other businesses, known as
Auction Business Solutions; and (iii) an Internet service provider known as
Tish.net.
The Company's financial position and results of operations are subject to
fluctuations due to a variety of factors. Fluctuations in the quality and value
of items sold on the Company's Internet auction site can result in significant
increases or decreases in revenues. The Company's historical results of
operations are not necessarily indicative of future results.
Selected Balance Sheet Items
As noted above, the Company raised approximately $925,000 in capital
through a private placement of securities. That transaction had a significant
impact on certain balance sheet accounts and the effects are described below.
Cash and Cash Equivalents
Cash and cash equivalents increased from $1,597 at December 31, 1997 to
$3,506 at December 31, 1998. This change resulted primarily from cash generated
from sales. Cash and cash equivalents increased from $3,506 at December 31, 1998
to $301,485 at August 31, 1999. This increased resulted primarily from the cash
generated in the Company's private placement of securities, which is described
above.
Accounts Receivable
Accounts receivable decreased from $4,323 at December 31, 1997 to $1,983 at
December 31, 1998. This change resulted primarily from enhanced collection
efforts by the Company. Accounts receivable increased from $1,983 at December
31, 1998 to $18,433 at August 31, 1999. This increase resulted from increased
sales volumes and from a larger product inventory.
Inventory
Inventory increased from $22,987 at December 31, 1997 to $39,886 at
December 31, 1998. This change resulted principally from increased purchases of
sports and celebrity memorabilia for auction during 1998. Inventory increased
from $39,886 at December 31, 1998 to $278,236 at August 31, 1999. This increase
resulted from large inventory purchases made in the second and third quarters of
1999.
Prepaid Expenses
Prepaid expenses and other assets increased from $0 at December 31, 1997
and December 31, 1998, to $51,094 at August 31, 1999. This change resulted
principally from the additional financial burdens placed on the Company as a
consequence of its public status.
Equipment
Equipment decreased from $11,450 at December 31, 1997 to $8,082 at December
31, 1998. This change resulted primarily from depreciation recorded during 1998.
Equipment increased from $8,082 at December 31, 1998 to $45,485 at August 31,
1999. The change resulted from the acquisition of computer equipment by the
Company and from the acquisition of Tish.net previously described.
-10-
<PAGE>
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses increased from $14,081 at December
31, 1997 to $20,733 at December 31, 1998.
This change resulted principally from increased inventory purchases.
Accounts payable and accrued expenses increased from $20,733 at December 31,
1998 to $34,837 at August 31, 1999. This change resulted principally from
increased numbers of employees of the Company and the growth of other overhead
costs.
Due to Related Parties
Due to related parties increased from $16,612 at December 31, 1997 (current
and long-term portions) to $34,304 at December 31, 1998. This increase was due
to loans made by officers of the Company. Due to related parties decreased from
$34,304 at December 31, 1998 to $0 at August 31, 1999. This change resulted from
payment of the aforementioned loans by the Company during 1999.
Common Stock and Additional Paid-In Capital
Common stock and additional paid-in capital increased from $500 and $7,500,
respectively at December 31, 1998 to $28,239 and $915,053, respectively at
August 31, 1999. This change resulted principally from the private placement of
securities in 1999, mentioned above.
Results of Operations
Year ended December 31, 1998 to Year Ended December 31, 1997
Sales
Sales increased from $212,379 during the year ended December 31, 1997 to
$399,392 during the year ended December 31, 1998. This increase resulted
principally from increased volume of transactions caused by increased visitation
to the Company's Internet site by potential customers.
Commission Income
Commission income increased from $9,780 for the year ended December 31,
1997 to $10,031 for the year ended December 31, 1998. This increase resulted
principally because the Company sold more consigned inventory during 1998 than
1997.
Cost of Sales
Cost of sales increased from $166,555 during the year ended December 31,
1997 to $290,511 during the year ended December 31, 1998. This increase resulted
from increased sales volume in 1998 over 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $31,505 for the
year ended December 31, 1997 to $112,934 for the year ended December 31, 1998.
This increase resulted principally from the increase in salaries and employee
benefits from $0 in 1997 to $68,069 in 1998. During 1997 the Company had no
employees as all matters were handled by officers of the Company without
compensation. Beginning in April 1998, the officers of the Company began
receiving compensation and as of December 31, 1998 the Company had four
employees.
Depreciation
Depreciation expense increased from $5,795 for the year ended December 31,
1997 to $7,067 for the year ended December 31, 1998. This increase resulted
principally due to the increase in depreciable assets.
-11-
<PAGE>
Interest
Interest expense increased from $1,332 for the year ended December 31, 1997
to $3,167 for the year ended December 31, 1998. This increase resulted
principally due to the increase in 1998 in the amounts due to related parties,
which bore interest.
Results of Operations
Eight Months Ended August 31, 1999 to August 31, 1998
Sales
Sales increased from $250,720 during the eight months ended August 31, 1998
to $400,198 during the eight months ended August 31, 1999. This increase
resulted principally from increased volume of transactions caused by increased
visitation to Company's Internet site by potential customers.
Internet Service Revenue
Internet service revenue increased from $0 during the eight months ended
August 31, 1998 to $43,615 during the eight months ended August 31, 1999. This
increase resulted from the 1999 acquisition of Tish.net, previously described.
Commission Income
Commission income decreased from $7,393 during the eight months ended
August 31, 1998 to $4,015 for the eight months ended August 31, 1999. This
decrease resulted principally because of a decrease in the volume of consigned
inventory sold.
Cost of Goods Sold
Cost of goods sold increased from $155,946 during the eight months ended
August 31, 1998 to $290,602 during the eight months ended August 31, 1999. The
increase resulted principally from the increase in auction sales offset by a
decline in gross margin. Cost of goods sold as a percentage of auction sales
increased from 62% during the eight months ended August 31, 1998 to 73% during
the eight months ended August 31, 1999. This increase is due to the increase of
items offered for sale, which diluted the bidding process and reduced margins
during the period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $84,339 during
the eight months ended August 31, 1998 to $429,904 during the eight months ended
August 31, 1999. This increase resulted principally because of an increase in
payroll and related costs from $35,501 during the eight months ended August 31,
1998 to $227,072 during the eight months ended August 31, 1999, an increase in
professional fees from $4,032 during the eight months ended August 31, 1998, to
$64,438 during the eight months ended August 31, 1999, and a increase in
advertising expense from $0 during the eight months ended August 31, 1998, to
$30,183 during the eight months ended August 31, 1999. The increase in payroll
and related costs was caused as the number of employees of the Company increased
from four at August 31, 1998 to fourteen at August 31, 1999. The increase in
professional fees is due to the costs incurred related to the public offering.
