AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 2000
REGISTRATION NO. 333-31276
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. 1)
-------------------------------
E-AUCTION GLOBAL TRADING INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
NEVADA 7389 (Services- Business Services) n/a
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
220 KING STREET WEST, SUITE 200
TORONTO, ONTARIO
CANADA M5H 1K7
(416) 214-1587
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
DAVID HACKETT
220 KING STREET WEST, SUITE 200
TORONTO, ONTARIO
CANADA M5H 1K7 (416) 214-0585
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable following the date on which this registration statement
becomes effective
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
----------------------------------- ---------------------- -------------------- ------------------------ -----------------------
Title of Each Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be registered Registered Unit Price Registration Fee
----------------------------------- ---------------------- -------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common Stock, par value $0.001
per share 44,095,915 shares $0.715 (1) $31,528,579 $8,323.54(2)
----------------------------------- ---------------------- -------------------- ------------------------ -----------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the high and low sales price of the
Common shares on November 9, 2000.
(2) No fee is currently due, based upon prior payment by the Company of a
fee, in the amount of $53,373.35, in connection with its registration
statement on Form S-1 (No. 333-31276) filed February 28, 2000, to
which registration statement this Form SB-2 is being filed as an
amendment.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (SUBJECT TO COMPLETION)
----------------------------------------------------------
E-AUCTION GLOBAL TRADING INC.
44,095,915 SHARES OF COMMON STOCK
----------------------------------------------------------
This prospectus relates to the sale by the selling shareholders of up
to 44,095,915 shares of common stock, $0.001 par value per share, of e-Auction
Global Trading Inc.
The shares of our common stock being registered were issued by us to
the selling shareholders in certain private placements during the last two
years.
We will not receive any of the proceeds from the sale of the shares of
common stock by the selling stockholders.
Our shares of common stock are quoted on the quotation system operated
by the National Quotation Bureau, LLC, known as the "Pink Sheets," under the
symbol "EAUC". On November 9, 2000, the closing price for shares of our common
stock as reported on the Pink Sheets was $0.70 per share.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF
RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING
"RISK FACTORS" COMMENCING ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR ACCURATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------------------------------------
The date of this prospectus is November 13, 2000.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Pro Forma Financial
Information and Notes thereto, appearing elsewhere in this prospectus, including
the information under "Risk Factors."
ABOUT OUR COMPANY
e-Auction Global Trading Inc. is an e-business services provider to
perishable commodity markets. Our goal is to provide multi-functional
Internet-enabled, real-time electronic trading systems that integrate financial,
logistics, information and infrastructure services. Our short term objective is
to deliver these integrated electronic trading systems in the perishable
commodities marketplace. In the longer term, we intend to expand our products
and services to electronic commodity auctions generally. Through acquisitions
and additional personnel, we believe that our current technology can be readily
adapted, without substantial cost or time, to provide services to other
commodity auctions.
In working towards these goals, we have made strategic acquisitions,
including the purchase of the proprietary internet auctioning technology of
Generated Solutions Ltd. on February 1, 1999 and the acquisition of Schelfhout
Computer Systemen N.V. on January 10, 2000. Schelfhout is a technology solutions
provider to perishable commodity auction houses, having access to over 150
perishable commodity auctions in Europe. More recently, we have signed a
letter-of-intent to acquire I-Three, Inc.
Through our newly acquired wholly-owned subsidiary, Schelfhout, we
intend to leverage Schelfhout's existing European market share to launch a new
product called "EuroNet Trading Portals". We anticipate launching EuroNet
Portals in early 2001. EuroNet Portals will act as a pan-European network
designed to link Schelfhout's existing standalone European systems, which
currently trade approximately US$7.0 billion in perishable commodities per year.
These EuroNet Portals are intended to become "end-to-end" solutions, providing
clients with efficient and centralized financial settlement, foreign exchange
and credit services and, more importantly, allowing individual buyers to
participate in the auction process remotely. To our knowledge, no such
end-to-end solutions are currently available to the perishable commodity auction
market.
Our Company was incorporated in the State of Nevada on January 8, 1998
under the name "Kazari International Inc." Pursuant to a share exchange
agreement dated February 26, 1999 among e-Auction Global Trading Inc.
(Barbados), QFG Holdings Limited and us, the shareholders of e-Auction
(Barbados) completed a reverse-takeover of our Company, at which time we changed
our name to e-Auction Global Trading Inc.
Our principal executive offices are located at 220 King Street West,
Suite 200, Toronto, Ontario, Canada M5H 1K7. Our telephone number is (416)
214-1587. We maintain websites at www.aucxis.com and www.schelfhout.com.
Information contained on our websites does not constitute a part of this
prospectus.
3
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and related notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. The consolidated statement of
operations data for the twelve (12) month period ended December 31, 1999 and the
six (6) month period ended June 30, 2000 and the consolidated balance sheet data
at December 31, 1999 and June 30, 2000 are derived from the audited and
unaudited interim consolidated financial statements included elsewhere in this
Prospectus. Historical results are not necessarily indicative of results to be
expected in the future.
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 JUNE 30, 2000
-------------------- ---------------------
<S> <C> <C>
Revenue: $ 0 $1,979,919
Cost of Goods Sold 0 1,282,051
Gross Margin 0 697,868
Expense:
Salaries and Benefits 1,209,801 805,901
Legal 167,345 0
Sales, General and Administration 1,277,286 831,166
Net Income (Loss) $ (2,654,432) $ (1,540,698)
Pro forma basic and diluted net income (loss)
per share (1) (0.07)(2) (0.03)
Shares used in computing pro forma basic 40,160,438 60,074,118
CONSOLIDATED BALANCE SHEET DATA:
AT DECEMBER 31, 1999 AT JUNE 30, 2000
--------------------- ---------------------
Cash and cash equivalents $ 4,179,394 10,207,204
Deposit in Schelfhout 1,000,000 0
Investment in Kwatrobox 0 1,062,125
Total Assets 5,213,641 20,221,727
Payables and Accruals 749,050 1,591,774
Long-term debt, less current portion 4,200,000 181,221
Shareholders' Equity $(2,654,431) 13,092,274
</TABLE>
----------
(1) See Note 3 of "Notes to Consolidated Financial Statements" for an
explanation of the determination of the shares used in computing pro forma
basic and diluted net loss per share.
(2) Based on the number of shares outstanding as of December 31, 1999.
Excludes 4,300,000 shares issuable upon exercise of outstanding stock
options as of December 31, 1999 granted under our 1999 stock option plan.
4
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
These financial statements have been prepared in connection with our
acquisition of Schelfhout Computer Systems N.V. in a purchase agreement dated
January 7, 2000. The proforma balance sheet reflects the acquisition as if it
took place on December 31, 1999. The condensed proforma income statement
reflects the combined operations for the year ended December 31, 1999 as if the
acquisition had taken place at January 1, 1999.
The financial information for the respective companies is based on
audited financial statements. The Schelfhout financial information was prepared
in accordance with Belgian generally accepted accounting principles and was
reported on by other auditors without reservation. There are no material
differences between Belgian and U.S. generally accepted accounting principles
with respect to these financial statements. The exchange rate used to convert
Schelfhout's historical income statement was 1.06626, this is the average
exchange rate for 1999 between Euro's and U.S. dollars. The exchange rate used
to convert Schelfhout's historical balance sheet was 1.00410, this is the
exchange rate at December 31, 1999 between Euro's and U.S. dollars.
PRO FORMA STATEMENT OF OPERATIONS DATA:
YEAR ENDED DECEMBER 31, 1999
----------------------------
<TABLE>
<CAPTION>
E-AUCTION SCHELFHOUT PRO FORMA PRO FORMA
GLOBAL COMPUTER SYSTEMEN ADJUSTMENTS STATEMENTS
TRADING, INC. NV
---------------- -------------------- -------------- --------------
<S> <C> <C>
Revenue - 3,469,498 - 3,469,498
Amortization of goodwill - - 1,376,354 (1) 1,376,354
Raw materials and goods for resale - 1,229,958 - 1,229,958
Services and other goods - 747,199 - 747,199
Salaries and benefits 458,924 1,188,048 - 1,646,972
Loan fee 1,000,000 - - 1,000,000
Other expenses 1,195,508 195,738 1,391,246
------------ --------- ---------
$ 2,654,432 $ 3,360,943 $ 7,391,729
----------- ----------- ---------
Income (loss) before taxes (2,654,432) 108,555 (3,922,231)
Income taxes - 49,061 49,061
------------ ----------- -----------
Net income (loss) (2,654,432) 59,494 1,376,354 (3,971,292)
========== ====== ========= ==========
Loss per share
Basic and diluted
Historical (0.07)
============
Proforma (0.10)
============
--------------
(1) The goodwill (to be amortized on a straight-line basis over 5 years) on
the acquisition is calculated as follows:
Purchase price $ 7,636,364
Net tangible assets of Schelfhout acquired
Total Assets $ 2,173,106
Less: Liabilities 1,418,513 754,593
--------- ----------
Excess of purchase price over net tangible assets, being goodwill $ 6,881,771
=========
</TABLE>
5
<PAGE>
PROFORMA BALANCE SHEET
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999
E-AUCTION SCHELFHOUT PRO FORMA PRO FORMA
GLOBAL COMPUTER SYSTEMEN ADJUSTMENTS STATEMENTS
TRADING, INC. NV
---------------- -------------------- -------------- --------------
ASSETS
Current assets:
<S> <C> <C> <C> <C>
Cash 4,179,394 284,686 (3,000,000) 1,464,080
Cash guarantees - 29,060 - 29,060
Other current assets - 1,191,179 - 1,191,179
--------- --------- --------- ----------
4,179,394 1,504,925 (3,000,000) 2,684,319
Investment in SCS 1,000,000 - (1,000,000) -
Tangible assets 34,247 668,181 - 702,428
Goodwill - - 6,881,771 6,881,771
--------- --------- --------- ----------
5,213,641 2,173,106 2,881,771 10,268,518
========= ========= ========= ==========
LIABILITIES AND SHARE CAPITAL (DEFICIT)
Loans payable 2,000,000 - - 2,000,000
Shareholders loan 2,200,000 - - 2,200,000
Share subscriptions received 1,858,229 - - 1,858,229
Other current liabilities 1,809,843 1,244,858 - 3,054,701
--------- --------- --------- ----------
7,868,072 1,244,858 - 9,112,930
Long-term debt - 173,655 - 173,655
--------- --------- --------- ----------
7,868,072 1,418,513 - 9,286,585
Redeemable common stock - - 3,636,364 3,636,364
Share capital 1 831,843 (831,843) 1
--------- --------- --------- ----------
Deficit (2,654,432) (77,250) 77,250 (2,654,432)
--------- ---------- ----------- ----------
(2,654,431) 754,593 (754,593) (2,654,431)
--------- ---------- ----------- ----------
5,213,641 2,173,106 2,881,771 10,268,518
========= ========= ========= ==========
</TABLE>
6
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve
certain known and unknown risks, uncertainties and other factors which may cause
the Company's actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by these forward-looking statements. Terms such as "will", "anticipate",
"believe", " estimate", "expect", "intend", "plan" and similar expressions are
intended to identify such forward-looking statements. The Company's actual
results, performance or achievement may differ materially from the results,
performance or achievement discussed in such forward-looking statements. Factors
include, among others, our ability to successfully integrate any prior and
future acquisitions; any uncertainties relating to business and economic
conditions in markets in which we operate; any uncertainties relating to
customer plans and commitments; the timely development and market acceptance of
our products and technologies; the highly competitive environment in which we
operate; and other risks discussed below in "Risk Factors" as well as those
discussed elsewhere in this prospectus.
We do not undertake any responsibility to release publicly any
revisions to these forward-looking statements to take into account events or
circumstances that occur after the date of this prospectus. Additionally, we do
not undertake any responsibility to update you on the occurrence of any
unanticipated events which may cause actual results to differ from those
expressed or implied by the forward-looking statements contained in this
prospectus. You are cautioned not to place undue reliance on these statements,
which speak only as of the date of this prospectus.
RISK FACTORS
WE HAVE A LIMITED OPERATING HISTORY Although the
AND AN EVOLVING BUSINESS MODEL completion of our acquisition of
Schelfhout Computer Systemen
N.V. provides us with more
extensive operating knowledge,
we have a limited operating
history under the current
business model upon which we can
be evaluated. Because our
business model relies on use of
the Internet, our prospects must
also be considered in light of
the risks and uncertainties
encountered by companies that
operate in the new and rapidly
evolving Internet market. There
can be no assurance that we will
be successful in addressing the
risks inherent in our business
model and the failure to do so
could have a material adverse
effect on our business,
operating results and financial
condition.
WE WILL REQUIRE ADDITIONAL FINANCING Our lack of
TO OPERATE OUR BUSINESS operating history and the
uncertainty of the Internet
market make any prediction of
our future results of operations
difficult or impossible.
Nonetheless, our business plan
demands that we incur
significant operating expenses
in order to develop and extend
our business model and
operations, as well as respond
to unanticipated competitive
pressures or take advantage of
unanticipated opportunities,
including acquisitions of
complementary businesses or
technologies. Anticipated rapid
growth may also require
additional funds to expand our
operations or enlarge our
organization. We do not expect
that our revenue will cover
those expenses. As a result, we
intend to raise additional
capital through public or
private debt or the sale of
equity and/or debt securities.
We cannot assure you
that additional financing will
be available on terms favorable
to us, or that additional
financing will be available at
all. If adequate funds are not
available or are not available
on acceptable terms, we may not
be able to take advantage of
unanticipated opportunities,
develop new technologies or
otherwise respond to
unanticipated
7
<PAGE>
competitive pressures, or
continue to fund our operations.
Such inability could have a
material adverse effect on our
business, financial condition,
results of operations and
prospects.
OUR USE OF THE INTERNET PRESENTS
SYSTEM DEVELOPMENT AND
OPERATIONAL RISKS Our software
products are based on
programming languages, which to
date have been used primarily
for specialized applications on
the desktop. Our future success
will depend, in large part, on
the development of specialized
programming languages geared to
facilitate Internet based
applications with a particular
emphasis on wide spread
commercial use in a server based
environment. In addition, rapid
technological change, dynamic
demands and frequent
introductions of new products
and product enhancements
characterize the market for our
services. Customer requirements
for services can change rapidly
as a result of innovations and
changes within the computer
hardware and software industries
and the customers' vertical
markets, the introductions of
new products and technologies
and the emergence, evolution or
widespread adoption of industry
standards. The actual or
anticipated introduction of new
services can render existing
services obsolete or
unmarketable or result in delays
in the purchase of such
services. Delays in the
development or adoption of new
standards or protocols required
to handle increased levels of
Internet activity and increased
governmental regulation or
taxation of Internet commerce
may restrict the growth of the
Internet. Capacity constraints
within our systems could result
in: (1) system disruptions; (2)
inaccessibility of our network;
(3) long response times; (4)
impaired quality; and (5) loss
of important reporting data.
Our future success
will depend in large part on our
ability to improve our current
services and to develop and
market new services that address
these changing markets and
market requirements on a timely
basis. We will be required to
add additional software and
hardware and further develop and
upgrade our existing technology,
transaction-processing
capability and network
infrastructure to accommodate
increased traffic over our
supported networks due to
increased auction volumes as we
expand our business. Any
inability to do so may cause
system disruptions, slower
response times and degradation
in auction service levels. There
can be no assurance that we will
be able to upgrade our systems
as necessary in a timely manner
or to integrate smoothly any
newly developed or purchased
upgrades or enhancements to our
current systems or that the
necessary infrastructure or
complementary products and
services are not developed. Any
inability to do so could have a
material adverse effect on our
business, prospects, financial
condition, and results of
operation.
WE DEPEND UPON THE MARKET'S ACCEPTANCE The vast majority of
OF OUR PACKAGED APPLICATIONS our revenues will be derived
from the implementation of
packaged applications around the
perishable commodity auction
process. Our success will depend
on the acceptance of financial
services and settlement services
application software and
services by the market, as well
as our ability to enhance our
products and services to meet
the evolving needs of customers
on a timely basis. While we
believe that the commodity
auction marketplace will embrace
the advent of integrated
financial services and
settlement software applications
and, further, that we will be
able to develop these products
efficiently (and through our
recently established business
relationship
8
<PAGE>
with ABN AMRO), there can be no
assurance that the perishable
commodity auction marketplace
and the business to business
electronic commerce marketplace
will continue to exist, of the
market's acceptance of our
solutions, or our ability to
meet customers' needs.
OUR INDUSTRY IS FACES INTENSE The e-commerce
COMPETITION business-to-business market is
highly competitive, is rapidly
changing, and is significantly
affected by new product
introductions and geographical
regional market growth. Barriers
to entry into this market are
relatively low and we expect
that competition will intensify
in the future. Specific factors
upon which we compete include,
but are not limited to,
functionality of our
applications and services,
technological sophistication,
ease of use, timing for
implementation, quality of
support and services, price and
breadth of experience. We
believe that we will compete
favorably on all of these
competitive factors. However,
there remains significant risk
that competitive forces may
effect our ability to compete
and generate revenue. Some of
our potential competitors, as
well as a number of potential
new competitors, have longer
operating histories, greater
brand name recognition, larger
customer bases and significantly
greater financial, technical and
marketing resources than we do.
Our competitors to include:
o in the fish
commodity space,
Fishmonger, Gofish,
French Fish and OES;
o in the flower
commodities space,
WCOL, American
Clock, and OES; and
o in the fruits and
vegetables
commodities space,
WCOL and OES.
Such competition
could result in reduced margins,
lower growth or loss of market
share, any of which could have a
material adverse effect on our
business, results of operations
and financial condition.
OUR PAST AND FUTURE ACQUISITIONS MAY We intend to engage
NOT PROVE SUCCESSFUL in selective acquisitions of
perishable commodity businesses
in the future, which may include
software vendors, auction houses
and information technology
service companies. There can be
no assurance, however, that we
will be successful in
identifying, financing and
completing any acquisitions.
Moreover, there can be no
assurance that we will
successfully integrate any of
the acquired businesses into our
operations, including our recent
acquisition of Schelfhout and
Kwatrobox B.V., and, if and when
completed, our intended purchase
of I-Three, which is the subject
of a letter of intent. Any
acquired business may not
achieve desired levels of
revenue, profitability or
productivity or otherwise
perform as expected. In
addition, growth through
acquisition of existing
companies involves risks such as
diversion of management's
attention, difficulties in the
integration of acquired
operations, difficulties in
retaining personnel, increased
off-limits conflicts, assumption
of liabilities not known at the
time of acquisition and tax and
accounting issues, some or all
of which could have a material
adverse effect on our business,
results of operations and
financial condition.
The success of our
proposed plan of operation
depends to a great extent on the
operations, financial condition
and management of Schelfhout and
other acquired or to be acquired
companies or business
9
<PAGE>
operations. While business
combinations with entities
having established operation
histories are preferred, there
are no assurances that we will
be successful in locating
candidates meeting such
criteria. In the event that we
complete business combinations,
the success of our operations
will depend on the management of
the acquired companies and
numerous other factors.
Currently, although
we have entered into a letter of
intent with I-Three in
contemplation of acquiring
additional service and
operational capabilities, such
letter of intent is merely a
statement of intention and is
not binding. Consummation of any
proposed acquisition remains
subject to: (i) entry into a
definitive purchase agreements
acceptable to all parties; (ii)
our satisfaction with our
investigation of the business
and affairs of the other party
to any proposed acquisition; and
(iii) the approval of the
proposed acquisition by the
shareholders of the other party
to any proposed acquisition.
Accordingly, there can be no
assurance that any of the
proposed acquisitions will be
completed. If the proposed
acquisitions do not occur, your
investment in our securities may
not retain any value and you may
not be able to sell such
securities.
WE MAY BE UNABLE TO HANDLE GROWTH OF Any future growth
OUR COMPANY may place a significant strain
on our managerial, operational
and financial resources. To
manage our growth, we will be
required to implement and
improve our managerial controls
and procedures and operational
and financial systems. In
addition, our success will
depend on our ability to hire
and retain qualified personnel
and to train, integrate and
manage our workforce,
particularly our technical
support, advertising, sales and
business development staff.
Locating and retaining qualified
personnel in our business is
extremely competitive. We expect
to hire a significant number of
new employees in the foreseeable
future. We can give no
assurances that we have
adequately allowed for the costs
and risks associated with our
proposed expansion or that our
systems, procedures or controls
will be adequate to support our
operations, or that our
management will be able to
successfully offer and expand
our services. We can also give
no assurances that we will be
able to successfully locate,
train and integrate personnel
into our workforce. If we are
unable to manage our growth
effectively, our business,
results of operations and
financial condition will likely
be materially adversely
affected.
WE MAY NOT BE ABLE TO PROTECT OUR Our success depends,
INTELLECTUAL PROPERTY RIGHTS in part, upon the protection of
proprietary rights in our
products, technology and trade
secrets. We rely on a
combination of patent,
copyright, and trademark laws,
confidentiality procedures and
licensing arrangements to
protect our proprietary rights.
There can be no assurance,
however, that the
confidentiality and license
agreements on which we rely to
protect our trade secrets and
proprietary technology will be
adequate. Further, the laws of
certain countries in which we do
business, do not protect our
proprietary rights to the same
extent as the laws of the United
States. Legal protections of our
proprietary rights may be
ineffective in such countries.
Policing unauthorized use of our
products is difficult, and
litigation to defend and enforce
our intellectual property rights
could result in substantial
costs and diversion of
resources. Despite our efforts
to safeguard and maintain our
proprietary rights both in the
United States and abroad, there
can be no assurance that we will
be successful in doing so, or
that the steps taken by us in
this regard will be adequate to
deter misappropriation or
10
<PAGE>
independent third party
development of our technology or
to prevent an unauthorized third
party from copying or otherwise
obtaining and using our products
or technology. Any failure in
the protection of our
proprietary rights could have a
material adverse effect on our
business, financial condition
and results of operations.
As the number of
industry-specific packaged
application and service vendors
in the industry increases and
the functionality of these
products further overlaps,
software development and
services companies like ours may
increasingly become subject to
claims of infringement or
misappropriation of the
intellectual property rights of
others. There can be no
assurance that third parties
will not assert infringement or
misappropriation claims against
us in the future with respect to
current or future products. Any
claims or litigation, with or
without merit, could be
time-consuming, result in costly
litigation, diversion of
management's attention and cause
product shipment delays or
require us to enter into royalty
or licensing arrangements. Such
royalty or licensing
arrangements, if required, may
not be available on terms
acceptable to us, if at all,
which could have a material
adverse effect on the our
business, financial condition
and results of operations.
Adverse determinations in such
claims or litigation could also
have a material adverse effect
on our business, financial
condition and results of
operations.
OUR SUCCESS DEPENDS ON OUR ABILITY TO The continued
ATTRACT AND RETAIN EMPLOYEES services of our founders and
other key personnel are deemed
important to our proper
operation. The loss of the
services of one or more of them
could have a material adverse
effect on our business,
financial condition, results of
operations and prospects. Except
for Messers. Daniel McKenzie and
David Hackett, the Chief
Executive Officer and Chief
Financial Officer of our
Company, respectively, None of
our key management personnel
have entered into employment
agreements obligating them to
remain employed by us for any
specific term nor are our key
employees party at this time to
nonsolicitation, confidentiality
or noncompetition agreements
with us. In addition, we do not
maintain "key man" life
insurance policies on any of our
founders or other key personnel,
and we may not be able to
recover from the unexpected loss
of any of their services. If we
lose such employees or other
employees leave to work for our
competitors or start their own
competing business, such loss
will likely have a materially
adversely affect our business,
results of operations and
financial condition. We will
need to continue to recruit and
retain additional members of
senior management to manage
anticipated growth, but there
can be no assurance that we will
be able to recruit or retain
additional members of senior
management on terms suitable to
us.
FUTURE ISSUANCE OF COMMON STOCK COULD Sales of substantial
ADVERSELY AFFECT THE MARKET. amounts of the common stock in
the public market, or the
prospect of these sales, could
depress the prevailing market
price of our common stock and
its ability to raise equity
capital in the future. At
November 9, 2000, we had
outstanding 65,745,915 shares
of common stock as well as
options and other equity and/or
debt securities outstanding
exercisable or convertible to
purchase up to an additional
7,388,000 shares of our common
stock, assuming the maximum
number of shares to be issued
upon such exercise or
conversion.
11
<PAGE>
THE PRICE OF OUR COMMON STOCK MAY Of the 65,745,915
BE DEPRESSED DUE TO POSSIBLE FUTURE shares of our common stock
SALES UNDER RULE 144 AND UPON THE issued and outstanding as of
EFFECTIVENESS OF THIS REGISTRATION November 9, 2000, 60,595,915
STATEMENT. shares are "restricted
securities" as defined by Rule
144 of the Securities Act. Under
Rule 144, restricted securities
which have been beneficially
owned for at least one year may
be sold in brokers' transactions
or directly to market makers,
subject to certain quantity and
other limitations. Generally,
once restricted securities are
eligible for sale under Rule
144, a person may sell, in any
three-month period, an amount
equal to the greater of (i) the
average weekly trading volume,
if any, of the common stock
during the four calendar weeks
preceding the sale or (ii) 1% of
the outstanding shares of our
common stock. Shares
beneficially owned for two years
by non-affiliates of our Company
may be sold. A substantial
number of shares of common stock
are already available for sale
in the public market under Rule
144 of the Securities Act and
additional shares may become
available for sale in the near
future. Sale of substantial
amounts of such stock could have
a depressive effect on the price
of the common stock in any
market which may develop.
