<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 2000
REGISTRATION STATEMENT NO. 333-34144
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NUMBER 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VERTICALBUYER, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7389 98-0216911
(STATE OF INCORPORATION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OR JURISDICTION OF ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
405 LEXINGTON AVENUE, SUITE 2505
NEW YORK, NEW YORK 10174
(917) 368-8116
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
TIMOTHY NEIL DAVID ROSEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VERTICALBUYER, INC.
405 LEXINGTON AVENUE, SUITE 2505
NEW YORK, NEW YORK 10174
(917) 368-8116
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Copies of all communications, including all communications sent to
the agent for service, should be sent to:
ADAM S. GOTTBETTER, ESQ.
JAMES G. SMITH, ESQ.
KAPLAN GOTTBETTER & LEVENSON, LLP
630 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 983-6900
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: From time to time after the
effective date of the registration statement until such time that all of the
shares of common stock registered hereunder have been sold.
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, please 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,
check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF EACH CLASS AMOUNT BEING PRICE PER MAXIMUM AGGREGATE
OF SECURITIES BEING REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1)
<S> <C> <C> <C>
Shares of Common Stock............................................ 2,050,000 $ 1.00 $ 2,000,000
Shares of Common Stock Underlying "A" Warrant(2).................. 1,000,000 1.00 1,000,000
Shares of Common Stock Underlying "B" Warrant(2).................. 1,000,000 1.00 1,000,000
Shares of Common Stock Underlying "C" Warrant(2).................. 1,000,000 1.00 1,000,000
Shares of Common Stock Underlying "D" Warrants(2)................. 225,000 1.00 225,000
"D" Warrants...................................................... 75,000 0.00(3) 0.00
Total............................................................. $ 5,225,000
Less Amount Previously Paid.......................................
Amount Due........................................................
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES BEING REGISTERED REGISTRATION FEE
<S> <C>
Shares of Common Stock............................................ $ 541.20
Shares of Common Stock Underlying "A" Warrant(2).................. 264.00
Shares of Common Stock Underlying "B" Warrant(2).................. 264.00
Shares of Common Stock Underlying "C" Warrant(2).................. 264.00
Shares of Common Stock Underlying "D" Warrants(2)................. 59.40
"D" Warrants...................................................... 0.00
Total............................................................. $1,392.60
Less Amount Previously Paid....................................... $1,327.15
Amount Due........................................................ $ 65.45
</TABLE>
(1) Estimated for purposes of computing the registration fee pursuant to
Rule 457.
(2) Pursuant to Rule 416, there are also being registered such indeterminate
number of shares as may become issuable as a result of stock splits, stock
dividends or similar events.
(3) Calculated pursuant to Rule 457(f)(2), based on the book value as of
June 30, 2000 of the registrant's common stock on a fully diluted basis,
less the exercise price of the "D" Warrants.
------------------------
THE REGISTRANT HEREBY AMENDS THE 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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL, NOR DOES IT SEEK AN OFFER TO BUY, THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED , 2000.
PROSPECTUS
VERTICALBUYER, INC.
4,482,517 SHARES OF COMMON STOCK
This prospectus relates to the resale by the selling stockholders of
4,482,517 shares of our common stock. The selling stockholders may sell the
shares from time to time at the prevailing market price or in negotiated
transactions. Of the shares offered:
o 1,332,517 are currently outstanding, and
o 3,150,000 shares are issuable upon the exercise of warrants currently
held by the selling stockholders.
We will not receive any of the proceeds from the sale of the shares by the
selling stockholders.
We intend that our common stock will trade on the Over-the-Counter Bulletin
Board under the symbol "VERB".
AS YOU REVIEW THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE MATTERS
DESCRIBED IN "RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 6
Cautionary Note Regarding Forward Looking Information...................................................... 15
Use of Proceeds............................................................................................ 16
Capitalization............................................................................................. 16
Dividend Policy............................................................................................ 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................................ 17
Business................................................................................................... 20
Our Business............................................................................................. 20
Our Strategy............................................................................................. 21
Our Websites............................................................................................. 21
Marketing................................................................................................ 23
Competition.............................................................................................. 23
Employees................................................................................................ 23
Facilities............................................................................................... 23
Management................................................................................................. 24
Certain Related Party Transactions......................................................................... 26
Principal Stockholders..................................................................................... 27
Description of Securities.................................................................................. 28
Selling Stockholders....................................................................................... 31
Plan of Distribution....................................................................................... 32
Shares Eligible for Future Sale............................................................................ 34
Where You Can Find More Information........................................................................ 34
Legal Proceedings.......................................................................................... 34
Legal Matters.............................................................................................. 34
Experts.................................................................................................... 34
Index to Financial Statements.............................................................................. 35
Financial Statements....................................................................................... F-1
</TABLE>
------------------------
You may rely only on the information contained in this prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. Neither the delivery of this prospectus nor sale of common
stock means that information contained in this prospectus is correct after the
date of this prospectus. This prospectus is not an offer to sell or solicitation
of an offer to buy these shares of common stock in any circumstances under which
the offer or solicitation is unlawful.