The increase in advertising expense is due to management's efforts to increase
sales.
Risks Associated with the Year 2000
The Year 2000 issue is the result of computer programs written using two
digits rather than four to define the applicable year. As a result, date-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in system failures or miscalculations causing
disruptions of operations, including, among others, a temporary inability to
process transactions, send invoices, or engage in similar normal business
activities.
Since the Company's systems and software are relatively new, management
does not expect Year 2000 issues related to its own internal systems to be
significant and does not anticipate that it will incur significant
-12-
<PAGE>
operating expenses or be required to invest heavily in computer systems
improvements to be Year 2000 compliant. As the Company makes arrangements with
significant suppliers and service providers, the Company intends to determine
the extent to which the Company's interface systems may be vulnerable should
those third parties fail to address and correct their own Year 2000 issues. The
Company anticipates that this will be an ongoing process as the Company begins
to implement supplier and service provider arrangements through 1999. There can
be no assurance that the systems of suppliers or other companies on which the
Company relies will be converted in a timely manner and will not have a material
adverse effect on the Company's systems. Additionally, there can be no assurance
that the computer systems necessary to maintain the viability of the Internet or
any of the Web sites that direct consumers to the Company's websites will be
Year 2000 compliant. As part of the Company's Year 2000 compliance plan, the
Company is developing plans to operate its websites from different systems
and/or at a different location in the event of any significant disruption as a
result of the Year 2000 issues. The Company believes it is taking the steps
necessary regarding Year 2000 compliance with respect to matters within its
control. However, no assurance can be given that the Company's systems will be
made Year 2000 compliant in a timely manner or that the Year 2000 problem will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
ITEM 3 - DESCRIPTION OF PROPERTY
Office Space
The Company leases approximately 871 square feet of office space at 35 West
Pine Street, Suites 211 and 226, Orlando, Florida 32801, at the current rental
rate of $692.44 per month (increasing to $769.37 per month on November 10, 1999.
The lease is for two years ending May 9, 2001, but the lease is renewable at the
Company's option for an additional one years. Currently, the facility is
adequate for the Company's operations, but Management expects that additional
facilities will be needed prior to the expiration of the lease.
Other
The Company owns or leases various computer equipment, telecommunications
equipment, furniture and office machinery at its location in Orlando, Florida.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) The following individuals hold five percent (5%) or more of the
outstanding voting stock of the Company. No other individual or any group is
known to the Company to be the beneficial owner of more than five percent (5%)
of any class of the Company's voting securities.
<TABLE>
<CAPTION>
Name and Address of Amount and nature of Percent of
Title of Class Beneficial Owner Beneficial Owner Class
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Raymond J. Hotaling III 8,471,694 owned directly 29.9%
35 West Pine St., Ste. 211
Orlando, Florida 32801
Common Stock Dennis A Kurir 8,471,694 owned directly 29.9%
35 West Pine St., Ste. 211
Orlando, Florida 32801
Common Stock Martin M. Meads 7,059,745 owned directly 24.9%
35 West Pine St., Ste. 211
Orlando, Florida 32801
</TABLE>
(b) The following includes beneficial ownership information for all
current executive officers and directors, and all who served as directors or
executive officers in the fiscal years ended January 31, 1998 and 1999.
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<PAGE>
Tabular information is provided for outstanding securities plus any securities
that a person has a right to acquire within 60 days pursuant to options,
warrants, conversion privileges or other rights.
<TABLE>
<CAPTION>
Name and Address of Amount and nature of Percent of
Title of Class Beneficial Owner Beneficial Owner Class
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Raymond J. Hotaling III 8,471,694 owned directly 29.9%
President/ Secretary/
Chairman/ Director
35 West Pine St., Ste. 211
Orlando, Florida 32801
Common Stock Dennis A Kurir 8,471,694 owned directly 29.9%
CEO/Director
35 West Pine St., Ste. 211
Orlando, Florida 32801
Common Stock Martin M. Meads 7,059,745 owned directly 24.9%
Co-CEO/ Treasurer/
Director
35 West Pine St., Ste. 211
Orlando, Florida 32801
Common Stock Joel E. Cavalier - 0 - 0.0%
FORMER
President/Chairman/Director
65-55 Woodhaven Blvd.
Rego Park, NY 11374
Common Stock Nancy Scalia-Dunn - 0 - 0.0%
FORMER
Secretary/Treasurer/Director
65-55 Woodhaven Blvd.
Rego Park, NY 11374
Common Stock Matthew J. Cavalier 10,000 owned directly 0.04%
FORMER Director
65-55 Woodhaven Blvd.
Rego Park, NY 11374
Common Stock Jesse Clayton - 0 - 0.0%
FORMER Director
65-55 Woodhaven Blvd.
Rego Park, NY 11374
Common Stock All directors and officers 24,013,133 owned directly 84.8%
(current and former) as
a group (7 persons)
</TABLE>
(c) Management knows of no arrangements that may result in a change
of control of the Company.
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following presents directors, executive officers, promoters and control
persons of the Company as of October 20, 1999:
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<PAGE>
<TABLE>
<CAPTION>
Name Age Title Term of Office
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Raymond J. Hotaling III 33 President Indefinite
Secretary Indefinite
Chairman of the Board (Director) 1 Year
Dennis A. Kurir 53 Chief Executive Officer Indefinite
Director 1 Year
Martin M. Meads 38 Co-Chief Executive Officer Indefinite
Treasurer Indefinite
Director 1 Year
</TABLE>
Raymond J. Hotaling III. Mr. Hotaling has been President, Secretary, a
-----------------------
Director and Chairman of the Board of the Company since March 10, 1999. He also
serves as the President and Secretary of the Company's wholly-owned subsidiary,
North Orlando Sports Promotions, Inc. Mr. Hotaling has been the President of
NOSP since its incorporation in 1995, and he has been responsible for its day-
to-day operations, including the design, development and marketing of the
corporate web site and Internet auction system, as well as daily accounting
functions. From 1993 to 1995, Mr. Hotaling was a materials engineer with Matrix
Composites, Inc. He also served as Flight Crew Systems Engineer with Lockheed
Space Operations Company from 1990 to 1993. Mr. Hotaling attended the State
University of New York at Binghamton from 1984 to 1986 and graduated from the
Florida Institute of Technology in 1989 with a B.S. in mechanical engineering.