If and when this
registration statement becomes
effective, 44,095,915 restricted
securities will be eligible to
be sold without limitation. No
prediction can be made as to the
effect, if any, that sales of
shares of common stock or the
availability of such shares for
sale will have on the market
prices prevailing from time to
time. Nevertheless, the
possibility that substantial
amounts of common stock may be
sold in the public market would
likely have a material adverse
effect on prevailing market
prices for the common stock and
could impair our ability to
raise capital through the sale
of our equity securities.
OUR SECURITIES ARE SUBJECT TO Our common stock may
"PENNY STOCK" RULES be deemed to be "penny stock" as
that term is defined in Rule
3a51-1 of the Securities and
Exchange Commission. Penny
stocks are stocks (i) with a
price of less than $5.00 per
share; (ii) that are not traded
on a "recognized" national
exchange; (iii) whose prices are
not quoted on the NASDAQ
automated quotation system
(NASDAQ-listed stocks must still
meet requirement (i) above); or
(iv) of issuers with net
tangible assets less than
$2,000,000 (if the issuer has
been in continuous operation for
at least three years) or
$5,000,000 (if in continuous
operation for less than three
years), or with average revenues
of less than $6,000,000 for the
last three years. Section 15(g)
of the Securities Exchange Act
of 1934, as amended, and Rule
15g-2 of the Securities and
Exchange Commission require
broker/dealers dealing in penny
stocks to provide potential
investors with a document
disclosing the risks of penny
stocks and to obtain a manually
signed and dated written receipt
of the document before effecting
any transaction in a penny stock
for the investor's account.
Moreover, Rule 15g-9
of the Securities and Exchange
Commission requires
broker/dealers in penny stocks
to approve the account of any
investor for transactions in
such stocks before selling any
penny stock to that investor.
This procedure requires the
broker/dealer to (i) obtain from
the investor information
concerning his or her financial
situation, investment experience
and investment objectives; (ii)
reasonably determine, based on
that information, that
transactions in penny stocks are
suitable for the investor and
that the investor has sufficient
knowledge and experience as to
be reasonably capable of
evaluating the risks of penny
stock transactions; (iii)
provide the investor
12
<PAGE>
with a written statement setting
forth the basis on which the
broker/dealer made the
determination in (ii) above; and
(iv) receive a signed and dated
copy of such statement from the
investor, confirming that it
accurately reflects the
investor's financial situation,
investment experience and
investment objectives.
Compliance with these
requirements may make it more
difficult for investors in our
common stock to resell their
shares to third parties or to
otherwise dispose of them.
THERE ARE LIMITATIONS ON THE LIABILITY Our bylaws contain
OF OUR DIRECTORS AND OFFICERS provisions limiting the
liability of our directors for
monetary damages to the fullest
extent permissible under Nevada
law. This is intended to
eliminate the personal liability
of a director for monetary
damages on an action brought by
or in the right of our Company
for breach of a director's
duties to us or to our
stockholders except in certain
limited circumstances. Our
bylaws also contain provisions
requiring us to indemnify our
directors, officers, employees
and agents serving at our
request, against expenses,
judgments (including derivative
actions), fines and amounts paid
in settlement. This
indemnification is limited to
actions taken in good faith in
the reasonable belief that the
conduct was lawful and in or not
opposed to the best interests of
our Company. The bylaws provide
for the indemnification of
directors and officers in
connection with civil, criminal,
administrative or investigative
proceedings when acting in their
capacities as agents for our
Company. These provisions may
reduce the likelihood of
derivative litigation against
directors and executive officers
and may discourage or deter
stockholders or management from
suing directors or executive
officers for breaches of their
duties to the Company, even
though such an action, if
successful, might otherwise
benefit the Company and our
stockholders.
13
<PAGE>
MARKET PRICE OF OUR COMMON STOCK
Our common stock are currently quoted on the quotation system operated
by the National Quotation Bureau, LLC, known as the "Pink Sheets" under the
symbol "EAUC."
On January 19, 2000, our shares of common stock were delisted from
quotation on the OTC Bulletin Board due to our inability to become a reporting
issuer prior to the deadline imposed by the National Association of Securities
Dealers, Inc. Prior to January 19, 2000, our common stock was quoted on the OTC
Bulletin Board under the symbol "EAUC".
The following table sets forth the closing [bid and ask] prices for the
common stock during the periods indicated, as reported by the OTC Bulletin Board
prior to January 19, 2000 and thereafter, as reported by the National Quotation
Bureau, LLC Pink Sheets. The bid prices reflect inter-dealer quotations, do not
include retail mark-ups, markdowns, or commissions and do not necessarily
reflect actual transactions. To our knowledge, prior to February 26, 1999, no
broker-dealer made an active market or regularly submitted quotations for our
common stock. During this period, there were only an infrequent number of trades
and virtually no trading volume.
<TABLE>
<CAPTION>
COMMON STOCK
------------
YEAR ENDING DECEMBER 31, 1999
-----------------------------
PRICE HIGH PRICE LOW
---------- ---------
<S> <C> <C>
First Quarter (commencing February 26, 1999) 9.05 4.70
Second Quarter 11.375 6.60
Third Quarter 9.25 1.1875
Fourth Quarter 1.78125 0.906
YEAR ENDING DECEMBER 31, 2000
-----------------------------
PRICE HIGH PRICE LOW
---------- ---------
First Quarter 6.375 1.343
Second Quarter 2.875 1.15
Third Quarter 1.45 0.59
Fourth Quarter (through October 30, 2000) 1.04 0.57
</TABLE>
As of November 9, 2000, we had 65,745,915 shares of common stock
outstanding held by approximately 231 record holders.
DIVIDEND POLICY
We have never declared or paid a cash dividend on our common stock. It
is our present policy to retain earnings, if any, to finance the development and
growth of our business. Accordingly, we do not anticipate that cash dividends
will be paid until our earnings and financial condition justify such dividends,
and there can be no assurance that we can achieve such earnings.
USE OF PROCEEDS
We are not receiving any of the proceeds from the sale of the shares
of our common stock being registered hereunder.
14
<PAGE>
OUR COMPANY
We were originally incorporated in the State of Nevada on January 8,
1998 under the name "Kazari International, Inc."
On February 26, 1999, we purchased all of the outstanding shares of
common stock of e-Auction Global Trading Inc. (Barbados). Pursuant to the terms
of the stock exchange agreement, we issued to the 11 shareholders of e-Auction
(Barbados), on an one-for-one exchange basis, thirty-four million five-hundred
thousand (34,500,000) shares of our common stock. We had no viable business
activities at the time of the exchange agreement.
On June 10, 1999, Kazari amended its articles of incorporation to
change its name from "Kazari International, Inc." to "e-Auction Global Trading
Inc." and increased the number of authorized shares of our common stock from
forty million (40,000,000) shares to two hundred and fifty million (250,000,000)
shares of common stock, par value $0.001 per share.
We currently own the following subsidiaries:
o a 100% ownership interest in e-Auction Global Trading Inc.
(Barbados), which in turn has a wholly-owned subsidiary,
Aucxis Corp. (Canada). Prior to May 11, 2000, this subsidiary
was known as e-Auction Global Trading Inc. (Canada)
o a 100% ownership interest in Aucxis Corp. (Belgium) N.V.,
which in turn has a wholly-owned subsidiary, Schelfhout
Computer Systemen N.V. Prior to May 12, 2000, this subsidiary
was known as e-Auction Belgium N.V.
o a 50.01% ownership interest in e-Auction Australasia Ltd.
o a 99% ownership interest in SDL Invest N.V. a new legal entity
formed March 22, 2000, in which we made a contribution in kind
of certain real property and liabilities. In connection with
the formation of SDL Invest N.V., we granted an option to Luc
Schelfhout and Hilde De Laet to purchase the shares of SDL
Invest N.V. for a nominal price equal to the book value.
OUR BUSINESS STRATEGY
Electronic and remote (on-line) auctions, which constitute
approximately 10% of the entire auction market, represent an outgrowth of the
auction market which had chiefly consisted of live auctions (see chart below).
[EVALUATION OF THE AUCTION SYSTEMS MODEL APPEARS HERE]
According to Forrester Research Inc.1 ("Forrester"), the remote or
on-line auction market is divided into the following three categories: (i)
commodity auctions; (ii) independent auctions selling goods; and (iii) private
auctions. We intend to specialize in commodity auctions, which Forrester
estimates to account for approximately 50% of the total value of business
auction transactions.
--------
1 Forrester Research Inc., Business Trade & Technology Strategies, March 1998.
15
<PAGE>
The on-line auction model has emerged as a significant channel and
electronic commerce methodology in the business to consumer market ("B2C"), also
referred to as "Independent Auctions", with such companies as eBay, Onsale, uBid
and Bid.com currently providing such services.
However, according to Forrester, the real potential for electronic
auctions lies in the business to business market ("B2B") also referred to as
"Commodity Auctions". Forrester predicts the trade in Commodity Auctions will
reach US$32.2 billion by the year 2002 (versus only US$5.5 billion dollars for
Independent Auctions).
We believe that an enormous opportunity awaits the company which can
successfully integrate and efficiently deliver the various components and
services of a dynamic global trading solution. We intend to deliver such a
global trading system in the form of an entirely new distribution channel which
will:
o improve economic efficiency in the management of sales and
distribution;
o improve information flow and product availability to potential
purchasers; and
o lower the cost of sales by exploiting Internet technologies
and sharing a technology platform.
Our management believes that we have the potential to be successful and
profitable because we are targeting low risk established high volume B2B auction
and commodity exchange markets. Our management further believes that our high
value and high margin transactional revenue model will help ensure sustainable
growth for the long term.
With the capabilites acquired by our acquisition of Schelfhout and our
strategic alliance with ABN AMRO Bank N.V., we shall soon be able to provide
real time, electronic auction and related financial services to auctioneers
selling commodities. Our intent is to become a world leader in the electronic
perishable commodity auctions in the short term, and expand our world leadership
into the electronic commodity auctions in the longer term. We currently have the
knowledge base, skills, equipment and software that is needed to provide
electronic services for perishable commodity auction businesses. Our knowledge,
skills, equipment and software, however, is not yet sufficient to provide
electronic services for other commodity auction businesses.
In accomplishing our goals, our intent is not to remove the traditional
auction house from the electronic auction process, but rather to make the
process more transparent to those involved in the auction process. Currently,
there are multiple steps in the auction process (from the actual auction to
providing foreign exchange services, settlement services, the insurance of goods
in transit and the delivery of the goods). Therefore, individual buyers and
sellers have to arrange the ancillary services around the auction themselves. We
propose to provide a "cradle to grave" solution for the buyers and sellers.
Initially, we will focus on the financial services component which
includes foreign exchange services and settlement services. Towards this end, we
entered into a strategic alliance with ABN AMRO on May 9, 2000, to jointly
develop an internet-based system to provide foreign exchange, credit management
and settlement services, to our perishable commodity auction customers.
OUR PRODUCTS AND SERVICES
Our trading platform consists of the following components:
Dynamic Trade Server(s)
These server applications are written in Java (and/or C++). They are
the multi-threaded engines that manage all dynamic trading (auctioning). They
support English and Dutch style auctioning as well as bid/offer and bid/ask
trading. They also support reverse or procurement auctions.
The servers communicate to our client through sockets, RMI (Remote
Method Invocation) and/or HTML pages (Java Server Pages). The C++ implementation
of the trade server must be hosted on a Windows NT platform. The Java
implementations of the trade servers are platform independent and may be hosted
on any computer platform that provides a Java Virtual Machine version 1.1.7 or
above.
Dynamic Trade Client(s)
There are different trade clients depending on the style of dynamic
trade server used. For Dutch, English and Procurement auctions, the client is
either a Java applet or application. For bid/offer auctions, the client is
16
<PAGE>
provided as HTML pages hosted on a web site. The bid/ask trading server will
support both a Java client and HTML page interface.
Trade Info Catalogue
The trade info catalogue is the repository that contains all lot
listings for the sales that are scheduled on the platform. This data is managed
by a SQL database and can be accessed through the trade info manager. The
information is also accessed by the trade servers when the auctions are running.
Trade Info Manager
The trade info manager is available as a Java application or as a set
of HTML pages (JSP/Servlet based). It is used to maintain the information
contained in the trade info catalogue. The info manager provides a generic
interface through which an auction house may enter the lot information for their
sales and configure their sale parameters.
Trade Accounting Server
As auction sales are completed, the data from those sales is summarized
and copied to the trade accounting server. This repository and interface is used
to provide billing information for customer settlement with our Company. This is
not the settlement of the auction sale itself, but rather the transactional fees
due to us for the use of the platform.
Trade History Server
As auction sales are completed, the data from those sales is moved to
the trade history server. This repository and interface is used to provide
historical analysis of the auction results. It provides a JSP/Servlet interface
to produce historical reports.
Trade Settlement System
The trade settlement system for any particular dynamic trader (auction
house) typically includes invoice printing for buyers, cheque printing for
sellers, collection or deduction of commissions, insurance fees, taxes, etc. It
may also include lot delivery scheduling and lot grading or inspection
processes. There is no generic system for trade settlement, but rather there is
a framework that is tailored to each dynamic trader (auction house). The system
can be web-based (HTML, Java Applet) or client-based (Java or other
application).
Financial Services Interface
Integration to our financial services back-end will be offered through
an integration interface. This interface will allow a dynamic trader to host the
financial services on a web-site or access them through our website(s).
We believe that an enormous opportunity awaits the company which can
successfully integrate and efficiently deliver the various components and
services of a dynamic global trading solution. It is our intention to deliver
such a global trading system in the form of an entirely new distribution channel
which will:
o improve economic efficiency in the management of sales and
distribution;
o improve information flow and product availability to potential
purchasers; and
o lower the cost of sales by exploiting internet technologies
and sharing a technology platform.
In addition, through our newly acquired subsidiary, Schelfhout, we can
offer the following services in connection with our trading platform:
Electronic Auction Clocks
Since 1985, Schelfhout has been a constant innovator in auctions based
on the "Dutch clock". Starting with (now primitive) projection systems, and
evolving into digital and LED-based clocks, the goal has always been to provide
clock systems that maximize usability and auction throughput. Many auctions now
employ several Schelfhout clocks simultaneously, substantially increasing the
number of lots that can be sold on any given auction day.
17
<PAGE>
In some auctions, the clock is mobile: the so-called "Moby-Clock". This
clock was developed to meet the specific needs of the fishing industry, where
buyers and the clock can move through a fish market and conduct sales over the
actual product.
Auction Controller
The auction master console runs the electronic clock and the digital
displays of the auction. It also registers the winning bid made by either a
local buyer or a buyer using a remote workstation. The console is a PC running
Microsoft Windows (3.1, 9x, NT), and bids are logged into a local SQL database.
At the time a bid is made, the controller also checks the credit position of the
buyer to ensure that they have sufficient credit to cover the purchase. This
credit information is also stored in a SQL database, and is one of the principal
integration points between the existing Schelfhout systems and the financial
services offered by e-Auction.
In some high-volume auctions, a multi-transaction controller is used
allowing several transactions to be processed every time the auction clock is
stopped.
Remote Bidding Systems
A number of auctions support buying through remote workstations, so
that the buyers do not have to be physically present at the auction. In some
cases, these remote terminals are actually in the auctions themselves, replacing
the main electronic clock. In either case, the remote terminals connect to the
main auction using dial-up or ISDN, and make socket connections to the
"syncrator", a dedicated server whose sole task is to determine which bid is the
highest. Through logic that takes into account transmission delays, the
syncrator ensures that, regardless of whether or not the bidder is physically
present, the auction is always fair.
As with the auction controller, the remote bidding clients are
currently using PC-based applications.
Mediation Systems
While most of Schelfhout's auction customers operate on a Dutch clock,
there are some circumstances under which a different type of bidding is
required. In these cases, a mediation system is used, where a server collects
bids, relates them to asking prices by producers and their agents, and assigns
lots to the relevant buyers.
Multi-trade
Schelfhout has been working on the development of a new, integrated
trading system that builds on the vast experience gained over the last 15 years.
The basic principal is that, to obtain the optimum price for a particular
product, a variety of tools must be available to the selling organization,
including spot market (clock), short term mediation, order/bid, long term
mediation and tenders, as well as detailed information services. Multi-Trade is
designed to provide some or all of these tools at the sellers' discretion. On
June 20, 2000, Schelfhout, through a wholly-owned subsidiary, installed the
first such multi-transaction electronic trading system in New Zealand for
Turners & Growers Flower Group/ Floramax of New Zealand ("Floramax"). The
Floramax auction, which represents an estimated 60% of all New Zealand's
domestic flower sales, can process more than 800 transactions an hour and uses
the electronic marketplace to eliminate inefficiencies and boost flower-trading
capabilities.
Since the "new" Schelfhout system will allow individual buyers to
conduct their auction purchases on the Internet in their own domestic currency,
we will generate revenue from both the foreign exchange and the settlement
services. Meanwhile, the existing Schelfhout computer system will continue to
provide software solicitors to an existing customer base with international
trade.
Schelfhout's controllers are also used to control condensers, gas
analysis, energy management, etc.
Other Controllers
Schelfhout has also developed a range of other controllers with
microprocessors, customized for the following market segments :
o (ultra low oxygen) preservation of hard fruit;
o Short-term preservation of soft fruit, exotic fruit,
vegetables, plants and flowers; and
o General temperature control for preservation of deep-frozen
and cooled products.
18
<PAGE>
Schelfhout's controllers are also used to control condensers, gas
analysis, energy management, etc.
Schelfhout has developed a graphic modular display panel on which text,
logos and drawings can be displayed. This innovative concept offers numerous
advantages over standard systems:
o unlimited dimensions;
o storage capacity of more than 100 graphic images; and
o various special effects are included as standard: scrolling,
blinking and animation via fast displays of successive images
EURONET TRADING PORTAL
Through our wholly-owned subsidiary, Schelfhout, we intend to launch
EuroNet Trading Portals later this year. EuroNet Trading Portals can be
described as a pan-European network targeted to link Schelfhout's existing
standalone European systems, which, when aggregated, currently trade
approximately US$7.0 billion dollars in perishable commodities per year.
The networks will be launched into the following three vertical
markets:
<TABLE>
<CAPTION>
<S> <C> <C>
o 38 Fish Auctions Approximately US $2.0 billion in trade volume annually
o 29 Fruits and Vegetables Auctions Approximately US $2.4 billion in trade volume annually
o 11 Flower Auctions Approximately US $2.4 billion in trade volume annually
</TABLE>
The EuroNet Trading Portals will link existing Schelfhout clients using
the Internet, extranet and X.25 networks, as well as clients interested in
migrating to Internet Protocol ("IP") based networks.
The EuroNet Trading Portals for fish, fruit, vegetables and flower will
consist of the development of European auction networks which will offer
financial settlement services and foreign exchange services as their main
services. The Internet will enable individual buyers to participate in the
auction process remotely.
[TIER CHART APPEARS HERE]
19
<PAGE>
The current European landscape of auctions is highly fragmented. (see
chart above). This fragmentation has not allowed for economies of scale to occur
as each auction house has been saddled with expenses. These expenses will be
reduced significantly with the implementation of our business proposition. We
intend to link existing stand-alone auction houses in each perishable commodity
vertical, which in turn will benefit from the centralization of ancillary
services around the auction process, such as foreign exchange services and
financial settlement services. Stand-alone auction houses currently do credit
checks and receive letters of credit for each buyer. The buyers, in turn, must
repeat the process with each auction house they deal with. Our plan is to
eliminate these redundancies by implementing a centralized financial settlement
solution which will benefit all the parties involved.
The solution will make it possible for a remote buyers to participate
in auctions using their own currency while the auction houses and producers will
also be paid in their own local currencies. Hence, a foreign currency service is
an integral part of the bundled financial services we offer.
The whole financial settlement for both buyer and seller (auction house
and producer) should be as understandable and as customer-friendly as possible.
All of these services will be offered on the basis of a transaction fee. The
advantage with this cost structure is that auctions will not need to make
substantial investments in Information Technology ("IT") and infrastructure. The
use of these services is therefore a variable cost.
When a network has been established with the Schelfhout customers, it
is our objective to extend that network to include the remaining European
auctions which are not currently Schelfhout's clients, as well as adding
additional international demand.
BENEFITS OF EURONET TRADING PORTALS
[GRAPH APPEARS HERE]
Benefits to Auction Houses on Network
o Increased numbers of buyers and sellers;
o Focuses on core competency rather than issues such as credit
checks and limits;
o Offers value added service;
o Offers competitive advantage over other European auction
houses; and
o Serves as a deterrent for non-payment, since only buyers with
credit approval may participate in the auctions.
Benefits to Buyers on Network
o Need only one letter of credit or a single escrow account;
o Can purchase from all the auction houses on the network;
20
<PAGE>
o Receive better quality product; and
o Better selection available.
Benefits to Seller on Network
o Better prices through transparency;
o Increased number of purchasers; and
o Guaranteed payment.
OUR BUSINESS ACQUISITIONS
Kwatrobox B.V.
On November 1, 2000, we purchased all of the issued and outstanding
shares of Kwatrobox B.V. a Netherlands corporation, in exchange for a cash sum
of Four Million (4,000,000) Guilders and an aggregate of One Million One Hundred
Thousand (1,100,000) shares of our common stock and, subject to future earnings,
possible options exercisable at the third anniversary date to purchase
additional shares of our common stock having an aggregate value of One Million
(1,000,000) Guilders.
Kwatrobox B.V. is the parent company of Nieaf Systems B.V. and
Automatiseringsbureau Palm B.V.
o Nieaf Systems B.V.
Nieaf Systems is a developer of electronic trading systems for perishable
commodity marketplaces. The company has over 100 years of experience developing
innovative trading systems to the perishable commodity market and building
relationships within the industry. Based in the Netherlands, two of Holland's
largest flower auctions, Aalsmeer flower auction and Bloemenveiling Holland in
Naaldwijk, are customers of Nieaf Systems.
o Automatiseringsbureau Palm B.V.
Palm develops specialized enterprise resource planning (ERP) software and IT
Infrastructure Systems for Exporters and Wholesalers in the US$ 6 Billion Dutch
flower industry. Palm Business Solutions (PBS) software allows its clients the
ability to manage the flow of produce from the auction floor to their respective
customers. PBS software divides, tracks, integrates, and supplies information to
client's back office systems. Palm seamlessly integrates web-based logistic
applications and Internet trading systems to allow clients to have complete
control over all facets of their business. With offices in the two largest
flower auctions and an installed base of over 400 applications, Palm has become
a recognized leader in the Dutch flower industry
I-Three, Inc.
We signed a letter-of-intent dated June 9, 2000, to purchase all of the
issued and outstanding shares of I-Three, Inc. in exchange for an aggregate of
500,000 shares of our common stock (representing approximately 0.76% of our
issued and outstanding shares) and options exercisable to purchase up to 50,000
additional shares of our common stock, at an exercise price of U.S.$1.45 per
share. We expect this transaction to close during our fourth quarter. I-Three is
an e-commerce solutions provider focused on delivering globally scalable,
event-driven applications for B2B enterprises that fully leverage the
opportunities of information gathering and sorting from the Internet. With
I-Three's existing line of B2B applications, and strategic partnerships with
industry leaders such as Sun-Netscape Alliance, TIBCO Software Inc. and Oracle,
we believe that I-Three will provide us with the capability to develop
internally our financial service and portal applications.
I-Three's current product line includes the following:
o I3 MESSAGE BOARD: a desktop interface that enhances corporate
communication and streamlines decision-making processes. It
includes a real-time internal employee roll-call application
and an inter-company contact and resource manager.
o I3 PORTAL ENGINE: an application that enables users to develop
their own customizable portal site. I-Three's Portal Engine
application constructs each page for users as they request it.
All elements of page look-and-feel are template-driven and
defined by user preferences stored in an LDAP database. The
Portal Engine's architecture is scalable, load balanced and
fault tolerant.
o I3 TICKER: I-Three's Ticker creates an applet that displays
scrolling bars containing data such as stock and commodity
prices. Generic, customizable and adaptable, Ticker can
present static, realtime or periodically updating data in
single, double or multiple lines.
o I3 CHART APPLICATION: an application that creates dynamic
charts that diagrammatically present data, for example, the
value of stocks over a certain time period. The chart
application creates a number of image layers containing grids,
lines, labels and date-time values corresponding to the
fluctuations of stock values, and allows users to drill down
through data such as intra-day charts.
o I3 ADAPTERS: I-Three adapters facilitate integration between
clients' existing software applications and TIBCO's products.
Our adapters include the httpAdapter, the TAW (TIBCO Adapter
for Web)-httpAdapter, ldapAdapter.
I-Three's commitment to providing event-driven, fast, easy-to-use, and
scalable web portal solutions can be seen in its finished product
"WallStreetview.com". Hired to develop an integrated portal for
WallStreetview.com, I-Three developed and delivered a comprehensive financial
services portal that offers current financial data, including realtime quotes,
the latest business news, historical charts and stock ticker, and additional
content from industry leaders such as Reuters, Standard & Poors, Comstock and
Morningstar.
Schelfhout Computer Systemen N.V.
By a share purchase agreement dated as of January 10, 2000 among Luc
Schelfhout, Hilde De Laet and our subsidiary, Aucxis (Belgium), we acquired all
of the shares of Schelfhout Computer Systemen N.V., a Belgium
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company. The purchase price for the shares of Schelfhout of $10 million, as
stipulated in the share purchase agreement, was paid by us in the form of $4
million cash and by the issuance of 3,636,364 shares of our common stock to Luc
Schelfhout and Hilde De Laet, of which 1,818,182 common shares were issued to
Luc Schelfhout, a current officer of our Company, and 1,818,182 common shares
were issued to Mr. Schelfhout's spouse, Hilde de Laet. For accounting purposes,
the purchase price per share was deemed to be $1.00. As part of the transaction,
we agreed not to sell or otherwise to transfer the shares of Schelfhout during
the 12 month period ending on January 10, 2001. As security for the covenant not
to sell the shares and for other matters, we pledged the shares of Schelfhout in
favor of Luc Schelfhout and Hilde De Laet.