2
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information in this prospectus including our financial statements and notes to
those statements appearing elsewhere in this prospectus. This prospectus
contains forward-looking statements based on current expectations of our company
and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of the factors described in the
"Risk Factors" section and elsewhere in this prospectus.
We have launched both an information website and an auction website
dedicated to the commercial lighting industry. We refer to these kinds of
websites as vertical portals, as they are gateways to companies in particular
industries to buy and sell products and services and to receive current industry
information. We have also launched similar websites including a website
dedicated to small business finance. We presently generate revenues from
advertising and anticipate generating revenues in the future primarily from
commissions based upon transactions carried out on our auction websites.
Our current portfolio consists of the following sites:
o Lightseek.com--sponsored by Philips Lighting, GE Lighting and Osram
as a portal site for lighting designers, architects and electrical
contractors.
o LightingBuyer.com--recently launched as a global marketplace for the
commercial lighting industry.
o LightingNews.com--sponsored by Philips Lighting as a news wire service
for the world lighting industry.
o FinanceBuyer.com--the product of a strategic alliance with SierraCities,
an online bank, providing online financing for small businesses.
o VoiceDataNews.com--an on-line news service for the global voice data
industry.
o ElectricalTimes.com--an on-line news service for the global electrical
industry.
We intend to continue the development of our portfolio of information and
business exchange websites in the following vertical sectors:
o Electrical o Shipping
o Construction o Automotive
o Aviation/Aerospace o Marine
Our management has an extensive background in marketing, publishing,
software development, corporate finance and emerging public company management.
VerticalBuyer, Inc., is a newly-formed company. Lightseek Limited, our
wholly-owned subsidiary, was owned substantially by our founders, Tim Rosen, our
President, and Leslie Kent, our Chief Financial Officer. Messrs. Rosen and Kent
had personally financed Lightseek since its inception in 1998. In order to gain
further funding, to establish an alliance with an established e-commerce company
and to move the center of its operations from the United Kingdom to the United
States, we acquired Lightseek and shortly thereafter, sold 2,000,000 shares of
our common stock and 3,075,000 common stock purchase warrants to CSPI, Inc., a
software development company, for $2 million. Messrs. Rosen and Kent own an
aggregate of 13,950,000 shares out of 16,675,000 shares outstanding.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares offered by the selling
stockholders............................ 4,482,517 shares of common stock
Common stock outstanding.................. 16,675,000 shares
Common stock outstanding after exercise of
outstanding warrants.................... 19,900,000 shares
Use of proceeds........................... The selling stockholders will receive the net proceeds from the sale
of shares. We will receive none of the proceeds from the sale of the
shares offered by this prospectus. We will use the net proceeds from
the exercise of warrants for general corporate and working capital
purposes.
Proposed OTCBB symbol..................... "VERB"
</TABLE>
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 2000(1) DECEMBER 31, 1999(2)
------------------ ----------------------------
ACTUAL ACTUAL PRO FORMA
------------------ ----------- ------------
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues............................................... $ 24,545 $ 21,945 $ 21,945
Gross profit............................................... 23,010 (80) (80)
Income (loss) from operations.............................. 1,535 (25,273) (25,273)
Net income (loss).......................................... (582,242) (25,273) (25,273)
Net income (loss) per share(3):
Basic.................................................... $ (0.03) $ (0.00)
Weighted average shares--basic........................... 16,625,000 16,625,000
Diluted(3)................................................. $ (0.03) $ (0.00)
Weighted average shares--diluted........................... 16,625,000 16,625,000
</TABLE>
------------------
(1) This Statement of Income Data reflects the consolidated results of
VerticalBuyer and Lightseek for the six months ended June 30, 2000.
(2) This Statement of Income Data reflects the operations of Lightseek Limited
for the period from inception (May 13, 1999) through December 31, 1999. The
pro-forma column reflects the consolidated results of VerticalBuyer and
Lightseek as if the acquisition had occurred on December 31, 1999.
(3) Pro-forma diluted loss per share excludes the 3,225,000 shares of common
stock underlying the warrants since the exercise of such warrants would be
antidilutive.
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000 AS OF DECEMBER 31, 1999
-------------------------------- ----------------------------
PRO FORMA AFTER PRO FORMA AFTER
CONSOLIDATED EXERCISE OF LIGHTSEEK CSPI
VERTICALBUYER WARRANTS(1) LIMITED ACQUISITION(2)
------------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 1,182,527 $4,407,527 $ -- $1,860,000
Working capital......................................... 1,031,752 4,256,752 (62,311) 1,797,689
Total assets............................................ 1,471,168 4,696,168 47,809 1,907,809
Debt and leases, long-term portion...................... -- -- -- --
Total stockholders' equity.............................. $ 1,254,850 $4,479,850 $ (23,658) $1,836,342
</TABLE>
------------------
(1) This pro-forma "After Exercise of Warrants" column represents the
consolidated accounts of VerticalBuyer and Lightseek as of June 30, 2000 as
if all warrants had been exercised as of that date.
