UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORTS OF SMALL BUSINESS ISSUERS
[X] Quarterly report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended September 30, 2000
[ ] Transition report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number
e-Auction Global Trading Inc.
-----------------------------
(Exact name of small business issuer as specified in its charter)
Nevada
------
(State or other jurisdiction)
Pending
-------
(IRS Employer of incorporation or organization
Identification No.)
220 King Street West, Suite 200 Toronto, Ontario, M5H 1K4 Canada.
-----------------------------------------------------------------
(Address of principal executive offices)
416-214-1587
------------
(Issuer's telephone number)
Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes...X...No........
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes......No....X....
Applicable only to corporate issuers
As of November 10, 2000 there were 65,745,915 shares of the Registrant's common
stock outstanding.
Transitional Small Business Disclosure Format (check one); Yes......No....X....
<PAGE>
E-AUCTION GLOBAL TRADING INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements 3
Consolidated Balance Sheet at September 30, 2000 and December 31, 1999 4
Consolidated Statements of Operations and Deficit for the nine months ended September 30, 5
2000 and 1999
Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 6
1999
Notes to Consolidated Financial Statements 7
Item 2. Managements' Discussion and Analysis of Financial Condition and Results of Operations 14
Part II. Other Information 15
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 16
</TABLE>
<PAGE>
ITEM 1. Financial Statements
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
3
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED BALANCE SHEET - SEPTEMBER 30, 2000
(UNAUDITED, IN U.S. FUNDS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
SEPTEMBER 2000 DECEMBER 1999
$ $
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and short-term deposits 7,838,378 4,179,394
Accounts receivable 1,109,737 -
Inventory 279,560 -
Work in progress 74,725 -
Prepaid expenses 73,681 -
Demand loan receivable
749,668 -
---------- ----------
10,125,749 4,179,394
DEPOSITS ON ACQUISITION OF SCHELFHOUT - 1,000,000
DEPOSITS ON ACQUISITION OF KWATROBOX 1,062,125 -
FIXED ASSETS 775,547 34,247
GOODWILL 6,178,159 -
-----------------------------------------------------------------------------------------------------------------
18,141,580 5,213,641
-----------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accruals 1,512,978 749,050
Due to Ventures North Investment Partners 3,393 860,793
Deferred revenue 457,084 200,000
Current portion of long-term debt 67,692 -
Shareholder loan - 2,200,000
Subscription receipts - 1,858,229
Loan payable - 2,000,000
---------- ----------
2,041,148 7,868,072
CONTINGENCIES (NOTE 7)
LONG-TERM DEBT 225,934 -
----------
2,267,082 -
REDEEMABLE COMMON STOCK 3,636,364 -
NON-CONTROLLING INTEREST 667,262 -
SHAREHOLDERS' EQUITY
SHARE CAPITAL 61,510 1
ADDITIONAL PAID IN CAPITAL 17,225,894 -
CUMMULATIVE TRANSLATION ADJUSTMENT 65,485 -
DEFICIT (5,782,017) (2,654,432)
---------- ----------
11,570,872 (2,654,431)
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
18,141,580 5,213,641
-----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED, IN U.S. FUNDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
$ $ $ $
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUE 951,401 - 2,931,321 -
COST OF GOODS SOLD 521,342 - 1,803,393 -
--------- --------- --------- ---------
GROSS MARGIN 430,060 - 1,127,928 -
EXPENSES
Consulting 995,297 103,833 1,232,999 195,463
Salaries and benefits 412,491 140,747 1,218,392 322,083
Sales, general and administrative 303,062 1,313,755 896,527 1,679,040
Depreciation and amortization 413,141 - 1,194,889 -
Interest income (119,834) - (173,441) -
Tax expense 56,571 - 68,763 -
--------- --------- --------- ---------
2,060,728 1,558,335 4,438,129 2,196,586
--------- --------- --------- ---------
LOSS BEFORE NON-CONTROLLING INTEREST (1,630,668) (1,558,335) (3,310,201) (2,196,586)
NON-CONTROLLING INTEREST 43,782 - 182,616 -
--------- --------- --------- ---------
NET LOSS (1,586,886) (1,558,335) (3,127,585) (2,196,586)
