<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ________________
Commission file number 333-34144
VERTICALBUYER, INC.
(Exact name of registrant as specified in its charter)
Delaware 98-0216911
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
405 Lexington Avenue, Suite 2505
New York, New York 10174
------------------ -----
(Address of principal executive offices) (Zip Code)
(917) 368-8116 (Registrant's telephone number, including area code)
--------------
Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes | | No |X|
As of November 13, 2000, there were 16,675,000 shares of the
registrant's common stock, par value $0.001 issued and outstanding.
<PAGE>
VERTICALBUYER, INC.
SEPTEMBER 30, 2000 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page Number
Special Note Regarding Forward Looking Information ................3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements ..............................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................14
Item 3. Quantitative and Qualitative Disclosures About Market Risk........16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................17
Item 2. Changes in Securities and Use of Proceeds.........................17
Item 3. Defaults Upon Senior Securities...................................17
Item 4. Submission of Matters to a Vote of Security Holders...............17
Item 5. Other Information.................................................17
Item 6. Exhibits and Reports on Form 8-K..................................17
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this Quarterly Report
on Form 10-QSB for the quarter ended September 30, 2000 discusses financial
projections, information or expectations about our products or markets, or
otherwise makes statements about future events, such statements are
forward-looking. Harmony Trading Corp (the "Registrant" or the "Company") is
making these forward-looking statements in reliance on the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Although the
Registrant believes that the expectations reflected in these forward-looking
statements are based on reasonable assumptions, there are a number of risks and
uncertainties that could cause actual results to differ materially from such
forward-looking statements. These risks and uncertainties are described, among
other places in this Quarterly Report, in "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
In addition, the Registrant disclaims any obligations to update any
forward-looking statements to reflect events or circumstances after the date of
this Quarterly Report. When considering such forward-looking statements, readers
should keep in mind the risks referenced above and the other cautionary
statements in this Quarterly Report.
3
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Accountant's Review Report 5
Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 6
Consolidated Statements of Income and Other Comprehensive Income - Three Months
Ended September 30, 2000 and 1999, the Nine Months Ended September 30, 2000,
and the Period from May 13, 1999 (Inception)
through September 30, 2000 7
Consolidated Statement of Stockholders' Equity (Deficit) - Period from
May 13, 1999 (Inception) through September 30, 2000 8
Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2000
and the Period from May 13, 1999 (Inception) through September 30, 2000 9-10
Notes to Consolidated Financial Statements 11-13
</TABLE>
4
<PAGE>
ACCOUNTANT'S REVIEW REPORT
To the Stockholders
VerticalBuyer, Inc.
We have reviewed the accompanying financial statements of VerticalBuyer, Inc. as
listed in the index to the consolidated financial statements in accordance with
Statements on Standards of Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All information included in these
financial statements is the representation of the management of VerticalBuyer,
Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope that an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Leslie Sufrin and Company, P.C.
New York, NY
November 10, 2000
5
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
ASSETS (Unaudited) (See Note)
------
<S> <C> <C>
Current assets:
Cash and equivalents $ 747,442 $ --
Accounts receivable 55,214 1,565
Prepaid expenses 8,290 7,591
----------- -----------
Total current assets 810,946 9,156
Property and equipment, net of accumulated depreciation
of $62,308 and $7,729 184,992 38,653
Deferred registration costs (Note 4) 110,000 --
Security deposit (Note 3) 50,000 --
----------- -----------
$ 1,155,938 $ 47,809
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
-----------
Current liabilities:
Cash overdraft $ -- $ 423
Accounts payable and accrued liabilities 179,487 7,881
Due to affiliate -- 53,069
Deferred revenue 62,524 10,094
----------- -----------
Total current liabilities 242,011 71,467
Stockholders' equity (deficit):
Common stock, $.001 par value; 50,000,000 shares
authorized, 16,675,000 issued and outstanding 16,675 --
Common stock, $1,61 par value; 100,000 shares
authorized, 1,000 shares issued and outstanding -- 1,615
Additional paid-in capital 1,938,190 --
Accumulated other comprehensive income 15,530 --
Retained deficit accumulated during the
development stage (1,056,468) (25,273)
----------- -----------
Total stockholders' equity (deficit) 913,927 (23,658)
----------- -----------
$ 1,155,938 $ 47,809
=========== ===========
</TABLE>
Note: This column represents the December 31, 1999 balance sheet of Lightseek
Limited ("Lightseek"), the now wholly-owned subsidiary of
VerticalBuyer, Inc. (see Note 1), and was derived from the audited
financial statements of Lightseek as of such date.