(2) This pro-forma "After CSPI Acquisition" column represents the consolidated
accounts of VerticalBuyer and Lightseek as if VerticalBuyer's acquisition of
Lightseek and CSPI's acquisition of 2 million shares of VerticalBuyer's
common stock had occurred on December 31, 1999.
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could be
harmed. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE OUR OPERATIONS.
We were formed in September, 1999 and acquired Lightseek on March 1, 2000.
Lightseek was formed in May, 1999. Accordingly, we have limited operating
history upon which you may evaluate us. Because our Internet auction site and
Internet news portal have only recently been launched and because we have a
small customer and advertiser base to date, you may find it difficult to
evaluate our future prospects and evaluate our business strategy.
WE ANTICIPATE WE WILL INCUR CONTINUED LOSSES FOR THE FORESEEABLE FUTURE.
We expect to incur losses for the foreseeable through costs associated with
building the infrastructure necessary for our business. Our revenue may not be
sufficient to fund these expenses. We may never be profitable or, if we become
profitable, we may be unable to sustain profitability.
We believe that profitability and growth will depend in large part on our
ability to do the following:
o develop our brand name awareness;
o provide our customers with superior trading experiences; and
o maintain sufficient transaction volume to attract buyers and sellers.
Anticipated losses may result from our plan to increase our operating
expenses to:
o increase our sales and marketing operations;
o broaden our customer support and software capabilities;
o pursue strategic marketing and distribution alliances; and
o attract qualified managers for our expanded administrative and commercial
functions as well as for possible new acquisitions.
Some of our expenses are or will be fixed, including non-cancelable
agreements, equipment leases and real estate leases. Other expenses will
increase as we hire more personnel. If our revenues do not increase, we may not
be able to compensate by reducing expenses in a timely manner. Expenses may also
increase due to the potential impact of goodwill and other charges from any
future acquisitions.
OUR REVENUE MODEL MAY NOT BE SUCCESSFUL.
Our revenue model calls for the collection of fees for listing products and
commissions for effecting sales on our auction website as well as advertising
revenues from our information website, www.lightseek.com and our new website,
www.lightingnews.com. We can give no assurance that this revenue model will be
successful in that sellers will pay commissions pursuant to our present
structure or existing advertisers will continue their programs with us or that
potential advertisers will choose our sites to promote their products and
services. In addition, our revenue model calls for levels of transactions which
may not be met.
WE HAVE A LIMITED FINANCIAL HISTORY UPON WHICH YOU MAY EVALUATE OUR FINANCIAL
PERFORMANCE.
Because of our limited financial history, we believe that period-to-period
comparisons of our results of operations will not be meaningful in the short
term and should not be relied upon as indicators of future performance.
6
<PAGE>
If we do not generate revenues from our initial target market of lighting
manufacturers, distributors and suppliers, or our revenues are lower than we
anticipate, the ability of our company to operate as a going concern might be
adversely affected.
To address these risks and uncertainties, we must do the following:
o maintain and increase our number of registered users, items listed on our
service and completed auctions;
o maintain and grow our website and customer operations;
o make trading through our service safer for users;
o maintain and enhance our brand;
o successfully execute our business and marketing strategy;
o refine and upgrade our technology and information processing systems;
o enhance our service to meet the needs of a changing market;
o provide superior customer service;
o respond to competitive developments; and
o attract, integrate, retain and motivate qualified personnel.
OUR ABILITY TO GENERATE AND INCREASE REVENUES IN OUR INITIAL MARKET MAY DEPEND
ON THE FACTORS STATED IN OTHER RISK FACTORS AND OTHER ISSUES.
Generation and increase of revenues in our present markets depends on the
following factors, among others:
o our ability to develop an active base of users which list items for sale
and which complete transactions through our service;
o our ability to keep our website operational and to manage the number of
items listed on our service;
o federal, state or local government regulation;
o the introduction of new sites, services and products by us and our
competitors;
o the success of our brand building and marketing campaigns;
o the level of use of the Internet and online services by businesses, and,
in particular, the trading of products such as those listed on our
present and planned websites;
o confidence in the security of transactions on our websites;
o our ability to upgrade and develop our systems and infrastructure to
accommodate growth;
o our ability to attract new personnel in a timely and effective manner;
o the volume of items listed on our website;
o technical difficulties or service interruptions;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and infrastructure; and
o general economic conditions and economic conditions specific to the
Internet and electronic commerce industries.
Our failure to implement one or more of these factors may lead to the
failure of our business as a whole.
7
<PAGE>
OUR BUSINESS MAY NOT DEVELOP ADDITIONAL REVENUE SOURCES.
We plan to generate revenues through relationships with strategic partners
for the sale of assets and services to particular industries. To generate
significant revenues from Internet business-to-business e-commerce, we will have
to continue to build these business relationships through our contacts and the
expertise of our current or future personnel. We may not be able to form new
strategic alliances due to a lack of sufficient financial resources or expertise
in a newly targeted industry. If we are not able to build these relationships
with strategic partners, we will have difficulty developing additional
businesses to generate revenues.