Unrealized foreign exchange gain 65,485 - 65,485 -
Comprehensive loss (1,521,401) - (3,062,100) -
DEFICIT beginning of period (4,195,131) (638,251) (2,654,432) -
-----------------------------------------------------------------------------------------------------------------------------------
DEFICIT end of period (5,782,017) (2,196,586) (5,782,017) (2,196,586)
===================================================================================================================================
EARNINGS (LOSS) PER SHARE (0.02) (0.04) (0.05) (0.07)
===================================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED, IN U.S. FUNDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30
2000 1999
$ $
-----------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss (3,127,585) (2,196,586)
Add items not affecting cash
Interest 21,698 -
Depreciation and amortization 1,194,889 -
Non-controlling interest (182,616) -
------------------------------------
(2,093,614) (2,196,586)
Net changes in non-cash operating accounts
Accounts receivable (1,109,738) -
Inventory (279,559) -
Work in progress (74,725) -
Prepaid expenses (73,681) -
Accounts payable 743,726 1,503,994
Deferred revenue 257,084 -
------------------------------------
(2,630,507) 1,503,994
------------------------------------
FINANCING ACTIVITIES
Due to related parties (266,140) 726,901
Issuance of share capital 9,876,217 1,000,000
Long-term debt 228,459 -
Non-controlling interest 849,878 -
------------------------------------
10,688,414 1,726,901
------------------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (374,254) (34,247)
Purchase of Schelfhout (3,000,000) (1,000,000)
Deposits on the acquisition of Kwatrobox (1,071,793) -
------------------------------------
(4,446,047) (1,034,247)
------------------------------------
INCREASE IN CASH 3,611,860 62
Effect of foreign exchange on cash 47,124 -
CASH, beginning of period 4,179,394 1
------------------------------------------------------------------------------------------------------------------------------------
CASH, end of period 7,838,378 63
===================================================================================================================================
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION (NOTE 10).
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
E-AUCTION GLOBAL TRADING INC.
.(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED, IN U.S. FUNDS)
--------------------------------------------------------------------------------
1. NATURE OF BUSINESS
--------------------------------------------------------------------------------
The Company is an e-business services provider to perishable commodity
marketplaces. Through its subsidiaries, the Company is focused on the
installation and maintenance of clock and cooling systems for internet
auction halls. To date, the Company continues to focus on streamlining
and increasing the capabilities of electronic commerce processing for
internet auction halls.
The Company's continued operations may be dependant upon its ability to
obtain financing from other sources and its ability to achieve future
profitability. The accompanying financial statements have been prepared
on the basis that the Company will continue as a going concern.
Accordingly, they do not purport to give effect to adjustments, if any,
that may be necessary should the Company be unable to continue operations
and therefore, be required to realize its assets and discharge its
liabilities and commitments in other than the ordinary course of
business.
--------------------------------------------------------------------------------
2. ORGANIZATION AND BASIS OF PRESENTATION
--------------------------------------------------------------------------------
a) Reverse takeover
Pursuant to a Share Exchange Agreement dated February 26, 1999,
e-Auction Global Trading Inc. (formerly Kazari International Inc.)
("Nevada"), a Nevada company, acquired 100% of the issued and
outstanding shares of e-Auction Global Trading Inc., ("Barbados"),
a Barbados company, in exchange for 34,500,000 common shares of
Nevada. As a result of the transaction, control of the Company
passed to Barbados. Accordingly, the share exchange has been
accounted for as a reverse takeover of Nevada by Barbados.