6
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF INCOME
AND OTHER COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
May 13, 1999
Three Months Three Months Nine Months (Inception)
Ended Ended Ended Through
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 2000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 12,445 $ 9,405 $ 36,990 $ 58,935
Cost of sales 77,943 9,439 100,953 122,978
----------- ----------- ----------- -----------
Gross profit (65,498) (34) (63,963) (64,043)
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 75,488 1,356 173,103 176,268
Product development 15,520 5,865 81,752 95,438
General and administrative 305,117 3,575 752,516 760,857
----------- ----------- ----------- -----------
Total operating expenses 396,125 10,796 1,007,371 1,032,563
----------- ----------- ----------- -----------
(Loss) from operations (461,623) (10,830) (1,071,334) (1,096,606)
Interest income (expense), net 12,669 -- 40,138 40,138
----------- ----------- ----------- -----------
Net (loss) before other comprehensive income (448,954) (10,830) (1,031,196) (1,056,468)
Other comprehensive income (loss):
Foreign currency translation adjustment 1,912 -- 15,530 15,530
----------- ----------- ----------- -----------
Net (loss) $ (447,042) $ (10,830) $(1,015,666) $(1,040,938)
=========== =========== =========== ===========
</TABLE>
7
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Period from May 13, 1999 (Inception) Through
September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Stock Preferred Paid-in
Shares Amount Stock Capital
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Recapitalization of Lightseek Limited 14,250,000 $ 14,250 $ -- $ (12,635)
Issuance of common stock:
CSP, Inc. 2,000,000 2,000 -- 1,998,000
Others 425,000 425 -- 49,575
Acquisition of warrants -- -- -- 750
Fund raising fees -- -- -- (97,500)
Foreign currency translation adjustment -- -- -- --
Net loss for the period from May 13, 1999
through September 30, 2000 -- -- -- --
----------- ----------- ------------ -----------
Balance at September 30, 2000 16,675,000 $ 16,675 $ -- $ 1,938,190
=========== =========== ============ ===========
<CAPTION>
Deficit Accumulated
Accumulated Other
in Development Comprehensive
Stage Income Total
----------- ----------- -----------
<S> <C> <C> <C>
Recapitalization of Lightseek Limited $ -- $ -- $ 1,615
Issuance of common stock:
CSP, Inc. -- -- 2,000,000
Others -- -- 50,000
Acquisition of warrants -- -- 750
Fund raising fees -- -- (97,500)
Foreign currency translation adjustment -- 15,530 15,530
Net loss for the period from May 13, 1999
through September 30, 2000 (1,056,468) -- (1,056,468)
----------- ----------- -----------
Balance at September 30, 2000 $(1,056,468) $ 15,530 $ 913,927
=========== =========== ===========
</TABLE>
8
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and
the Period from May 13, 1999 (Inception) Through
September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Nine Months May 13, 1999
Ended (Inception) through
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Operating activities:
Net (loss) $(1,031,196) $(1,056,468)
Adjustments to reconcile net (loss) to net cash
(used) by operating activities:
Depreciation of property and equipment 62,308 62,308
Change in operating assets and liabilities:
Accounts receivable (52,899) (54,464)
Prepaid expenses (698) (8,290)
Security deposits (50,000) (50,000)
Deferred registration costs (60,000) (60,000)
Accrued expenses 171,606 179,487
Deferred revenue 52,430 62,524
----------- -----------
Net cash (used) by operating activities (908,449) (924,903)
----------- -----------
Investing activities:
Acquisition of property and equipment (208,647) (247,300)
----------- -----------
Net cash (used) by investing activities (208,647) (247,300)
----------- -----------
Financing activities:
Proceeds from issuance of common stock 2,000,000 2,001,615
Repayment of affiliate advances (53,069) --
Fund raising fees (97,500) (97,500)
----------- -----------
Net cash provided by financing activities 1,849,431 1,904,115
----------- -----------
Effect of exchange rate differences on cash and
cash equivalents 15,530 15,530
----------- -----------
Increase in cash and cash equivalents 747,865 747,442
Cash and cash equivalents - beginning of period (423) --
----------- -----------
Cash and cash equivalents - end of period $ 747,442 $ 747,442
=========== ===========
</TABLE>
9
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2000 and
the Period from May 13, 1999 (Inception) Through
September 30, 2000
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Nine Months May 13, 1999
Ended (Inception) through
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ -- $ --
============= =======
Income taxes $ -- $ --
============= =======
Supplemental schedule of non-cash investing
and financing activities:
Issuance of 50,000 shares of the Company's
common stock as payment for professional services
rendered in connection with the Company's SB-2
Registration Statement $ 50,000 $50,000
============= =======
</TABLE>
10
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
Note 1 - Organization, nature of business and basis of presentation
---------------------------------------------------------------------
The consolidated financial statements include the accounts of VerticalBuyer, Inc
("VerticalBuyer") and its wholly owned subsidiary Lightseek Limited
("Lightseek"). VerticalBuyer, a Delaware corporation, was incorporated on
September 24, 1999 and on March 1, 2000 issued 14,250,000 shares of its common
stock to the shareholders of the Lightseek in exchange for all of the
outstanding common stock of Lightseek. The acquisition has been accounted for in
a manner similar to a pooling of interests since it occurred between entities
under common control. As such, the consolidated financial statements give
retroactive effect of the acquisition to January 1, 2000. VerticalBuyer and
Lightseek are collectively referred to as the "Company". All significant
intercompany transactions and balances have been eliminated in consolidation.