WE MAY HAVE DIFFICULTY IN OBTAINING ADDITIONAL FUNDING, IF REQUIRED.
Although we believe that the funds to be raised through warrant exercise
will be sufficient for our needs for the foreseeable future, if additional funds
are needed, we may have difficulty obtaining them, and we may have to accept
terms that would adversely affect our shareholders. For example, the terms of
any future financings may impose restrictions on our right to declare dividends
or on the manner in which we conduct our business. Also, lending institutions or
private investors may impose restrictions on future decisions by us to make
capital expenditures, acquisitions or asset sales.
We may not be able to locate additional funding sources at all or on
acceptable terms. If we cannot raise funds on acceptable terms, if and when
needed, we may not be able to develop or enhance our services to customers, take
advantage of future opportunities for strategic alliances within a particular
industry, grow our business or respond to competitive pressures or unanticipated
requirements, which could seriously harm our business.
ACQUISITIONS AND NEW STRATEGIC ALLIANCES MAY DISRUPT OR OTHERWISE HAVE A
NEGATIVE IMPACT ON OUR BUSINESS.
We plan to make investments in complementary companies, technologies and
assets. Future acquisitions are subject to the following risks, among others:
o acquisitions may cause a disruption in our ongoing business, distract our
management and make it difficult to maintain our standards, controls and
procedures;
o we may acquire companies or make strategic alliances in markets in which
we have little experience;
o we may not be able to successfully integrate the services, products and
personnel of any acquisition or new alliance into our operations;
o we may be required to issue equity securities to pay for acquisitions,
which may be dilutive to existing stockholders; and
o our acquisitions may not result in any return on our investment and, as a
result, we may lose our entire investment.
OUR SUCCESS IS DEPENDENT ON RETAINING OUR CURRENT KEY PERSONNEL AND ATTRACTING
ADDITIONAL PERSONNEL, PARTICULARLY IN THE AREAS OF SALES, TECHNICAL SERVICES AND
CUSTOMER SUPPORT.
We believe that our success will depend on continued employment of our
senior management team, particularly Tim Rosen, our President, and Leslie Kent,
our Chief Financial Officer, and other key technical personnel for the
development of our on-line services and our ability to attract businesses to use
our on-line websites for the effective management, purchase and sale of
equipment, inventory and assets. Their experience in e-commerce asset
management, sales and procurement is important to the establishment of business
in the various industries in which we hope to develop e-commerce sites. We do
not maintain key-man life insurance on any of our personnel.
Our success also depends on having a highly trained sales force, telephone
sales group and technical and customer support personnel. We will need to hire
personnel as our business grows. A shortage in the number of trained sales,
technical and customer support personnel in the on-line service
8
<PAGE>
industry could limit our ability to increase sales and to sell services.
Competition for personnel, particularly for employees with technical expertise,
is intense. New hires also frequently require extensive training before they
achieve desired levels of productivity. If we cannot hire and retain suitable
personnel, we may not be able to expand and develop new business to business
online communities effectively or support those that are developed, resulting in
loss of customers and revenues.
MARKETING AND DISTRIBUTION ALLIANCES MAY NOT GENERATE THE EXPECTED NUMBER OF NEW
CUSTOMERS OR MAY BE TERMINATED.
We intend to use marketing, distribution and strategic trade group
alliances with other Internet companies to create traffic on our on-line
business communities and, consequently, to generate revenues. These marketing
and distribution alliances will allow us to link our on-line websites to
Internet search engines and other websites. The success of these relationships
depends on the amount of increased traffic we receive from the alliance
partners' websites.
We may have difficulty entering into marketing and distribution alliances.
These arrangements may not generate the number of new customers we expect. We
also cannot assure you that we will be able to enter into these marketing and
distribution alliances or renew any marketing and distribution alliance
agreements that we are able to establish. If we are unable to establish these
alliances or if any of these agreements is terminated, the traffic on our
on-line websites might not grow and could decrease.
COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR BUSINESS.
The market for business to business trading over the Internet is new,
rapidly evolving and intensely competitive, and we expect competition to
intensify in the future. Barriers to entry are relatively low, and current and
new competitors can launch new sites at a relatively low cost using commercially
available software.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY WITH OTHER PROVIDERS OF E-COMMERCE
SERVICES.
We believe that the strongest potential competition does not come from
traditional service groups but rather the evolution of the Internet and the
types of business-to-business service providers that such evolution will create.
As applications for business-to-business e-commerce begin to proliferate and
mature, we will continue to compete with other technology companies and
traditional service providers that seek to integrate on-line business
technologies with their traditional service mix.
Competition for Internet products and services and electronic business
commerce is intense. We expect that competition will continue to intensify.
Barriers to entry are minimal, and competitors can launch new websites at a
relatively low cost. We expect that additional companies will establish
competing on-line business communities on a stand-alone basis.
