U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 2000
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- -------------
Commission file number 0-27865
AUCTIONANYTHING.COM, INC.
(Exact name of small business issuer as specified in it charter)
DELAWARE 13-264091
-------- ---------
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
35 WEST PINE STREET, SUITE 211, ORLANDO, FLORIDA 32801
------------------------------------------------------
(Address of principal executive offices)
(407) 481-2140
----------------
(Issuer's telephone number)
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date: 28,238,980 shares of common
stock, $0.001 par value as of June 6, 2000.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [X]
<PAGE>
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
Basis of Financial Statements
-----------------------------
The unaudited condensed consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All such
adjustments are, in the opinion of management, of a normal recurring nature.
The results of operations for the three months are not necessarily indicative of
those for the full year. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements contain all adjustments
necessary to fairly present the financial position and the results of operations
for the periods indicated.
Certain information and footnote disclosures normally included in condensed
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's annual report
on Form 10-KSB for the year ended January 31, 2000.
Financial Statements
See pages F-1 - F-5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
--------------------------
Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, as amended, including without limitation, statements regarding industry
trends, strategic business development, pursuit of new markets, competition,
results from operations, and are subject to the safe harbor provisions created
by that statute. Each forward looking statement involves known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance, or achievements of the Company to be materially different from any
future results, performance, or achievements expressed or implied by such
forward looking statements.
These forward looking statements were based on various factors and were derived
utilizing numerous important assumptions and other important factors that could
cause actual results to differ materially from those in the forward-looking
statements. Important assumptions and other factors that could cause actual
results to differ materially from those in the forward looking statements,
include, but are not limited to: competition in the Company's existing and
potential future product lines of business; the Company's ability to obtain
financing on acceptable terms if and when needed; uncertainty as to the
Company's future profitability, uncertainty as to the future profitability of
acquired businesses, uncertainty as to any future expansion of the company.
Other factors and assumptions not identified above were also involved in the
derivation of these forward looking statements, and the failure of such
assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. The Company assumes no
obligation to update these forward looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting such forward
looking statements.
Financial Condition and Changes in Financial Condition
------------------------------------------------------
As a result of the Company's focus on the business development of its Internet
Business Solutions (IBS) suite of products, significant decreases in sales of
company-owned inventory and Internet service (ISP) have been realized during the
three months ended April 30, 2000. The Company's financial position and results
of operations are subject to fluctuations due to a variety of factors. The
Company's historical results of operations are not necessarily indicative of
future results.
Selected Balance Sheet Items
----------------------------
As noted in the Company's registration statement on Form 10-SB/A filed May 9,
2000, the Company, in the first quarter ended April 30, 1999, raised
approximately $925,000 in capital through a private placement of
<PAGE>
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 decreased from $144,011 at January 31, 2000 to $90,014
at April 30, 2000. This decrease resulted primarily from increases in
operational expenses over this time period.
Accounts Receivable
-------------------
Accounts receivable decreased from $6,288 at January 31, 2000 to $2,810 at April
30, 2000. This decrease is primarily the result of the decreases in revenue
generated from Auction sales and Internet services.
Inventory
---------
Inventory decreased from $58,077 at January 31, 2000 to $2,391 at April 30,
2000. This decrease was the result of sales during the quarter ended April 30,
2000 and the discontinuation of inventory purchases. The Company plans to
discontinue auctioning its own merchandise.
Other Assets
------------
Other assets decreased from $18,041 at January 31, 2000 to $4,539 at April 30,
2000. The decrease resulted principally from the amortization of prepaid
expenses, which consists principally of prepaid insurance, during the quarter
ended April 30, 2000.
Due from Related Parties
------------------------
Due from related parties was $3,487 at January 31, 2000 and at April 30, 2000.
This did not change as no payments were made during the quarter ended April 30,
2000.
Equipment
---------
Equipment decreased from $78,467 at January 31, 2000 to $73,114 at April 30,
2000. The decrease is the result of depreciation recorded during the quarter
ended April 30, 2000.
Goodwill, net
-------------
Goodwill, net decreased from $139,931 at January 31, 2000 to $123,139 at April
30, 2000 as a result of amortization recorded during the quarter ended April 30,
2000.