Lightseek was incorporated in the United Kingdom on May 13, 1999. The Company is
principally engaged in the development of Internet sites designed to exploit
Business-to-Business e-commerce opportunities within the global commercial
electrical and lighting markets.
The Company is a development stage company as defined by Statement of Financial
Accounting Standard No. 7, "Accounting and Reporting by Development Stage
Enterprises", as it devotes substantially all its efforts to establishing a new
business. While the Company's planned principal operations have commenced, the
Company has not yet recognized significant revenues from such principal
operations.
Note 2 - Summary of significant accounting policies
---------------------------------------------------
The following summary of the Company's significant accounting policies is
presented as an integral part of the accompanying financial statements.
Use of estimates
----------------
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
-------------------------
The Company considers all bank money market accounts and other investments that
can be liquidated on demand or with an original maturity of three months or less
to be cash equivalents.
Concentrations of credit risk
-----------------------------
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and trade accounts receivable. The Company
currently places all of its cash with one financial institution and believes it
is not exposed to any significant credit risk on cash. The Company extends
credit to its customers based upon an evaluation of the customer's financial
condition and credit history. The Company since inception has not incurred any
credit losses and believes that its trade accounts receivable credit risk
exposure is limited.
Property and equipment
----------------------
Purchased software and computer equipment are stated at cost and depreciated
using the straight-line method over the estimated useful lives of the respective
assets, which is 3 years.
Revenue recognition
-------------------
The Company's revenues are derived principally from the sale of banner and
sponsorship advertisements. Advertising revenues from both banner and
sponsorship contracts are recognized ratably over the period in which the
advertisement is displayed. Auction revenues consist of seller placement and
success fees. Revenues related to placement fees are recognized at the time the
item is listed. Success fees are recognized at the time that the transaction is
successfully concluded. Success fees are calculated as a percentage of the gross
value of the auction sales transaction.
11
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
Note 2 - Summary of significant accounting policies (continued)
--------------------------------------------------------------
Cost of sales
-------------
Cost of sales consists of expenses associated with the production of the
Company's online media properties. These costs consist primarily of Web-site
hosting and customer service charges, hardware maintenance and the depreciation
of purchased software and computer equipment.
Product development expenses
----------------------------
Product development costs such as content development, editorial management, and
modifications to graphics are generally expensed as incurred, except for certain
costs relating to the acquisition or development of internal-use software which
are capitalized in accordance with Emerging Issues Task Force ("EITF") No.
2000-02 "Accounting for Web Site Development Costs".
Foreign currency translation gain or (loss)
------------------------------------------
Lightseek's functional currency is the British Pound. The accompanying financial
statements have been translated to United States dollars using a year-end rate
of exchange for assets and liabilities, and average rates of exchange for
revenues and expenses. Translation gains (losses) are included in other
comprehensive income and accumulated as a separate component of stockholders'
equity.
Income taxes
------------
Deferred income taxes are provided on a liability method whereby deferred tax
assets are established for the difference between the financial reporting and
income tax basis of assets. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
Note 3 - Security deposit
-------------------------
In June 2000, the Company placed $50,000 into an interest bearing cash account
as a rental security deposit for a residential apartment in New York City.
Note 4 - Deferred registration costs
------------------------------------
As of September 30, 2000, the Company capitalized $110,000 of professional fees
incurred in connection with its SB-2 Registration Statement with the Securities
and Exchange Commission. These costs were charged to equity pursuant to the
SEC's acceptance of the registration in October 2000.