Application of reverse takeover accounting results in the
following:
i) The consolidated financial statements of the combined entity are
issued under the name of the legal parent, e-Auction Global
Trading Inc. (formerly Kazari International Inc.), but are
considered a continuation of the financial statements of the
legal subsidiary (Barbados).
ii) As Barbados is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
consolidated financial statements of the continuing entity at
their carrying value.
iii)The 34,500,000 shares issued are deemed to be issued on April
30, 1998, the date of incorporation of Barbados.
b) Principles of consolidation
The accompanying financial statements consolidate the accounts of
the Company and its wholly owned subsidiaries: Aucxis N.V. (formerly
e-Auction Belgium N.V.), and their wholly owned subsidiary;
Schelfhout Computer Systemen N.V. and their 99% owned subsidiary SDL
Invest N.V.; e-Auction Global Trading Inc. (Barbados) and their
wholly owned subsidiary Aucxis Corp. (formerly e-Auction Global
Trading Inc. (Canada)); V-Wholesaler.com B.V. and the Company's
50.01% interest in e-Auction Australasia Limited.
7
<PAGE>
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
a) Foreign currency translation
The Company's functional currencies are Euros, Australian dollars, and
U.S. dollars; and its reporting currency is in U.S. dollars. In
accordance with SFAS 52 all foreign currency transactions are
translated using the exchange rate in effect at the date of the
transaction. At each balance sheet date, recorded balances denominated
in a currency other than U.S. dollars are adjusted to reflect the
period end exchange rate. Assets and liabilities of operations with
functional currencies other than United States dollars are translated
at the exchange rate prevailing at the balance sheet date, and the
results of their operations are translated at average exchange rates
for the year. The resulting translation adjustments are reflected in a
component of shareholders' equity (deficit) in the accompanying
consolidated financial statements.
b) Measurement uncertainty
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Significant areas requiring
the use of management estimates relate to the determination of
impairment of assets and useful lives for depreciation and
amortization. Financial results as determined by actual events could
differ from those estimates.
c) Financial instruments
The Company's financial instruments consist of cash, short term
deposits, accounts receivable, accounts payable, financial debts,
short-term loan, and due to related parties, the fair market value of
which approximates their carrying value, due to the short term nature
and normal trade terms.
d) Fixed assets
Capital assets are recorded at the lower of cost less accumulated
amortization and net realizable value. Capital assets and goodwill are
amortized from the date of acquisition and is provided at the following
rates:
Buildings Straight-line over 20 years
Software Straight-line over 5 years
Furniture and fixtures Straight-line over 5 to 15 years
Tools and equipment Straight-line over 3 to 5 years
Vehicles Straight-line over 5 years
Goodwill Straight-line over 5 years
The company evaluates its long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. Recoverability of assets held and
used is measured by a comparison of the carrying amount of any asset to
future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the asset
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value, less costs
to sell.
e) Related party transactions
Related party transactions are recorded at their exchange amounts which
approximate fair market value.
f) Non-controlling interest
Non-controlling interest, as stated on the balance sheet, represents
the carrying value in the net assets of minority shareholders of the
Company's subsidiaries. The balance is increased or decreased by the
minority shareholders' percentage of the subsidiaries' earnings or
losses during the period.
8
<PAGE>
g) Income taxes
The company provides for income taxes under the asset and
liability method in accordance with SFAS No. 109, "Accounting for
Income Taxes". Under this method, deferred tax assets and
liabilities are determined based on differences between the
financial reporting and income taxes bases of assets and
liabilities and are measured using enacted tax rates and laws.
Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amounts expected to be realized.
h) Revenue recognition
The Company recognizes revenue from license fees related to
software sales upon the signing of the specific agreement and the
delivery of software to the purchaser. Royalties are recognized in
the period it is earned.