Dennis A. Kurir. Mr. Kurir has been the Chief Executive Officer and a
---------------
Director of the Company since March 10, 1999. He also serves as the Chief
Executive Officer of NOSP, a position that he has held since 1995. From 1994 to
1995, Mr. Kurir served as the Orlando Print Show Manager, the North Florida Vice
President of Operations and then the Membership Director of the Printing
Association of Florida. Mr. Kurir graduated from Michigan Technological
University in 1967 with a B.S. in biological sciences. In 1971, after service
in the United States Army during the Vietnam War, he earned his M.B.A. from
Michigan Technological University.
Martin M. Meads. Mr. Meads has been the Treasurer and a Director of
---------------
the Company since March 10, 1999. He was also the Company's Senior Vice
President of Business Operations from March 10, 1999, until June 11, 1999, at
which time he became co-Chief Executive Officer. Mr. Meads also serves as the
Vice President and Treasurer of NOSP, a position he has held since February 18,
1999. Prior to March, 1999, Mr. Meads served as the President of The
Information SuperHighway Corporation ("TISH"), an Orlando, Florida based
Internet Service Provider (ISP) since June 1995. Mr. Meads was a senior systems
engineer at Coleman Research Corporation between September ,1992, and April,
1996. Mr. Meads holds B.S. and M.S. degrees in electrical engineering from
Michigan Technological University and also holds a M.S. degree in electro-optics
from the University of Central Florida.
As of October 20, l999, there were no family relationships among the
directors and executive officers. Further, to the knowledge of Management, no
director, executive officer, promoter or control person has been involved in any
legal proceedings during the past five years that are material to an evaluation
of the ability or integrity of such director, person nominated to become a
director, executive officer, promoter or control person of the Company. None of
the individuals listed in this Item 5 has had a bankruptcy petition filed by or
against any business of which such person was a general partner or executive
officer either at the time of such bankruptcy, if any, or within two years prior
to that time. No director, executive officer, promoter or control person was or
has been convicted in a criminal proceeding or is subject to a pending criminal
proceeding or subject to any order, judgment, or decree, not subsequently
reversed, suspended, or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, borrowing, or otherwise limiting his or
her involvement in any type of business, securities or banking activities. No
director, executive officer, promoter or control person has been found by a
court of competent jurisdiction in a civil action to have violated federal or
state securities or commodities laws.
-15-
<PAGE>
ITEM 6 - EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the last two
fiscal years to the chief executive officer of the Company. No information has
been shown for other executive officers, each of whom received less than
$100,000 in compensation in the last fiscal year. Due to the change of control
of the Company that occurred on March 10, 1999, the information provided below
reflects compensation paid during the past two fiscal years to the chief
executive officer of North Orlando Sports Promotions, Inc., who has served as
the chief executive officer of the Company since said change in control. All of
the current executive officers of the Company have served since March 10, 1999.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Annual compensation Long term compensation
Awards Payouts
Securities
Restricted underlying Other
Name and principal position Year Salary Bonus Total stock options/SARs Compensation
($) ($) ($) award(s) (#)
(a) (b) (c) (d) (e) ($) (g)
(f)
<S> <C> <C> <C> <C> <C> <C> <C>
Dennis A. Kurir, CEO 1998 19,434 -0- 19,434 -0- -0- -0-
1997 -0- -0- -0- -0- -0-
</TABLE>
Employment Contracts
As of October 20, 1999, there are no existing employment contracts.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 18, 1999, prior to the acquisition transaction by which the
Company acquired North Orlando Sports Promotions, Inc., NOSP acquired
substantially all of the assets, and assumed certain liabilities, of The
Information SuperHighway Corporation, a Florida corporation ("TISH"), in
exchange for 208 1/3 shares of the common stock of NOSP. TISH was wholly-owned
by Martin M. Meads, who also serves as the President and as a Director of TISH,
and Mr. Meads was ultimately beneficial owner of the shares of stock in NOSP
received by TISH in that transaction. Subsequent to that transaction, Mr. Meads
became the Vice President and Treasurer of NOSP, and he now also serves as the
co-CEO, Treasurer and a Director of the Company, positions he has held
subsequent to the Company's acquisition of NOSP on March 10, 1999. In that
acquisition transaction, Mr. Meads' 208 1/3 shares of stock in NOSP were
acquired by the Company for 7,059,745 shares of the Company's Common Stock.
ITEM 8 - DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of Common Stock, par
value $0.001 per share. As of October 20, 1999, 28,321,946 shares of Common
Stock are outstanding, held of record by approximately 189 persons. The holders
of Common Stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. There is no cumulative voting with the
result that the holders of more than 50% of the shares voting for the election
of directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of the funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining available for distribution
after payment of liabilities and after provision has been made for each class of
stock, if any, having preference over the Common Stock. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
The Company is not currently authorized to issue any shares of preferred
stock.
-16-
<PAGE>
The Company has never paid any dividends. Future dividends, if any, will be
contingent upon the Company's revenues and earnings, if any, capital
requirements and general financial condition subsequent to the consummation of a
business combination. The payment of dividends is within the discretion of the
Company's Board of Directors. The Company presently intends to retain all
earnings, if any, for use in the Company's business operations and accordingly,
the Board does not anticipate declaring any dividends in the foreseeable future.
However, there are no current restrictions on the payment of dividends either by
contract or regulation.
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
At the time of filing, only a limited market existed for common shares of
the Company. As of October 20, 1999, the Company had outstanding 28,321,946
shares of Common Stock with a par value of $0.001 per share. According to the
records of the Company's transfer agent, Olde Monmouth Stock Transfer Co., Inc.,
a total of 4,308,813 of those shares were freely tradeable over the counter.