E-commerce applications are in the early stages of development. Currently,
the principal focus of e-commerce business-to-business groups is to provide
information and generate revenues from advertising. As e-commerce evolves,
however, we expect that other entrepreneurs and large, well-known leaders in
specific industries will create other niche business-to-business services that
may compete with our services.
These large industry leaders, particularly major original equipment
manufacturers, would have better name recognition in the markets that we may
target. We also expect competition from large consulting firms and software
solution providers, which have begun developing e-commerce applications for
their existing clients. The larger financial resources of these competitors may
enable them to market to potential buyers and sellers of equipment, inventory,
parts and other assets and launch more widespread marketing campaigns that would
make it more difficult for us to compete.
WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE.
The market in which we compete is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
introductions and enhancements and changing customer demands. These market
characteristics are worsened by the emerging nature of the Internet and the
apparent need of
9
<PAGE>
companies from a multitude of industries to offer web-based products and
services. Our future success therefore will depend on our ability to adapt to
rapidly changing technologies, to adapt our services to evolving industry
standards and to continually improve the performance, features and reliability
of our service. Our failure to adapt to such changes would harm our business.
THERE ARE MANY RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
As we expand internationally, we are subject to risks of doing business
internationally, including the following:
o regulatory requirements that may limit or prevent the offering of our
services in local jurisdictions;
o legal uncertainty regarding liability for the listings of our users,
including less Internet friendly basic law and unique local laws;
o government-imposed limitations on access to the Internet;
o difficulties in staffing and managing foreign operations;
o longer payment cycles, different accounting practices and problems in
collecting accounts receivable;
o political instability;
o seasonal reductions in business activity;
o potentially adverse tax consequences; and
o administrative burdens in collecting local taxes, including value-added
taxes.
To the extent we expand our international operations and have additional
portions of our international revenues denominated in foreign currencies, we
also could become subject to increased difficulties in collecting accounts
receivable and risks relating to foreign currency exchange rate fluctuations.
REGULATIONS REGARDING THE INTERNET MAY BE ENACTED WHICH COULD IMPEDE OUR
BUSINESS.
The future success of our business is dependent on our ability to use an
effective Internet marketing strategy. Because the original role of the Internet
was to link the government's computers with academic institutions' computers,
the Internet was historically administered by organizations that were involved
in sponsoring research. Private parties have assumed larger roles in the
enhancement and maintenance of the Internet infrastructure. Therefore, it is
unclear what organization, if any, will govern the administration of the
Internet in the future, including the authorization of domain names.
The lack of an appropriate organization to govern the administration of the
Internet infrastructure and the legal uncertainties that may follow pose risks
to the commercial Internet industry and our specific website business. In
addition, the effective operation of the Internet and our business is also
dependent on the continued mutual cooperation among several organizations that
have widely divergent interests, including the government, Internet service
providers and developers of system software and software language. These
organizations may find that achieving a consensus may become difficult,
impossible, time-consuming and costly.
Although we are not subject to direct regulation in the United States other
than federal and state business regulations generally, changes in the regulatory
environment could result in the Federal Communications Commission or other
United States regulatory agencies directly regulating our business.
Additionally, as Internet use becomes more widespread internationally, there is
an increased likelihood of international regulation.
We cannot predict whether or to what extent any new regulation affecting
e-commerce will occur. New regulation could increase our costs. For example, we
do not collect sales or other similar taxes with respect to the equipment,
inventory and other products sold through our on-line communities. One or more
states may seek to impose sales tax collection obligations on out-of-state
companies like ours that engage in or facilitate e-commerce. State and local
governments have made proposals that would impose additional taxes
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on the sale of goods and services over the Internet. A successful assertion by
one or more states or any foreign country that we should collect sales and other
taxes on the exchange of equipment, inventory and other goods on our system
could increase costs that we could have difficulty recovering from users of our
websites.
Governmental agencies and their designees regulate the acquisition and
maintenance of web addresses generally. For example, in the United States, the
National Science Foundation had appointed Network Solutions, Inc. as the
exclusive registrar for the website names, known as generic top-level addresses,
ending in .com, .net and .org. Although Network Solutions no longer has
exclusivity, it remains the dominant registrar. The regulation of web addresses
in the United States and in foreign countries is subject to change. As a result,
we may not be able to acquire or maintain relevant web addresses in all
countries where we conduct business that are consistent with our brand names and
marketing strategy. Furthermore, the relationship between regulations governing
website addresses and laws protecting trademarks is unclear.
WE MAY FACE INCREASED ACCESS COSTS FROM BROWSER PROVIDERS AND INTERNET
DISTRIBUTION CHANNELS.
Leading website, browser providers and other Internet distribution channels
may begin to charge us to provide access to our products and services which
would increase our cost of doing business.
IF WE CANNOT PROTECT OUR TRADEMARKS AND DOMAIN NAMES WE MAY NOT BE ABLE TO
MAINTAIN FUTURE BUSINESS.
Proprietary rights are important to our success and our competitive
position. We intend to apply for federal registration of "Lightseek.com" and
"LightingBuyer.com" as service marks for use in connection with our electronic
commerce services.