Note 5 - Stockholders' equity
-----------------------------
On March 1, 2000, VerticalBuyer issued 375,000 shares of its common stock as
payment for certain fund raising related consulting services.
On March 2, 2000, VerticalBuyer entered into a Securities Purchase and
Facilities Agreement with CSP Inc., a U.S. publicly traded company ("CSPI"),
under which CSPI purchased two million shares of VerticalBuyer's common stock
and redeemable warrants to purchase up to an additional three million shares of
such stock for an aggregate purchase price of $2 million. The three classes of
warrants (Class A, Class B and Class C) entitle CSPI, subject to certain
conditions and the occurrence of certain events, to purchase up to one million
shares each of VerticalBuyer's common stock at an exercise price of $1 per
share. These warrants, along with 225,000 Class D warrants which were issued in
March 2000 and are also exercisable at $1 per share, are exercisable for a
period of two years beginning on the effective date of a registration statement
covering the underlying shares.
12
<PAGE>
VERTICALBUYER, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
Note 5 - Stockholders' equity (Continued)
On March 2, 2000, VerticalBuyer issued options to purchase up to 1,250,000
shares of its common stock at $1 per share under its 2000 Non-statutory Stock
Option Plan. These options expire four years from the date of issuance.
In connection with CSPI's acquisition of VerticalBuyer's common stock and
redeemable warrants, the Company incurred a fund raising fee of $97,500.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Quarterly
Report. Certain statements in this Quarterly Report which are not statements of
historical fact are forward-looking statements. See "Special Note Regarding
Forward-Looking Information" on Page 3.
Overview
We develop and operate business to business Internet e-commerce sites in
vertical market sectors. Our initial focus will be in the global commercial
lighting market.
We commenced our operations in May, 1999 as Lightseek Limited, a United Kingdom
corporation. Lightseek was acquired by VerticalBuyer, Inc., a Delaware
Corporation, on February 24, 2000. We began development of our first website, an
information portal called www.lightseek.com, in June 1999. Our
business-to-business auction website, www.lightingbuyer.com, commenced
operations in February 2000. In February, 2000, we commenced operations of
www.financebuyer.com our small business online financing website. Finally, in
May, 2000, we launched www.lightingnews.com, a 24 hour/7 day news center for the
global commercial lighting industry. Other than Tim Rosen, President, and Leslie
Kent, Chief Financial Officer, we presently employ no personnel having
outsourced all required activities.
Most of our present income arises from advertising. However, we anticipate
ultimately that most of our income will be derived from fees derived from
auction sales.
We do not charge fees to buyers and, to date, we have chosen not to sell
advertising on our auction website. Sellers pay a nominal placement fee to list
items for sale. Sellers also pay a success fee for each item sold, equal to 5%
of the gross value of each transaction.
Revenues from placement fees are recognized when an item is listed; revenues
relating to success fees are recognized at the time that an auction is
successfully concluded. At no point during the auction process do we take
possession of the item being sold. Successful buyers' payments are held in an
escrow account until the goods are received by the buyer.
Our business model differs from those of online sellers of goods. Because
individual sellers list the items, we do not incur any cost for goods sold, nor
do we pay procurement, carrying or shipping costs and bear no inventory risk.
Thus, we anticipate that any growth in our expenses will be driven by increases
in expenditures for advertising and promotion and the development of additional
websites. We anticipate increases in our expenses, and in particular
advertising, promotion and personnel, in our effort to grow our
business-to-business sales.
We are a development stage company and have a limited operating history on which
to base an evaluation of our business and prospects. Our prospects must be
considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets such as online
commerce.
It is difficult for us to forecast our revenues or earnings accurately. We
believe that future period-to-period comparisons of our operating results may
not be meaningful and should not be relied upon as an indication of future
performance as we have and will have no backlog of orders. Our operating results
in one or more future quarters may fall below investor expectations. Assuming
our common stock trades on a recognized market, in that event, the future
trading price of our common stock would almost certainly decline.
14
<PAGE>
Results of Operations
The following table sets forth for the nine and three months ended September 30,
2000, certain data from our statements of income. The operating results are not
necessarily indicative of the results that may be expected for any future
period.