(a) The Common Stock of the Company has been traded on the over-the-
counter market since September of 1998, initially under the symbol, LWTN. The
stock began trading under the symbol, UBUY, on March 22, 1999. The high and low
bid prices each fiscal quarter, in fraction and decimal form, since the second
quarter of 1998 are as follows:
<TABLE>
<CAPTION>
1998
----
High Low
<S> <C> <C>
3rd Quarter (9/1 to 9/30) 4/43 (0.093) 4/43 (0.093)
4th Quarter 4/43 (0.093) 4/43 (0.093)
1999
----
High Low
1st Quarter 2-1/2 (2.500) 4/43 (0.093)
2nd Quarter 3 (3.000) 81/85 (0.953)
3rd Quarter 11/16 (0.6875) 5/8 (1.625)
</TABLE>
The quotations above reflect interdealer prices without retail markup, mark down
or commission, and may not represent actual transactions.
(b) As of October 20, 1999, the Company had 189 Shareholders of record of
its common stock.
(c) The Company has not previously paid cash dividends on its Common
Stock. The payment of cash dividends from current earnings is not prohibited by
any agreements to which the Company is a party, but is subject to the discretion
of the Board of Directors and will be dependent upon many factors, including the
Company's earnings, its capital needs and its general financial condition. The
Company currently does not intend to pursue a policy of payment of dividends,
but rather to utilize any excess proceeds to finance the development and
expansion of its business.
ITEM 2 - LEGAL PROCEEDINGS
No legal proceedings are pending against the Company.
-17-
<PAGE>
ITEM 3 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
On or about May 5, 1999, the Company engaged KPMG LLP as its independent
auditors. Prior to that date, the company had not engaged the services of an
independent auditor. To Management's knowledge, the Company has had no
disagreements with its accountants regarding accounting or financial disclosure
matters.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
On or about February 18, 1999, the Company concluded a private offering of
securities in reliance upon the exemption from registration requirements
provided by Rule 504, promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). The Company sold one million units to 18 investors at
the offering price of $0.10 per unit, and each unit consisted of one share of
Common Stock, par value $0.001 per share, and one stock purchase warrant. Each
warrant entitled the holder thereof to purchase three additional shares of
Common Stock at a purchase price of $0.30 per share. Consequently, the total
offering price was $100,000, and an additional $900,000 would be received upon
the exercise of all of the warrants. No underwriting discounts or commissions
were paid. The warrants were exercisable by the holder at any time upon the
payment of the exercise price and a transfer agent fee of $25.00, until the
expiration of the warrant May 31, 1999. In addition, the Company could call a
warrant if the Common Stock traded at or above a $5.00 reported closing bid or
trade price for 10 consecutive trading days, upon 15 days' written notice to the
warrant holder of the Company's intention to do so, if the warrant holder shall
not have exercised the warrant prior to the end of such 15-day notice period.
Each investor in the offering executed a subscription agreement in which
such investor represented, among other things, that he, she or it was an
accredited investor, as such term is defined in the Securities Act. In
conducting the offering, the Company utilized an offering document that
disclosed the terms of the offering and the securities offered, as well as
information about the Company. It should be noted that the offering was
conducted and concluded by the Company's previous management prior to the
acquisition transaction by which the current controlling shareholders of the
Company obtained control of the Company. The current controlling shareholders,
in connection with the acquisition transaction, received assurances, in the form
of representations and warranties, that the offering was properly conducted in
accordance with the requirements of Rule 504 and applicable state securities
laws.
The exemption under Rule 504 is available to any issuer that is not a
reporting company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended, or not a development stage company that either
has no specific business plan or purpose or has indicated that its business plan
is to engage in a merger or acquisition with an unidentified company or
companies, or other entity or person. Rule 504 allows companies to sell up to
$1,000,000 of its securities within a 12-month period in an exempt transaction
to an unlimited number of investors without regard to the investment
sophistication of the investor. In the registration provisions which require the
delivery of a prospectus before sale, there was no restriction on resale of the
securities by investors. Thus, the Common Stock issued under the Rule 504
exemption was "free-trading" and not restricted under federal law. Rule 504 was
amended effective April 7, 1999, subsequent to the completion of the offering,
and stock sold pursuant to that exemption would now be restricted and not "free-
trading."
Since the closing of the offering and the aforementioned acquisition
transaction, all of the holders of the stock purchase warrants sold during the
offering have exercised such warrants, resulting in the issuance of an
additional three million shares of Common Stock at the warrant exercise price of
$0.30 per share. Most of the shares of Common Stock issued pursuant to the
warrant exercises were issued as "free-trading"; however, 40,000 of such shares
of Common Stock were issued as restricted stock because the warrant holder
exercised his warrant subsequent to April 6, 1999, the effective date of the
amendment to Rule 504.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
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<PAGE>
The Company is incorporated in Delaware. Under Section 145 of the
Corporation Law of Delaware, a Delaware Company may, under specified
circumstances, indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement, actually and reasonably incurred by a director,
officer, employee or agent of the Company in connection with the action, suit or
proceeding, provided that such provision shall not eliminate or limit the
liability of an individual applying for indemnification if, unless otherwise
ordered by a court, a final adjudication establishes that (i) his acts or
omissions involved intentional misconduct, fraud, or a knowing violation of the
law and (ii) the act or omission was material to the cause of action.
The Company's Articles of Incorporation and Bylaws provide that the Company
may indemnify its officers, directors, employees and agents to the fullest
extent permissible under Delaware law. Directors and officers shall be, and
employees and agents may be, upon adoption of a resolution of the Board of
Directors, indemnified if made a party or threatened to be made a party, or
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative, or any
appeal of such an action or any inquiry or investigation that could lead to such
an action, against judgments, penalties (including excise and similar taxes and
punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred in connection with such
action. The Board of Directors has the option of making any indemnification
payments in advance and to purchase and maintain insurance to protect itself and
its officers, directors, employees and agents. These indemnification rights are
non-exclusive, but they will not eliminate or limit the liability of any
directors, officer, employee or agent to the extent that such person is found
liable for: (i) a breach of a duty of loyalty to the Company or its members;
(ii) an act or omission not in good faith that constitutes a breach of duty to
the Company or involves intentional misconduct or a knowing or reckless
violation of the law; (iii) a transaction from which the director, officer,
employee or agent received an improper benefit, whether or not the benefit
resulted from an action taken within the scope of the individual's duties; or
(iv) an act or omission for which liability is expressly provided by an
applicable statute.
The Company currently maintains a Directors and Officers liability
insurance policy with an annual aggregate limit of $1,000,000.