Over the past 17 years, as a solutions provider for perishable
commodity (fish, flower, fruits and vegetables) auction houses, Schelfhout had
developed over 150 electronic trading systems for numerous selling organizations
all over the world. Schelfhout delivers the tools to bring together supply and
demand under optimum conditions and thus create a better market situation.
Because of its experience in the marketing of perishable goods and the
development of customized hardware and software solutions in this niche market,
Schelfhout takes pride in its knowledge of the sector. We believe that the
hardware and software employed by Schelfhout can be adapted, without substantial
cost or time, to provide services to other commodity auctions.
Since its establishment in 1983, Schelfhout has focused on two market
sectors: (i) the computerization of auctions and (ii) automation for the
preservation of perishable products. As an ancillary to the auction system, a
modular graphic display panel was developed by Schelfhout in 1992 and added to
the product range.
Generated Solutions Ltd.
Upon the completion of our share exchange agreement with e-Global
(Barbados) in February 1999, we acquired the rights of e-Global (Barbados) to
market and exploit the internet auctioning software and other technologies of
Generated Solutions Ltd. (GSL) and National Electronic Marketing Inc. (NEMI).
The purchase price paid by us and attributable to GSL's technology rights was
Cdn$50,000 in cash. E-Global (Barbados) had previously acquired from NEMI the
exclusive license rights granted by GSL to NEMI to market GSL's internet
auctioning software outside of North America as well as the non-exclusive market
rights within North America. The price paid by e-Global (Barbados) for the NEMI
rights was Cdn$300, in the form of a grant of options to purchase up to 30,000
shares of the common stock of e-Global (Barbados), at an exercise price of
$0.01. On December 1, 1998, NEMI received additional options to purchase up to
65,000 additional shares of common stock of e-Global (Barbados), at $0.01 per
share. All of these options were assumed by us under our stock option plan and
became our obligations following the completion of the share exchange.
As part of the earlier transaction between e-Global (Barbados) and
NEMI, e-Global (Barbados) entered into a consulting agreement with Canadian
Caging Corporation, a company associated with the vendor, for Cdn$5,000 per
month. Our subsidiary, acting through its wholly-owned subsidiary, Aucxis Corp.
(Canada), continues to pay for services under the consulting agreement. The
consulting agreement ends February 1, 2001.
STRATEGIC ALLIANCE WITH ABN AMRO BANK N.V.
By a Letter Agreement dated as of May 27, 2000 between Aucxis Corp.
(Canada) and ABN AMRO Bank N.V., we entered into a strategic alliance with ABN
AMRO to develop and provide integrated financial services to our perishable
commodity auction customers. Through this arrangement, ABN AMRO and our Company
intend to jointly develop an Internet-based system to provide financial services
including foreign exchange, credit management and settlement services. Marketing
activities in support of the offered services will also be undertaken jointly.
The services are scheduled to be offered as part of a pilot project in Holland,
in the form of a financial system platform for the Urk Fish Auction enabling
real time portable credit reservation and settlement services. The Urk Fish
Auction is one of the largest electronic fish auctions in the world,
representing 145 Million Euro in transactions annually, and is the driving force
behind EFICE (Electronic Fish Information Center Europe), a trading network
linking seven (7) Dutch fish markets. Management believes that we are
well-positioned to exploit opportunities to provide integrated online financial
services to the perishable commodity e-marketplace because of our knowledge and
experience in electronic perishable commodity auctions and ABN AMRO's financial
services expertise, technological innovation and global reach.
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OUR INTELLECTUAL PROPERTY
We currently have neither any registered patents or trademarks nor any
licenses, franchises, concessions or royalty agreements. There has been small
amounts (approximately Cdn$185,000) spent since inception on research and
development. From February 1999 to present, we have had a development team
working on the auction platform.
OUR COMPETITION
The electronic auction market is highly competitive, is changing
rapidly, and is significantly affected by new product and service introductions.
Companies are increasing the demand for industry-specific solutions to meet
their needs in providing products and services to customers and trading
partners. Barriers to entry into this market are relatively low, and we expect
that competition will intensify in the future. The market environment in which
we operate is extremely dynamic and is characterized by constantly evolving
standards and new market entrants.
Our primary competition currently comes from traditional auction
suppliers of hardware and software services such as OES and Agro Marche
Internationaux. OES is North Americas largest traditional auction builder
specializing on flowers and tobacco. Agro Marche focuses on the food production
industry as well as the international seafood sector.
Our secondary competition comes from new internet companies such as
World Commerce On-line (WCOL), Decofrut, Farms.com, Pan European Fish Auction
(PEFA), Vertical Net, Moai, OpenSite Technologies, FairMarketSM, Inc, Ariba and
Trade'ex, Gofish, Fishmonger, FreeMarkets and many other. A brief description is
included below:
WCOL delivers Internet-based, global e-commerce solutions to large
international organizations and worldwide vertical industries. Decofrut provides
the verification of the quality of fruits shipped into the world's largest port,
Rotterdam, and Philadelphia. Farms.com will shortly be offering a Bid-Ask
marketplace. Commodity traders will be able to participate in Real Time Bid-Ask
trading with bids exchanged instantaneously. Pan European Fish Auction (PEFA)
operates a network of electronic Fish Auctions spread over Europe. These
auctions are linked together and accessible to the buyers via the internet, thus
creating a virtual marketplace on a " business-to-business" level. VerticalNet,
Inc. is a creator and operator of vertical trade communities. VerticalNet
leverages the interactive features and global reach of the Internet to create
multi-national, targeted business-to-business communities. Moai provides
commerce solutions for the Internet. Moai provides companies with the technology
and services for customized online auctions and trading exchanges. OpenSite
Technologies: provides online auction solutions. Since 1996, OpenSite has
offered online auction software with quick implementation and ease of
management.
FairMarketSM, Inc. is a provider of networked, online dynamic pricing
solutions that are designed to allow customers to expand their distribution
channels and create new online revenue opportunities. Their primary service
offering is an outsourced, private-label auction solution that is used by some
of merchants and portals on the Web. Ariba and Trade'ex: the evolution of the
Internet economy and the creation of new Digital Marketplaces will streamline
the commerce process and totally transform the way businesses exchange goods,
services, and information. Sorcity is an Internet hosted, business-to-business
reverse-auction service for buyers and sellers of both direct and indirect
items. Respond.co is a online shopping service, a way of matching buyers and
sellers of a wide range of products and services. Gofish: creates a single
resource for everyone connected with the seafood industry. Where buyers and
sellers can do business faster and easier than ever before--with features like
real-time pricing and up-to-date credit reporting.
FishMonger is based adjacent to the bustling seafood industry of
Seattle, the Puget Sound, and the North Pacific. It has been developed by
combining the talent from the seafood industry with exceptional expertise from
the world of e-commerce. FreeMarkets creates business-to-business online
auctions for buyers of industrial parts, raw materials, commodities and
services. Since 1995, it has created auctions for goods and services in more
than 50 product categories, including injection molded plastic parts, commercial
machinings, metal fabrications, chemicals, printed circuit boards, corrugated
packaging and coal.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than us, greater
name recognition, more strategic relationships and a larger installed base of
customers. In addition, certain competitors have well-established relationships
with our current or potential customers. As a result, our competitors may be
able to devote greater resources to the development, promotion and
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sale of their services, may have more direct access to corporate decision-makers
based on previous relationships and may be able to respond more quickly to new
or emerging technologies and changes in customer requirements. There can be no
assurance that we will be able to compete successfully against current or future
competitors or that competitive pressure will not have a material adverse effect
on our business, operating results and financial condition.
OUR EMPLOYEES
Our management considers our Company's labor relations to be good. None
of our employees are covered by a collective bargaining agreement. As of
September 2000, we had thirty six (36) full time employees and four (4)
part-time employees.
None of our employees is represented by a labor union, and we consider
our employee relations to be good. Competition for qualified personnel in our
industry is intense, particularly among software development and other technical
staff. We believe that our future success will depend in part on our continued
ability to attract, hire and retain qualified personnel.
OUR FACILITIES
We have offices located at 220 King Street West, Suite 200, Toronto,
Ontario, Canada, M5H 1K7 and at Bormte 204/A, Stekene, Belgium 9190. The offices
at 220 King Street West are leased by i-Three, which lease ends September 3,
2004 and provides for rent payments of Cdn$174,000 per year.
Schelfhout's real property was divested prior to our acquisition. As
part of the acquisition, however, Schelfhout shall be entitled to remain on the
premises where it currently conducts its business operations for a twelve (12)
month period ending January 7, 2001 rent free and thereafter, for an additional
term of 10 years, at a rate of 2,400 BEF per square meter for office space,
1,800 BEF per square meter for the work room and 1,200 per square meter for the
warehouse.
We do not own any real property other than the building contributed by
us to our subsidiary, SDL Invest N.V., which ownership interest is subject to an
option to purchase granted to such subsidiary's minority shareholders. We have
not entered into any agreements to acquire any properties.
LEGAL PROCEEDINGS
Execept as described below, we are currently neither a party to any
litigation nor aware of any other litigation threatened against us.
(1) A shareholder derivative action was brought against the Company on
November 17, 1999 in the United States District Court of 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.'s ("Sanga") was damaged and that the defendants are 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 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 proceeding was stayed on November 29, 1999 as a result of
Sanga filing for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court.
(2) The shareholders derivative suit brought on February 7, 2000 and
disclosed in our previous filings with the SEC, in which we were a named
defendant, has been dismissed.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Over the next twelve months, we intend to grow rapidly. We will need
additional cash to fund such growth and fully intend to engage in additional
financing to meet expanded operating capital needs.
At September 30, 2000, we had approximately $8.0 million in cash. In
addition, the operations of our wholly-owned subsidiary, Schelfhout, generate a
modest amount of positive cash flow.
Despite the foregoing, our business plan does not provide for, and we
do not anticipate, any major capital expenditures during our fiscal year 2001.
The majority of our expenditures will be used to hire qualified programmers to
continue to develop our technology, as well as to hire a larger sales and
marketing staff to grow our business and effectively service our clientele. It
is anticipated that we will spend approximately $500,000 out of current working
capital in fiscal year 2000 to purchase new computer equipment for the increased
staff. We anticipate that our accounts payable and accruals will be satisfied
out of our working capital.
During fiscal year 2000, we raised the following funds:
In January, 2000, we raised approximately $4.4 million of new capital
through the private placement of 9,293,777 shares of our common stock, raised
$2.2 million through a convertible debenture from Halium Hongorzul. Total cash
raised was $6.6 million ($4.4 million and $2.2 million).
In June, 2000, we completed a private offering of our common stock,
raising approximately $7.5 million through the issuance of 4,072,639 shares of
common stock to ABN AMRO Capital Investments (Belgie) N.V.
The principal use of funds raised during fiscal year 2000 included:
o $3.0 million, as final payment in the acquisition of
Schelfhout;
o $200,000, as payment for Halium Hongorzul fee in connection
with convertible debenture;
o $250,000, as partial repayment for the loan with Ventures
North Investment Partners Inc.;
o $163,000, as legal fees for services in regard to the January
financing and other corporate issues;
o $120,000, as fees owed to Millennium Advisors Inc. for final
and complete settlement of a services contract;
o $55,000, as filing fees with the SEC for S-1 Registration
Statement as filed February 28, 2000;
o and other miscellaneous amounts of approximately $42,000.
Of the $3.8 million shown as restricted cash held in trust by lawyers at
December 31, 1999, . These restricted amounts became unrestricted upon the
closing of the Schelfhout transaction.
In addition, we also issued an additional 7,625,916 shares of our
common stock in January 2000 to retire $3.8 million in existing debts held by
Halium Hongorzul, Millennium Advisors Inc., and Ventures North Investment
Partners Inc.
RESULTS OF OPERATIONS
Comparison of Year Ended December 31, 1999 to period from January 8, 1998 to
December 31, 1998
REVENUES. Revenue for the year ended December 31, 1999 was $0 compared
to $0 for the similar period ended December 31, 1998.
NET LOSS/EARNINGS. Net loss for the year ended December 31, 1999 was
($2,654,432) compared with $0 for the period from April 30, 1998 (date of
incorporation) to December 31, 1998. The increase in loss was due to the start
up nature of the company. The company started to develop its business plans
during 1999 and the costs reflect this development.
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OPERATING EXPENSES. The 1999 fiscal year was one of business
development for us. We spent considerable time and effort in defining our market
space and in acquiring Schelfhout (which was completed on January 10, 2000).
During the year, we spent $2,654,432 in operating expenses, compared to $0 for
the period from April 30, 1998 (date of incorporation) to December 31, 1998).
The majority of these costs were in relation to business development efforts in
research and development and SG&A.
RESEARCH AND DEVELOPMENT. On February 1, 1999, e-Auction Global
Trading, Inc. (Barbados), acquired the internet auctioning software, technology
and other intellectual property assets of Generated Solutions Ltd. ("GSL"). GSL
had been providing its propriety internet auctioning technology to a number of
auction houses conducting electronic auctions. On February 1, 1999, e-Auction
(Barbados) acquired the intellectual property assets of National Electronic
Marketing Inc. ("NEMI"). NEMI assets included the exclusive rights to market
GSL's internet auctioning software outside of North America and non-exclusive
North American rights. Upon our completion of the share exchange agreement with
e-Auction (Barbados) in February, 1999, we acquired the rights to market and
exploit the GSL and NEMI technologies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, General and
Administrative increased from $0 in the fiscal year ended 1998 to $1,654,432 in
the fiscal year ended 1999. The 1999 SG&A is consistent with our business
development growth and the need to hire additional personnel. In June, we hired
David Hackett as the Chief Financial Officer. Mr. Hackett is responsible for the
Finance and Administration department as well as the day to day operations of
the Company. In January 2000, with the completion of the purchase of Schelfhout,
we hired Daniel McKenzie as the Chief Executive Officer and the Chairman of the
Board. During the first quarter of 2000, we also increased our management team
with the addition of Jeff Turner, Vice-President Marketing, Thomas Jakubowski,
Vice-President Business Development, Paul King, Managing Director Europe, and
Dave Dingle, Vice-President, Research and Development. The newest members of our
team bring extensive executive and market experience from leading companies in
the B2B and Internet software market. We also increased the size of our board of
directors with the additions of Dr. Phillip Lapp, Mr. Phil MacDonnell and Mr.
Mark Milazzo. All members of our board of directors have specific strengths that
will prove invaluable to the growth and future of our Company as we position
ourselves to be the premiere business-to-business e-commerce commodity portal.
Collectively, this wealth of technical and professional knowledge is an asset
that we can use and expand as we grow.
Comparison of six months ended June 30, 2000 to six months ended June 30, 1999
HIGHLIGHTS
Revenue for the six months ended June 30, 2000 was $1,979,919 compared
to $0 for the six months ended June 30, 1999. Revenue for the three months ended
June 30, 2000 was $951,084 compared to $0 in the three months ended June 30,
1999. The increase in revenue was a result of the Company's acquisition of
Schelfhout Computer Systemen, N.V. in January 2000. Schelfhout derives its
revenues from the development and installation of clock systems, cooling
installations and maintenance for auction halls.
Net loss for the six months ended June 30, 2000 was $1,540,698, as
compared to a loss of $638,251 in the corresponding six month period ended June
30, 1999. Net loss for the three months ended June 30, 2000 was $779,848, as
compared to $505,774 in the similar three months ended June 30, 1999. The
increase in net loss for the six months is partially attributable to an increase
in depreciation and amortization of $781,748.
The Company completed a strategic partnership with ABN AMRO Capital
Investments (Belgie) N.V. in June 2000 to provide integrated financial services
to our perishable commodity auction houses. The Company and ABN AMRO will
jointly develop the Internet-based system to provide financial services
including foreign exchange, credit management and settlement services.
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MANAGEMENT
The following table sets forth the names, positions and ages of the
executive officers and directors of our Company as at October 30, 2000.
Directors are elected at our annual meeting of shareholders and serve for one
year or until their successors are elected. Officers are elected by the board of
directors and their terms of office are, except to the extent governed by
employment contracts, at the discretion of the board of directors.
<TABLE>
<CAPTION>
NAME AGE TITLE
----------------------------------------- -------------- -----------------------------------------------------------
<S> <C>
Daniel McKenzie 45 President, C.E.O. and Chairman
Luc Schelfhout 38 President, Schelfhout Computer System N.V.
David Hackett 34 Chief Financial Officer
Jeff Turner 35 Vice-President, Marketing
Thomas Jakubowski 41 Vice-President, Business Development
Paul King 37 Managing Director, Europe
Philip Lapp 71 Director, since January 25, 2000
Phillip MacDonnell 58 Director, since January 25, 2000
Mark Milazzo 43 Director, since March 6, 2000
Bart Sonck 35 Director, since June 16, 2000
Ken Reid 60 Director, since June 23, 2000
</TABLE>
BIOGRAPHIES
Dan A. McKenzie, President, C.E.O. and Chairman.
Dan McKenzie brings a strong and diversified background in corporate
management and technology development. Mr. McKenzie has 19 years of high tech
management experience, with 15 as an owner/manager. He is the principal founder
of two successful businesses, McKenzie Brown Canada and EveryWare Development
Inc. His experience in mapping out strategic directions, operational skills, and
turnaround techniques have, in each case, maximized shareholder returns.
McKenzie Brown, a national computer peripheral distribution company, was founded
in 1983 and reached sales in excessive of $30 million per year. Mr. McKenzie was
the initial investor and founding partner of EveryWare Development Inc. in 1990
and built the business through sales and software development with a record of
profit for 5 consecutive years as President and CEO. EveryWare is a market
leader in providing innovative cross-platform development tools for creating
dynamic Web-based applications. Mr. Mckenzie took the company public in 1995 as
CEO and Chairman of the Board. He led the company through numerous financings
and acquisitions, including InContext Systems Inc. (TSE:INI), and in November
1998 EveryWare was purchased by Pervasive Software Inc. Mr. McKenzie's
experience in growing and merging early stage technology companies enables him
to identify the needs of the marketplace to bring new products and services
quickly and profitably to market. Mr. McKenzie's entrepreneurial spirit
developed after working his way up through management at Corvus Computer
Corporation and Maclean Hunter Limited. Mr. McKenzie was National Sales Manager
for Corvus, responsible for developing revenues and reseller relationships
across Canada, and at Maclean Hunter he served in their Business Press Division.
Luc Schelfhout, President, Schelfhout Computer Systemen N.V.
Luc Schelfhout created Schelfhout Computer Systemen N.V. in 1983 which
company has grown under his management into a market leader in the development
and implementation of electronic trading systems. Prior to starting Schelfhout,
Mr. Schelfhout worked for Stafa Control Systems, a company specializing in
control and measurement systems. Mr. Schelfhout also has a degree in Electronics
(A1-B1) and is a licensed pilot. Through Mr. Schelfhout's leadership, Schelfhout
has lead in the development of more than 100 electronic trading systems
world-wide and numerous feasibility studies, as follows:
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o Apeda, New Delhi, India: establishment of 4 flower markets in
Pune, Bombay, Bangalore & Madras.
o European Commission: Information and trading network for the
marketing of fresh fish in Europe (INFOMAR).
o Irish Fish Producers' Organisation Dublin, Ireland : fish
auction network.
o Meat & Livestock Commission, Milton Keynes : Improvement of IT
in UK cattle markets.
o F.A.O. of the UNITED NATIONS : establishment of fish markets
in Morocco.
David Hackett, Chief Financial Officer
David Hackett attained his Chartered Accountant designation in 1989
while at Ernst & Young. Mr. Hackett also holds a Master of Business
Administration from the University of Western in Ontario, Canada. In 1992, Mr.
Hackett co-founded 323-2323-The Infotainment Line, a movie, restaurant, kids and
special events information telephone service. From 1994 to 1996, Mr. Hackett was
a consultant for the television production industry with Alliance Atlantis
Communications Inc. (formerly Atlantis Communications Inc.) and CanWest Global
Communications Corp. In 1996, Mr. Hackett joined EveryWare Development Inc., a
provider of middleware database conductivity tools. As Chief Financial Officer
of EveryWare, Mr. Hackett was responsible for the finance and administration
department as well as the day-to-day operations of EveryWare and its
subsidiaries. While at EveryWare, Mr. Hackett completed numerous financings,
acquisitions and divestitures including the sale of EveryWare to Pervasive
Software Inc. in November 1998. Mr. Hackett is not a director of any other
reporting company.
Jeff Turner, Vice-President, Marketing
Mr. Turner brings more than 12 years of experience in marketing,
advertising and strategic planning with companies such as Bell Canada,
Investorline, Nesbitt Burns, HomeProject.com, Harris Bank Corp., and Bank of
Montreal. Most recently, Mr. Turner has been focused on marketing and strategic
planning as a consultant for technology-related companies, with extensive work
in computer software, Internet B2C and B2B, and Application Service Providers.
Thomas Jakubowski, Vice-President, Business Development
Mr. Jakubowski brings a strong background in strategic planning and
investor relations in a high-technology environment. He has extensive experience
in the telecommunications industry, having spent more than 15 years at Nortel
Networks in a number of senior positions. Most recently, he was the Director of
Business Intelligence where he led a corporate group focused on market and
competitive analysis. While at Nortel, he was involved in the acquisition of Bay
Networks and the integration of the company into Nortel. He also served as
Director of Investor Relations for Nortel for two years. Mr. Jakubowski holds a
Master of Business Administration from York University and a Master of Applied
Science (Engineering) from the University of Toronto.
Paul King, Managing Director, Europe
Mr. King brings more than 15 years of sales and marketing experience to
our management team. Prior to joining us, he served as the Director of Sales and
Marketing at emailtopia, a software firm targeting the internet messaging
market. Previously, Mr. King held a variety of sales and marketing positions at
EveryWare Development, Inc., and McKenzie Brown Canada, Inc
Philip A. Lapp, Director
Dr. Lapp has been Senior Vice President and Director of SPAR Aerospace
Limited, responsible for all engineering and technical programs. While there,
Dr.. Lapp established and developed entry into the medical and technological
markets. Dr. Lapp served as both Director of Technical Operations and Chief
Engineer at de Havilland Aircraft of Canada. At the Massachusetts Institute of
Technology Dr. Lapp was a research Associate and Instructor in Aeronautical
Engineering. Dr. Lapp has received a Centennial Medal 1967, Honorary Member,
Engineering Institute of Canada 1973, Fellow of Ryerson Polytechnical Institute
1987, Gold Medal from the Association of Professional Engineers of Ontario in
1992, Officer of the Order of Canada in 1995. Dr. Lapp still holds many present
Directorships including CDM Information Inc., InfoWest Services Inc., Kenneth
Molson Foundation (Chairman), EMR Microwave Technology Corporation, PCI
Enterprises Inc. Mind The Store Inc.
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(Chairman), VisuaLabs Inc., and Honorary Governor, York University. Dr. Lapp
also holds the following professional affiliations: Canadian Council of
Professional Engineers, (President 1987-1988); Fellow of the Royal Society of
Canada; Fellow of the Canadian Academy of Engineering, (President 1988); Member
of the Association of Professional Engineers of Ontario (President 1982-1983);
Senior Member of the Institute of Electrical and Electronics Engineers; Fellow
of Canadian Aeronautics and Space Institute (President 1967-1968); Member of
Canadian Remote Sensing Society; and Senior Member of American Aeronautics and
Astronautics.
Phil MacDonnell, Director
Mr. MacDonnell is presently Vice President and a Director of Hawk
Capital Corporation and Hawk Partners Ltd., which provides financial services to
Canadian companies, he has held these positions since 1998 and 1997
respectively. Mr. MacDonnell is also currently President and Director of P.G.
MacDonnell Services Ltd., a Director of Constitution Insurance Company since
1987, Director of Syntex Systems Ltd. (a publicly traded company on the ASE,
since 1997), Director of World Wide Warranty (CDNX) and a Director of Palco
Communications, apriate Alabama company since 1999. Mr. MacDonnell obtained an
Honors Business Administration Degree at the University of Western Ontario in
1960, later in 1964 he obtained a Chartered Accountants Degree from the
Institute of Chartered Accountants. Mr. MacDonnell became a founding partner in
Loewen Ondaattje McCutheon & Co. Ltd. (an international institutional stock
Brokerage Company and publicly traded on the TSE). From 1989-1991 Mr. MacDonnell
was the President of Family Trust Corporation before it was sold to Manulife
Insurance. Mr. MacDonnell has sat on the Board of the Vancouver Stock Exchange
and was a Director of Grand Field Pacific Ltd., (a publicly traded hotel company
on the TSE 1996-1998) and EveryWare Development Inc., (a publicly traded
software company on the ASE 1997-1998)
Mark F. Milazzo, Director
Mr. Milazzo currently is the Director, Wireless Market Development,
Service Provider Line of Business, for Cisco Systems Ind., San Jose, CA. He is
responsible for strategy development and Cisco's global sales channel support in
Cisco's Mobile Wireless area. Mr. Milazzo joined Cisco Systems Canada, in 1992
as Channel Manager, and was responsible for developing the channel of business
in Canada, emphasizing public carriers. From 1994-1995 Mr. Milazzo was an
Account Manager, his assigned territory was the BCE group, Nortel, Bell Canada
and Bell Mobility. As Region Manager from 1995-1998, Mr. Milazzo structured
teams that have consistently over-achieved goals, responsible for business
alliances with partners, specifically relating to the developing public carrier
market. In 1998 Mr. Milazzo became the Director, Service Provider Global
Alliances, for Cisco Systems Inc. Mr. Milazzo was responsible for building
Cisco's Global Alliances with key Service Providers. Prior to joining Cisco,
from 1987-1992, Mr. Milazzo was the General Manager for Computer Logics Ltd.,
where he managed a software development firm developing PC to mainframe gateway
software to corporate clients worldwide. From 1983 to 1987 Mr. Milazzo was with
Unisys Canada in a variety of engineering activities in the Federal Government.