Accounts Payable and Accrued Expenses
-------------------------------------
Accounts payable and accrued expenses increased from $31,153 at January 31, 2000
to $94,131 at April 30, 2000. The increase resulted primarily to increased
administrative costs during the quarter ended April 30, 2000.
<PAGE>
Unearned Revenue
----------------
Unearned revenue decreased from $3,000 at January 31, 2000 to $2,797 at April
30, 2000. The decrease is the result of IBS client sales commission recognized
as revenue during the quarter ended April 30, 2000.
Auction Sales
-------------
Auction sales decreased from $116,158 during the three months ended April 30,
1999 to $66,900 during the three months ended April 30, 2000. The decrease
resulted principally from decreased volume of sales transactions as a result of
the Company's planned discontinuation of this portion of its business.
Internet Service Revenue
------------------------
Internet service revenue decreased from $16,640 during the three months ended
April 30, 1999 to $12,123 during the three months ended April 30, 2000. The
decrease resulted principally from decreased volume of ISP clients as a result
of the Company's planned discontinuation in this portion of its business.
Internet Business Solutions
---------------------------
Internet Business Solutions revenue increased from $250 during the three months
ended April 30, 1999 to $6,621 during the three months ended April 30, 2000.
This increase resulted primarily from the introduction of the Internet Business
Solutions portion of the business in 1999 and the Company's focus of the growth
on this portion of its business.
Commission Sales
----------------
Commission Sales decreased from $2,671 during the three months ended April 30,
1999 to $0 during the three months ended April 30, 2000. This decrease was due
to the fact that no consignment sales were realized during the quarter ended
April 30, 2000.
Cost of Sales and Cost of Internet Connections
----------------------------------------------
Cost of sales decreased from $100,528 during the three months ended April 30,
1999 to $54,253 during the three months ended April 30, 2000. This decrease
resulted from the corresponding reduction in auction sales revenue as part of
the Company's planned discontinuance of the auction sales portion of its
business. Cost of services increased from $3,417 for the three months ended
April 30, 1999 to $7,883 for the three months ended April 30, 2000. The increase
resulted from the fact that the Company incurred these costs for two months in
the quarter ended April 30, 1999 compared to three months for the quarter ended
April 30, 2000. Cost of sales as a percentage of auction sales decreased from
87% during the three months ended April 30, 1999 to 81% during the three months
ended April 30, 2000. The decrease is principally due to the increase in margin
of items offered for sale.
Operating Expenses
------------------
Operating expenses increased from $71,997 during the three months ended April
30, 1999 to $236,539 during the three months ended April 30, 2000. The increase
resulted principally from the increase in salaries and
<PAGE>
employee benefits from $7,599 during the three months ended April 30, 1999 to
$115,145 during the three months ended April 30, 2000. As of April 30, 1999 the
Company had six employees while, as of April 30, 2000, the number of employees
had increased to eleven.
Professional fees increased from $37,247 during the three months ended April 30,
1999 to $60,423 during the three months ended April 30, 2000. Advertising fees
increased from $1,230 during the three months ended April 30, 1999 to $13,207
during the three months ended April 30, 2000. Insurance expense increased from
$384 during the three months ended April 30, 1999 to $13,774 during the three
months ended April 30, 2000. Each of these increases is due to additional
administrative costs associated with the public status of the Company.
Depreciation and amortization expense increased from $14,872 during the three
months ended April 30, 1999 to $23,284 during the three months ended April 30,
2000. This increase is primarily due to amortization of the goodwill realized
for the three months ended April 2000 and for March and April 1999 as a result
of the TISH acquisition in February 1999. Also, additional equipment was
purchased after April 30, 1999, resulting in additional depreciation expense.
Other Income
------------
Other income increased from $0 during the three months ended April 30, 1999 to
$1,448 during the three months ended April 30, 2000. The increase was the result
of Company funds deposited in interest bearing checking accounts.
Interest Expense
----------------
Interest expense decreased from $1,448 during the three months ended April 30,
1999 to $0 during the three months ended April 30, 2000. The decrease is the
result of the payment in March 1999 of the amounts due to related parties, which
bore interest.
Risks Associated with the Year 2000
-----------------------------------
As of the date of filing, the Company has not realized any adverse effects from
the Year 2000 rollover.