PART F/S
FINANCIAL STATEMENTS
NORTH ORLANDO SPORTS PROMOTIONS, INC.
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
To The Shareholders
North Orlando Sports Promotions, Inc.:
We have audited the accompanying balance sheets of North Orlando Sports
Promotions, Inc. as of December 31, 1998 and 1997 and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
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<PAGE>
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of North Orlando Sports
Promotions, Inc. as of December 31, 1998 and 1997 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
- ------------------
Orlando, Florida
September 24, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NORTH ORLANDO SPORTS PROMOTIONS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Balance Sheets
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Current assets:
- --------------------------------------------------------------------------------
Cash and cash equivalents $ 3,506 1,597
- --------------------------------------------------------------------------------
Accounts receivable 1,983 4,323
- --------------------------------------------------------------------------------
Inventory 39,886 22,987
- --------------------------------------------------------------------------------
Due from related parties 6,988 --
- --------------------------------------------------------------------------------
Total current assets 52,363 28,907
- --------------------------------------------------------------------------------
Equipment, less accumulated depreciation of $16,124 in
1998 and $9,057 in 1997 8,082 11,450
- --------------------------------------------------------------------------------
$60,445 40,357
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------
Current liabilities:
- --------------------------------------------------------------------------------
Accounts payable and accrued expenses $20,733 14,081
- --------------------------------------------------------------------------------
Due to related parties 34,304 5,353
- --------------------------------------------------------------------------------
Total current liabilities 55,037 19,434
- --------------------------------------------------------------------------------
Long-term liabilities:
- --------------------------------------------------------------------------------
Due to related parties -- 11,259
- --------------------------------------------------------------------------------
Total long-term liabilities -- 11,259
- --------------------------------------------------------------------------------
Stockholders' equity:
- --------------------------------------------------------------------------------
Common stock, par value $1; 500 shares authorized,
issued and outstanding 500 500
- --------------------------------------------------------------------------------
Additional paid-in capital 7,500 7,500
- --------------------------------------------------------------------------------
Retained earnings (accumulated deficit) (2,592) 1,664
- --------------------------------------------------------------------------------
Total stockholders' equity 5,408 9,664
- --------------------------------------------------------------------------------
$60,445 40,357
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NORTH ORLANDO SPORTS PROMOTIONS, INC.
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Statements of Operations
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Years ended December 31, 1998 and 1997
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Revenues:
- -------------------------------------------------------------------------------------------------------
Sales $ 399,392 212,379
- -------------------------------------------------------------------------------------------------------
Commission income 10,031 9,780
- -------------------------------------------------------------------------------------------------------
409,423 222,159
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Cost of sales 290,511 166,555
- -------------------------------------------------------------------------------------------------------
Gross profit 118,912 55,604
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------------------------------
Selling, general and administrative 112,934 31,505
- -------------------------------------------------------------------------------------------------------
Depreciation 7,067 5,795
- -------------------------------------------------------------------------------------------------------
Interest 3,167 1,332
- -------------------------------------------------------------------------------------------------------
Total expenses 123,168 38,632
- -------------------------------------------------------------------------------------------------------
Net (loss) income $ (4,256) 16,972
=========== ==========
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
-21-
<PAGE>
- --------------------------------------------------------------------------------
NORTH ORLANDO SPORTS PROMOTIONS, INC.
- --------------------------------------------------------------------------------
Statements of Stockholders' Equity
- --------------------------------------------------------------------------------
Years ended December 31, 1998 and 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Retained
Additional earnings Total
Common paid-in (accumulated stockholders'
stock capital deficit) equity
- --------------------------------------------------------------------------------
Balances at December 31, 1996 $ 500 7,500 (15,308) (7,308)
- --------------------------------------------------------------------------------
Net income -- -- 16,972 16,972
- --------------------------------------------------------------------------------
Balances at December 31, 1997 500 7,500 1,664 9,664
- --------------------------------------------------------------------------------
Net loss -- -- (4,256) (4,256)
- --------------------------------------------------------------------------------
Balances at December 31, 1998 $ 500 7,500 (2,592) 5,408
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
-22-
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------
NORTH ORLANDO SPORTS PROMOTIONS, INC.
- ------------------------------------------------------------------------------------
Statement of Cash Flows
- ------------------------------------------------------------------------------------
Years ended December 31, 1998 and 1997
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------
Cash flows used in operating activities:
- ------------------------------------------------------------------------------------
Net (loss) income $ (4,256) 16,972
- ------------------------------------------------------------------------------------
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
- ------------------------------------------------------------------------------------
Depreciation 7,067 5,795
- ------------------------------------------------------------------------------------
Cash provided by (used in) changes in assets
and liabilities:
- ------------------------------------------------------------------------------------
Accounts receivable 2,341 (3,645)
- ------------------------------------------------------------------------------------
Inventory (15,680) (12,900)
- ------------------------------------------------------------------------------------
Accounts payable and accrued expenses 11,211 5,467
- ------------------------------------------------------------------------------------
Due to/from related parties (12,341) --
- ------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (11,658) 11,689
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Cash flows used in investing activities:
- ------------------------------------------------------------------------------------
Capital expenditures (3,699) (5,288)
- ------------------------------------------------------------------------------------
Net cash used in investing activities (3,699) (5,288)
- ------------------------------------------------------------------------------------
Cash flows from financing activities:
- ------------------------------------------------------------------------------------
Proceeds from issuance of notes payable to related parties -- 4,538
- ------------------------------------------------------------------------------------
Proceeds from issuance of notes payable 65,500 --
- ------------------------------------------------------------------------------------
Principal payments on notes payable to related parties (22,455) --
- ------------------------------------------------------------------------------------
Principal payments on notes payable (25,779) (15,523)
- ------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 17,266 (15,523)
- ------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 1,909 (9,122)
- ------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 1,597 6,181
- ------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 3,506 (2,941)
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE>
NORTH ORLANDO SPORTS PROMOTIONS, INC.
Notes to Financial Statements
December 31, 1998 and 1997
(1) Summary of Significant Accounting Policies
(a) Description of Business
North Orlando Sports Promotion, Inc. (the "Company") operates on-line
auctions specializing in sports memorabilia. The Company's primary
site for operations is www.SportsAuction.com., which focuses on the
----------------------
collectibles market. The Company generates revenue by procuring
specialty merchandise at the wholesale level and selling it at retail
in an on-line format. Examples of typical inventory would include
autographed memorabilia (photos, football jerseys, balls, hats, etc.),
sports cards, and other related collectibles. The Company also
generates commissions revenue through consignment sales of
memorabilia.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined principally on the specific identification method.