Mr. Milazzo holds a Bachelor of Science (B.Sc.) and a Master of Science (M.Sc.)
in Microbiology & Immunology from the University of Western Ontario in London,
Ontario. Mr. Milazzo is a Board Member of InfoInteractive Inc. (IIA.To:TSE).
Ken Reid, Director
Mr. Reid is presently President & CEO of Ontario Flower Growers Inc.,
one of North America's largest suppliers of cut flowers and plant products to
the wholesale and retail market place. Additionally, Mr. Reid is the General
Manager of Ontario Flower Growers Co-Operative Limited, the largest
concentration of growers in Canada. OFG operates the floral auction in Toronto
and Mr. Reid has developed international connections with European and domestic
auction houses providing members with similar services. Mr. Reid obtained his
C.A. degree in 1972, launching a public accounting career in his native
Hamilton. In 1980 Mr. Reid joined a small local home centre chain, merged it
with Beaver Lumber, then a subsidiary of Molson Co.'s. Rising to the position of
Vice-President & General Manager, Mr. Reid and his principals sold the
successful South Ontario chain in 1991. After a brief but well deserved
sabbatical, Mr. Reid assumed his present role and has successfully guided OFG
and its subsidiary into their pre-eminent position today.
Bart Sonck, Director
Mr. Sonck has been involved in the banking community for over ten
years, with JP Morgan, Bank Brussel Lambert and most recently with ABN AMRO.
Over the past 6 years with ABN AMRO, Mr. Sonck has been a Senior Account Manager
Corporate Banking for ABN AMRO Bank N.V. (Belgian Branch) - Antwerp Office,
29
<PAGE>
responsible for Customer Relations Management and Business Development; Regional
Manager Corporate Banking for ABN AMRO Bank N.V. (Belgian Branch) - Brussels
Office (responsible for management of team of (senior) account managers, for
Customer Relations Management & Business Development; and Managing Director or
ABN AMRO Capital Investments responsible for the development of the Private
Equity and Venture Capital operations of ABN AMRO in Belgium.
Mr. Sonck holds a Master in Arts from Vrije Universiteit Brussel and a
Master of Business Administration, Vrije Universiteit Brussel Solvay Business
School. Mr. Sonck has also lectured at Hogere Taal- & Handelsleergangen in the
areas of Quality Management in the Banking Industry, Trade & Export Finance,
Interest and Currency Risk Hedging and Credit Negotiation for Relationship
Managers.
DIRECTOR COMPENSATION
Currently, each director of the Company receives options to purchase up
to 50,000 shares of our common stock under the stock option plan adopted by the
Company in March 1999 and amended on March 13, 2000. In addition, we compensate
each of our directors Cdn$5,000 per annum and Cdn$500 for each meeting held for
which such director attends.
STOCK OPTION PLAN
We established a stock option plan on March 1, 1999, which plan was
amended on March 13, 2000. The purpose of the 1999 stock option plan is to
further the interest of our Company and our stockholders by providing incentives
in the form of stock or stock options to attract, retain and motivate key
employees and directors who contribute to our success. The grant of options
recognize and reward outstanding individual performances and contributions and
give such persons a proprietary interest in our Company, thus enhancing their
personal interest in our continued success and progress. To date, options to
purchase up to an aggregate of 7,388,000 shares of our common stock have been
granted
EXECUTIVE COMPENSATION
The following table sets forth certain information for the years ended
December 31, 1999 and 1998 (from date of inception on April 30, 1998) regarding
the compensation of our Chief Executive Officer and each of our other most
highly compensated executive officers whose compensation on an annualized basis
(salary and bonus) for services rendered in all capacities to our Company during
the year ended December 31, 1999 exceeded US$100,000 (collectively, the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------- ------- -------------------------------------- ------------------------------------- --------------
Name and Year Annual compensation Long-term compensation
Principal Position
------------------------ ------------ --------------
Awards Payouts
----------- ----------- -------------- ----------- ------------ ------------ --------------
Salary Bonus Other annual Restricted Securities LTIP All other
compensation stock underlying payouts compensation
(Cnd$) (Cnd$) awards options/
(Cnd$) SARs (Cnd$) (Cnd$)
(Cnd$)
(#)
------------------- ------- ----------- ----------- -------------- ----------- ------------ ------------ --------------
<S> <C>
Fred Tham, CEO 1999 - - - - - - -
and President(1)
1998 $39,500
------------------- ------- ----------- ----------- -------------- ----------- ------------ ------------ --------------
Shane Maine, CEO 1999 - - - - 1,000,000 - -
and President (2)
1998
------------------- ------- ----------- ----------- -------------- ----------- ------------ ------------ --------------
David Hackett, 1999 $58,333 - - - 1,000,000 - -
Chief Financial
Officer 1998
------------------- ------- ----------- ----------- -------------- ----------- ------------ ------------ --------------
Dan McKenzie, 1999 - - - - 1,500,000 - -
President, CEO
and Chairman (3)
------------------- ------- ----------- ----------- -------------- ----------- ------------ ------------ --------------
</TABLE>
----------------------
30
<PAGE>
(1) Fred Tam resigned as Chief Executive Officer and President on February
26, 1999.
(2) Shane Maine resigned as acting Chief Executive Officer and director on
January 17, 2000.
(3) Dan McKenzie was named Chief Executive Officer on January 17, 2000.
Shane Maine, a former director and CEO of our Company, does not receive
any compensation, other than options as indicated below, for his services. He
has not received such compensation in the past, and is not accruing any
compensation pursuant to any agreement with us.
We are currently negotiating an employment agreement with Dan McKenzie,
our President, Chief Executive Officer and Chairman, providing for a base salary
of Cnd$150,000 per annum and a Cnd$12,000 per annum car allowance. Under the
proposed agreement, if we terminate Mr. McKenzie without just cause before
December 31, 2000, he will receive a severance payment equal to six (6) months
compensation or Cnd $75,000. If we terminate Mr. McKenzie without just cause
after December 31, 2000, he will receive a severance payment equal to twelve
(12) months compensation at his then current salary. We also granted Mr.
McKenzie options to purchase 1,500,000 shares of our common stock. The options
vest on date of grant and are exercisable at $0.80 per share.
David Hackett, our Chief Financial Officer, has an employment contract
dated April 1999 with us whereby he receives a base salary of Cdn$100,000 per
annum and is entitled to bonuses of up to Cnd$100,000 per annum. If we terminate
Mr. Hackett without just cause at any time he will receive a severance payment
equal to the greater of: (i) twelve (12) months compensation at his then current
salary and (ii) Cnd$150,000.00, plus bonuses. Under the employment agreement,
Mr. Hackett was granted options to purchase up to 1,000,000 shares of our common
stock. The options vest on date of grant and are exercisable at $0.80 per share.
No retirement, pension, annuity benefits have been adopted by our
Company for the benefit of our employees.
INCENTIVE STOCK OPTIONS GRANTED TO NAMED EXECUTIVE OFFICERS
DURING THE FINANCIAL YEAR ENDED DECEMBER 31, 1999
The following table sets forth the particulars of individual grants of
options to purchase shares of our common stock made to each of the Named
Executive Officers who were granted options during the financial year ended
December 31, 1999:
<TABLE>
<CAPTION>
-------------------- ----------------- ------------------ ----------------- -------------------- --------------------
MARKET VALUE OF
SECURITIES
% OF TOTAL UNDERLYING OPTIONS
OPTIONS GRANTED ON THE DATE OF THE
SECURITIES TO EMPLOYEES IN GRANT
UNDER OPTION FISCAL YEAR
NAME GRANTED EXERCISE PRICE EXPIRATION DATE
-------------------- ----------------- ------------------ ----------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Dan McKenzie 1,500,000 31% $0.80 $0.59 August 24, 2009
-------------------- ----------------- ------------------ ----------------- -------------------- --------------------
David Hackett 1,000,000 21% $0.80 $0.59 August 24, 2009
-------------------- ----------------- ------------------ ----------------- -------------------- --------------------
Shane Maine 1,000,000 21% $0.80 $0.59 August 24, 2009
-------------------- ----------------- ------------------ ----------------- -------------------- --------------------
</TABLE>
31
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We believe that the terms and conditions of the following transactions
were no less favorable to us than terms attainable from unaffiliated third
parties:
On February 26, 1999, we entered into a stock exchange agreement with
the stockholders of e-Auction Global Trading, Inc. (Barbados). In the
transaction, we issued a total of 34,500,000 shares of our common stock to the
stockholders of e-Auction (Barbados) in exchange for all of the issued and
outstanding shares in the capital of e-Auction (Barbados). The terms and
conditions of the agreement were determined by the parties through arms-length
negotiations. As a result of the agreement, the e-Auction (Barbados)
shareholders received 86.6% of the shares of our common stock. The transaction
was treated as an acquisition of e-Auction (Barbados) and a recapitalization of
our Company whereby e-Auction (Barbados) was deemed the acquirer for accounting
purposes. At the time of the transaction, there were only an infrequent number
of trades and virtually no trading volume of our common stock and we were unable
to estimate the market value of our common stock to determine resulting
valuations of the transaction.
The majority of our operations during the 1999 fiscal year were funded
by Ventures North Investment Partners Inc. As of December 31, 1999, we owed
Ventures North approximately $860,793. The amounts advanced were non-interest
bearing, with no fixed terms of repayment. The entire balance owing was repaid
in January, 2000. A significant percentage of the ownership interest of Ventures
North is owned by shareholders of our Company. In addition, Ventures owns
2,000,000 of the issued and outstanding shares of our common stock.
Under an agreement dated March 1, 1999 with Millennium Advisors Inc.,
we agreed to pay to Millennium a management fee of $20,000 per month for advice
and services with respect to mergers and acquisitions, corporate structuring,
corporate administration, and financing. We also entered into a contract for
service whereby Millennium would be paid 25% of any funds it raised by the sale
of our equity or issuance of debt by us in excess of the amount required to
complete the acquisition of Schelfhout. No amounts were paid under this
agreement, which agreement has now expired. As of March 20, 2000, our Company
and Millennium agreed to terminate the March 1, 1999 agreement. As part of such
settlement, we agreed to pay, and did pay, Millennium $120,000 as full and final
settlement under the March 1, 1999 agreement. Michael Gilley, a former director
and officer of our Company, is President of Millennium.
On August 12, 1999, we received a loan of $1,000,000 from Millennium
Advisors Inc., The loan was to be repaid within 30 days. In consideration for
the loan, Millennium received 197,219 shares of our common stock, with a deemed
value of $1,000,000 as a financing fee. The number of shares of our common stock
issued was based on the weighted average closing price over the five (5) trading
days prior to the date the loan was granted. The shares were issued in January,
2000.
On August 29, 1999 Michael Gilley received stock options to purchase up
to 250,000 shares of our common stock which options were to vest over 3 years at
an exercise price of $5.00 per share. At the time these options were granted,
Mr. Gilley was a director of our Company. These options were canceled as part of
the settlement with Millennium.
On January 10, 2000, acting through our subsidiary e-Auction Belgium
N.V. (now Aucxis N.V. (Belgium)), we purchased all of the shares of Schelfhout
for a purchase price of US$10 million. The purchase price was satisfied by (i)
the payment of US$4 million in cash (US$1million was paid in August 1999 and the
US$3 million balance was paid on completing the acquisition in January 2000) and
(ii) the issuance of 3,636,364 shares of our common stock, at a price per share
of $1.65, having an aggregate value of US$6 Million. Of the shares issued,
1,818,182 shares of our common stock were issued to Luc Schelfhout, a current
officer of our Company, and 1,818,182 shares of our common stock were issued
to Mr. Schelfhout's spouse, Hilde de Laet. The $1.65 per share price was a
negotiated price among Luc Schelfhout, Hilde de Laet and us. The price was
based, in part, on the weighted average 40 day trading price of our stock from
the period of October 18, 1999 to December 13, 1999.
32
<PAGE>
On March 22, 2000, we formed a new subsidiary, to be owned 99% by us
and 1% by Luc Schelfhout, a current officer of our Company, and his spouse,
Hilde de Laet. As part of this transaction, Mr. Schelfhout and his spouse were
granted an option to purchase our ownership interest in SDL Invest, N.V. at a
nominal price, based upon the book value of our contribution to capital.
On August 24, 2000, Messrs. McKenzie and Hackett, directors and
officers of our Company, and Mr. Maine, a former director and Chief Executive
Officer of our Company, received options to purchase up to an aggregate of
1,500,000 and 1,000,000 shares of our common stock, respectively. The options
vest on date of the date of grant and are exercisable at an exercise price of
$0.80 per share.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the shares of our common stock as of the date of this Prospectus by
(i) each person who is known by us to own beneficially more than five percent
(5%) of our issued and outstanding shares of common stock, (ii) each of the
Named Executive Officers, and (iii) each of our directors.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES (1) PERCENTAGE OF CLASS
------------------------------------ ---------- -------------------
<S> <C> <C> <C>
J. Andrews in Trust for the Shareholders of Sanga International Inc.(2) 16,500,000 25.1%
c/o Pachulski, Stong, Ziehl, Yang & Jones P.C.
10100 Santa Monica Blvd., Suite 1100, Los Angeles, CA. 90067
------------------------------------------------------------------------ ------------------ ----------------------
ABN AMRO Capital Investments (Belgie) N.V. 4,072,639 6.2%
Regentlaan 53, 1000 Brussels, Belgium
------------------------------------------------------------------------ ------------------ ----------------------
Luc Schelfhout 3,636,364 (3) 5.5%
Bornte 204/A, Stekene, Belgium 9190
------------------------------------------------------------------------------------------------------------------
QFG Holding Limited (4) 4,455,883 6.8%
P.O. Box 659, Roadtown, Tortola, BVI
------------------------------------------------------------------------ ------------------ ----------------------
Daniel McKenzie 1,661,987 (5) *
RR5, Georgetown, Ontario L5G 4S8
------------------------------------------------------------------------ ------------------ ----------------------
David Hackett 1,236,987 (6) *
20 Astley Avenue, Toronto, Ontario M4W 3B4
------------------------------------------------------------------------------------------------------------------
Philip Lapp 50,000 (7) *
c/o 220 King Street West, Suite 200, Toranot, Ontario M5H 1K7
------------------------------------------------------------------------------------------------------------------
Mark Milazzo 50,000 (7) *
c/o 220 King Street West, Suite 200, Toranot, Ontario M5H 1K7
------------------------------------------------------------------------------------------------------------------
Phillip MacDonnell 50,000 (7) *
c/o 220 King Street West, Suite 200, Toranot, Ontario M5H 1K7
------------------------------------------------------------------------------------------------------------------
Ken Reid 50,000 (7) *
c/o 220 King Street West, Suite 200, Toranot, Ontario M5H 1K7
------------------------------------------------------------------------------------------------------------------
Bart Sonck 50,000 (7) *
c/o 220 King Street West, Suite 200, Toranot, Ontario M5H 1K7
------------------------------------------------------------------------ ------------------ ----------------------
All executive officers and directors as a group (11 persons) 6,868,626 10%
(4)(5)(6)(7)
------------------------------------------------------------------------ ------------------ ----------------------
</TABLE>
1. The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such
rule, beneficial ownership includes any share as to which
33
<PAGE>
the individual or entity has voting power or investment power. Unless
otherwise indicated, each person or entity has sole voting and
investment power with respect to shares shown as beneficially owned. A
person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days, whether pursuant to the
exercise of options, conversion of securities or otherwise.
2. The shares are beneficially owned by Sanga International Inc. which is
currently undergoing a restructuring pursuant to Chapter 11 of United
States Bankruptcy laws. Sanga does not have any controlling
shareholder. The sole officer of Sanga is John Andrews and its
directors are John Andrews, Mitch Stein and Masood Jabor.
3. Includes 1,818,182 shares held by Mr. Schelfhout's spouse, Hilde de
Laet.
4. QFG is controlled by the Ballantine Family Trust, and David Ballantine
is the sole director of QFG.
5. Includes 161,987 shares held by a holding company and 1,500,00 shares
issuable upon exercise of stock options, at $0.80 per share.
6. Includes 136,987 common shares held by a holding company for Mr.
Hackett's wife and children and 1,000,000 shares issuable upon exercise
of stock options, at $0.80 per share.
7. Consists of options enabling the holder to purchase up to 50,000
shares, at an exercise price of $0.80 per share.
34
<PAGE>
SELLING STOCKHOLDERS
The following table provides certain information regarding the selling
stockholders and the number of shares of our common stock being offered by them
as of the date of this prospectus.
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK SHARES THAT MAY BE
NAME AMOUNT OUTSTANDING SOLD (1)
---- ------ ----------- --------
<S> <C> <C> <C>
Q.F.G. Holdings Limited 4,455,883 6.78% 4,455,883
ABN AMRO Capital Investments (Belgie) NV 4,072,639 6.19% 4,072,639
Flynn, Von Shubert & Associates Attorneys Escrow Account 2,250,000 3.42% 2,250,000
v-Wholesaler.com Inc. 2,000,000 3.04% 2,000,000
Ventures North Investment Partners Inc. 2,000,000 3.04% 2,000,000
e-Ventures Investments Inc. 2,000,000 3.04% 2,000,000
Online Global Commodities Exchange Limited 2,000,000 3.04% 2,000,000
Institute of Global Trading Communities Limited 2,000,000 3.04% 2,000,000
Luc Schelfhout 1,818,182 2.77% 1,818,182
Hilde de Laet 1,818,182 2.77% 1,818,182
Zorba Holdings Limited 1,500,000 2.28% 1,500,000
Platinium Capital Management Inc. 1,500,000 2.28% 1,500,000
e-Auction Global Trading Inc. (BVI) 1,500,000 2.28% 1,500,000
BFM Enterprises 1,420,000 2.16% 1,420,000
Troy Lalonde 1,101,530 1.68% 1,101,530
Platinium Capital Management Inc. Trust for John Andrews 1,000,000 1.52% 1,000,000
Hartford Group Holdings Limited 830,000 1.26% 830,000
Web CCB (BVI) 750,000 1.14% 750,000
Assayriska Investments Inc. 642,500 0.98% 642,500
Tradewinds Investments Ltd. 550,000 0.84% 550,000
Hartford Holdings Limited 500,000 0.76% 500,000
HSBC Securities Trinity Account 159 500,000 0.76% 500,000
SABE Holdings Inc. 476,304 0.72% 476,304
Egger & Co 13-6022146 359,590 0.55% 359,590
John & Victoria O'Toole 326,295 0.50% 326,295
National Bank Financial 305,479 0.46% 305,479
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Peces BV 275,000 0.42% 275,000
Rendex BV 275,000 0.42% 275,000
Van Veen Boys BV 275,000 0.42% 275,000
Wodan BV 275,000 0.42% 275,000
T.F Fred Tham 250,000 0.38% 250,000
Red Sands Capital Management 210,000 0.32% 210,000
Brian Antonen 205,480 0.31% 205,480
Parkplace Finance Limited as trustee for the Parkplace
Trust 205,479 0.31% 205,479
Nesbit Burns in Trust For Trophy Foods Inc. 205,479 0.31% 205,479
Trinity Capital Ltd. 205,007 0.31% 205,007
Hani Rashid /Sami Rashid 200,000 0.30% 200,000
Edith M. Michel 200,000 0.30% 200,000
Millenium Advisors Inc. 197,219 0.30% 197,219
Ron Engineering & Consruction (Eastern) Ltd. 150,000 0.23% 150,000
HSBC Securities (Canada) Inc. TCL194 101,096 0.15% 101,096
Shenkman Corporation. In Trust 100,000 0.15% 100,000
Elias Haloute 100,000 0.15% 100,000
Albert Haloute 100,000 0.15% 100,000
Trendafile Ahmet 100,000 0.15% 100,000
Mike Lam 100,000 0.15% 100,000
Leannine Ottewill & Bruce Ottewill 100,000 0.15% 100,000
Powder Capital 100,000 0.15% 100,000
Warren Thompson 100,000 0.15% 100,000
Tina Whiting 100,000 0.15% 100,000
Ironshore Capital 70,000 0.11% 70,000
Larry Sisnet 70,000 0.11% 70,000
Barry Boatman 68,493 0.10% 68,493
Thomas Jakubowski 68,493 0.10% 68,493
Jim Dale 65,000 0.10% 65,000
Domenic Palumbo 61,636 0.09% 61,636
Jan Loeber 60,000 0.09% 60,000
Bob Standing 54,795 0.08% 54,795
Jeff Turner 54,795 0.08% 54,795
Sandra Usherwood 50,685 0.08% 50,685
Sam Angel 50,000 0.08% 50,000
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Stephen Greenberg 50,000 0.08% 50,000
John Naime 50,000 0.08% 50,000
Ken Friedman 50,000 0.08% 50,000
James Kilpatrick 50,000 0.08% 50,000
John Loy 50,000 0.08% 50,000
Whitman Tucker 50,000 0.08% 50,000
Sally Martyniuk 47,945 0.07% 47,945
Soloway Holdings Limited 40,000 0.06% 40,000
S&O Building Partnership 40,000 0.06% 40,000
Richard J. Valentine & Penny E. Valentine JTWROS
###-##-#### 40,000 0.06% 40,000
Michael Williamson 39,660 0.06% 39,660
Michael O'Quinn 36,000 0.05% 36,000
Steve Lowrie 34,247 0.05% 34,247
Frederick H. Stierheim TTEE FBO Frederick H. Stierheim
Revocable Living Trust 33,000 0.05% 33,000
Rebound Resoures 30,666 0.05% 30,666
Isabel Cruise & John Cruise 28,000 0.04% 28,000
Kevin Gabri 25,000 0.04% 25,000
Daniel McKenzie 25,000 0.04% 25,000
Ana Teresa Segarra 24,000 0.04% 24,000
Efthymios Kyriakopoulos 22,800 0.03% 22,800
Brian Heringer 22,000 0.03% 22,000
David Williamson 21,000 0.03% 21,000
Apollo Nominees Inc. 20,000 0.03% 20,000
Murray Hill Investments Limited 20,000 0.03% 20,000
Fadi Haram 20,000 0.03% 20,000
Nancy Sicurella 20,000 0.03% 20,000
Steven Uslinov 20,000 0.03% 20,000
Norris Williamson 20,000 0.03% 20,000
Bill Wilson 20,000 0.03% 20,000
Debbie Cairns 17,000 0.03% 17,000
Mary L Al Jaar 16,000 0.02% 16,000
Christopher Cuff 15,000 0.02% 15,000
Janet Hoyt 15,000 0.02% 15,000
Sheila Kaplan 14,850 0.02% 14,850
Scott Family Investments 13,602 0.02% 13,602
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Christian Rojkjaer 13,567 0.02% 13,567
Trendafile Rose Ahmet 13,188 0.02% 13,188
Jeff Figliuzzi 13,082 0.02% 13,082
Bruno Figliuzzi 13,082 0.02% 13,082
FR Holdings, Ltd. 12,000 0.02% 12,000
Peter F. Anderson 12,000 0.02% 12,000
Dennis A. Lavia 12,000 0.02% 12,000
Louis Al Jaar 12,000 0.02% 12,000
Tareq L Al Jaar 12,000 0.02% 12,000
Dario DiRenzo 10,959 0.02% 10,959
Richard G. Harrington,Jr. 10,000 0.02% 10,000
LJ, Inc. Of Central Florida 10,000 0.02% 10,000
Luke D'Angelo 10,000 0.02% 10,000
Larry Humenik 10,000 0.02% 10,000
Rick Kumar 10,000 0.02% 10,000
Rika Lam 10,000 0.02% 10,000
Frank Landi 10,000 0.02% 10,000
Andy Smith 10,000 0.02% 10,000
Michael Smith 10,000 0.02% 10,000
Andy Smith & Martha Smith 10,000 0.02% 10,000
Jim Sutton 10,000 0.02% 10,000
Gabriel Albina 10,000 0.02% 10,000
Linda Morrison 9,600 0.01% 9,600
Francois MarceauLeo MArco3000 8,819 0.01% 8,819
John F. Doen 8,333 0.01% 8,333
Andre Bourgon 8,000 0.01% 8,000
Robert Childerhose 8,000 0.01% 8,000
Maria D'Angelo 8,000 0.01% 8,000
Carlo Dibattista 8,000 0.01% 8,000
Veronica Munks 8,000 0.01% 8,000
Daphne Tapp 8,000 0.01% 8,000
Richard Valentine 8,000 0.01% 8,000
Julie Duffy 7,800 0.01% 7,800
Bill Duffy 7,800 0.01% 7,800
Terri McMenamin 7,500 0.01% 7,500
Everen Securities C/F William Racine IRA Rollover Account
#838-5798 7,200 0.01% 7,200
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Sterling A. Farmer 7,000 0.01% 7,000
Paul Schneider 6,750 0.01% 6,750
Mark Alex Marchque 6,667 0.01% 6,667
George Barakat 6,600 0.01% 6,600
Suzanne Williamson 6,378 0.01% 6,378
Frank Marceau 6,181 0.01% 6,181
Robert Dorsey 6,000 0.01% 6,000
Patrick McNerney 6,000 0.01% 6,000
Donald Dandelski 6,000 0.01% 6,000
Brian Griffin 6,000 0.01% 6,000
Gerry Tapp 6,000 0.01% 6,000
Scott C. Basnan 5,000 0.01% 5,000
Lee Jensen 5,000 0.01% 5,000
Hugh Dorsey IRA 5,000 0.01% 5,000
Gerry Bachman 5,000 0.01% 5,000
Laila Barakat 5,000 0.01% 5,000
Reay Cairns 5,000 0.01% 5,000
Margaret Heringer & Alf Heringer 5,000 0.01% 5,000
Douglas Andrews 4,800 0.01% 4,800
Bob Peterson 4,800 0.01% 4,800
Mary McMenamin 4,700 0.01% 4,700
Keith Fournier 4,400 0.01% 4,400
Mark Morrison 4,080 0.01% 4,080
Gary Windt 4,080 0.01% 4,080
Geoff Mather 4,000 0.01% 4,000
David Griffin 4,000 0.01% 4,000
Lee D'Epasquale 4,000 0.01% 4,000
Mary Diabattista 4,000 0.01% 4,000
Lance Johnston 4,000 0.01% 4,000
Sandra Johnston 4,000 0.01% 4,000
Chris Kelly 4,000 0.01% 4,000
Charlotte Sparx 4,000 0.01% 4,000
Karin Von Nickisch 4,000 0.01% 4,000
Ken Mulvaney & Brian Mulvaney JTWROS 3,000 0.00% 3,000
Laurent Maurier 3,000 0.00% 3,000
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
John Paterson 3,000 0.00% 3,000
294616 BC Ltd 3,000 0.00% 3,000
436618 Bc Ltd 3,000 0.00% 3,000
436620 Bc Ltd. 3,000 0.00% 3,000
Leo Marco 3,000 0.00% 3,000
Mary Jo McMenamin 2,800 0.00% 2,800
Robert Cairns 2,500 0.00% 2,500
Mike Marshall 2,400 0.00% 2,400
Michelle Saber & Jeff Knight JTWROS 2,000 0.00% 2,000
Anton Hammerschmidt 2,000 0.00% 2,000
Gretchen Bastian 1,999 0.00% 1,999
Robert Davies 1,920 0.00% 1,920
Bruce Andree 1,680 0.00% 1,680
John E Doerr 1,667 0.00% 1,667
Jandy Kerby-Miller 1,666 0.00% 1,666
Mark Alex Maidique 1,333 0.00% 1,333
Tim Over 1,200 0.00% 1,200
Sheila Davies 1,200 0.00% 1,200
John Morrison 1,200 0.00% 1,200
Kasie Worrel 1,000 0.00% 1,000
Scott Bastian 1,000 0.00% 1,000
Raymond James & Associates CSDN For Hugh Dorsey IRA 1,000 0.00% 1,000
Victor Chapman 400 0.00% 400
Jane Kirby Miller 333 0.00% 333
Cindy Phoel 240 0.00% 240
---------- ----- ----------
Total: 44,095,915 66.26% 44,095,915
------------------------
</TABLE>
(1) Assumes the sale of all of the Shares offered by each of the Selling
Shareholders.