The Company follows the completed contract method for recognizing
revenues earned from clock and cooling systems installation. The
application is reasonable given majority of contracts are short
term in nature. Cost of sales relating to the clock and cooling
systems installation include only costs directly related to the
specific contracts. Revenue earned from maintenance contracts
related to software sales are recognized on a straight line basis
over the life of the contract.
i) Inventory and work in progress
Raw materials and consumables inventories are stated at the lower
of cost or market with cost being determined using the weighted
average cost of inventory. Obsolete or defective inventories are
reduced to net realizable value. Write-downs of inventories are
recorded on the basis of age and turnover of inventory according
to the judgment of management.
The work in progress represents only direct costs including raw
materials and labour.
--------------------------------------------------------------------------------
4. ACQUISITION OF SHELFHOUT COMPUTER SYSTEMEN N.V.
--------------------------------------------------------------------------------
On January 10, 2000, the Company completed the purchase of 100% of the
issued and outstanding shares of Schelfhout Computer Systemen N.V. (SCS),
a Belgium company which supplies clocks and cooling systems to auction
houses. The Company acquired the shares of SCS in exchange for 3,636,364
common shares and cash of $4,000,000. The common shares have been valued
at $3,636,364, based on their estimated fair value at January 10, 2000.
Fair value has been determined based on the cash price paid for stock in
a contemporaneous private placement, the put feature related to the
shares issued to acquire SCS and the market price of the Company's stock
around the acquisition date.
The following is a summary of the purchase:
Consideration 7,636,364
Less: net tangible assets of SCS 369,205
---------
7,267,159
The net tangible assets of SCS at January 10, 2000 are comprised of the
following: cash of approximately $280,000; other working capital amounts
of approximately $1.2 million; capital assets of approximately $300,00;
current liabilities of approximately $1.24 million and loans payable of
approximately $170,000.
The purchase price of $7,636,364 was paid as follows:
<TABLE>
<CAPTION>
$
<S> <C> <C>
Refundable deposit paid in 1999 1,000,000
Cash on closing (January 2000) 3,000,000
Common shares at fair value issued on January, 2000 (3,636,364) 3,636,364
---------
7,636,364
=========
</TABLE>
9
<PAGE>
The 3,636,364 common shares issued are not free trading at the time of
issue and are subject to a timed release formula which allows for release
of 454,545 shares, redeemable at $1.65 per share, on each of the 6, 12,
18 and 24 month anniversary of the closing and 606,061 shares, redeemable
at $1.65 per share, on each of the 36, 48 and 60 month anniversary of the
closing. If the Company's shares are not freely trading on any given
release date the shares are to be redeemed at their redemption price of
$1.65 per share. If the Company is required to repurchase shares issued,
additional goodwill will arise.
As at November 10, 2000 the shares of the Company are not freely trading
and the Company has not advanced the required sum of $750,000 in lieu of
the release of 454,545 common shares per the purchase agreement.
--------------------------------------------------------------------------------
5. SHARE CAPITAL AND CONTRIBUTED SURPLUS
--------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER OF PAID-IN TOTAL
SHARES $ CAPITAL $ $
<S> <C> <C> <C> <C> <C> <C>
b) Balance December 31, 1998 34,500,000 34,500 (34,499) 1
Cancel outstanding shares (34,500,000) (34,500) 34,499) (1)
Issue new shares 39,820,000 39,820 (39,819) 1
------------------ --------------- ----------------- ---------------
Balance December 31, 1999 39,820,000 39,820 (39,819) 1
Issued common stock (i) 7,625,916 7,626 3,654,734 3,662,360
Issued on exchange of warrants (i) 8,965,899 8,966 4,297,250 4,306,216
Issued as commission (i) 327,878 328 163,611 163,939
Issued as a financing fee (ii) 197,219 197 999,803 1,000,000
Schelfhout (`SCS') Acquisition (Note 4) 3,636,364 3,636 3,632,728 3,636,364
Deposits on acquisition of Kwatrobox (iii) 1,100,000 1,100 1,626,654 1,627,754
Private placement, net of issue costs (iv) 4,072,639 4,073 7,410,927 7,415,000
------------------ --------------- ----------------- ---------------
65,745,915 65,746 21,745,888 21,811,634
Less: redeemable portion for SCS acquisition (3,636,364) (3,636) (3,632,728) (3,636,364)
held in treasury (vi) (600,000) (600) (887,266) (887,866)
------------------ --------------- ----------------- ---------------
Balance, September 30, 2000 61,509,551 61,510 17,225,894 17,287,405
========== ====== ========== ==========
</TABLE>
(i) On January 7, 2000, through a private placement, the Company issued
7,625,916 common shares and 8,965,899 share purchase warrants, net of
cash costs of $163,391 and an additional 327,878 common shares issued
as a commission to an agent to the transaction. The Company raised net
cash proceeds of $4,319,557 and issued shares to five companies who
collectively settled Company debt with a face value of $3,812,958. The
8,965,899 share purchase warrants were immediately exchanged for common
shares on a basis of one common share for each share purchase warrant.