Provisions for potentially obsolete or slow-moving inventory is made
based on management's analysis of inventory levels.
Consignment inventory is not recorded as inventory by the Company and
is not placed in an auction until the merchandise is received. If a
consignment item does not sell in an auction, the Company requests
that the consignor lower the minimum bid or withdraw the item from the
auction.
(c) Equipment
Equipment is stated at cost less accumulated depreciation.
Depreciation of equipment is computed using the straight-line method
over its estimated useful life of 3 years.
(d) Income Taxes
The Company is considered an S-corporation for federal income tax
purposes. As such, the Company is not subject to federal income taxes
directly. Income or loss of the Company passes through to the
individual stockholders.
(e) Revenue Recognition
The Company sells merchandise to customers under one of two types of
sales transactions. The Company either purchases merchandise and sells
it to customers or sells merchandise to customers under consignment
arrangements and earns a commission.
Revenue from sales of purchased merchandise is recognized and title
passes when the Company receives verification of the credit card
transaction or verification of the check clearing.
Commission income from consignment sales is calculated as a percentage
of the final sales value at the close of the auction and recognized
when the Company receives verification of the credit card transaction
or verification of the check. Commission is paid to the consignor
after the merchandise has been shipped.
(f) Merchandise Return Policy
The Company guarantees all items to be authentic, including
consignment items. Any item may be returned within seven days for a
full refund provided that the item has not been altered.
-24-
<PAGE>
(g) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(2) Related Party Transactions
From January 1, 1997 to March 31, 1998, the Company's officers and
stockholders (the "Officers") provided administrative, purchasing and
engineering services to the Company without compensation. Also during 1998
and 1997, the Company did not incur rental expense as its operations were
conducted from the personal residences of one of the Company's Officers.
During 1998 and 1997, the Officers auctioned collectible merchandise
through the Company as consignors and did not pay the Company a commission
for this service.
At December 31, 1998 and 1997, notes payable bearing interest of 14% and
due August 31, 1999 in the amount of $34,304 and $5,353, respectively, was
due to related parties. Subsequent to December 31, 1998, the notes were
paid off.
(3) Year 2000 (Unaudited)
The Company is dependent on computer systems and system applications for
conducting its ongoing business functions. In 1998, the Company began its
process of identifying, evaluating and implementing changes to computer
programs necessary to address the year 2000 issue. This issue involves the
ability of computer systems that have time sensitive programs to recognize
properly the year 2000. The inability to do so could result in failures or
miscalculations, which could disrupt the Company's ability to meet its
customer and other obligations on a timely basis.
In addition, the Company is developing contingency plans to address
perceived risks associated with the Year 2000 effort. These include
business resumption plans to address the possibility of internal systems
failures and the possibility of failure of systems or processes outside the
Company's control. Preparations for the management of the date change will
continue through 1999.
(4) Subsequent Events
Subsequent to December 31, 1998, the Company acquired the assets of The
Information SuperHighway Corporation (TISH) in exchange for approximately
208 shares of the Company's common stock. The acquisition was accounted for
as purchase. On the date of acquisition, February 18, 1999, assets were
approximately $10,000.
Subsequent to December 31, 1998, AuctionAnything.com (previously Lawton -
York), acquired 100% of the Company in exchange for 85%, or 24,003,133
shares of the outstanding shares of AuctionAnything. In anticipation of the
acquisition, AuctionAnything.com completed a private offering of 1,000,000
units at an offering price of $.10 per unit. Each unit consisted of one
share of common stock and one stock purchase warrant. Each stock purchase
warrant entitled the holder to purchase three shares of common stock of
AuctionAnything.com for $.30 per share. A total of 4,000,000 shares of
common stock were issued and sold by AuctionAnything.com for net proceeds
of approximately $925,000. The proceeds of the offering will be used for
working capital and to fund the Company's expansion plans.
Subsequent to the acquisition of the Company by AuctionAnything.com, on
March 10, 1999, the assets and liabilities of AuctionAnything.com were
liquidated and the Company became a wholly-owned subsidiary of
AuctionAnything.com.
-25-
<PAGE>
Subsequent to December 31, 1998, the Company entered into an operating lease for
office space as well as assuming an operating lease in conjunction with the
purchase of the assets of TISH. The future minimum lease payments under these
non-cancelable operating leases are as follows:
Year ending December 31,
------------------------------
1999 $ 7,634
2000 10,904
2001 3,300
--------
Total minimum lease payments $ 21,838
========
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AUCTIONANYTHING.COM, INC.
- --------------------------------------------------------------------------------
Balance Sheets
- --------------------------------------------------------------------------------
August 31, 1999 and 1998
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Current assets:
- --------------------------------------------------------------------------------
Cash and cash equivalents $ 301,485 46,714
- --------------------------------------------------------------------------------
Accounts receivable 18,433 4,892
- --------------------------------------------------------------------------------
Inventory 278,236 21,663
- --------------------------------------------------------------------------------
Prepaid and other assets 51,094 --
- --------------------------------------------------------------------------------
Due from related parties -- 6,052
- --------------------------------------------------------------------------------
Total current assets 649,248 79,321
- --------------------------------------------------------------------------------
Equipment, less accumulated depreciation of $22,733 45,485 3,738
- --------------------------------------------------------------------------------
$ 694,733 83,059
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------
Current liabilities:
- --------------------------------------------------------------------------------
Accounts payable and accrued expenses $ 34,837 10,968
- --------------------------------------------------------------------------------
Due to related parties -- 48,404
- --------------------------------------------------------------------------------
Total current liabilities 34,837 59,372
- --------------------------------------------------------------------------------
Stockholders' equity:
- --------------------------------------------------------------------------------
Common stock, par value $.001; 50,000,000 shares
authorized; 28,238,980 shares issued and
outstanding 28,239 500
- --------------------------------------------------------------------------------
Additional paid-in capital 915,053 7,500
- --------------------------------------------------------------------------------
Retained earnings (accumulated deficit) (283,396) 15,687
- --------------------------------------------------------------------------------
Total stockholders' equity 659,896 23,687
- --------------------------------------------------------------------------------
$ 694,733 83,059
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AUCTIONANYTHING.COM
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
Eight months ended August 31, 1999 and 1998
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------
Revenues:
- --------------------------------------------------------------------------------
Sales $ 400,198 250,720
- --------------------------------------------------------------------------------
Internet service revenue 43,615 --
- --------------------------------------------------------------------------------
Commissions income 4,015 7,393
- --------------------------------------------------------------------------------
447,828 258,113
- --------------------------------------------------------------------------------
Cost of sales 290,602 155,946
- --------------------------------------------------------------------------------
Gross profit 157,226 102,167
- --------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------
Selling, general and administrative expenses 429,904 84,339
- --------------------------------------------------------------------------------
Depreciation 6,665 5,209
- --------------------------------------------------------------------------------
Interest 1,461 1,167
- --------------------------------------------------------------------------------
Total expenses 438,030 90,715
- --------------------------------------------------------------------------------
Net (loss) income $(280,804) 11,452
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AUCTIONANYTHING.COM, INC.