Although we seek to protect our proprietary rights, our actions may be
inadequate to protect any trademarks and other proprietary rights or to prevent
others from claiming violations of their trademarks and other proprietary
rights. We may not be able to protect our domain names for our on-line
industry-specific websites as trademarks because those names may be too generic
or perceived as describing a product or service or its attributes rather than
serving a trademark function.
If we are unable to protect our proprietary rights in trademarks, service
marks and other indications of origin, competitors will be able to use names and
marks that are identical or sufficiently similar to ours to cause confusion
among potential customers between us and our services and our competitors and
their services. This confusion may result in the diversion of business to our
competitors or the loss of potential or existing customers. Also, to the extent
competitors using identical or similar marks have problems with the quality of
their services, this confusion may injure our reputation for quality.
Litigation against infringers of our service marks, trademarks and similar
rights may be expensive. Because of the difficulty in proving damages in
trademark litigation, we may have difficulty in recovering damages should we
elect to bring an action against infringers of our marks.
WE MAY ENCOUNTER LEGAL AND FINANCIAL RISKS IN PROTECTING OUR COPYRIGHTS AND
PATENTS.
While we seek to protect our text, designs and other works of authorship by
copyright, we may not be able to detect all possible infringements. Also,
copyright protection does not extend to functional features of software and will
not be effective to prevent third parties from duplicating our software's
capabilities through engineering research and development. The global nature of
the Internet makes it impossible to control the ultimate destination of our work
and our copyrights and trademarks may receive limited or no protection in some
countries.
OUR SOFTWARE MAY INFRINGE ON THE RIGHTS OF THIRD PARTIES.
We have not conducted searches to determine if our software infringes on
any patents of third parties. If our software is found to infringe on the rights
of a third party, the third party could require us to pay royalties for past use
and for continued use, or to modify or replace the software to avoid
infringement. We
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cannot assure you that we will be able to modify or replace our software. In
addition, claims brought by or against us could subject us to costly litigation
and the diversion of our technical and management personnel.
CONCERNS REGARDING SECURITY OF TRANSACTIONS AND TRANSMITTING CONFIDENTIAL
INFORMATION OVER THE INTERNET MAY NEGATIVELY IMPACT OUR E-COMMERCE BUSINESS.
We believe that concern regarding the security of confidential information
transmitted over the Internet, including, for example, business and supply
requirements, credit card numbers and other forms of payment methods, prevents
many potential business customers from engaging in online transactions. If we do
not add sufficient security features to future product releases, our services
may not gain market acceptance or we may face additional legal exposure.
Our infrastructure is potentially vulnerable to physical or electronic
break-ins, computer viruses, hackers or similar problems caused by employees,
customers or other Internet users. If a person circumvents our security
measures, that person could misappropriate proprietary information or cause
interruptions in our operations. Security breaches that result in access to
confidential information could damage our reputation and expose us to a risk of
loss or liability. These risks may require us to make investments and efforts to
protect against or remedy security breaches, which would increase the costs of
maintaining our websites.
WE MAY BE SUBJECT TO LEGAL LIABILITY FOR PUBLISHING OR DISTRIBUTING CONTENT OVER
THE INTERNET.
We may be subject to legal claims relating to the content in our
industry-specific on-line websites, or the downloading and distribution of
content. The representations as to the origin and ownership of licensed content
that we generally obtain may not adequately protect us. In addition, we draw
some of the content provided in our on-line business communities from data
compiled by other parties, including governmental and commercial sources. This
data may contain errors.
WE DEPEND ON THE CONTINUOUS INTRODUCTION OF ENHANCED SOFTWARE CAPABILITIES AND
EXPANSION OF OUR SOFTWARE SERVICES, WHICH WE MAY NOT BE ABLE TO PROJECT
ACCURATELY.
As traffic in our on-line businesses increases, we must upgrade our
technology, transaction processing systems and network hardware and software. In
addition, we may not be able to expand and upgrade our systems and network
hardware and software capabilities to accommodate increased use of our on-line
businesses. If we do not appropriately upgrade our systems, network hardware and
software on an ongoing basis, we may have difficulty retaining our customers and
competing effectively.
The life cycles of the software used to support our e-commerce services are
difficult to predict because the market for our e-commerce websites for sales
and procurement of equipment, inventory and assets is new and emerging and is
characterized by changing customer needs and industry standards. The
introduction of on-line products employing new technologies and industry
standards could render our existing system obsolete and unmarketable.
OUR BUSINESS MAY BE HARMED BY FRAUDULENT ACTIVITIES ON OUR WEBSITE.
Our future success will depend largely upon sellers reliably delivering and
accurately representing their listed goods and buyers paying the agreed purchase
price. While we can suspend the accounts of users who fail to fulfill their
obligations to other users, we do not have the ability to require users to make
payments or deliver goods or otherwise make users whole. Any negative publicity
generated as a result of fraudulent or deceptive conduct by users of our service
could damage our reputation and diminish the value of our brand name.