The investors included a related party and four parties related to this
party through common shareholdings.
(ii) On August 13, 1999, in consideration for a loan of $1 million by
Millennium Advisors Inc. to e-Auction, Millennium received 197,219
common shares of the Company with a deemed value of $1,000,000 as a
financing and interest fee. These shares were issued in January 2000.
(iii) During the period the Company issued 1,100,000 shares in connection
with its acquisition of Kwatrobox. 500,000 of the shares were released
to the vendors and the remaining 600,000 are held in treasury subject
to the release conditions. An additional 150,000 were issued upon
closing on November 1, 2000 and will be held in treasury subject to
release conditions. (SEE NOTE 11)
10
<PAGE>
(iv) On June 22, 2000, the Company completed a private placement of
4,072,639 shares at $1.842 per share of common stock for proceeds, net
of costs of $85,000, of $7,415,000.
d) Stock options
On March 1, 1999, and amended on March 13, 2000 the Company adopted
a stock option plan which reserved 9,000,000 shares. Vesting
requirements are determined by a Committee when the options are
granted. No option may be exercisable after 10 years. The exercise
price of an option may not be less than the fair market value on
the date of grant.
<TABLE>
<CAPTION>
Options for Exercise Price
Common Shares per Share $
<S> <C> <C> <C>
Balance December 31, 1998 - -
Issued March 1, 1999 1,000,000 0.01
Issued August 29, 1999 250,000 5.00
Issued December 1, 1999 3,050,000 0.85
--------------------- --------------------
Balance December 31, 1999 4,300,000 0.90
Cancelled during the year (250,000) (5.00)
Cancelled during the year (3,050,000) (0.85)
Issued August 24, 2000 6,388,000 $0.80
--------------------- --------------------
Balance September 30, 2000 7,388,000 0.69
--------------------- --------------------
</TABLE>
The weighted average grant date fair value of options granted during
the period is as follows:
- Exercise price equals fair market value $0.00
- Exercise price exceeds fair market value $0.69
- Exercise price less than fair market value $0.00
The Company has not recognized compensation expense for its
stock-based awards to employees.
--------------------------------------------------------------------------------
6. COMPARATIVE FIGURES
--------------------------------------------------------------------------------
Comparative figures for the Consolidated Statement of Operations and
Deficit and the Consolidated Statement of Cash Flows are for the period
from January 1, 1999 to September 30, 1999 and the Consolidated Balance
Sheet as at December 31, 1999 are of e-Auction Global Trading Inc.
Certain of the comparative figures have been reclassified to conform to
the current presentation.
--------------------------------------------------------------------------------
7. CONTINGENCIES
--------------------------------------------------------------------------------
a) A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court against the
Company, its subsidiaries, two of its directors and several other
companies and individuals.
The action alleges Sanga International, Inc.'s ("Sanga") reputation
was damaged by the Defendants (i) engaging in conversion (ii)
engaging in fraud (iii) interfering with Sanga's prospective business
advantage (iv) breach of contract (v) violating California usury laws
and (vi) breach of fiduciary duty.