- --------------------------------------------------------------------------------
Statement of Stockholders' Equity
- --------------------------------------------------------------------------------
Eight months ended August 31, 1999
- --------------------------------------------------------------------------------
(Unaudited)
- --------------------------------------------------------------------------------
Retained
Additional earnings Total
Common paid-in (accumulated stockholders'
stock capital deficit) equity
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Balances at December 31, 1998 $ 500 7,500 (2,592) 5,408
- --------------------------------------------------------------------------------
Common stock issued (note 4) 27,739 907,553 -- 935,292
- --------------------------------------------------------------------------------
Net loss -- -- (280,804) (280,804)
- --------------------------------------------------------------------------------
Balances at August 31, 1999 $28,239 915,053 (283,396) 659,896
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
AUCTIONANYTHING.COM, INC.
- ----------------------------------------------------------------------------------------------
Statements of Cash Flows
- ----------------------------------------------------------------------------------------------
Eight months ended August 31, 1999 and 1998
- ----------------------------------------------------------------------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
Cash flows used in operating activities:
- ----------------------------------------------------------------------------------------------
Net (loss) income $(280,804) 16,526
- ----------------------------------------------------------------------------------------------
Adjustments to reconcile net (loss) income to net cash used
in operating activities:
- ----------------------------------------------------------------------------------------------
Depreciation 6,665 5,209
- ----------------------------------------------------------------------------------------------
Cash provided by (used in) changes in assets
and liabilities:
- ----------------------------------------------------------------------------------------------
Accounts receivable (16,450) (569)
- ----------------------------------------------------------------------------------------------
Prepaid and other assets (51,094) --
- ----------------------------------------------------------------------------------------------
Inventory (238,350) 1,324
- ----------------------------------------------------------------------------------------------
Accounts payable and accrued expenses 14,104 (3,113)
- ----------------------------------------------------------------------------------------------
Due to/from related parties 6,988 (8,612)
- ----------------------------------------------------------------------------------------------
Net cash used in operating activities (558,941) 10,765
- ----------------------------------------------------------------------------------------------
Cash flows used in investing activities:
- ----------------------------------------------------------------------------------------------
Capital expenditures (44,068) --
- ----------------------------------------------------------------------------------------------
Net cash used in investing activities (44,068) --
- ----------------------------------------------------------------------------------------------
Cash flows from financing activities:
- ----------------------------------------------------------------------------------------------
Proceeds from issuance of common stock 935,292 --
- ----------------------------------------------------------------------------------------------
Principal payments on notes payable to related parties (34,304)
- ----------------------------------------------------------------------------------------------
Proceeds from notes payable to related parties -- 34,352
----------------------------------------------------------------------------------------------
Net cash provided by financing activities 900,988 34,352
- ----------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 297,979 45,117
- ----------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 3,506 1,597
- ----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of eight months $ 301,485 46,714
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
-29-
<PAGE>
AUCTIONANYTHING.COM
Notes to Financial Statements
August 31, 1999 and 1998
(Unaudited)
(1) Summary of Significant Accounting Policies
(b) Description of Business
AuctionAnything.com, Inc. (the "Company") operates on-line auctions
specializing in sports memorabilia. The Company's primary site for
operations is www.SportsAuction.com., which focuses on the
----------------------
collectibles market. The Company generates revenue by procuring
specialty merchandise at the wholesale level and selling it at retail
in an on-line format. Examples of typical inventory would include
autographed memorabilia (photos, football jerseys, balls, hats, etc.),
sports cards, and other collectibles such as Beanie Babies. The
Company also generates commissions revenue through consignment sales
of memorabilia.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined principally on the specific identification method.
Provisions for potentially obsolete or slow-moving inventory is made
based on management's analysis of inventory levels.
Consignment inventory is not recorded as inventory by the Company and
is not placed in an auction until the merchandise is received. If a
consignment item does not sell in an auction, the Company requests
that the consignor lower the minimum bid or withdraw the item from the
auction.
(c) Equipment
Equipment is stated at cost less accumulated depreciation.
Depreciation of equipment is computed using the straight-line method
over its estimated useful life of 3 years. Depreciation expense was
$6,665 for the eight months ended August 31, 1999.
(d) Income Taxes
The Company was considered an S-corporation for federal income tax
purposes through March 9, 1999. As such, the Company was not subject
to federal income taxes directly. Income or loss of the Company passed
through to the individual stockholders. Effective March 10, 1999, the
Company is considered a C-corporation for federal income tax purposes.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases, and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(e) Revenue Recognition
-30-
<PAGE>
The Company sells merchandise to customers under one of two types of
sales transactions. The Company either purchases merchandise and sells
it to customers or sells merchandise to customers under consignment
arrangements and earns a commission.
Revenue from sales of purchased merchandise is recognized and title
passes when the Company receives verification of the credit card
transaction or verification of the check clearing.
Commission income from consignment sales is calculated as a percentage
of the final sales value at the close of the auction and recognized
when the Company receives verification of the credit card transaction
or verification of the check. Commission is paid to the consignor
after the merchandise has been shipped.
(f) Merchandise Return Policy
The Company guarantees all items to be authentic, including
consignment items. Any item may be returned within seven days for a
full refund provided that the item has not been altered.
(g) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(2) Related Party Transactions
During 1999, the Officers auctioned collectible merchandise through the
Company as consignors and did not pay the Company a commission for this
service.