Risk Factors that may Affect Results of Operation and Financial Condition
-------------------------------------------------------------------------
In addition to the other information in this Form 10-QSB, the risk factors
previously filed in the Company's annual report on Form 10-KSB for the fiscal
year ended January 31, 2000 should be carefully considered in evaluating the
Company and the business because these factors may have a significant impact on
the business, operating results and financial condition.
Liquidity and Capital Resources
-------------------------------
Since inception, the Company's operating and investing activities have used more
cash than they have generated. Because of the continued need for substantial
amounts of working capital to fund the growth of the business, the Company
expects to continue to experience significant
<PAGE>
negative operating and investing cash flows for the foreseeable future. The
Company intends to raise capital through a private placement of funds within
sixty days of this submission. Subsequently the Company may need to raise
additional capital in the form of another private placement to meet the
immediate operating and investing cash requirements. The Company may also seek
outside funding sources within six to nine months of this submission, if
necessary, to meet the long-term goals of the Company in regard to its growth.
If additional funds are raised through the issuance of equity, equity-related or
debt securities, these securities may have rights, preferences or privileges
senior to those of the rights of the common stock, and the stockholders may
experience additional dilution to their equity ownership.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Plan of Operation
-----------------
As the Auction sales and Internet service revenue portions of the Company
decline, additional emphasis has been placed on IBS revenue increases.
Additional efforts have been made by the Company to enhance the sales and
marketing for IBS products and the AuctionAnything.com network. During the three
months ended April 30, 2000, the Company entered into a contract with the
International Hockey League to provide an auction site for them. Other new
clients include Jewelry Auction House and USA Rinks, which cater to the
business-to-consumer market and Prairie Source and VWH Auctions, which cater to
the business-to-business market.
As the ongoing growth of the Company continues, new services are being added to
complement and enhance the existing services. The Company has developed a
storefront module called "eCartPLUS" which can be used as either a stand-alone
module for clients with mainly fixed priced inventory or as an add-on to an
auction site to give IBS clients both options of selling solutions.
As an incentive for consignors and to increase consignment revenues on the
SportsAuction.com and AutographAuctions.com sites, the Company is currently
developing a feature, which gives each consignor their own web
<PAGE>
page. Consignors will be able to develop the web page themselves and change the
page at their convenience.
The Company officers, Raymond J. Hotaling III, Dennis A. Kurir, and Martin M.
Meads, have filed the required Form 3, Initial Statements of Beneficial
Ownership of Securities on May 1, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following documents are filed herewith or have been included as exhibits to
previous filings with the Commission and are incorporated herein by this
reference:
Exhibit No. Exhibit
----------- -------
3.1 Certificate of Incorporation of the Company
and all Amendments thereto (filed as Exhibit
2.1 to registration statement on Form 10-SB
on October 28, 1999, and incorporated herein
by reference)
3.2 Bylaws of the Company (filed as Exhibit 2.2
to registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
4.1 Article Fourth of the Certificate of
Incorporation of the Company, as amended
(filed as part of Exhibit 2.1 to
registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
4.2 Articles II, V and VI of the Bylaws of the
Company (filed as part of Exhibit 2.1 to
registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
10.1 Office Lease dated May 10, 1999, between the
Company and Tradewinds Office Building
(filed as Exhibit 6.1 to registration
statement on Form 10-SB on October 28, 1999,
and incorporated herein by reference)
10.2 Acquisition Agreement dated February 18,
1999, among the Company, North Orlando
Sports Promotions, Inc., and the
Shareholders of North Orlando Sports
Promotions, Inc. (filed as Exhibit 6.2 to
registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
10.3 Asset Purchase Agreement dated February 18,
1999, between North Orlando Sports
Promotions, Inc., and The Information
SuperHighway
<PAGE>
Corporation (filed as Exhibit 6.3 to
registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
10.4 Form of Stock Purchase Warrant dated March
17, 1999 (filed as Exhibit 6.4 to
registration statement on Form 10-SB/A on
January 18, 2000, and incorporated herein by
reference)
11 Statement re: computation of per share
earnings (included in financial statements
in Part I, Item 1, hereof)
21 Subsidiaries of the registrant (filed as
Exhibit 21 to annual report on Form 10-KSB
for fiscal ended January 31, 2000, and
incorporated herein by reference)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AUCTIONANYTHING.COM, INC.