<TABLE>
<CAPTION>
Nine Months Three Months
Ended Ended
September 30, 2000 September 30, 2000
------------------ ------------------
<S> <C> <C>
Net revenues ................. $ 36,990 $ 12,445
Cost of net revenues ......... 100,953 77,943
----------- -----------
Gross profit ................. (63,963) (65,498)
----------- -----------
Operating expenses:
Sales and marketing ....... 173,103 75,488
Product development ....... 81,752 15,520
General and administrative 752,516 305,117
----------- -----------
Total operating expenses 1,007,371 396,125
----------- -----------
(Loss) from operations ....... (1,071,334) (461,623)
Interest income (expense), net 40,138 12,669
----------- -----------
Net (loss) ................... $(1,031,196) $ (448,954)
=========== ===========
</TABLE>
Revenues
Revenues were $36,990 and $12,445 for the nine and three months ended September
30, 2000, respectively. These revenues consist substantially of advertising
sales on our www.lightseek.com site. Sales for the balance of 2000 and in future
years will be of an unknown mix of commissions from auction sales, site
sponsorships and advertising revenues. Revenues for the three months ended
September 30, 1999 were insignificant.
Cost of Sales
Cost of sales were $100,953 and $77,943 for the nine and three months ended
September 30, 2000, respectively. These costs consist of Internet service
provider connectivity charges and the amortization of purchased hardware and
software. Cost of sales for the three months ended September 30, 1999 were
insignificant.
Sales and Marketing Expense
Sales and marketing expenses were $173,103 and $75,488 for the nine and three
months ended September 30, 2000, respectively. These costs primarily consist of
expenditures for sales and marketing activity, including advertising, and other
promotional costs. Sales and marketing expense for the three months ended
September 30, 1999 were insignificant.
Product Development Expense
Product development expenses were $81,752 and $15,520 for the nine and three
months ended September 30, 2000, respectively. These costs consist principally
of payments for editorial and technical support, web site operations,
advertising production, and consulting costs related to enhancing the features
of our web sites. Product development costs are generally expensed as incurred,
except for certain costs relating to the acquisition or development of
internal-use software which are capitalized in accordance with Emerging Issues
Task Force ("EITF") No. 2000-02 "Accounting for Web Site Development Costs".
Product development expenses for the three months ended September 30, 1999 were
insignificant.
15
<PAGE>
General and Administrative Expense
Our general and administrative expenses amounted to $752,516 and $305,117 for
the nine and three months ended September 30, 2000, respectively. This expense
category consists principally of office rent and other administrative costs
along with compensation and travel and entertainment reimbursements paid to Tim
Rosen and Leslie Kent for business development, contract negotiations, and other
general corporate purposes. General and administrative expenses for the three
months ended September 30, 1999 were insignificant.
Liquidity and Capital Resources
The initial cash funding of both www.lightseek.com and www.lightingbuyer.com was
principally undertaken by Tim Rosen and Leslie Kent, our founding stockholders.
As a result, we did not incur any principal debt during the period. Thus, our
cash flow has no meaningful significance in terms of future developments.
Capital expenditures to date consist solely of the acquisition of web site
related hardware and software. These expenditures amounted to $208,647 and
$39,076 during the nine and three months ended September 30, 2000, respectively.
Capital expenditures for the three months ended September 30, 1999 were
insignificant. We believe that our existing cash, cash equivalents and
short-term investments and any cash generated from operations together with the
proceeds from warrant exercise will be sufficient to fund our operating
activities, capital expenditures and other obligations for the foreseeable
future. However, if during that period or thereafter, we are not successful in
generating sufficient cash flow from operations or in raising additional capital
when required in sufficient amounts and on terms acceptable to us, our business
could suffer. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our then-current stockholders would be
reduced.
Year 2000 Issues
We have not suffered any programming problems as a result of Year 2000 issues.
In the development of our programming, we endeavor to use only vendors and
contractors who are Year 2000 compliant. We have reviewed our internal programs
and have determined that there are no significant Year 2000 issues within our
systems or services.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In August 2000, the Registrant issued 50,000 shares of common stock in
connection with legal services rendered to the Registrant. These securities were
sold under the exemption from registration provided by Section 4(2) of the
Securities Act. Neither the Registrant nor any person acting on its behalf
offered or sold the securities by means of any form of general solicitation or
general advertising. The purchaser represented in writing that it acquired the
securities for its own account. A legend was placed on the stock certificates
stating that the securities have not been registered under the Securities Act
and cannot be sold or otherwise transferred without an effective registration or
an exemption therefrom.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VERTICALBUYER, INC.
Dated: November 13, 2000 By: /s/ TIMOTHY ROSEN
-----------------
Timothy Rosen
President and Chief Executive Officer
By: /s/ LESLIE KENT
---------------------
Leslie Kent
Chief Financial Officer
17
<PAGE>
EXHIBIT INDEX
27 Financial Data Schedule