THE INABILITY TO EXPAND OUR SYSTEMS MAY LIMIT OUR GROWTH.
We seek to generate a high volume of traffic and transactions on our
service. The satisfactory performance, reliability and availability of our
website, processing systems and network infrastructure are critical to our
reputation and our ability to attract and retain large numbers of users. Our
revenues depend on the number of items listed by users, the volume of user
auctions that are successfully completed and the final
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prices paid for the items listed. If the volume of traffic on our website or the
number of auctions being conducted by customers continues to increase, we will
need to expand and upgrade our technology, transaction processing systems and
network infrastructure. We may not be able to accurately project the rate or
timing of increases, if any, in the use of our service or to timely expand and
upgrade our systems and infrastructure to accommodate any increases.
SYSTEM FAILURES COULD HARM OUR BUSINESS.
Our future success, and in particular our ability to facilitate trades
successfully and provide high quality customer service, will depend on the
efficient and uninterrupted operation of our computer and communications
hardware and software systems, which are, in general, operated and maintained by
third parties. Our systems and operations are vulnerable to damage or
interruption from a variety of causes. They are also subject to break-ins,
sabotage, intentional acts of vandalism and similar misconduct. We do not have
fully redundant systems, a formal disaster recovery plan or alternative
providers of hosting services. Any damage to or failure of our systems could
result in interruptions in our service. Such interruptions will reduce our
revenues and profits, and our future revenues and profits will be harmed if our
users believe that our system is unreliable.
OUR BUSINESS IS DEPENDENT ON THE DEVELOPMENT AND MAINTENANCE OF THE WEB
INFRASTRUCTURE.
The success of our service will depend largely on the development and
maintenance of the Internet infrastructure, including a reliable network
backbone with the necessary speed, data capacity and security. Because global
e-commerce and the online exchange of information is new and evolving, we cannot
predict whether the web will prove to be a viable commercial marketplace in the
long term. The web has experienced, and is likely to continue to experience,
significant growth in the numbers of users and amount of traffic. If the web
continues to experience increased numbers of users, increased frequency of use
or increased bandwidth requirements, the web infrastructure may be unable to
support the demands placed on it. In addition, the performance of the web may be
harmed by increased users or bandwidth requirements.
WE ARE CONTROLLED BY OUR EXECUTIVE OFFICERS AND DIRECTORS.
Our officers and directors own approximately 86.7% of our outstanding
common stock. As a result, they have the ability to control our company and
direct our affairs and business, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may have the effect of delaying, deferring or preventing a change in control of
our company and may make some transactions more difficult or impossible without
the support of these stockholders. Any of these events could decrease the market
price of our common stock.
MANAGEMENT WILL HAVE BROAD DISCRETION OVER ALLOCATION OF PROCEEDS FROM EXERCISE
OF THE WARRANTS.
The net proceeds to us from the exercise of our warrants will be $3,225,000
as all expenses relating to the registration of our shares underlying the
warrants are being paid from funds presently in our treasury. We currently have
no specific plans for a significant portion of the net proceeds from warrant
exercise. Consequently, our management will have the discretion to allocate the
net proceeds to uses that stockholders may not deem desirable. We may be unable
to yield a significant return on any investment of the proceeds. Substantially
all of the proceeds from exercise of our warrants will be invested in
short-term, interest-bearing, investment grade government and corporate
securities and bank deposits.
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ANTI-TAKEOVER PROVISIONS AND OUR RIGHT TO ISSUE PREFERRED STOCK COULD MAKE A
THIRD PARTY ACQUISITION OF US DIFFICULT AND COULD DEPRIVE STOCKHOLDERS OF A
TAKEOVER PREMIUM FOR THEIR SHARES.
We are a Delaware corporation. Anti-takeover provisions of Delaware law
could make it more difficult for a third party to acquire control of us, even if
a change in control would be beneficial to shareholders.
Our amended certificate of incorporation provides that our board of
directors may issue preferred stock without shareholder approval. The issuance
of preferred stock could make it more difficult for a third party to acquire us.
Our board of directors may issue preferred stock with voting or conversion
rights that may have the effect of delaying, deferring or preventing a change of
control of us and would adversely affect the market price of VerticalBuyer
common stock or voting and other rights of holders of VerticalBuyer common
stock.
CSPI'S RIGHT TO APPOINT A MEMBER OF OUR BOARD OF DIRECTORS AND PERCENTAGE OF
COMMON STOCK IT WILL OWN IF IT EXERCISES ITS WARRANTS WILL PERMIT IT TO
INFLUENCE, IF NOT CONTROL, OUR DIRECTION.
CSPI has the right to appoint a member of our board of directors while the
Class A, Class B and Class C warrants are outstanding. CSPI has exercised this
right by appointing its Chairman of the Board, Alexander Lupinetti, to our
board. CSPI presently owns 2,000,000 of 16,675,000 outstanding shares of our
common stock and will own approximately 4,282,517 shares out of 19,900,000
outstanding, or 22.8%, if all of the warrants are exercised. Under the
circumstances, it could influence our operations in a manner contrary to the
interests of other stockholders.