by /s/ Martin M. Meads
--------------------
Martin M. Meads, CEO, Chief Accounting Officer
Date: June 9, 2000
<PAGE>
AUCTIONANYTHING.COM, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
April 30, 2000 and January 31, 2000
Unaudited
<TABLE>
<CAPTION>
April 30, January 31,
Assets 2000 2000
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 90,014 144,011
Accounts receivable 2,810 6,288
Inventory 2,391 58,077
Other assets 4,539 18,041
Due from related parties 3,487 3,487
----------- ----------
Total current assets 103,241 229,904
Equipment, less accumulated depreciation of $45,369
in 2000 and $38,877 in 1999 73,114 78,467
Goodwill, net 123,139 139,931
----------- ----------
$ 299,494 448,302
=========== =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 94,131 31,153
Unearned revenue 2,797 3,000
----------- ----------
Total current liabilities 96,928 34,153
----------- ----------
Stockholders' equity:
Common stock, par value $.001; 50,000,000 shares
authorized, 28,238,980 issued and outstanding
at April 30, 2000, and April 30, 1999 28,239 28,239
Additional paid-in capital 1,181,553 1,181,553
Accumulated deficit (1,007,226) (795,643)
----------- ----------
Total stockholders' equity 202,566 414,149
----------- ----------
$ 299,494 448,302
=========== =======
</TABLE>
See accompanying notes to financial statements.
F-1
<PAGE>
AUCTIONANYTHING.COM, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
Three months ended April 30, 2000 and three months ended April 30, 1999
Unaudited
<TABLE>
<CAPTION>
Three months Three months
ended % ended %
April 30, of April 30, of
2000 sales 1999 sales
------------ ---------- ------------ ----------
<S> <C> <C> <C>
Revenues:
Auction sales $ 66,900 116,158
Internet service revenue 12,123 16,640
Internet business solutions 6,621 250
Commission sales -- 2,671
------------ ------------
85,644 135,719
Cost of sales 54,253 81% 100,528 87%
Cost of services 7,883 65% 3,417 21%
------------ ------------
62,136 103,945
------------ ------------
Gross profit 23,508 31,774
Operating expenses:
Salaries and employee benefits 115,145 7,599
Professional fees 60,423 37,247
Other selling, general and administrative 10,706 10,665
Depreciation and amortization 23,284 14,872
Advertising 13,207 1,230
Insurance 13,774 384
------------ ------------
Total operating expenses 236,539 71,997
------------ ------------
Operating loss (213,031) (40,223)
Other income 1,448 --
Interest expense -- (1,448)
------------ ------------
Net loss $ (211,583) (41,671)
Weighted average shares outstanding 28,321,946 25,106,325
============ ============
Loss per share $ (0.007) (0.002)
============ ============
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
AUCTIONANYTHING.COM, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
Three months ended April 30, 2000, and three months ended April 30, 1999
Unaudited
<TABLE>
<CAPTION>
Three months Three months
ended ended
April 30, April 30,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows used in operating activities:
Net loss $(211,583) (41,671)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 23,284 14,872
Cash provided by (used in) changes in assets
and liabilities:
Accounts receivable 3,478 (8,479)
Inventory 55,686 (71,456)
Other assets 13,502 --
Accounts payable and accrued expenses 62,978 6,209
Unearned revenue (203) --
Due to/from related parties -- (858)
---------- ----------
Net cash used in operating activities (52,858) (101,383)
---------- ----------
Cash flows used in investing activities:
Capital expenditures (1,139) (60,475)
---------- ----------
Net cash used in investing activities (1,139) (60,475)
---------- ----------
Cash flows from financing activities:
Principal payments on notes payable to related parties -- (34,304)
Proceeds from issuance of common stock -- 935,292
---------- ----------
Net cash provided by financing activities -- 900,988
---------- ----------
Net increase (decrease) in cash and cash equivalents (53,997) 739,130
Cash and cash equivalents at beginning of period 144,011 2,804
---------- ----------
Cash and cash equivalents at end of period $ 90,014 741,934
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ -- 1,448
========== ==========
Supplemental disclosure of non-cash investing and
financing activities:
Goodwill generated from stock issued in TISH acquisition $ -- 201,500
========== ==========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
AuctionAnything.com, Inc.