40
<PAGE>
PLAN OF DISTRIBUTION
The shares may be sold or distributed from time to time by the selling
stockholders or by pledgees, donees or transferees of, or successors in interest
to, the selling stockholders, directly to one or more purchasers (including
pledgees) or through brokers, dealers or underwriters who may act solely as
agents or may acquire shares as principals, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices, which may be changed. The distribution of the shares
may be effected in one or more of the following methods:
o ordinary brokers transactions, which may include long or short
sales,
o transactions involving cross or block trades or otherwise on
the on the quotation system operated by the National Quotation
Bureau, LLC, known as the Pink Sheets, or on one or more other
securities markets and exchanges, in privately negotiated
transactions,
o purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to
this prospectus,
o "at the market" to or through market makers or into an
existing market for the common stock,
o in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales
effected through agents,
o through transactions in options, swaps or other derivatives
(whether exchange listed or otherwise), or
o any combination of the foregoing, or by any other legally
available means.
In addition, the selling stockholders may enter into hedging
transactions with broker-dealers who may engage in short sales of shares in the
course of hedging the positions they assume with the selling stockholders. The
selling stockholders may also enter into option or other transactions with
broker-dealers that require the delivery by such broker-dealers of the shares,
which shares may be resold thereafter pursuant to this prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the shares may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders and/or the purchasers
of shares for whom such broker-dealers may act as agent or to whom they may sell
as principal, or both (which compensation as to a particular broker-dealer may
be in excess of customary commissions). The selling stockholders and any
broker-dealers acting in connection with the sale of the shares hereunder may be
deemed to be underwriters within the meaning of Section 2(11) of the Securities
Act of 1933, and any commissions received by them and any profit realized by
them on the resale of shares as principals may be deemed underwriting
compensation under the Securities Act of 1933. Neither the selling stockholders
nor us can presently estimate the amount of such compensation. We know of no
existing arrangements between the selling stockholders and any other
stockholder, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares.
We will not receive any proceeds from the sale of the shares pursuant
to this prospectus. We have agreed to bear the expenses (other than broker's
commissions and similar charges) of the registration of the shares, including
legal and accounting fees.
The selling stockholders may also use Rule 144 under the Securities Act
of 1933 to sell the shares if they meet the criteria and conform to the
requirements of such Rule.
Offers or sales of the shares have not been registered or qualified
under the laws of any country other than the United States. To comply with
certain states' securities laws, if applicable, the shares will be offered or
sold in such jurisdictions only through registered or licensed brokers or
dealers.
There can be no assurance that the selling stockholders will sell any
or all of the shares offered by them hereunder.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following is a summary description of our capital stock and certain
provisions of our articles of incorporation and by-laws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this Prospectus1 forms a part. The following discussion is qualified in
its entirety by reference to such exhibits.
GENERAL
Our authorized capital stock consists of 250,000,000 shares of common
stock, par value $.001 per share. At the present time, no preferred stock is
authorized under our Articles of Incorporation. We have also reserved 9,000,000
shares of our common stock for issuance pursuant to options granted pursuant to
our 1999 Stock Option Plan, dated March 1, 1999 and amended effective March 13,
2000. As of October 4, 2000, we had 65,745,915 shares of common stock issued and
outstanding and 0 shares of preferred stock issued and outstanding.
COMMON STOCK
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Our articles
of incorporation and by-laws do not provide for cumulative voting rights in the
election of directors. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of our shares of common stock are
entitled to receive ratably such dividends as may be declared by the board of
directors out of funds legally available therefore. In the event of our
liquidation, dissolution or winding up, holders of common stock are entitled to
share ratably in the assets remaining after payment of liabilities. Holders of
common stock have no preemptive, conversion or redemption rights. All of the
outstanding shares of common stock are fully-paid and non-assessable.
The election of directors and other general stockholder action requires
the affirmative vote of a majority of shares represented at a duly held meeting
at which a quorum is represented, except that pursuant to the by-laws, a written
consent to corporate action by a majority of stockholders entitled to vote on a
matter is permitted. The outstanding shares of common stock are validly issued,
fully paid and non-assessable.
PREFERRED STOCK
At the present time, no preferred stock is authorized in the Articles
of incorporation.
OPTIONS AND WARRANTS
We approved the issuance of up to 9,000,000 options to acquire common
stock in the company on March 1, 1999 pursuant to our 1999 stock option plan. At
the time of filing the registration statement, there were options outstanding to
purchase up to an aggregate of 7,388,000 shares of our common stock.
NEVADA ANTI-TAKEOVER LAW
A corporation is subject to Nevada's control share law if it has more
than 200 stockholders, at least 100 of whom are stockholders of record and
residents of Nevada, and if it does business in Nevada or through an affiliated
corporation. Sections 78.378 through 78.3793 of the Nevada General Corporation
Law generally provide that any "control shares" acquired by a person in the
direct or indirect acquisition of a "controlling interest" in a Nevada
corporation, greater than a level of "controlling interest" previously
authorized by the corporation's stockholders, (i) shall be divested of all
voting rights, except to the extent that the retention of voting rights is
authorized by the stockholders of the corporation other than the acquiring
person and associated persons, and (ii) may be redeemed, in whole but not in
part, by the corporation at the average price paid for the control shares. These
sections define "control shares" as those voting shares which an acquiring
person and associated persons acquire in the acquisition of a "controlling
interest", greater than the level of controlling interest previously authorized
by the corporation's stockholders, or within 90 days immediately preceding the
date the acquiring person acquired such greater controlling interest. A
"controlling interest" is defined in the statutes as the ownership of voting
shares sufficient, but for the provisions of Sections 73.378 through 78.3793, to
enable a person, directly or indirectly and individually or in association with
others, to exercise (i) one-fifth or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority or more, of all
voting power of the corporation in the election of directors. These provisions
could have the result of delaying or preventing an acquirer from being able to
elect a majority of the board of directors, or otherwise obtain control of our
company.
NEVADA BUSINESS COMBINATION PROVISIONS
In addition to the above control share law, we are governed by the
provisions of Section 78.438 of the Nevada General Corporation Law. In general,
this statute prohibits certain business combinations between Nevada corporations
that have 200 or more stockholders and "interested stockholders" for three years
after the "interested stockholder" first becomes an "interested stockholder"
unless the corporation's board of directors approves the combination in advance.
Section 78.423 defines "interested stockholder" to be any person who is (i) the
beneficial owner, directly, or indirectly, of 10 percent or more of the voting
power of the outstanding voting shares of the resident domestic corporation, or
(ii) an affiliate or associate of the resident domestic corporation and at any
time within 3 years immediately before the date in question was the beneficial
owner, directly or indirectly, of 10 percent or more of the voting power of the
then outstanding shares of the resident domestic corporation. For purposes of
Nevada law, "business combination" includes, without limitation, mergers,
consolidations, stock sales and asset-based transactions and other transactions
resulting in a financial benefit to the interested stockholder. The effect of
this law is to potentially discourage parties interested in taking control of
the company from doing so if it cannot obtain the approval of our board of
directors.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Articles V and VI of our articles of incorporation contain provisions
which limit the liability of our directors to the fullest extent permissible
under the General Corporation Law of the State of Nevada. In addition, these
provisions provide that our Company shall, to the fullest extent permitted by
law, indemnify and any [all persons] from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by the General
Corporation Law of the State of Nevada. The indemnification provided for therein
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors and administrators.
Section 9 of our by-laws provides for the indemnification of agents of
our Company and the purchase of liability insurance. For purposes of Section 9,
"agent" means any person who is or was a director, officer, employee
42
<PAGE>
or other agent of Corporation, or is or was serving at our request as a
director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the Corporation or of another enterprise at the
request of such predecessor corporation of us or of another enterprise at the
request of such predecessor corporation at the time of a proceeding.
"Proceeding" means any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative; and "expenses"
included without limitation, attorneys' fees and any expenses of establishing a
right to indemnification under this Section 9.
We also have the power to indemnify any person who was or is a party or
is threatened to be made a party to any proceeding) other than an action by or
in the right of our Company to procure a judgment in its favor) by reason of the
fact that such person is or was an agent of ours, against expenses, judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with such proceedings to the fullest extent permitted under the
General Corporation Law of the State of Nevada.
SHARES ELIGIBLE FOR FUTURE SALE
Of the 65,745,915 shares of our common stock outstanding, 5,150,000 are
freely tradeable shares as of the date of filing this registration statement and
60,595,915 shares of common stock are restricted securities as that term is
defined in Rule 144 promulgated under the Securities Exchange Act of 1934.
Rule 144 governs resale of restricted securities for the account of any
person, other than the issuer, and restricted and unrestricted securities for
the account of an "affiliate" of the issuer. Restricted securities generally
include any securities acquired directly or indirectly from an issuer or its
affiliates, which were not issued or sold in connection with a public offering
registered under the Securities Exchange Act of 1934. An "affiliate" of the
issuer is any person who directly or in directly controls, is controlled by, or
is under common control with the issuer. Affiliates of our Company may include
our directors, executive officers and persons directly or indirectly owning 10%
or more of the outstanding common stock. Under Rule 144, unregistered resale of
restricted common stock cannot be made until it has been held for a minimum of
one year from the later of its acquisition from us or an affiliate of ours.
Thereafter, shares of common stock may be resold without registration subject to
Rule 144's volume limitation aggregation, broker transaction, notice filing
requirements, and requirements concerning publicly available information about
our Company. Resale by our affiliates of restricted and unrestricted common
stock is subject to the above requirements. The volume limitations provide that
a person, or persons who must aggregate their sale cannot, within any three (3)
month period, sell more than the greater of (i) one percent (1%) of our then
outstanding shares of common stock, or (ii) the average weekly reported trading
volume during the four (4) calendar weeks preceding each such sale. A person who
is not deemed an "affiliate" of ours and who has beneficially owned shares for
at least two years would be entitled to sell such shares under Rule 144 without
regard to such requirements.
Any employee of the Company who has been granted options to purchase
Shares or who has purchased Common Shares pursuant to a written compensatory
plan or written contract prior to the date of this offering pursuant to Rule 701
will be entitled to rely on the resale provisions of Rule 701, which permits
such persons who are not "affiliates" of the Company to sell such Common Shares
without compliance with the public information, holding-period, volume
limitation or notice provisions of Rule 144 and permits such persons who are
"affiliates" to sell such Common Shares without compliance with the Rule 144
holding period restrictions, in each case commencing 90 days after the date of
this Prospectus.
Shortly after this registration statement becomes effective, the
Company intends to file a registration statement on Form S-8 under the
Securities Act to register shares of our common stock reserved for issuance
under the 1999 stock option plan, in some cases, shares of our common stock for
which an exemption under Rule 144 or Rule 701 would also be available, thus
permitting the resale of shares of our common stock issued under the 1999 stock
option plan by non-affiliates in the public market without restriction under the
Securities Act. Such registration statement will become effective immediately
upon filing. As of November 9, 2000, stock options to purchase 7,388,000 shares
of our common stock were outstanding.
43
<PAGE>
CHANGES IN ACCOUNTANTS
In a report dated October 10, 2000, Dale, Matheson, Carr-Hilton ceased
to be our auditors. As our auditors, they had reported on our audited financial
statements for the period from June 2, 1998 to December 31, 1998, the twelve
(12) month period ended December 31, 1999 and the unaudited results of our
financial operations for the interim period. Such reports did not contain an
adverse opinion or disclaimer of opinion, nor were such reports qualified or
modified as to uncertainty, audit scope or accounting principles. There were no
disagreements with Dale, Matheson, Carr-Hilton on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure when Dale, Matheson, Carr-Hilton ceased as auditor of our Company. The
departure of Dale, Matheson, Carr-Hilton as auditor was not due to any
disagreement or dissatisfaction on the part of either Dale, Matheson,
Carr-Hilton or our Company. Our board of directors approved the hiring of
PricewaterhouseCoopers LLC as auditors of our Company on October 10, 2000.
Previously, our Company's accountant had been David A. Cox, a Chartered
accountant, who reported on our interim financial operations from the date of
our incorporation on January 8, 1998 to June 1, 1998.
EXPERTS
The consolidated financial statements and related schedules for the
twelve (12) month period ended December 31, 1999 appearing in this prospectus
have been audited by Dale, Matheson, Carr-Hilton, independent accountants. Their
report appears elsewhere herein. The interim consolidated financial statements
and related schedules for the six (6) month period ended June 30, 2000 appearing
in this prospectus were reviewed by Dale, Matheson, Carr-Hilton.
The consolidated financial statements and related schedules for
Schelfhout Computer Systemen, N.V. appearing in this prospectus have been
audited by PricewaterhouseCoopers Bedrijfsrevisoren bcvba. Its report appears
elsewhere herein.
The validity of the shares of common stock offered in this prospectus
has been passed upon for us by Parker Chapin LLP, The Chrysler Building, 405
Lexington Avenue, New York, New York 10174. Its telephone number is (212)
704-6000.
TRANSFER AGENT AND REGISTRAR
Interwest Transfer Co., Inc., located at 100-1981 East Murray Holiday
Road, Salt Lake City, Utah, 84117 was appointed transfer agent, registrar and
dividend disbursing agent for all of the shares of our common stock on April 15,
1999 and continues to act in those capacities as of the date of filing this
registration statement.
WHERE YOU CAN GET MORE INFORMATION
We file reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any report, proxy
statement or other information we file with the Commission at the Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices at 75 Park Place, Room 1400, New York, New York
10007 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. In addition, we file
electronic versions of these documents on the Commission's Electronic Data
Gathering Analysis and Retrieval, or EDGAR, System. The Commission maintains a
website at http://www.sec.gov that contains reports, proxy statements and other
information filed with the Commission.
You should note that statements contained in this prospectus that refer
to the contents of any contract, agreement or other document are not necessarily
complete. Such statements are qualified by reference to the copy of such
contract, agreement or other document filed as an exhibit to the registration
statement or any amendments thereto, including exhibits filed as part thereof,
filed with the SEC. No person is authorized to give any information or to make
any representation with respect to the matters described in this prospectus
other than those contained herein and, if given or made, the information or
representation must not be relied upon as having been authorized by us. You may
inspect and copy the registration statement and any amendments thereto,
including exhibits filed as part thereof, at the SEC's offices as described
above.
44
<PAGE>
E-AUCTION GLOBAL TRADING INC.
INDEX TO FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
E-AUCTION GLOBAL TRADING INC. -
-------------------------------
<TABLE>
<CAPTION>
PAGE
CONSOLIDATED FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 1999
<S> <C>
Report of Dale Matheson Carr-Hilton, Chartered Accountants, Independent Auditors............ F-2
Consolidated Balance Sheets as of December 31, 1998 and 1999 (audited) and as of June 30, 2000
(unaudited)................................................................................. F-3
Consolidated Statements of Operations (audited) for the period from June 2, 1998 to December
31, 1998 and the year ended December 31, 1999 .............................................. F-4
Consolidated Statements of Cash Flows (audited) for the period from June 2, 1998 to December
31, 1998 and the year ended December 31, 1999............................................... F-5
Notes to Consolidated Financial Statements.................................................. F-6
E-AUCTION GLOBAL TRADING INC. -
-------------------------------
CONSOLIDATED FINANCIAL STATEMENTS FOR SIX (6) MONTHS ENDED JUNE 30, 2000
Consolidated Balance Sheet (unaudited) at June 31, 2000 and June 31, 1999................... F-18
Consolidated Statements (unaudited) of Operations and Deficit for the six months ended June
31, 2000 and 1999........................................................................... F-20
Consolidated Statements (unaudited) of Cash Flows for the six months ended June 31, 2000 and
1999........................................................................................ F-21
Notes to Consolidated Financial Statements.................................................. F-22
SCHELFHOUT COMPUTER SYSTEMEN N.V. -
-----------------------------------
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Report of Independent Accountants........................................................... F-38
Balance Sheets as of December 31, 1999 and 1998............................................. F-39
Statements of Operations for the years ended December 31, 1999 and 1998..................... F-41
Notes to financial statements............................................................... F-42
E-AUCTION GLOBAL TRADING INC. -
-------------------------------
UNAUDITED PROFORMA FINANCIAL STATEMENTS FOR YEAR ENDED DECEMBER 31, 1999
Pro Forma Balance Sheet as of December 31, 1999............................................. F-54
Proforma Consolidated Income Statement for the year ended December 31, 1999................. F-55
Notes to Proforma Consolidated Financial Statements ........................................ F-56
</TABLE>
45
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(IN U.S. FUNDS)
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
E-AUCTION GLOBAL TRADING INC.
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations and deficit and cash flows present fairly, in all
material respects, the financial position of e-Auction Global Trading Inc. at
December 31, 1999, and the results of their operations and their cash flows for
the year then ended, in conformity with accounting principles generally accepted
in the United States. 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 audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ Alvin F. Dale, Ltd.
Dale Matheson Carr-Hilton
VANCOUVER, B.C.
FEBRUARY 1, 2000 CHARTERED ACCOUNTANTS
F-2
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1999
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
1999 1998
$ $
-----------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash 301,461 1
Unrestricted cash held in trust by lawyers 66,853 -
Restricted cash held in trust by lawyers (NOTE 15) 3,811,080 -
--------- ---------
4,179,394 1
INVESTMENT IN SCHELFHOUT (NOTE 4) 1,000,000 -
CAPITAL ASSETS (NOTE 5) 34,247 -
-----------------------------------------------------------------------------------------------------------------------------------
5,213,641 1
===================================================================================================================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable 749,050 -
Deferred revenue (NOTE 6) 200,000 -
Due to related party (NOTE 7) 860,793 -
Loans payable (NOTE 8) 2,000,000 -
Shareholder's loan (NOTE 9) 2,200,000 -
Share subscriptions received 1,858,229 -
--------- ---------
7,868,072
--------- ---------
SHAREHOLDERS' EQUITY
SHARE CAPITAL AND CONTRIBUTED SURPLUS (NOTE 10) 1 1
DEFICIT, ACCUMULATED DURING DEVELOPMENT STAGE (2,654,432) -
--------- ---------
(2,654,431) 1
-----------------------------------------------------------------------------------------------------------------------------------
5,213,641 1
===================================================================================================================================
</TABLE>
CONTINGENCIES (NOTE 16)
APPROVED BY THE DIRECTORS
________________________________________ DIRECTOR
________________________________________ DIRECTOR
SEE ACCOMPANYING NOTES
F-3
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
1999 1998
$ $
-----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
<S> <C>
Advertising and promotion 19,221 -
Bank charges 277 -
Consulting fees 426,158 -
Insurance 3,698 -
Investor relations 316,567 -
Loan fee (NOTE 8) 1,000,000 -
Office and miscellaneous 31,685 -
Professional fees 241,748 -
Rent 59,874 -
Salaries 458,924 -
Telephone 59,136 -
Travel 37,144 -
--------- ---------
2,654,432 -
--------- ---------
NET LOSS (2,654,432) -
DEFICIT, beginning of year - -
-----------------------------------------------------------------------------------------------------------------------------------
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE, end of year (2,654,432) -
===================================================================================================================================
-----------------------------------------------------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER SHARE (NOTE 6) (0.07) 0.00
===================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
F-4
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
1999 1998
$ $
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (2,654,432) -
Net changes in non-cash operating accounts
Accounts payable 749,050 -
Deferred revenue 200,000 -
(1,705,382) -
FINANCING ACTIVITIES
Due to related parties 860,793 -
Issuance of share capital - 1
Share subscriptions received 247,149 -
Loans received 2,000,000 -
Shareholder's loan received - -
3,107,942 1
--------- -----------
INVESTING ACTIVITIES
Deposit on Schelfhout acquisition (1,000,000) -
Acquisition of capital assets (34,247) -
--------- -----------
(1,034,247) -
--------- -----------
INCREASE (DECREASE) IN CASH 368,313 -
CASH, beginning of year 1 -
-----------------------------------------------------------------------------------------------------------------------------------
CASH, end of year 368,314 1
===================================================================================================================================
CASH
Unrestricted cash held in trust by lawyers 66,853 -
Cash 301,461 1
-----------------------------------------------------------------------------------------------------------------------------------
368,314 1
===================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
F-5
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
1. NATURE OF BUSINESS
--------------------------------------------------------------------------------
The Company is a development stage entity and was organized with the
intent to be a holding company which will acquire and/or form joint
ventures with corporate entities conducting various types of businesses
throughout the world.
--------------------------------------------------------------------------------
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, for the issuance of 34,500,000 common shares.
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.
(SEE NOTE 11)
b) Principles of consolidation
The accompanying financial statements consolidate the accounts of
the Company and its wholly owned subsidiaries, e-Auction Belgium
N.V., e-Auction Global Trading Inc. (Barbados) and their wholly
owned subsidiary e-Auction Global Trading Inc. (Canada).
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
a) Foreign currency translation
The Company's functional currency and reporting currency are U.S.
dollars. The Company follows SFAS 52 where 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 year end exchange rate.
F-6
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
--------------------------------------------------------------------------------
b) Loss per common share
The weighted average number of shares used for calculating loss
per share is 40,160,438.
c) 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.
d) Financial instruments
The Company's financial instruments consist of cash, accounts
payable, due to related parties, loans payable and a shareholder's
loan, the fair market value of which approximates their carrying
value.
e) Amortization
Amortization of capital assets. Amortization is provided at the
following annual rates:
Software Straight-line over 5 years
f) Related party transactions
Related party transactions are recorded at their exchange amounts
which approximate fair market value.
g) Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use
two digits rather than four to identify a year. Date-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some systems
which use certain dates in 1999 to represent something other than
a date. The effects of the Year 2000 Issue may be experienced
before, on, or after January 1, 2000, and, if not addressed, the
impact on operations and financial reporting may range from minor
errors to significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue
affecting the entity, including those related to the efforts of
customers, suppliers, or other third parties, will be fully
resolved.
h) Income taxes
The Company would record a deferred tax asset subject to an
evaluation allowance where that asset is impaired or not expected
to be realized. The Company has deferred tax assets of
approximately $1,194,494. The Company's valuation allowance would
be equal to the amount of the deferred tax assets. Therefore,
there have been no amounts booked in the accounts of the Company.
F-7
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
--------------------------------------------------------------------------------
i) Revenue recognition
The Company's policy is to recognize revenue from license fees
when an agreement specifying the Company's fee is signed, the
software is delivered and collection is considered probable.
Revenue from royalties are recorded as earned and when
collection is considered probable.