The plaintiff claims the defendants' actions have not only damaged
Sanga but also the plaintiff and the remaining shareholders of Sanga
by as much as $100 million dollars.
The Action was stayed on November 29, 1999 as a result of Sanga
filing for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court.
There is no recognition of the contingent loss in the period.
11
<PAGE>
b) On February 7, 2000 a second action was brought against the Company,
its subsidiaries, two of its former directors, QFG Holdings Limited,
Ventures North International Inc. and several other individuals and
companies in the United States District Court.
The action alleges they breached their fiduciary duty to the
plaintiff, a shareholder of Sanga International Inc. The plaintiff
claims that the defendants' actions have damaged the plaintiff
totaling several millions of dollars.
Sanga International, Inc. has filed a motion seeking to intervene in
the lawsuit and is seeking to substitute itself as the real party
plaintiff.
Subsequent to quarter end, the California court dismissed the action.
There is no recognition of the contingent loss in the period.
--------------------------------------------------------------------------------
8. SEGMENTED INFORMATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY A, NORTH AMERICA
2000 1999
$ $
<S> <C> <C>
Revenue outside the Company - -
Segmented operating loss (1,848,888) (2,196,586)
Identifiable assets 8,549,970 1,034,310
Capital expenditure 68,671 -
Amortization - -
INDUSTRY B, EUROPE
2000 1999
$ $
Revenue outside the Company 2,826,077 -
Segmented operating profit (1,056,320) -
Identifiable assets 9,056,248 -
Capital expenditure 146,664 -
Amortization 1,190,589 -
INDUSTRY C, AUSTRALIA
2000 1999
$ $
Revenue outside the Company 105,244 -
Segmented operating loss (355,459) -
Identifiable assets 535,363 -
Capital expenditure 77,121 -
Amortization 4,301 -
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
TOTAL
2000 1999
$ $
<S> <C>
Revenue outside the Company 2,931,321 -
Segmented operating loss (3,310,201) (2,196,586)
Identifiable assets 18,141,580 1,034,310
Capital expenditure 292,456 -
Amortization 1,194,889 -
</TABLE>
For the purpose of segmented information as presented above, goodwill
arising from the acquisitions of subsidiaries are included in the
identifiable assets of the geographic segments of the subsidiaries.
--------------------------------------------------------------------------------
9. LOSS PER COMMON SHARE
--------------------------------------------------------------------------------
The weighted average number of common shares used for calculating the
basis loss per share is 61,703,137 (1999 - 32,616,703). Fully diluted
loss per share is not reported as it would be antidilutive for the nine
months ended September 30, 2000 and 1999.
--------------------------------------------------------------------------------
10. SUPPLEMENTAL NON-CASH INFORMATION
--------------------------------------------------------------------------------
During the period the Company issued 3,636,364 common shares with a
deemed value of $3,636,364 in connection with the acquisition of
Schelfhout Computer Systemen N.V.
The Company issued 197,219 common shares with a fair value of $98,610 to
Millennium Advisors Inc. as payment of a financing and interest fee, and
realized a gain on extinguishments of $901,390.
The Company issued 8,026,456 common shares to a related party to settle
various debts totaling $4,013,228 and issued 327,878 shares with a deemed
value of $163,940 to pay commission on a private placement.
The Company issued 500,000 common shares with a deemed value of $739,884
in connection with its investment in Kwatrobox B.V.
--------------------------------------------------------------------------------
11. SUBSEQUENT EVENTS
--------------------------------------------------------------------------------
DEPOSITS ON THE ACQUISITION OF KWATROBOX B.V.
On June 5, 2000 the Company entered into a pledge agreement to purchase
100% of the issued and outstanding shares of Kwatrobox B.V. ("Kwatrobox")
under the terms and conditions of the draft share purchase agreement. For
the purpose of the payment schedule, the parties agreed the closing date
of the share purchase agreement is deemed to be June 5, 2000, however the
purchase was not completed until November 1, 2000.