Notes to Condensed Consolidated Financials
Statements Three months ended April 30, 2000 and three
months ended April 30, 1999
unaudited
Summary of Significant Accounting Policies
------------------------------------------
General
-------
The accompanying unaudited condensed consolidated financial statements as of
April 30, 2000 and for the three month ended April 30, 2000 should be read in
conjunction with the Company's audited financial statements for the year ended
January 31, 2000.
The accompanying unaudited condensed consolidated financial statements have been
prepared assuming that the Company will continue operations on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. However, the Company has incurred
an accumulated deficit of $1,007,226 as of April 30, 2000. The Company's ability
to continue as a going concern is dependent upon the attainment of a profitable
level of operations. The Company's ability to attain profitable operations is
contingent upon its ability to grow its business.
Description of Business
-----------------------
AuctionAnything.com, Inc. (the "Company") operates a variety of internet-related
services. Currently, the Company has three main revenue generating operations,
which are provided collectively by AuctionAnything.com, Inc. and North Orlando
Sports Promotions, Inc. ("NOSP"), a wholly owned subsidiary of
AuctionAnything.com, Inc.: 1) Internet Business Solutions ("IBS"): a service
which establishes and hosts auction and/or E-commerce web sites for other
businesses and organizations primarily in both the business-to-business and
business-to-consumer markets; 2) Two company owned and maintained
auction/E-commerce web sites (www.SportsAuction.com and
www.AutographAuctions.com) from which the Company sells its own inventory
(collectibles, memorabilia, photos, sports cards, etc.) and allows online
person-to-person "electronic consignment" from which the Company derives
commission fees; and 3) an Internet service provider ("ISP") service, known as
Tish.net.
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 and the related merchandise is shipped.
Commission income from consignment sales is calculated as a percentage of the
F-4
<PAGE>
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. The Company earns revenues for IBS services as a percentage of all
successful sales. These revenues are recognized when the Company receives
verification of a successful sale. Internet service revenue is recognized on a
pro rata basis over the term of the contract.
F-5
<PAGE>
Exhibits Index
Exhibit No. Exhibit
----------- -------
3.3 Certificate of Incorporation of the Company
and all Amendments thereto (filed as Exhibit
2.1 to registration statement on Form 10-SB
on October 28, 1999, and incorporated herein
by reference)
3.4 Bylaws of the Company (filed as Exhibit 2.2
to registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
4.1 Article Fourth of the Certificate of
Incorporation of the Company, as amended
(filed as part of Exhibit 2.1 to
registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
4.2 Articles II, V and VI of the Bylaws of the
Company (filed as part of Exhibit 2.1 to
registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
10.4 Office Lease dated May 10, 1999, between the
Company and Tradewinds Office Building
(filed as Exhibit 6.1 to registration
statement on Form 10-SB on October 28, 1999,
and incorporated herein by reference)
10.5 Acquisition Agreement dated February 18,
1999, among the Company, North Orlando
Sports Promotions, Inc., and the
Shareholders of North Orlando Sports
Promotions, Inc. (filed as Exhibit 6.2 to
registration statement on Form 10-SB on
October 28, 1999, and incorporated herein by
reference)
10.6 Asset Purchase Agreement dated February 18,
1999, between North Orlando Sports
Promotions, Inc., and The Information
SuperHighway Corporation (filed as Exhibit
6.3 to registration statement on Form 10-SB
on October 28, 1999, and incorporated herein
by reference)
10.4 Form of Stock Purchase Warrant dated March
17, 1999 (filed as Exhibit 6.4 to
registration statement on Form 10-SB/A on
January 18, 2000, and incorporated herein by
reference)
11 Statement re: computation of per share
earnings (included in financial statements
in Part I, Item 1, hereof)
22 Subsidiaries of the registrant (filed as
Exhibit 21 to annual report on Form 10-KSB
for fiscal ended January 31, 2000, and
incorporated herein by reference)
27 Financial Data Schedule (filed herewith)