--------------------------------------------------------------------------------
4. INVESTMENT IN SCHELFHOUT
--------------------------------------------------------------------------------
1999 1998
$ $
Deposit 1,000,000 -
=========
Pursuant to a share purchase agreement dated January 7, 2000, the
Company paid a deposit on the purchase of 100% of the issued and
outstanding share capital of Schelfhout Computer Systemen N.V.
("Schelfhout").
The purchase price is $10,000,000, this represents the price stipulated
in the purchase agreement. For accounting purposes the purchase price
is $7,636,364 and is to be paid as follows:
<TABLE>
<CAPTION>
<S> <C>
Refundable deposit $ 1,000,000 paid
Cash on closing 3,000,000 paid subsequent to year end
Common shares at fair value
issued on closing (3,636,364) 3,636,364 issued subsequent to year end
---------
$ 7,636,364
===========
</TABLE>
The 3,636,364 common shares are not free trading and are subject to a
timed release formula which allows for release of 454,545 shares with a
deemed value of $750,000 on each of the 6, 12, 18 and 24 month
anniversary of the closing and 606,061 shares with a deemed value of
$1,000,000 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 equivalent cash is to be paid by the Company and the
shares returned to the treasury.
The Schelfhout acquisition was completed and publicly announced on
January 7, 2000.
The stock price of $1.00 per share for accounting purposes represents
the fair value of the shares issued.
F-8
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
4. INVESTMENT IN SCHELFHOUT - CONT'D
--------------------------------------------------------------------------------
The fair value of the shares issued was determined based on: (a) the
cash price paid for stock in a contemporaneous private placement, (b)
the put feature related to the shares issued and (c) market price of
the stock.
The dollar values for the shares to be released are based on $1.65 per
share which represents the cash price per share that the Company may be
required to pay; and
If the Company is required to repurchase the shares issued at $1.65 per
share that will result in additional goodwill.
(SEE NOTE 15)
--------------------------------------------------------------------------------
5. CAPITAL ASSETS
--------------------------------------------------------------------------------
1999 1998
$ $
Software 34,247 -
======
No amortization has been taken for the year as the software was not put
into use until after year end.
--------------------------------------------------------------------------------
6. DEFERRED REVENUE
--------------------------------------------------------------------------------
1999 1998
$ $
200,000 -
=======
In September of 1999 the Company entered into a Software License and
Non-Competition Agreement to grant an exclusive license in perpetuity,
subject to performance, to use its technology to commercially exploit
electronic auctions in the region of Australia and New Zealand.
The Agreement called for a payment of $200,000 by December 31, 1999 and
royalties of 20% of gross revenue less gross operating costs.
The $200,000 is being recorded as deferred revenue until the Company
ships the software at which time it will be taken into income. The
Company's revenue recognition policy is to recognize the license fee upon
shipment of the software as no other obligations exist and to recognize
royalties when received.
F-9
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
7. DUE TO RELATED PARTIES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C> <C>
Ventures North Investment Partners Inc. ("Ventures") 860,793 -
=======
</TABLE>
The majority of the Company's operations during the year were funded by
Ventures. Ventures is related through significant common shareholdings.
The amounts advanced are non-interest bearing with no fixed terms of
repayment. (SEE NOTE 12)
--------------------------------------------------------------------------------
8. LOANS PAYABLE
--------------------------------------------------------------------------------
1999 1998
$ $
Millennium Advisors Inc.
Loan payable 1,000,000 -
Financing fee payable 1,000,000 -
--------- ------
2,000,000 -
========= =====
On August 12, 1999 the Company received a loan of $1,000,000 from
Millennium Advisors Inc. ("Millennium"), a company related through a
common director, acting as agent for undisclosed lenders. The loan was to
be repaid within 30 days. In consideration for the loan Millennium
received 197,219 common shares of the Company with a deemed value of
$1,000,000 as a financing fee. The number of shares issued was based on
the weighted average closing price in a 5 day range when the loan was
granted. These shares were issued in January, 2000. (SEE NOTE 15)
The Company also entered into a contract for services whereby Millennium
would be paid 25% of any funds raised by the sale of equity or issuance
of debt by the Company in excess of the amount reasonably required by the
Company to complete the Schelfhout acquisition. To date Millennium had
raised no additional funds and no additional amounts have been paid. The
Company also entered into an agreement on March 1, 1999 to pay Millennium
consulting fees of $20,000 per month for one year.
(SEE NOTE 12)
F-10
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
9. SHAREHOLDER'S LOAN
--------------------------------------------------------------------------------
1999 1998
$ $
Halium Hongorzul 2,200,000 -
=========
The loan was obtained on December 14, 1999 to help finance the Schelfhout
acquisition and was originally set up to be convertible to common shares.
Prior to December 31, 1999 the loan was non-interest bearing. Subsequent
to year end, in February, 2000 the loan was repaid with $21,698 in
interest.
A finders fee of $200,000 in connection with the loan was paid to the
shareholder subsequent to year end.
(SEE NOTE 15)
--------------------------------------------------------------------------------
10. SHARE CAPITAL AND CONTRIBUTED SURPLUS
--------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
NUMBER OF 1999 CONTRIBUTED TOTAL
SHARES $ SURPLUS $
------------ ------ ------------- ------
<S> <C> <C> <C>
b) Issued - Balance, beginning of year 34,500,000 34,500 (34,500) -
Resulting from reverse takeover acquisition 5,320,000 5,320 (5,319) 1
----------- ------- -------- -----------
Balance, end of year 39,820,000 39,820 (39,819) 1
========== ====== ======= ===========
c) Share capital and contributed surplus since inception
CONTRIBUTED
NUMBER SURPLUS
DATE ISSUED OF SHARES $ $
----------- --------- ---- ------------
April 30, 1998 (i) 34,500,000 34,000 (34,500)
February 26, 1999 (ii) 5,320,000 5,320 (5,319)
----------- ------- --------
39,820,000 39,820 (39,819)
========== ====== =======
</TABLE>
(i) For reverse takeover accounting purposes these shares have
been deemed to have been issued on April 30, 1998, the date of
incorporation of Barbados.
(ii) Shares issued by Nevada prior to the incorporation of
Barbados. For reverse takeover accounting purposes these have
been deemed to have been issued on February 26, 1999, the date
of the reverse takeover transaction.
F-11
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
10. SHARE CAPITAL AND CONTRIBUTED SURPLUS - CONT'D
--------------------------------------------------------------------------------
d) Stock options
On March 1, 1999 the Company adopted a stock option plan which
reserved 6,000,000 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>
DATE OF EXERCISE EXPIRY
GRANT NUMBER PRICE DATE RESTRICTIONS
----- ------ ----- ---- ------------
<S> <C> <C> <C> <C>
March 1, 1999 1,000,000 $0.01 December 1, 2003 None
August 29, 1999 250,000 $5.00 August 29, 2009 Vest equally over 3 years
December 1, 1999 3,000,000 $0.85 December 1, 2009 50% vest immediately
50% vested exercisable over 3 years
December 1, 1999 50,000 $0.85 December 1, 2009 Vest equally over 3 years
</TABLE>
The weighted average exercise price of the options is $0.90/share.
The weighted average grant date fair value of options granted during the
year is as follows:
- Exercise price equals fairmarket value $0.34
- Exercise price exceeds fair market value $0.03
- Exercise price less than fair market value $0.67
The Company has not recognized compensation expense for its stock-based
awards to employees. The following reflects proforma net income and loss
per share had the Company elected to adopt the fair value approach of
SFAS 123:
1999 1998
$ $
Net loss
As reported (2,654,432) -
Pro forma (7,125,932) -
Basic and diluted loss per share
As reported (0.07) 0.00
Pro forma (0.16) 0.00
The estimated fair value of each option granted is calculated using the
Black-Scholes option-pricing model. The weighted average assumptions used
in the model were as follows:
F-12
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
10. SHARE CAPITAL AND CONTRIBUTED SURPLUS - CONT'D
--------------------------------------------------------------------------------
1999 1998
---- ----
Risk-free interest rate 5% 0%
Expected years until exercise 8 0%
Expected stock volatility 36.8% 0%
Dividend yield 0% 0%
(SEE NOTE 15)
--------------------------------------------------------------------------------
11. ACQUISITION
--------------------------------------------------------------------------------
On February 26, 1999 the Company entered into a Share Exchange Agreement
between itself, e-Auction Global Trading Inc. ("Barbados") and QFG
Holdings Limited ("QFG"), a significant shareholder of Barbados.
The Agreement required the Company to purchase 100% of the issued and
outstanding shares of Barbados for 34,500,000 shares of the Company. Also
contemplated in the agreement was the adoption of 1,000,000 options at
$0.01/share outstanding in Barbados.
At the time Barbados' only assets were two purchases of intellectual
property negotiated by QFG and assigned to Barbados. The first purchase
was for the exclusive rights to market the operation and management of an
on-line auction system for $300 Cdn. paid in the form of 30,000 options
at a price of $0.01 in the share capital of Barbados. In connection with
this acquisition a consulting agreement was entered into where a company
associated with the vendor would be paid $5,000 Cdn. per month to be
expensed as consulting fees when paid. Additionally on December 1, 1998,
the vendor received options to acquire 65,000 common shares at
$0.01/share in Barbados.
The second purchase was for intellectual property rights relating to the
operation and management of on-line auction for $50,000 Cdn. in cash. In
connection with this acquisition a management services agreement was
entered into where $1,000 Cdn. per month would be paid to the vendor.
These fees will be expensed as consulting fees when paid. Additionally on
December 1, 1998 the vendor received options to acquire 80,000 common
shares at $0.01/share in Barbados.
Subsequent to the acquisitions, Barbados transferred the intellectual
property to its Canadian subsidiary e-Global Auction Trading Inc. The
$50,000 cash purchase price was not paid prior to the share exchange
agreement and is now being paid by the Canadian subsidiary.
At the time of the Agreement, Barbados through QFG had entered into a
three way letter agreement with Jameson Investment Corporation
("Jameson") to acquire 100% of the outstanding shares of Jameson
International Foreign Corporation for a purchase price of $7,500,000.
F-13
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
11. ACQUISITION - CONT'D
--------------------------------------------------------------------------------
During the ongoing negotiations QFG agreed to pay Jameson a $2,000,000
Canadian deposit to extend the closing date to October 15,1999. Funds
totalling $1,400,000 were borrowed by QFG from Millennium Advisors Inc.
("Millennium"), a company related through common directors. These funds
were deposited into the Company's trust account and paid to Jameson.
During the fall of 1999 the deal failed to close and the deposit provided
by QFG was forfeited. QFG has accepted responsibility for repaying the
funds they borrowed from Millennium. The Company paid $88,785 in
professional fees in connection with this proposed acquisition.
The options issued in connection with the two purchases of intellectual
property are included in the 1,000,000 options adopted from Barbados.
Since both companies had no net tangible assets, the value assigned to
the 34,500,000 shares issued is nil.
--------------------------------------------------------------------------------
12. RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
$ $
<S> <C>
Loan fee charged by a company with a common director 1,000,000 -
Consulting fees paid to a company with a common director 180,000 -
Consulting fees charged by an individual who subsequently
became a director 13,501 -
Expenses paid on behalf of the Company and allocations of
expenses charged to the Company by companies with significant
common shareholdings and common directors 900,479 -
--------------------------------------------------------------------------------
13. COMPARATIVE FIGURES
--------------------------------------------------------------------------------
Comparative figures are for the period from April 30, 1998 (date of
incorporation) of e-Auction Global Trading Inc. ("Barbados") to December
31,1998. Certain of the comparative figures have been reclassified to
conform to the current presentation.
F-14
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
14. CUMULATIVE STATEMENTS
--------------------------------------------------------------------------------
a) CUMULATIVE STATEMENT OF OPERATIONS AND DEFICIT
$
EXPENSES
<S> <C>
Advertising and promotion 19,221
Bank charges 277
Consulting fees 426,158
Insurance 3,698
Loan fee 1,000,000
Office and miscellaneous 31,685
Professional fees 241,748
Rent 59,874
Salaries 458,924
Telephone 59,136
Travel 37,144
-----------
2,654,432
CUMULATIVE NET LOSS, being deficit accumulated during
development stage (2,654,432)
=========
b) CUMULATIVE STATEMENT OF CASH FLOWS
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net loss (2,654,432)
Net changes in non-cash operating accounts
Accounts payable 749,050
Deferred revenue 200,000
----------
(1,705,382)
FINANCING ACTIVITIES
Due to related parties 860,793
Issuance of share capital 1
Share subscriptions received 247,149
Loans received 2,000,000
---------
3,107,943
INVESTING ACTIVITIES
Deposit of Schelfhout acquisition (1,000,000)
Acquisition of capital assets (34,247)
-----------
(1,034,247)
CASH, end of year 368,314
==========
</TABLE>
F-15
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
15. SUBSEQUENT EVENTS
--------------------------------------------------------------------------------
a) On January 7, 2000 the Company completed its acquisition of
Schelfhout Computer Systemen N.V.
b) On January 7, 2000 the Company completed a private placement of
16,885,447 shares at $0.50/share. 7,625,916 of the shares were
issued to Ventures North Investment Partners Inc., a company related
through significant common shareholdings and four companies related
to them in exchange for their settling the Company's debts to
Millennium Advisors Inc. of $1,000,000, the shareholders loan of
$2,200,000 with interest of $21,968 and a finders fee to the
shareholder of $200,000 and Ventures North Investment Partners Inc.
of $591,260. The remaining 9,259,531 were issued for cash.
c) On January 7, 2000 the Company issued 197,219 shares to Millennium
Advisors Inc. as a financing fee. (SEE NOTE 8)
d) On January 20, 2000 the Company granted 300,000 options with an
exercise price of $2/share and on March 1, 2000 the Company granted
1,300,000 options with an exercise price of $4.38/share.
e) In January 2000, all restricted funds held in trust by the Company's
lawyers were released to the Company.
--------------------------------------------------------------------------------
16. 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.
It is management's option that the likelihood of a material loss is
remote.
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
totalling several millions of dollars.
It is management's option that the likelihood of a material loss is
remote.
F-16
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
F-17
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED BALANCE SHEET - JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
2000 1999
$ $
(NOTE 14)
--------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and short-term deposits 10,207,204 1,024
Accounts receivable 1,196,821 -
Inventory 253,222 -
Work in progress 30,011 -
Prepaid expenses 207,345
---------- ----------
11,894,603 1,024
CAPITAL ASSETS (NOTE 4) 723,840 34,247
DEPOSITS ON ACQUISITION OF KWATROBOX (NOTE 6) 1,062,125 -
GOODWILL (NOTE 5) 6,541,159 -
--------------------------------------------------------------------------------------------------------------------
20,221,727 35,271
--------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
F-18
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED BALANCE SHEET - JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
2000 1999
$ $
(NOTE 14)
--------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accruals 1,591,774 307,697
Short-term loan 83,469 -
Due to Ventures North Investment Partners (NOTE 8) 47,945 365,824
Deferred revenue (NOTE 7) 721,212 -
Current portion of long-term debt (NOTE 9) 53,029 -
-
Current portion of obligations under capital lease (NOTE 10) 8,304 -
---------- -----------
2,505,733 673,521
LONG-TERM DEBT (NOTE 9) 181,221 -
OBLIGATIONS UNDER CAPITAL LEASE (NOTE 10) 26,467 -
---------- -----------
2,713,421 673,521
---------- -----------
REDEEMABLE COMMON STOCK (NOTES 5 AND 12) 3,636,364 -
---------- -----------
NON-CONTROLLING INTEREST (NOTE 11) 779,668 -
---------- -----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (NOTE 12) 65,146 1
CONTRIBUTED SURPLUS (NOTE 12) 17,222,258 -
DEFICIT (4,195,130) (638,251)
---------- -----------
13,092,274 (638,250)
--------------------------------------------------------------------------------------------------------------------
20,221,727 35,271
--------------------------------------------------------------------------------------------------------------------
</TABLE>
CONTINGENCIES (NOTE 15)
SEE ACCOMPANYING NOTES
F-19
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
APR. 1 TO JAN. 1 TO APR. 1 TO JAN. 1 TO
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 2000 1999 1999
$ $ $ $
(NOTE 14)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE 951,083 1,979,919 - -
COST OF GOODS SOLD 564,363 1,282,051 - -
------- --------- ------- -------
GROSS MARGIN 386,720 697,868 - -
EXPENSES
Salaries and benefits 563,544 1,043,603 208,057 272,966
Sales, general and administrative 344,877 593,464 297,717 365,285
Depreciation and amortization 397,416 781,748 - -
Interest on long-term debt 4,399 11,965 - -
Interest income (55,135) (65,572) - -
Belgian taxes 9,248 12,192 - -
------- --------- ------- -------
1,264,349 2,377,400 505,774 638,251
------- --------- ------- -------
LOSS BEFORE NON-CONTROLLING INTEREST (877,629) (1,679,532) (505,774) (638,251)
NON-CONTROLLING INTEREST (NOTE 11) 97,781 138,834 - -
------- --------- ------- -------
NET LOSS (779,848) (1,540,698) (505,774) (638,251)
RETAINED EARNINGS (DEFICIT),
beginning of period (3,415,282) (2,654,432) (132,477) -
----------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS (DEFICIT),
end of period (4,195,130) (4,195,130) (638,251) (638,251)
==================================================================================================================================
EARNINGS (LOSS) PER SHARE (0.01) (0.01) (0.01) (0.02)
==================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
F-20
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
JAN. 1 TO JAN. 1 TO
JUNE 30, JUNE 30,
2000 1999
$ $
(NOTE 14)
----------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
<S> <C> <C>
Net loss (1,540,698) (638,251)
Add items not affecting cash
Depreciation and amortization 781,748 -
Non-controlling interest (138,834) -
-------- --------
(897,784) (638,251)
Net changes in non-cash operating accounts
Accounts receivable (467,692) -
Inventory 39,667 -
Work in progress (30,011) -
Prepaid expenses (164,030) -
Accounts payable 42,435 307,697
Deferred revenue 138,600 -
Short-term loan 67,999 -
-------- --------
(1,270,816) (330,554)
-------- --------
FINANCING ACTIVITIES
Due to related parties (812,848) 365,824
Issuance of share capital 11,947,046 -
Capital lease obligations 34,771 -
Long-term debt 234,250 -
Non-controlling interest 918,502 -
Shareholder loan 2,200,000 -
-------- --------
14,521,721 365,824
-------- --------
INVESTING ACTIVITIES
Purchase of fixed assets (89,774) (34,247)
Purchase of Schelfhout (3,000,000) -
Deposits on the acquisition of Kwatrobox (322,241) -
-------- --------
(3,412,015) (34,247)
-------- --------
INCREASE IN CASH 9,838,890 1,023
CASH, beginning of period 368,314 1
-----------------------------------------------------------------------------------------------------------------------------------
CASH, end of period 10,207,204 1,024
====================================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES
F-21
<PAGE>
E-AUCTION GLOBAL TRADING INC.
.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 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.
--------------------------------------------------------------------------------
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, for the issuance of 34,500,000 common shares.
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.
F-22
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
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 are U.S. dollars. The
Company follows SFAS 52 where 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.
b) Loss per common share
The weighted average number of shares used for calculating loss
per share is 60,074,118 (1999 - 28,955,359).
c) 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.
d) Financial instruments
The Company's financial instruments consist of cash, short term
deposits, accounts receivable, accounts payable, financial debts,
short-term loan, due to related parties and obligations under
capital lease, the fair market value of which approximates their
carrying value.
e) Amortization
Amortization of capital assets and goodwill. Amortization is
provided at the following annual rates:
Land and 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
f) Related party transactions
Related party transactions are recorded at their exchange amounts
which approximate fair market value.
F-23
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
3. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
--------------------------------------------------------------------------------
g) 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.
h) Income taxes
The Company would record a deferred tax asset subject to an
evaluation allowance where that asset is impaired or not expected
to be realized. At December 31, 1999 the Company had deferred tax
assets of approximately $1,194,494. The Company's valuation
allowance would be equal to the amount of the deferred tax assets.
Therefore, there have been no amounts booked in the accounts of
the Company.
i) Revenue recognition
The Company recognizes revenue from license fees 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 are
recognized on a straight line basis over the life of the contract.
j) 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 method. Obsolete or defective inventories have been
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 includes only direct costs (i.e. raw materials
and labour costs).
F-24
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
4. CAPITAL ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
$ $
----------------------------------------- ------------------
Accumulated
Cost Amortization Net Net
---- ------------ --- ---
<S> <C> <C> <C>
Land and buildings 483,916 25,321 458,595 -
Equipment and furniture 75,454 6,372 69,082 -
Software * 12,329 - 12,329 34,247
Vehicles 216,797 32,963 183,834 -
------- ------ ------- ------
788,496 64,656 723,840 34,247
======= ====== ======= ======
</TABLE>
* The software is currently not in use and therefore no
amortization has been claimed.
Included in vehicles are assets under capital lease with a cost of
$83,627. Accumulated amortization on these vehicles totals $6,704.
--------------------------------------------------------------------------------
5. ACQUISITION OF SHELFHOUT COMPUTER SYSTEMEN N.V.
--------------------------------------------------------------------------------
2000 1999
---- ----
$ $
Goodwill 7,267,159 -
Less: accumulated amortization 726,000 -
--------- ------------
6,541,159
========= ============
On January 7, 2000 the Company completed the purchase of 100% of the
issued and outstanding shares of Schelfhout Computer Systemen N.V.
("Schelfhout"). The acquisition has been accounted for using the purchase
method.
F-25
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
5. ACQUISITION OF SHELFHOUT COMPUTER SYSTEMEN N.V. - CONT'D
--------------------------------------------------------------------------------
The following represents a summary of the acquisition of Schelfhout:
<TABLE>
<CAPTION>
$ $
---------- ----------
<S> <C> <C>
Purchase price 7,636,364
Net tangible assets of SCS acquired
Total assets 2,231,733
Less: Liabilities (1,862,528) 369,205
---------- ----------
Excess of purchase price over net tangible assets, being goodwill 7,267,159
=========
The purchase price is $7,636,364 and is to be paid as follows:
$
Refundable deposit 1,000,000 paid
Cash on closing 3,000,000 paid
Common shares at fair value
issued on closing (3,636,364) 3,636,364 issued
---------
7,636,364
=========
</TABLE>
The 3,636,364 common shares are not free trading and are subject to a
timed release formula which allows for release of 454,545 shares worth
$750,000 on each of the 6, 12, 18 and 24 month anniversary of the closing
and 606,061 shares with a deemed value of $1,000,000 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 equivalent cash is to be
paid by the Company and the shares returned to the treasury.
The 3,636,364 common shares issued to the vendors on closing has been
valued at $1 per share for accounting purposes; however, should the
Company decide to redeem the shares, the redemption price would be $1.65
per share.
As at October 2, 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.
--------------------------------------------------------------------------------
6. DEPOSITS ON ACQUISITION OF KWATROBOX
--------------------------------------------------------------------------------
2000 1999
$ $
Cash issued to date (750,000 Dutch Guilders) 322,241 -
Shares issued to date (500,000) 739,884 -
-------
-
1,062,125 -
========= ==========
F-26
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
6. DEPOSITS ON ACQUISITION OF KWATROBOX - CONT'D
--------------------------------------------------------------------------------
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. The
pledge agreement stipulated the purchase of Kwatrobox was to be completed
on or before August 31, 2000. The completion date was extended to
November 30, 2000 by both parties in an agreement dated August 30, 2000.
For the purpose of the payment schedule, the parties agreed the closing
date of the share purchase agreement is deemed to be June 30, 2000. As at
October 2, 2000 the purchase is not yet complete.
In connection with the purchase agreement, the Company agreed to pay the
vendors 10,500,000 Dutch Guilders ($4,506,600 at the June 5, 2000
exchange rate or 0.4292). The purchase price is payable in cash and
common shares of the Company as follows:
Date Dutch Guilders Common Shares
June 5, 2000 750,000 (paid) 500,000 (issued)
June 5, 2001 2,250,000 450,000
June 5, 2002 1,000,000 150,000
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
October 2, 2000 no shares have been issued as the requirements have not
been met.
--------------------------------------------------------------------------------
7. DEFERRED REVENUE
--------------------------------------------------------------------------------
2000 1999
---- ----
$ 0 $
Deferred revenue 721,212 -
======= ========
Deferred revenue relates to the Company's European operations of
installation of clock and cooling systems.
F-27
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
8. DUE TO RELATED PARTIES
--------------------------------------------------------------------------------
<S> <C> <C>
2000 1999
$ $
Ventures North Investment Partners Inc. ("Ventures") 47,945 365,824
====== =======
</TABLE>
The majority of the Company's operations during 1999 were funded by
Ventures. During the first quarter, Ventures converted approximately
$591,000 of debt owed to it into common shares at a price of $0.50 per
share. Ventures is related through significant common shareholdings. The
amounts advanced were non-interest bearing with no fixed terms of
repayment.