In connection with the purchase agreement, the Company agreed to pay the
vendors 11,250,000 Dutch Guilders or $4,828,500 based on an agreed
exchange rate of 0.292 at the June 5, 2000. The purchase price is payable
in cash and common shares of the Company as follows:
<TABLE>
<CAPTION>
Date Dutch Guilders Common Shares
<S> <C> <C> <C>
June 5, 2000 750,000 (paid) 500,000 (issued)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
June 5, 2001 2,250,000 600,000
June 5, 2002 1,000,000 150,000
</TABLE>
The amounts paid and shares issued at June 5, 2000 are non-refundable.
Additionally, the Company is also committed to issuing up to 200,000
common shares to the vendors subject to Kwatrobox meeting performance
requirements for a three-year period commencing June 5, 2000. As at
November 10, 2000 no shares have been issued as the requirements have not
been met.
<TABLE>
<CAPTION>
2000 1999
$ $
---- ----
<S> <C> <C>
Cash issued to date (750,000 Dutch Guilders) 322,241 -
Shares issued to date (500,000) 739,884 -
--------- ---------
1,062,125 -
--------- ---------
Funds lent to Kwatrobox, payable on demand 749,668 -
--------- ---------
1,811,793 -
========= =========
</TABLE>
At the time of preparation of these financial statements there is insufficient
information available to determine the allocation of the purchase price to the
assets and liabilities of Kwatrobox.
E-AUCTION AUSTRALASIA LIMITED
On October 27, 2000 the shareholders of Hunter Capital Limited (Hunter),
a public company on the Australian Stock Exchange, agreed to acquire the
remaining shares of e-Auction Australasia Limited (EAA) through the
issuance of Hunter common shares. Prior to the reverse take over the
Company owned 50.01% of EAA, after giving effect to the reverse takeover
of Hunter by EAA the Company has 50,100,447 shares of the total issued
capital of Hunter of 103,915,029 or 48.2%. Subsequent to the reverse
takeover Hunter changed its name to Aucxis Ltd. and the new trading
symbol is AXL.
14
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------------
Results of Operations
---------------------
When used herein, the words "may", "will", "expect," anticipate," "continue,"
"estimate," "project," "intend", "plan" and similar expressions are intended to
identify forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended, regarding events, conditions and financial trends that may affect the
Company's future plans of operations, business strategy, operating results and
financial position. Forward-looking statements are not guarantees of future
performance and are subject to risks and significant uncertainties and that
actual results may differ materially from those included within the
forward-looking statements as a result of various factors. The occurrence of any
unanticipated events may cause actual results to differ from those expressed or
implied by the forward-looking statements contained herein. You are cautioned
not to place undue reliance on these statements, which speak only as of the date
of this report.
OVERVIEW
Please find enclosed the Consolidated Balance Sheet as at September 30, 2000 and
1999 and the Consolidated Statement of Operations and Deficit and Consolidated
Statement of Cash Flows for the three and nine months ended September 30, 2000
and 1999 for e-Auction Global Trading Inc. (e-Auction).
e-Auction was originally incorporated in Nevada on January 8, 1998 under the
name Kazari International, Inc. On February 26, 1999, Kazari, e-Auction Global
Trading Inc. (Barbados) entered into a share exchange agreement. Pursuant to the
agreement, Kazari purchased e-Auction (Barbados) shares on a one for one basis.
Kazari had no viable business activities at the time of the share exchange
agreement. On June 10, 1999, Kazari amended its name to e-Auction Global Trading
Inc.
e-Auction currently has a wholly owned subsidiary, e-Auction (Barbados), which
in turn has one wholly owned subsidiary, Aucxis Corp. (Canada). The Company also
owns Aucxis Corp. (Belgium), directly, which in turn has one wholly owned
subsidiary, Schelfhout Computer Systemen N.V. ("Schelfhout"), a Belgium company.
e-Auction also has a 48.2% ownership interest in e-Auction Australasia Ltd., an
Australian company.