Notes payable bearing interest of 14% with a balance of $34,304 were paid
in full to related parties on March 31, 1999.
(3) Year 2000 (Unaudited)
The Company is dependent on computer systems and system applications for
conducting its ongoing business functions. In 1998, the Company began its
process of identifying, evaluating and implementing changes to computer
programs necessary to address the year 2000 issue. This issue involves the
ability of computer systems that have time sensitive programs to recognize
properly the year 2000. The inability to do so could result in failures or
miscalculations, which could disrupt the Company's ability to meet its
customer and other obligations on a timely basis.
In addition, the Company is developing contingency plans to address
perceived risks associated with the Year 2000 effort. These include
business resumption plans to address the possibility of internal systems
failures and the possibility of failure of systems or processes outside the
Company's control. Preparations for the management of the date change will
continue through 1999.
(4) Acquisition
On March 10, 1999, the Company closed a transaction by which it acquired
100% of the outstanding capital stock of North Orlando Sports Promotions,
Inc., a privately held Florida Corporation ("NOSP") from the shareholders
of NOSP. As consideration for this acquisition, the Company issued
24,003,133 shares of its common stock, $.001 par value (the "Common
Stock"), which amounted to approximately 85% of the Company's outstanding
Common Stock, to the three former shareholders of NOSP. Also, prior to the
closing of the transaction, the Company sold substantially all of its pre-
acquisition assets to its majority pre-acquisition shareholder in exchange
for his assignment to the Company of 747,116 shares of common stock and his
assumption of all of the Company's pre-acquisition liabilities.
-31-
<PAGE>
In anticipation of the acquisition, the Company completed a private
offering of 1,000,000 units at an offering price of $.10 per unit. Each
unit consists of one share of common stock and one stock purchase warrant.
Each stock purchase warrant entitled the holder to purchase three shares of
common stock of the Company for $.30 per share. A total of 4,000,000 shares
of common stock were issued and sold by the Company for net proceeds of
approximately $925,000. The proceeds of the offering will be used for
working capital and to fund the Company's expansion plans.
(5) Leases
During 1999, the Company entered into an operating lease for office space.
The future minimum lease payments under these non-cancelable operating
leases are as follows:
<TABLE>
<CAPTION>
Operating
Year ending December 31, leases
--------------------------------- ----------
<S> <C>
1999 $ 3,414
2000 10,904
2001 3,300
----------
Total minimum lease payments $ 17,618
==========
</TABLE>
(6) Income Taxes
The following is a reconciliation between expected income tax benefit and
actual using the applicable statutory federal income tax rate of 34% and
applicable state of Florida income tax rate of 5.5% for the eight month
period ended August 31, 1999:
<TABLE>
<S> <C>
Expected tax benefit $ 110,918
Allowance (110,918)
-----------
$ --
===========
</TABLE>
The tax effect of temporary differences that give rise to deferred tax
assets as of August 31, 1999 are as follows:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss $ 110,918
Less allowance (110,918)
-----------
Total $ --
===========
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the projected future taxable income and tax planning strategies,
as well as carryback opportunities, in making this assessment. Based upon
the level of historical taxable income, projections for future taxable
income over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not the Company will not realize
the benefits of these deductible differences.
PART III
ITEM 1- INDEX TO EXHIBITS
-32-
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number Number Description
- ------ ------ -----------
<S> <C> <C>
2.1 - Certificate of Incorporation of the Company and
all Amendments thereto (filed with Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
2.2 - Bylaws of the Company (filed with Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
3.1 - Article Fourth of the Certificate of
Incorporation of the Company, as amended (filed
with Form 10-SB on October 28, 1999, and
incorporated herein by reference)
3.2 - Articles II, V and VI of the Bylaws of the
Company (filed with Form 10-SB on October 28,
1999, and incorporated herein by reference)
6.1 - Office Lease dated May 10, 1999, between the
Company and Tradewinds Office Building (filed
with Form 10-SB on October 28, 1999, and
incorporated herein by reference)
6.2 - Acquisition Agreement dated February 18, 1999,
among the Company, North Orlando Sports
Promotions, Inc., and the Shareholders of North
Orlando Sports Promotions, Inc. (filed with
Form 10-SB on October 28, 1999, and
incorporated herein by reference)
6.3 - Asset Purchase Agreement dated February 18,
1999, between North Orlando Sports Promotions,
Inc., and The Information SuperHighway
Corporation (filed with Form 10-SB on October
28, 1999, and incorporated herein by reference)
10.1 - Consent of KPMG LLP (filed herewith)
</TABLE>
ITEM 2- DESCRIPTION OF EXHIBITS
The documents listed in Item 1- Index to Exhibits, other than Exhibit
10.1, which is attached hereto, were attached to the initial filing of this
registration statement as exhibits and are incorporated herein by this
reference. Exhibit 2.1 consists of the Certificate of Incorporation of the
Company on file with the Secretary of State of Delaware, together with all
amendments thereto to date. Exhibit 2.2 is the current Bylaws of the Company.
Exhibits 3.1 and 3.2 are those portions of Exhibits 2.1 and 2.2 that describe
the rights of the Company's security holders. Exhibits 3.1 and 3.2 are not filed
herewith as separate exhibits, but they are referred to in the Index to Exhibits
in order to identify where such information may be found in Exhibits 2.1 and
2.2. Exhibit 6.1 is the Office Lease that is described in Item 3 of Part I of
this registration statement. Exhibit 6.2 is the Acquisition Agreement that is
first described in the Corporate History section of Item 1 of Part I of this
registration statement. Exhibit 6.3 is the Asset Purchase Agreement that is
first described in Item 7 of Part I of this registration statement. Exhibit
10.1, filed herewith, is the consent of KPMG LLP.
-33-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
AUCTIONANYTHING.COM, INC.
Date: November 12, 1999 By: /s/ Raymond J. Hotaling III
----------------------------------------
Raymond J. Hotaling III, President
-34-
<PAGE>
EXHIBIT 10.1
Accountants' Consent
The Shareholders
North Orlando Sports Promotions, Inc.
We consent to the use of our report dated September 24, 1999 incorporated herein
by reference and in the Registration Statement of AuctionAnything.com on Form
10-SB.
/s/ KPMG LLP
Orlando, Florida
November 10, 1999