--------------------------------------------------------------------------------
9. LONG-TERM DEBT
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
$ $
---- ----
<S> <C>
Various bank loans for automobile purchases bearing interest at
rates of 3.67% to 5.59%. Monthly payments of 4,129 euro. Due
dates extend to June 15, 2003 100,142 -
Bank loan with interest at 5.65% per annum. Monthly payments of
1,359 euro. Due December 25, 2007 92,844 -
Directors loan with interest at 5.65% per annum. Monthly payments of
446 euro. Due July 1, 2009 41,264 -
-------- --------
234,250 -
Less: current portion 53,029 -
-------- --------
181,221 -
======= =========
</TABLE>
F-28
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
10. OBLIGATIONS UNDER CAPITAL LEASE
--------------------------------------------------------------------------------
2000 1999
$ $
Obligations under capital lease 34,771 -
Less: current portion 8,304 -
------- -------
26,467 -
======= =======
Future minimum payments due:
$
2001 10,819
2002 8,928
2003 8,928
2004 7,740
-----
36,415
Less: amount representing interest 1,644
---------
34,771
======
--------------------------------------------------------------------------------
11. NON-CONTROLLING INTEREST
--------------------------------------------------------------------------------
The Company is the majority owner (50.01%) of e-Auction Australasia
Limited ("Australasia"). The non-controlling interest represents the
interest of the minority shareholders of Australasia as at June 30, 2000
as follows:
Non-controlling interest at acquisition $ 918,502
Less: share of current period earnings(loss) (138,834)
--------
Non-controlling interest, end of period $ 779,668
========
F-29
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
12. SHARE CAPITAL AND CONTRIBUTED SURPLUS
--------------------------------------------------------------------------------
a) Authorized - 250,000,000 common shares with a par value of $0.001
<TABLE>
<CAPTION>
NUMBER OF CONTRIBUTED TOTAL
SHARES $ SURPLUS $
---------- ------ ---------- ----------
<S> <C> <C> <C> <C>
b) Issued - balance, beginning of period 39,820,000 39,820 (39,819) 1
--------- ----- --------- ---------
Private placement (iii) 16,591,815 16,592 8,279,315 8,295,907
Commission 327,878 328 163,612 163,940
Less: issue costs and commission (327,332) (327,332)
Millenium advisors (iv) 197,219 197 999,803 1,000,000
Schelfhout Acquisition (v) 3,636,364 3,636 3,632,728 3,636,364
Deposits on acquisition of Kwatrobox (vi) 1,100,000 1,100 1,626,654 1,627,754
Private placement 4,072,639 4,073 7,495,927 7,500,000
Less: issue costs - - (85,000) (85,000)
--------- ----- --------- ---------
25,925,915 25,926 21,785,707 21,811,633
--------- ----- --------- ---------
65,745,915 65,746 21,745,888 21,811,634
Less: allocated to redeemable common stock - - (3,636,364) (3,636,364)
held in treasury (vi) (600,000) (600) (887,266) (887,866)
--------- ----- --------- ---------
Balance, end of period 65,145,915 65,146 17,222,258 17,287,404
========== ====== ========== ==========
</TABLE>
c) Share capital and contributed surplus since inception
<TABLE>
<CAPTION>
CONTRIBUTED SURPLUS
DATE ISSUED NUMBER OF SHARES $ $
----------- ---------------- ------- -------------------
<S> <C> <C> <C>
April 30, 1998 (i) 34,500,000 34,500 (34,500)
February 26, 1999 (ii) 5,320,000 5,320 (5,319)
January 7, 2000 (iii) 16,919,693 16,920 8,115,595
January 7, 2000 (iv) 197,219 197 999,803
January 10, 2000 (v) 3,636,364 3,636 3,632,728
June 5, 2000 (vi) 500,000 500 739,388
June 22, 2000 4,072,639 4,073 7,410,927
--------- ----- ---------
65,145,915 65,146 20,858,622
========== ====== ==========
</TABLE>
(i) For reverse takeover accounting purposes these shares have
been deemed to have been issued on April 30, 1998, the date of
incorporation of Barbados.
F-30
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
12. SHARE CAPITAL AND CONTRIBUTED SURPLUS - CONT'D
--------------------------------------------------------------------------------
(ii) Shares issued by Nevada prior to the incorporation of
Barbados. For reverse takeover accounting purposes these have
been deemed to have been issued on February 26, 1999, the date
of the reverse takeover transaction.
(iii)On January 7, 2000 the Company completed a private placement
of 16,919,693 shares at $0.50/share. 7,625,916 of the shares
were issued to Ventures North Investment Partners Inc., a
company related through significant common shareholdings and
four companies related to them in exchange for the settlement
of the Company's debts with Millenium Advisors Inc. for
$1,000,000, with the shareholders loan for $2,200,000 plus
interest of $21,968 and a finders fee to the shareholder of
$200,000 and with Ventures North Investment Partners Inc. for
$591,260. The remaining shares were issued for cash.
(iv) 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.
(v) On January 10, 2000, the Company issued 3,636,364 shares of
common stock to the former shareholders of Schelfhout as
partial consideration for the purchase by the Belgium
subsidiary of the Company of all of the shares of Schelfhout.
The deemed price per share for accounting purposes was $1.00.
As there are put provisions in the purchase agreement the
Company has recorded a portion of the shares under the heading
`Redeemable common stock'.
(vi) 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 being held in treasury subject to the release conditions.
As at October 2, 2000 the acquisition is not yet complete.
(SEE NOTE 6)
F-31
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
12. SHARE CAPITAL AND CONTRIBUTED SURPLUS - CONT'D
--------------------------------------------------------------------------------
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>
DATE OF GRANT NUMBER EXERCISE PRICE EXPIRY DATE RESTRICTIONS
------------- ------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
March 1, 1999 1,000,000 $0.01 December 1, 2003 None
December 1, 1999 3,000,000 $0.85 December 1, 2009 None
December 1, 1999 50,000 $0.85 December 1, 2009 Vest over 3 years
January 20, 2000 300,000 $2.00 January 20, 2010 None
April 24, 2000 100,000 $2.00 April 24, 2010 Vest over 3 years
May 2, 2000 1,825,000 $2.00 May 2, 2010 Various
</TABLE>
The weighted average exercise price of the options is $1.13/share.
The weighted average grant date fair value of options granted during
the period is as follows:
- Exercise price equals fair market value $2.22
- Exercise price exceeds fair market value $0.70
- Exercise price less than fair market value $0.00
The Company has not recognized compensation expense for its
stock-based awards to employees. The following reflects proforma net
income and loss per share had the Company elected to adopt the fair
value approach of SFAS 123:
<TABLE>
<CAPTION>
2000 1999
$ $
---- ----
Net loss
<S> <C>
As reported (1,540,698) -
Proforma (3,366,906) 2,890,300)
Basic and diluted loss per share
As reported (0.03) -
Proforma (0.05) (0.12)
The estimated fair value of each option granted is calculated using
the Black-Scholes option-pricing model. The weighted average
assumptions used in the model were as follows:
2000 1999
Risk-free interest rate 6% 5%
Expected years until exercise 8 8
Expected stock volatility 36.85% 36.8%
Dividend yield 0% 0%
</TABLE>
F-32
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
13. RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
$ $
------- ------
<S> <C> <C>
Expenses paid on behalf of the Company and allocations of expenses charged
to the Company by companies with significant common
shareholdings and common directors 67,145 132,477
Financing fee paid to Millennium Advisors Inc., a company related through
a common director. Paid through the issuance of 197,219 common shares 1,000,000 -
A finders fee in connection with the shareholder's loan was paid to a
shareholder 200,000 -
Interest in connection with the shareholder's loan was paid 21,698 -
Management fees paid to a company controlled by two directors 158,400 -
</TABLE>
Included in accounts payable and accrued liabilities is $431,398 and
included in long-term debt is $41,264 owing to two directors of
Schelfhout.
--------------------------------------------------------------------------------
14. COMPARATIVE FIGURES
--------------------------------------------------------------------------------
Comparative figures are for the period from January 1, 1999 to June 30,
1999 of e-Auction Global Trading Inc. Certain of the comparative figures
have been reclassified to conform to the current presentation. The
comparative figures were prepared by management.
F-33
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
15. 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.
It is management's option that the likelihood of a material loss is
remote.
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.
It is management's option that the likelihood of a material loss is
remote.
F-34
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
16. SEGMENTED INFORMATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY A
NORTH AMERICA
2000 1999
$ $
---- ----
<S> <C> <C>
Revenue outside the Company - -
Segmented operating loss (1,408,485) (638,251)
Identifiable assets 10,685,661 35,271
Capital expenditure 39,731 -
Amortization 728,400 -
INDUSTRY B
EUROPE
2000 1999
$ $
---- ----
Revenue outside the Company 1,979,919 -
Segmented operating profit 6,565 -
Identifiable assets 8,969,272 -
Capital expenditure 50,179 -
Amortization 51,522 -
INDUSTRY C
AUSTRALIA
2000 1999
$ $
---- ----
Revenue outside the Company - -
Segmented operating loss (277,612) -
Identifiable assets 566,794 -
Capital expenditure 62,582 -
Amortization 1,826 -
</TABLE>
F-35
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
16. SEGMENTED INFORMATION - CONT'D
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL
2000 1999
$ $
---- ----
<S> <C>
Revenue outside the Company 1,979,919 -
Segmented operating loss (1,679,532) -
Identifiable assets 20,221,727 (638,251)
Capital expenditure 152,492 35,271
Amortization 781,748 -
</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.
--------------------------------------------------------------------------------
17. 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 deemed value of
$1,000,000 to Millennium Advisors Inc. as payment of a financing and
interest fee.
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.
The Company acquired a vehicle with a cost of $42,362 through a capital
lease.
F-36
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN NV
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998
RECONCILED TO US GAAP
F-37
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
I. REPORT OF INDEPENDENT ACCOUNTANTS
To the shareholders and the Board of Directors of
Schelfhout Computer Systemen NV
We have examined the accompanying balance sheets of Schelfhout Computer Systemen
NV (the "Company") as of December 31, 1999 and 1998 and the related statements
of operations for each of the two years in the period ended December 31, 1999,
all expressed in Euro. Our examinations of these statements were made in
accordance with auditing standards generally accepted in the United States and
accordingly included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the
financial position of the Company and the results of its operations for each of
the two years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in Belgium consistently applied.
Accounting principles generally accepted in Belgium vary in certain significant
respects from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of net profit
expressed in Euro for each of the two years in the period ended December 31,
1999 and the determination of shareholders' equity also expressed in Euro at
December 31, 1999 and 1998 to the extent summarized in Note 4 to the financial
statements.
Antwerp, July 3, 2000
PricewaterhouseCoopers Bedrijfsrevisoren bcvba
Represented by
/s/ Luc Discry
Luc Discry
Strictly Private & Confidential
F-38
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
II. BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
THOUSANDS OF EUROS
-------------------------
12/31/99 12/31/98
-------- --------
ASSETS
Fixed assets:
Tangible assets:
<S> <C> <C>
A. Land and buildings......................................................... 516 567
B. Plant, machinery and equipment............................................. 2 5
C. Furniture and vehicles..................................................... 103 89
D. Leasing and other similar rights........................................... 44 77
----- -----
Total tangible assets........................................................... 665 738
Financial assets...................................................................... 29 25
----- -----
Total fixed assets 694 763
Current assets:
Stocks and contracts in progress:
A. Stocks..................................................................... 274 198
B. Contracts in progress...................................................... 192 37
----- -----
Total stocks and contracts in progress.......................................... 466 235
Amounts receivables within one year:
A. Trade debtors.............................................................. 653 388
B. Other amounts receivable................................................... 54 114
----- -----
Total amounts receivables within one year 707 502
Cash at bank and in hands.......................................................... 284 415
Deferred charges and accrued income................................................ 13 17
----- -----
Total current assets............................................................... 1,470 1,169
----- -----
TOTAL ASSETS.......................................................................... 2,164 1,932
===== =====
</TABLE>
The accompanying Notes 1 to 4 are an integral part of these Financial
Statements.
The financial statements and notes to financial statements are presented in
Euro. The company previously reported this information in Belgian francs. The
conversion of Belgian francs amounts into Euro related to the financial
information presented prior to the creation of the Euro on January 1, 1999 was
calculated using the exchange rate as of January 1, 1999 which was 1 Euro to
40.3399 Belgian francs.
Strictly Private & Confidential
F-39
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
II. BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 (CONTINUED)
<TABLE>
<CAPTION>
THOUSANDS OF EUROS
-------------------------
12/31/99 12/31/98
-------- --------
LIABILITIES
Capital and reserves:
<S> <C> <C>
Share capital...................................................................... 793 793
Reserves:
A. Legal reserve.............................................................. 9 9
B. Reserves available for distribution........................................ 26 26
Profit/(Loss) carried forward...................................................... (77) (130)
----- -----
Total capital and reserves......................................................... 751 698
Creditors:
Amounts payable after more than one year: Financial debts:
Credit institutions, leasing and other similar obligations................. 173 205
----- -----
Total amounts payable after more than one year..................................... 173 205
Amounts payable within one year:
A. Current portion of amounts payable after one year.......................... 70 182
B. Financial debts............................................................ 15 ---
C. Trade debts................................................................ 403 246
D. Advances received on contracts in progress................................. 254 131
E. Taxes, remuneration and social security
1. Taxes................................................................. 107 89
2. Remuneration and social security...................................... 266 229
----- -----
Total taxes, remuneration and social security................................... 373 318
F. Other amounts payable...................................................... 8 ---
----- -----
Total amounts payable within one year.............................................. 1,123 877
Accrued charges and deferred income................................................ 117 152
----- -----
Total creditors.................................................................... 1,413 1,234
----- -----
TOTAL LIABILITIES..................................................................... 2,164 1,932
===== =====
</TABLE>
The accompanying Notes 1 to 4 are an integral part of these Consolidated
Financial Statements.
The financial statements and notes to financial statements are presented in
Euro. The company previously reported this information in Belgian francs. The
conversion of Belgian francs amounts into Euro related to the financial
information presented prior to the creation of the Euro on January 1, 1999 was
calculated using the exchange rate as of January 1, 1999 which was 1 Euro to
40.3399 Belgian francs.
Strictly Private & Confidential
F-40
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
III. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
THOUSANDS OF EUROS
------------------
YEAR ENDED
----------
12/31/99 12/31/98
-------- --------
INCOME STATEMENT
Operating income and charges:
<S> <C> <C>
Turnover ....................................................................... 3,218 3,116
Other income ................................................................... 36 47
Cost of goods sold ............................................................. (1,153) (1,045)
------ ------
Gross operating income ......................................................... 2,101 2,116
Services and sundries .......................................................... (699) (844)
Remuneration, social security and pensions ..................................... (1,121) (983)
Depreciation of and other amounts written off formation expenses, intangible and
tangible fixed assets ..................................................... (127) (151)
Value adjustments to stocks, contracts in progress and
trade debtors ............................................................. (4) --
Other operating charges ........................................................ (17) (8)
------ ------
Operating profit ............................................................... 133 132
Financial income .................................................................. 7 (38)
Financial charges ................................................................. (41) (38)
Profit on ordinary activities before taxes ........................................ 99 132
Extraordinary income .............................................................. -- 2
Extraordinary charges ............................................................. -- (1)
------ ------
Profit for the year before taxes .................................................. 99 133
Income taxes ...................................................................... (46) (66)
------ ------
Profit for the period ............................................................. 53 67
Profit for the period available for appropriation ................................. 53 67
====== ======
</TABLE>
The accompanying Notes 1 to 4 are an integral part of these Consolidated
Financial Statements.
The financial statements and notes to financial statements are presented in
Euro. The company previously reported this information in Belgian francs. The
conversion of Belgian francs amounts into Euro related to the financial
information presented prior to the creation of the Euro on January 1, 1999 was
calculated using the exchange rate as of January 1, 1999 which was 1 Euro to
40.3399 Belgian francs.
Strictly Private & Confidential
F-41
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(1) BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS
TRUE AND FAIR VIEW -
The individual financial statements were prepared by the company's directors in
accordance with the accounting principles and standards regulated in Belgium by
the Company Law and Accounting Law as implemented by the Belgian Chart of
Accounts, and are presented in accordance with the regulations for the
preparation of financial statements, as approved by the Royal Decree dated 8
October 1976. Accordingly, these financial statements give a true and fair view
of the financial position of Schelfhout Computer Systemen NV for the years ended
December 31, 1999 and 1998 and of the results of its operations for the years
then ended.
(2) ACCOUNTING PRINCIPLES
The significant accounting principles used in the preparation of these financial
statements are as follows:
RESEARCH AND DEVELOPMENT-
Costs incurred in the research and development of software products, clocks,
cooling installations and displays are expensed as incurred.
TANGIBLE ASSETS -
All tangible assets are carried at cost and are not revalued.
Tangible assets are depreciated using the straight-line method over the
estimated useful life of the assets, as follows:
<TABLE>
<CAPTION>
Years of Estimated
Useful Life
------------------
Industrial, administrative or commercial buildings:
<S> <C>
Buildings............................................................................... 20
Furnishing and refurbishing............................................................. 5 - 15
Plant, machinery and equipment:
Tools................................................................................... 5
Test equipment 3
Vehicles:
Cars and leasing cars................................................................... 5
Second-hand cars........................................................................ 3
Office furniture:
Office furniture........................................................................ 5
Computer hardware 5
</TABLE>
Strictly Private & Confidential
F-42
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
In compliance with Belgian accounting and fiscal regulations, the company
depreciates its fixed assets investments for a full year in the year of
acquisition. Accumulated depreciation on total tangible assets at December 31,
1999 and 1998 amounts to 1,394 and 1,288, respectively. Accumulated depreciation
on tangible assets under capital lease at December 31, 1999 and 1998 amounts to
332 and 312, respectively.
STOCKS AND CONTRACTS IN PROGRESS -
Raw materials and consumables inventories are stated at the lower of cost or
market with cost being determined on the weighted average price method of
accounting. Obsolete or defective inventories have been reduced to net
realizable value. The write-downs of inventories are recorded on the basis of
age and turnover of inventory according to the judgment of management. The
company does not book provisions to write down inventories but records inventory
write-downs as inventory movements (i.e. as cost of sales), in accordance with
Belgian GAAP.
The inventory in progress includes only direct costs (i.e., raw materials and
labor costs).
FOREIGN CURRENCY TRANSLATION -
Foreign currency transaction gains and losses are included in the results of
operations. The assets, liabilities, income and expenses for historic periods
are translated to Euro at a fixed exchange rate of BEF 40.3399 per Euro.
Effective January 1, 1999 the functional currency of the company was changed
from BEF to the Euro.
The main foreign currency transactions are performed in United States dollars
and British pounds sterling.
The comparative statements reported in Euro show the same trends as would have
been presented if the company had presented such statements in Belgian francs.
The financial statements may not be comparable to financial statements of other
companies that report in Euro and that restate amounts from currencies other
than Belgian francs.
CORPORATE INCOME TAX AND OTHER TAXES --
These captions in the statements of operations include all debits and credits
arising from Belgian corporate income tax, including those relating to period
expenses and those arising from adjustments to amounts recorded in prior
periods.
The corporate income tax expense for each year is calculated on the basis of
book income before taxes, increased or decreased, as appropriate, by the
permanent differences from taxable income, defined as those arising between
taxable income and book income before taxes that do not reverse in subsequent
periods.
Strictly Private & Confidential
F-43
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
RECOGNITION OF REVENUES AND EXPENSES -
General standard -
The company derives its revenues from the development and installation of clock
systems, cooling installations and maintenance for auction halls.
In accordance with the accounting principle of prudence, only realizable income
is recorded at year-end. Invoiced advances on contracts in progress are deferred
on the balance sheet and shown under the heading "Advances received on contracts
in progress".
Revenues from the clock systems and cooling installation activities are
recognized according to the completed contract method, therefore upon completion
of the project.
Maintenance contracts are sold separately from specific projects. Revenues from
annual maintenance contracts are recognized on a straight line basis over the
period in which the services are provided and when all contractual obligations
have been met.
Cost of sales derived from clock systems, cooling installations and maintenance
consist of those costs directly related to each respective activity.
(3) SHAREHOLDER'S EQUITY- CAPITAL AND RESERVES
The details of the balances of and changes in shareholders equity- capital and
reserves accounts in the year ended 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
THOUSANDS OF EUROS
---------------------------------------------------------------------------------------
LOSSES TOTAL
COMPREHENSIVE SHARES SHARE CARRIES CAPITAL &
INCOME N(degree) CAPITAL RESERVES FORWARD RESERVES
------ --------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE 12/31/97........ 640 793 35 (197) 631
Profit of the year...... 67 67 67
BALANCE 12/31/98........ 640 793 35 (130) 698
Profit of the year...... 53 53 53
BALANCE 12/31/99........ 640 793 35 (77) 751
SHARE CAPITAL -
</TABLE>
The share capital of Schelfhout Computer Systemen NV as of December 31, 1999 is
represented by 640 authorized and outstanding bearer shares each with equal
rights and representing one vote each.
Strictly Private & Confidential
F-44
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
RESERVES -
Under the revised Corporations Law, 5% of income for each year must be
transferred to the legal reserve until the balance of this reserve reaches at
least 10% of share capital.
As of December 31, 1999, Schelfhout Computer Systems NV has a legal reserve
amounting to Euro 9.
Distribution of available reserves is at the discretion of the company's
shareholders upon proposal of the board of directors. These can however only be
distributed after the losses carried forward have been absorbed.
As at December 31, 1999, Schelfhout Computer Systems NV has reserves available
for distribution of Euro 26.
(4) DIFFERENCES BETWEEN BELGIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES AND OTHER REQUIRED DISCLOSURES
The financial statements of Schelfhout Computer Systemen NV were prepared in
accordance with generally accepted accounting principles in Belgium ("Belgian
GAAP"), which differ in some respects from generally accepted accounting
principles in the United States ("U.S. GAAP"). A reconciliation of net result
and shareholders' equity from Belgian GAAP to U.S. GAAP and the most significant
differences are provided in this Note. The reconciliation presented in item L
includes the effect of all the adjustments.
The following paragraphs include adjustments to the Belgian statutorily approved
financial statements of the Company solely for the purpose of complying with the
United States securities regulations.
NATURE OF OPERATIONS
Schelfhout Computer Systemen, NV, is located at Zavelstraat 7, in 9190 Stekene,
Belgium.
The Company has been incorporated on August 29, 1986 under the legal form of a
B.V.B.A. This legal form has been changed to an NV on June 15, 1989. The Company
is registered with the commercial register of St-Niklaas, Belgium, under number
43.775.
The company installs clock systems, cooling installations and offers maintenance
services to clients all over the world.
Strictly Private & Confidential
F-45
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. 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 dates of the financial
statements, and the reported amounts of revenues and expenses during the
reported periods. Actual results could differ from such estimates.
IMPAIRMENT OF LONG-LIVED ASSETS
Management re-evaluates its long-lived assets whenever events or circumstances
arise indicating that the carrying amount of a long-lived asset may not be
recoverable. Management has determined that no provision for impairment is
required.
FINANCIAL INSTRUMENTS
Financial instruments consist solely of short and long-term bank loans. The
carrying amount of short-term debt approximates fair value due to their
short-term nature. The carrying value of the company's long-term debt
approximates fair value since all of the company's long term debts bear interest
based on prevailing market rates currently available in the open market.
Financial instruments that potentially subject the company to concentrations of
credit risk comprise principally accounts receivable. The company generally does
not require collateral on accounts receivable, as the majority of the company's
customers are well-established companies. The company has not experienced any
significant losses related to individual customers or groups of customers in
their particular industry or geographic area.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The company recorded advertising
expenses during 1999 and 1998 of Euro 11 and Euro 19, respectively.
NET INCOME PER SHARE
Basic and diluted profit per share are computed by dividing net profit available
to common shareholders by the weighted average number of common shares
outstanding for the period. The Company has no common stock equivalents.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, or SFAS 133, Accounting for Derivative Instruments and Hedging Activities.
SFAS 133 establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS 133 requires that all derivatives be
recognized at fair value in the balance sheet, and that the
Strictly Private & Confidential
F-46
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
corresponding gains or losses be reported either in the statement of operations
or as a component of comprehensive income, depending on the type of hedging
relationship that exists. SFAS 133 will be effective for fiscal years beginning
after June 15, 2000. The company does not currently hold derivative instruments
or engage in hedging activities and does not anticipate that adoption of SFAS
133 will have a material effect on its financial position or its results of
operations.
DEPRECIATIONS OF TANGIBLE ASSETS
In compliance with Belgian accounting and fiscal regulations, the company
depreciates its fixed assets investments for a full year in the year of
acquisition. Under U.S. GAAP, the fixed assets should be depreciated from the
date the assets are placed in service. The effect of this issue is recorded as
an adjustment for US GAAP purposes in the company's reconciliation of
shareholder's equity and net profit from Belgian GAAP to US GAAP.
MAINTENANCE CONTRACTS
The company adopted its current policy to recognize revenue from maintenance
contracts as services are provided on January 1, 1998. Prior to this date, the
company recognized revenue from maintenance contracts at the moment of
invoicing. The effect on revenue for amounts recognized on maintenance contracts
prior to January 1, 1998 is recorded as an adjustment for US GAAP purposes in
the company's reconciliation of net profit from Belgian GAAP to US GAAP.
As from January 1, 1998 revenue generated from maintenance contracts is
recognized on a straight line basis over the life of the contract.
CORPORATE INCOME TAXES
The company's income before taxes of Euro 99 and Euro 133 in 1999 and 1998,
respectively has been entirely generated in Belgium. The company's current
income taxes of Euro 46 and Euro 66 in 1999 and 1998, respectively have also
been entirely generated in Belgium. The company has recorded no deferred tax
assets or liabilities in the financial statements for the periods presented.