HIGHLIGHTS OF THE QUARTER
Revenue for the nine months ended September 30, 2000 was $2,931,321 compared to
$0 in the similar period in 1999. Revenue for the three months ended September
30, 2000 was $951,401 compared to $0 in the similar three months for 1999.
Increases in revenue were driven by the Company's acquisition of Schelfhout.
Schelfhout derives its revenues from the development and installation of clock
systems, cooling installations and maintenance for auction halls. Net loss for
the nine months was $3,127,585 compared to a loss of $2,196,586 in the
corresponding period in 1999. Net loss for the three months ended September 30,
2000 was $1,586,887 compared to $1,558,335 in the similar three months for 1999.
The increase in net loss for the nine months is partially attributable to an
increase in depreciation and amortization of $1,194,889.
LIQUIDITY AND CAPITAL RESOURCES
As at September 30, 2000 the company had cash of $7,838,378, the majority of
which is from the $7.5 million financing completed in June 2000 and underwritten
by ABN AMRO Capital Investments (Belgium). During the quarter ended September
30, 2000 cash decreased by $2.4 million. Of this, approximately $1.2 million was
to fund ongoing operations, approximately $750,000 was used to fund Kwatrobox,
and deferred revenues decreased by approximately $264,000.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
a) A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court in California
against the Company, its subsidiaries, two of its directors and
several other companies and individuals. The proceeding alleges that
the reputation of Sanga International, Inc. ("Sanga") was damaged
and that the defendants were liable for: (i) engaging in conversion
(ii) engaging in fraud (iii) interfering with Sanga's prospective
business advantage (iv) breach of contract (v) violating California
usury laws and (vi) breach of fiduciary duty.
The proceeding was stayed on November 29, 1999 as a result of Sanga
filing for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court.
b) On February 7, 2000 a second action was brought against the Company,
its subsidiaries, two of its former directors, QFG Holdings Limited,
Ventures North International Inc. and several other individuals and
companies in the United States District Court, alleging defendants
breached their respective fiduciary duties to the plaintiff, a
shareholder of Sanga International Inc.
Subsequent to quarter end, the California court dismissed the action.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-----------------------------------------
On November 1, 2000, the Company completed its acquisition of Kwatrobox
b.v., a Dutch company. Pursuant to the purchase agreement, the Company issued as
of June 5, 2000 an aggregate of 1,100,000 shares of common stock to the
shareholders of Kwatrobox b.v. in partial consideration for the purchase of all
of the shares of Kwatrobox b.v. For accounting purposes the purchase price per
share is deemed to be $1.48. The offering was made in an off-shore transaction
to foreign institutional and individual purchasers who represented that they (i)
were not U.S. persons and were not acquiring the securities for the account or
benefit of any U.S. person, (ii) were accredited or sophisticated purchasers,
and (iii) would resell the securities only in compliance with Regulation S as
promulgated by the SEC under the Securities Act of 1933, as amended (the "Act").
The purchaser understands that they must hold the shares for an indefinite
period of time unless the sale or other transfer thereof is subsequently
registered under the Securities Act or an exemption from such registration is
available at that time. In issuing the above referenced securities, the Company
relied on the exemption afforded by Section 4(2) of the Act and Regulation S, as
transactions by an issuer not involving any public offering to a non-US person
in an off-shore transaction.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted for a vote of securities holders during
the three months ended September 30, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT # EXHIBIT NAME
--------- ------------
Exhibit 27 Financial Data Schedule
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: November 10, 2000 e-Auction Global Trading Inc.
(Registrant)
By: /s/ David W.A. Hackett
---------------------------------------
David W.A. Hackett
Chief Financial
Officer (Duly Authorized Officer)