The following table sets forth a reconciliation of the company's taxes for the
years ended December 31,1999 and 1998 to the taxes calculated as enacted
statutory rates for each respective year:
Strictly Private & Confidential
F-47
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
THOUSAND OF EUROS
-----------------
YEAR ENDED
-----------------
12/31/99 12/31/98
-------- --------
Taxes enacted at statutory rates 40 53
Disallowed expenses 6 13
Current taxes 46 66
The company is subject to the reduced income tax rate. This rate is determined
as follows :
Taxable income up to Euro 24,8 28,84%
Taxable income between Euro 24,8 and Euro 89,2 37,08%
Taxable income between Euro 89,2 and Euro 322,3 42,23%
REVENUE RECOGNITION
The company applies the completed contract method as revenue recognition policy
for clock and cooling systems revenues. The application of the completed
contract method is accepted under Belgian GAAP and has been approved by the
Board of Directors and included in the company's valuation rules. A contract is
considered complete upon final acceptance by the client, which is usually one
month after the service goes live. Moreover the company has primarily short-term
contracts, which on average take 3 to 4 months to complete. During 1999, the
company recognized revenue on one customer project in its financial statements
prepared under Belgian GAAP which would not qualify for recognition in 1999
under US GAAP due to the fact that the company had not yet fulfilled all
contractual obligations. The effect of this issue is recorded as an adjustment
for US GAAP purposes in the company's reconciliation of shareholder's equity and
net profit from Belgian GAAP to US GAAP.
RECONCILIATION OF SHAREHOLDER'S EQUITY AND NET PROFIT FROM BELGIAN GAAP TO U.S.
GAAP
<TABLE>
<CAPTION>
THOUSAND OF EUROS
-----------------------------------
YEAR ENDED
-----------------------------------
12/31/99 12/31/98
-------- --------
<S> <C> <C>
SHAREHOLDER'S EQUITY PER
BELGIAN GAAP.................................................... 698 751
Adjustments for U.S. GAAP purposes:
Depreciation of tangible assets........................... 21 18
Revenue recognition....................................... (36)
Deferred Taxation......................................... 6 (7)
-------- --------
Total differences............................................... (9) 11
-------- --------
SHAREHOLDER'S EQUITY PER U.S. GAAP.............................. 742 709
========= ========
</TABLE>
Strictly Private & Confidential
F-48
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
<TABLE>
<CAPTION>
THOUSAND OF EUROS
-----------------------------------
YEAR ENDED
-----------------------------------
12/31/99 12/31/98
-------- --------
<S> <C> <C>
NET PROFIT PER BELGIAN GAAP..................................... 53 67
Adjustments for U.S. GAAP purposes:
Depreciation of tangible assets........................... 3 8
Maintenance contracts..................................... 142
Revenue recognition....................................... (36)
Deferred taxation 13 (60)
Total differences............................................... (20) 90
NET PROFIT PER COMMON SHARE U.S. GAAP........................... 33 157
Basic........................................................... 51.56 245.31
Diluted......................................................... 51.56 245.31
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic........................................................... 640 640
Diluted......................................................... 640 640
STATEMENT OF CASH FLOWS
</TABLE>
Belgian GAAP does not require the presentation of statements of cash flows.
The following are the statements of cash flows under "SFAS No. 95" based on the
financial statement amounts reported under Belgian GAAP:
<TABLE>
<CAPTION>
THOUSANDS OF EUROS
------------------
YEAR ENDED
-------------------------
12/31/99 12/31/98
-------- --------
<S> <C> <C>
Net profit per Belgian GAAP 53 67
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation and amortization................................................... 127 151
Bad debt expense................................................................ 4 ---
Changes in operating assets and liabilities
(Increase) Decrease --
Inventory....................................................................... (232) (12)
Accounts receivable................................................................... (209) 109
Other current assets.................................................................. (4) ---
Prepayments..................................................................... 4 4
</TABLE>
Strictly Private & Confidential
F-49
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
<TABLE>
<CAPTION>
THOUSANDS OF EUROS
------------------
YEAR ENDED
-------------------------
12/31/99 12/31/98
-------- --------
<S> <C> <C>
Increase (Decrease) --
Trade creditors................................................................. 157 18
Non trade creditors............................................................. 179 (24)
Other liabilities............................................................... (27) 151
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES............................................. 52 464
-------- --------
Cash flow from investing activities:
Capital expenditures............................................................ (54) (133)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES................................................. (54) (133)
-------- --------
Cash flow from financing activities:
Increase (decrease) in financial liabilities....................................... (129) (48)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES................................................. (129) (48)
-------- --------
Net change in cash and cash equivalents............................. (131) 283
Cash and cash equivalents at beginning of year...................... 415 132
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF THE PERIOD....................................................... 284 415
======== ========
Supplemental disclosure of cash flow information
Interests paid 18 24
Income taxes paid 31 88
======== ========
</TABLE>
RELATED PARTY TRANSACTIONS
The company enters into transactions with certain related parties primarily
comprised of shareholders (those prior to the acquisition of 100 % of the shares
of the company by E-Auction Global Trading Inc) and directors. These
transactions include management fee arrangements and sundry services. For the
year ended December 31, 1999 revenues and expenses generated by related party
transactions are 0 and 174, respectively. At December 31, 1999, outstanding
related party receivables and payables amounted to 0 and 57, respectively. For
the year ended December 31, 1998 revenues and expenses generated by related
party transactions are 51 and
Strictly Private & Confidential
F-50
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
222, respectively. At December 31, 1998, outstanding related party receivables
and payables amounted to 51 and 56, respectively.
COMMITMENTS AND CONTINGENCIES
LEASES -
Future minimum lease payments for non-cancellable automobile leases as of
December 31, 1999 are Euro 17 for 2000. The company has no other commitments for
later payments.
The company is currently negotiating a new rent contract for the office
building. These negotiations have not yet been finalized yet. Consequently, the
future lease payments are not fixed.
LITIGATION -
In the normal course of business the company is party to certain legal
proceedings. At December 31, 1999 and 1998 there are no matters of pending or
threatened litigation known to management that would be expected to have a
material adverse impact on the company's results of operations or financial
position.
SEGMENT REPORTING
Based on the current nature of operations, management assesses the company's
performance and reports its results of operations in only one industry segment
for which information is disclosed in the statement of operations. In 1999 and
1998 all of the company's revenues were generated and long-lived assets were
located in its sole operating entity domiciled in Belgium.
SUBSEQUENT EVENTS
On January 7, 2000, the shareholders entered into an agreement with E-Auction
Global Trading NV (later on renamed to Auxcis NV), a company incorporated in
Belgium. Auxcis NV at that date acquired 100% of the outstanding share capital
of the company. Auxcis NV is owned by E-Auction Global Trading Inc (Nevada) and
E-Auction Global Trading Inc (Canada).
The purchase price for the shares of Schelfhout was $10 million, paid by $4
million cash and by the issuance of 3,636,364 common shares to the former
shareholders of Schelfhout Computer Systemen. E-Auction Global Trading Inc in
the SCS Agreement agreed to not sell or otherwise transfer the shares of
Schelfhout during the 12 month period ending on January 10, 2001. As security
for the covenant not to sell the shares and for other matters, the Company has
pledged the shares of Schelfhout in favour of Luc Schelfhout and Hilde De Laet.
The agreement included also a decrease of the company's share capital by K 393.
Strictly Private & Confidential
F-51
<PAGE>
SCHELFHOUT COMPUTER SYSTEMEN, NV
June 2000
IV. NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1998 AND
1999- IN THOUSANDS OF EURO, EXCEPT SHARE AND PER SHARE AMOUNTS
(CONTINUED)
On March 22, 2000, the company has participated in the incorporation of a new
legal entity, SDL Invest NV. The company holds 379 out of 381 outstanding shares
of SDL Invest NV. The incorporation of SDL Invest NV was performed through
contribution in kind of the company's buildings and some liabilities. Also in
the context of the above agreement an option was granted by Schelfhout Computer
Systems NV to Luc Schelfhout and Hilde De Laet to purchase the shares of SDL
Invest NV for a price equal to the bookvalue.
Strictly Private & Confidential
F-52
<PAGE>
Unaudited Pro Forma Financial Statements
F-53
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
PROFORMA BALANCE SHEET - DECEMBER 31, 1999
(IN U.S. FUNDS)
ASSETS
<TABLE>
<CAPTION>
E-AUCTION SCS ADJUSTMENTS PROFORMA
$ $ $ $
--------- ------- ---------- ---------
Current assets
<S> <C> <C> <C> <C>
Cash 4,179,394 284,686 (3,000,000) 1,464,080
Cash guarantees -- 29,060 -- 29,060
Other current assets -- 1,191,179 -- 1,191,179
--------- ------- ---------- ---------
4,179,394 1,504,925 (3,000,000) 2,684,319
Investment in SCS 1,000,000 -- (1,000,000) --
Tangible assets 34,247 668,181 -- 702,428
Goodwill -- -- 6,881,771 6,881,771
--------- ------- ---------- ---------
5,213,641 2,173,106 2,881,771 10,268,518
========= ========= ========= ==========
LIABILITIES AND SHARE CAPITAL (DEFICIT)
Loans payable 2,000,000 -- -- 2,000,000
Shareholders loan 2,200,000 -- -- 2,200,000
Share subscriptions received 1,858,229 -- -- 1,858,229
Other current liabilities 1,809,843 1,244,858 3,054,701
--------- ------- ---------- ---------
7,868,072 1,244,858 -- 9,112,930
Long-term debt -- 173,655 -- 173,655
--------- ------- ---------- ---------
7,868,072 1,418,513 -- 9,286,585
--------- ------- ---------- ---------
Redeemable common stock -- -- 3,636,364 3,636,364
Share capital 1 831,843 (831,843) 1
Deficit (2,654,432) (77,250) 77,250 (2,654,432)
(2,654,431) 754,593 (754,593) (2,654,431)
--------- ------- ---------- ---------
5,213,641 2,173,106 2,881,771 10,268,518
========= ========= ========= ==========
</TABLE>
F-54
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
PROFORMA CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
<TABLE>
<CAPTION>
PROFORMA
E-AUCTION SCS ADJUSTMENTS PROFORMA
$ $ $ $
--------- --------- -------- -------
<S> <C> <C>
Revenue --- 3,469,498 --- 3,469,498
Amortization of goodwill --- 1,376,354 1,376,354
Raw materials and goods for resale --- 1,229,958 --- 1,229,958
Services and other goods --- 747,199 --- 747,199
Salaries and benefits 458,924 1,188,048 --- 1,646,972
Loan fee 1,000,000 --- 1,000,000
Other expenses 1,195,508 195,738 1,391,246
---------- ------ --------- ----------
2,654,432 3,360,943 7,391,729
---------- ------ --------- ----------
Income (loss) before taxes (2,654,432) 108,555 (3,922,231)
Income taxes --- 49,061 49,061
---------- ------ --------- ----------
Net income (loss) (2,654,432) 59,494 1,376,354 (3,971,292)
---------- ------ --------- ----------
Loss per share
Basic and diluted
Historical (0.07)
Proforma (0.10)
==========
</TABLE>
F-55
<PAGE>
E-AUCTION GLOBAL TRADING INC.
(A NEVADA CORPORATION)
NOTE TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
(IN U.S. FUNDS)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
--------------------------------------------------------------------------------
These financial statements have been prepared in connection with the purchase of
Schelfhout Computer Systems N.V. ("Schelfhout") by the Company in a purchase
agreement dated January 7, 2000.
The proforma balance sheet reflects the acquisition as if it took place on
December 31, 1999. The condensed proforma income statement reflects the combined
operations for the year ended December 31, 1999 as if the acquisition had taken
place at January 1, 1999. The goodwill on the acquisition is calculated as
follows:
<TABLE>
<CAPTION>
$ $
--------- -------
<S> <C> <C>
Purchase price 7,636,364
Net tangible assets of SCS acquired
Total Assets 2,173,106
Less: Liabilities 1,418,513 754,593
--------- -------
Excess of purchase price over net tangible assets, being goodwill 6,881,771
=========
Goodwill is to be amortized on a straight-line basis over 5 years.
The purchase price is $7,636,364 and is to be paid as follows:
Refundable deposit $ 1,000,000 paid
Cash on closing 3,000,000 paid subsequent to year end
Common shares at fair value issued on
closing(3,636,364)
3,636,364 issued subsequent to year
---------------- end
$ 7,636,364
================
</TABLE>
F-56
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS 44,095,915 SHARES
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE COMMON SHARES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF. E-AUCTION GLOBAL TRADING INC.
TABLE OF CONTENTS
Page
----
Prospectus Summary..................................3
Selected Consolidated Financial Data................4
Cautionary Statement Regarding Forward
Looking Statements..............................7
Risk Factors........................................7
Market Price of Common Stock.......................14
Use of Proceeds....................................14
Our Company........................................15
Management's Discussion and Analysis
of Financial Conditions and Results
of Operations..................................25
Management/Executive Compensation..................27
Certain Relationships and Related Transactions.....32 PROSPECTUS
Principal Stockholders.............................33
Selling Shareholders...............................35
Plan of Distribution...............................41
Description of Capital Stock.......................42
Shares Eligible for Future Sale....................43
Changes in Accountants.............................44
Experts............................................44
Transfer Agent and Registrar.......................44
Where you can get more information.................44
Index to Financial Statements......................45
Until ____________ (25 days after the date
of this prospectus), all dealers effecting
transactions in our common shares, whether
or not participating in this distribution,
may be required to deliver a prospectus.
This delivery requirement is in addition to
the obligation of dealers to deliver a
prospectus when acting as underwriters and
with respect to their unsold allotments or
subscriptions.
NOVEMBER 13, 2000
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our articles of incorporation of Registrant contain the following
provisions which limit the liability of directors:
Article V
The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permissible under the General Corporation Law
of the State of Nevada, as the same may be amended and supplemented.
Article VI
The corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented (the "Law") indemnify and any all persons whom it shall have power
to indemnify under the Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by the Law. The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors and administrators.
Section 9 of e-Auction's By-laws, which reads as follows, provides for
the indemnification of agents of and the purchase of liability insurance:
For purposes of this Section 9, "agent" means any person who is or was
a director, officer, employee or other agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation of the Corporation or of another enterprise at the request of such
predecessor corporation; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" included without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under this Section 9.
The Corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding) other than an
action by or in the right of the Corporation to procure a judgment in its favor)
by reason of the fact that such person is or was an agent of the Corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceedings to the fullest extent
permitted under the General Corporation Law of the State of Nevada, as amended
from time to time.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by the
Registrant in connection with the sale of Common Shares being registered. All
amounts are estimates except the SEC registration fee.
SEC registration fee.......................................
Printing and engraving costs...............................
Legal fees and expenses....................................
Accounting fees and expenses...............................
Blue Sky fees and expenses.................................
II-1
<PAGE>
Miscellaneous expenses.....................................
Total................................................
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since the date of its incorporation, the following transactions were
effected by the Registrant in reliance upon exemptions from registration under
the Securities Act of 1933, as amended, (the "1933 Act"). Each certificate
issued for unregistered securities contained a legend stating that the
securities have not been registered under the Act and setting forth the
restrictions on the transferability and the sale of the securities.
On January 8, 1998, the Registrant issued 1,250,000 shares of common
stock equally to Fred Tham, Kam Chun Hui, Noni Wee, Kar Chun Chow and AiNgoh
Chiam for an aggregate and net purchase price of $1,250.00 pursuant to the
exemption from registration provided under Rule 504 of Regulation D promulgated
under the 1933 Act.
On January 30, 1998, the Registrant issued 4,000,000 shares of common
stock for an aggregate and net purchase price of $40,000.00 through an offering
circular under Rule 504 of Regulation D promulgated under the 1933 Act.
Registrant believes that the investors had knowledge and experience in financial
and business matters which allowed them to evaluate the merits and risks of the
receipt of these securities and that they were knowledgeable about the
Registrant's operations and financial condition.
On April 26, 1998, Registrant issued 70,000 shares of common stock at a
purchase price of three dollars ($3.00) per share for an aggregate purchase
price of $210,000.00 and net proceeds of $200,000.00 pursuant to an offering
under Rule 504 of Regulation D promulgated under the 1933 Act. The Registrant
believes that the investors had knowledge and experience in financial and
business matters which allowed them to evaluate the merits and risks of the
receipt of these securities and that they were knowledgeable about the
Registrant's operations and financial condition.
On February 26, 1999, the Registrant entered into a stock exchange
agreement with the stockholders of e-Auction (Barbados). The Registrant issued a
total of 34,500,000 shares of its common stock pursuant to Regulation S
promulgated under the 1933 Act to the e-Auction (Barbados) stockholders in
exchange for all of the outstanding shares of e-Auction (Barbados). There was no
cash exchanged in this transaction. The share exchange took place on a one for
one basis. The Registrant believes that the stockholders of e-Auction (Barbados)
had knowledge and experience in financial and business matters which allowed
them to evaluate the merits and risks of the receipt of these securities and
that they were knowledgeable about the Registrant's operations and financial
condition.
On August 13, 1999, in consideration for a loan of $1 million from
Millennium Advisors Inc. to the Registrant, Millennium received 197,219 common
shares of the Registrant, having a deemed value of $1,000,000, as a financing
and interest fee. The deemed price of the shares was based on the weighted
average closing price over the five (5) trading days immediately preceding the
date the loan was granted. The Registrant issued these shares in January 2000 to
Millennium Advisors Inc., which is a non-US person. In connection with the above
issuance, the Registrant relied on the exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), as
transactions by an issuer not involving any public offering, and Regulation S
promulgated under the Act, as an off-shore transaction with a non-U.S. person
("Regulation S").
On January 7, 2000, the Registrant issued 8,965,899 special warrants to
various non-US purchasers. Each special warrant entitled the holder thereof to
acquire one (1) share of the Registrant's common stock for no additional
consideration. The holders of the special warrants exercised their special
warrants immediately following their issuance, pursuant to which exercise the
Registrant issued an aggregate of 8,965,899 shares of its common stock to such
holders. The offering of the special warrants and the issuance of the shares of
common stock of the Registrant resulting from the subsequent exercise of the
special warrants were made in reliance of the exemption from registration
afforded by Section 4(2) of the 1933 Act and Regulation S with respect to
off-shore transactions to non-U.S. purchasers. Each such purchaser certified
that it (i) was not a U.S. person, (ii) was not acquiring the securities for the
account or benefit of any U.S. person, (iii) was an accredited investor and (iv)
had the requisite sophistication. Each such purchaser further agreed not to
resell the securities other than in compliance with Regulation S. The purchase
price for the special warrants was US$0.50, resulting in approximately
$4,482,948 in new capital to the Registrant.
II-2
<PAGE>
In connection with the foregoing, the Registrant issued an additional
327,878 shares of its common stock to various non-U.S. entities as commissions.
The issue price of the common shares used to pay the commissions was $0.50, for
a deemed value of $163,939. The issuance of such additional shares of the
Registrant's common stock was also made in reliance of Section 4(2) of the 1933
Act and Regulation S.
During the first quarter of the fiscal year 2000, the Registrant
settled various outstanding liabilities by issuing an aggregate of 7,625,916
shares of its common stock. The issuance price for the common stock was US$0.50
per share and the Registrant retired approximately $3,812,958 in outstanding
liabilities. All of the recepients of these shares were non-US persons, having
the requisite knowledge and experience in financial and business matters to
evaluate the merits and risks of the receipt of the Registrant's securities in
lieu of repayment in cash. In issuing these securities, the Registrant relied on
the exemption from registration afforded by Section 4(2) of the 1933 Act and
Regulation S.
On January 10, 2000, the Registrant issued 3,636,364 shares of its
common stock to the former shareholders of Schelfhout Computer Systemen, N.V.,
as partial consideration for the purchase by the Registrant's Belgium subsidiary
of all of the outstanding shares of capital stock of Schelfhout. For accounting
purposes, the purchase price per share was deemed to be $1.00. There was no cash
paid for the shares by Schelfhout. The offering was made in an off-shore
transaction to foreign individual purchasers who each certified that they (i)
were not U.S. persons; (ii) were not acquiring the securities for the account or
benefit of any U.S. person, (iii) were an accredited or sophisticated purchaser;
and (iv) would resell the securities only in compliance with Regulation S. The
Registrant further believes that the stockholders of Schelfhout had knowledge
and experience in financial and business matters which allowed them to evaluate
the merits and risks of the receipt of these securities and that they were
knowledgeable about the Registrant's operations and financial condition. The
issuance of shares of the Registrant's common stock for and in consideration for
all of the outstanding capital stock of Shelfhout was made in reliance of the
exemption afforded by Section 4(2) of the 1933 Act and Regulation S, as
transactions by an issuer not involving any public offering to non-US persons in
an off-shore transaction.
On June 22, 2000, the Registrant issued 4,072,639 shares of common
stock to ABN AMRO Capital Investments (Belgie) N.V. The purchase price for the
shares of the common stock was $1.842, resulting in proceeds to the Registrant
of approximately $7,500,000. The offering was made in an off-shore transaction
to the purchaser who certified that it (i) was not a U.S. person, (ii) was not
acquiring the securities for the account or benefit of any U.S. person, (iii)
was an accredited or sophisticated purchaser and (iv) agreed to resell the
securities only in compliance with Regulation S. The purchaser understands that
it must hold the shares for an indefinite period of time unless the sale or
other transfer thereof is subsequently registered under the 1933 Act or an
exemption from such registration is available at that time. In issuing the above
referenced securities, the Registrant relied on the exemption afforded by
Section 4(2) of the 1933 Act and Regulation S, as transactions by an issuer not
involving any public offering to a non-US person in an off-shore transaction.
On November 1, 2000, the Registrant issued an aggregate of 1,100,000
shares of common stock to the stockholders of Kwatrobox B.V as partial
consideration for the purchase of all of the outstanding shares of capital stock
of Kwatrobox N.V. In conenction with its purchase of the capital stock, the
Registrant paid a cash sum of 4,000,000 Guilders and granted options exercisable
at the three (3) year anniversary to purchase up to an additional number of
shares of common stock having an aggregate value equal to 1,000,000 Guilders,
based upon and subject to the future earnings of Kwatrobox B.V. In issuing the
above referenced securities, the Registrant relied on the exemption afforded by
Section 4(2) of the 1933 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 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
NUMBER DESCRIPTION
------ -----------
3.1 Articles of Incorporation, as amended, of the Company
(Incorporated by reference to Exhibit 2(i) of the
Registrant's Amended Registration Statement on Form
10SB-12g/A (No. 000-28741) filed with the Securities
and Exchange Commission on September 29, 2000.)
3.2 By-laws of the Company (Incorporated by reference to
Exhibit 3(ii) of the Registrant's Amended
Registration Statement on Form 10SB-12g/A (No.
000-28741) filed with the Securities and Exchange
Commission on September 29, 2000.)
II-3
<PAGE>
4.1 Specimen Common Stock Certificate (Incorporated by
reference to Exhibit 4 of the Registrant's Amended
Registration Statement on Form 10SB-12g/A (No.
000-28741) filed with the Securities and Exchange
Commission on September 29, 2000.)
5.1 Opinion of Parker Chapin LLP regarding the validity
of the securities being registered.
10.1 Share Exchange Agreement dated as of February 26,
1999 between Kazari International Inc. (now e-Auction
Global Trading Inc.) and QFG Holdings Inc.
(Incorporated by reference to the Registrant's
Amended Registration Statement on Form 10SB-12g/A
(No. 000-28741) filed with the Securities and
Exchange Commission on September 29, 2000. Exhibit 6
(i))
10.2 Share Purchase Agreement dated January 17, 2000
between e-Auction Global Trading Inc., e-Auction
Belgium N.V., Luc Schelfhout, and Hilde De Laet
(Incorporated by reference to Exhibit 6(iv) of the
Registrant's Amended Registration Statement on Form
10SB-12g/A (No. 000-28741) filed with the Securities
and Exchange Commission on September 29, 2000.)
10.3 Pledge Agreement dated January 10, 2000 between
e-Auction Belgium N.V., Luc Schelfhout, and Hilde De
Laet*
10.4 Stock Option Plan, adopted March 1, 1999 and amended
March 13, 2000 of the Company (Incorporated by
reference to Exhibit 6(iii) of the Registrant's
Amended Registration Statement on Form 10SB-12g/A
(No. 000-28741) filed with the Securities and
Exchange Commission on September 29, 2000.)
10.5 Stock Purchase Agreement dated June 21, 2000 between
e-Auction Global Trading, Inc. and ABN AMRO Capital
Investments (Incorporated by reference to Exhibit
6(v) of the Registrant's Amended Registration
Statement on Form 10SB-12Ga (No. 000-28741) filed
with the Securities and Exchange Commission on
September 29, 2000.)
21.1 Subsidiaries of the Company
23.1 Consent of PricewaterhouseCoopers Bedrijfsrevisoren
bcvba
23.2. Consent of Dale, Matheson, Carr-Hilton
----------
* Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-1 (No. 333-31276) to which this registration
statement prospectus is an amendment.
(b) Financial Statement Schedules
All schedules are omitted because they are inapplicable or the
requested information is shown in the financial statements of the Registrant or
related notes thereto contained elsewhere in this prospectus.
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Canada on the 13th day of November, 2000.
E-AUCTION GLOBAL TRADING INC.
By: /s/ David W.A. Hackett
-------------------------------------------
David W.A. Hackett,
Chief Financial Officer
(duly authorized officer)
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Dan McKenzie and David Hackett
and each of them, his attorneys-in-fact, each with the power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto in all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities stated on November 13, 2000:
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
/s/ Dan McKenzie Chief Executive Officer, President & Director
--------------------------------------------
Dan McKenzie
/s/ David Hackett Chief Financial Officer
--------------------------------------------
David Hackett
/s/ Philip Lapp Director
--------------------------------------------
Philip Lapp
/s/ Phil MacDonnell Director
--------------------------------------------
Phil MacDonnell
/s/ Mark F. Milazzo Director
--------------------------------------------
Mark F. Milazzo
/s/ Ken Reid Director
--------------------------------------------
Ken Reid
</TABLE>
<PAGE>
/s/ Bart Sonck Director
--------------------------------------------
Bart Sonck