FLUCTUATIONS IN OUR QUARTERLY RESULTS MAY ADVERSELY AFFECT OUR STOCK PRICE.
Our quarterly operating results will likely vary significantly in the
future. Our operating results, from time to time, may likely fall below the
expectations of our investors or analysts and others who may be following our
stock. Our failure to meet these expectations would likely adversely affect the
market price of our common stock.
Our quarterly operating results may vary depending on a number of factors,
including:
o demand of buyers and sellers to use our websites to list and purchase
equipment, inventory and parts;
o actions taken by our competitors, including new product introductions,
fee schedules, pricing policies and enhancements;
o size and timing of sales of our services;
o our ability to control costs;
o budget cycles of buyers and sellers of equipment, inventory and parts and
changes in these budget cycles; and
o general economic factors.
OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
We initially intend that our common stock trade on the Over-the-Counter
Bulletin Board. The market price of our common stock is likely to be highly
volatile, as the stock market in general, and the market for Internet-related
and technology companies in particular, has been highly volatile. Our
stockholders may not be able to resell their shares of our common stock
following periods of volatility because of the market's adverse reaction to this
volatility. The trading prices of many technology and Internet-related
companies' stocks have reached historical highs within the past 24 months and
have reflected relative valuations substantially above historical levels. During
the same period, these companies' stocks have also been highly volatile and have
recorded lows well below those historical highs. We cannot assure you that our
stock will trade at the same levels of other Internet stocks or that Internet
stocks in general will sustain their current market prices.
Factors that could cause this volatility may include, among other things:
o actual or anticipated variations in quarterly operating results;
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o announcements of technological innovations;
o new sales formats or new products or services;
o changes in financial estimates by securities analysts;
o conditions or trends in the lighting industry;
o conditions or trends in the Internet industry;
o changes in the market valuations of other Internet companies;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships or joint ventures;
o changes in capital commitments;
o additions or departures of key personnel; and
o sales of our common stock.
Many of these factors are beyond our control. These factors may materially
adversely affect the market price of our common stock, regardless of our
operating performance.
SHARES ELIGIBLE FOR FUTURE SALES BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY
AFFECT THE MARKET PRICE OF OUR STOCK PRICE.
If our existing shareholders, particularly Tim Rosen, our President, Leslie
Kent, our Chief Financial Officer, and CSPI, our major investor and the holder
of most of our warrants, sell in the public market substantial amounts of our
common stock, including shares issued on the exercise of outstanding options and
warrants, the market price of our common stock could fall.
THE EXERCISE OF WARRANTS WILL DILUTE THE INTERESTS OF OUR STOCKHOLDERS.
We presently have 16,675,000 shares of our common stock outstanding. If all
the warrants are exercised, we will have 19,900,000 shares outstanding. Thus,
the percentage of shares owned by all existing stockholders and those who
purchase from CSPI or its stockholders who receive our shares as a dividend,
will be reduced proportionately as warrants are exercised.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains certain financial information and statements
regarding our operations and financial prospects of a forward-looking nature.
Although these statements accurately reflect our management's current
understanding and beliefs, we caution you that certain important factors may
affect our actual results and could cause such results to differ materially from
any forward-looking statements which may be deemed to be made in this
prospectus. For this purpose, any statements contained in this prospectus which
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as,
"may", "will", "intend", "expect", "believe", "anticipate", "could", "estimate",
"plan" or "continue" or the negative variations of those words or comparable
terminology are intended to identify forward-looking statements. There can be no
assurance of any kind that such forward-looking information and statements will
be reflective in any way of our actual future operations or financial results,
and any of such information and statements should not be relied upon either in
whole or in part in connection with any decision to invest in us.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of the stockholders' shares
offered by this prospectus. All proceeds from the sale of the stockholders'
shares will be for the account of the selling stockholders.
Both gross and net proceeds of warrant exercise will be $3,225,000 as all
costs associated with registration of the shares of our common stock underlying
the warrants have been or will be paid from funds presently in our treasury. We
will use funds raised through warrant exercise for general corporate and working
capital needs and, as a result, they are unallocated. Prior to use, all of the
proceeds from warrant exercise will be invested in short-term, interest-bearing,
investment grade government and corporate securities and bank deposits.
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2000.
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
<S> <C>
Long-term debt................................................................. $ --
Stockholders' equity:
Common stock, $.001 par value; authorized 50,000,000 shares, issued and
outstanding 16,625,000 shares;............................................... 16,625
Preferred stock, $.001 par value; authorized 5,000,000 shares, issued and
outstanding -0- .............................................................
---
Additional paid-in capital..................................................... 1,845,740
Accumulated other comprehensive income......................................... 13,618
Accumulated deficit............................................................ (621,133)
-----------
Total stockholders' equity..................................................... 1,254,850
-----------
Total capitalization........................................................... $ 1,254,850
===========
</TABLE>
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock and do
not anticipate paying any cash dividends in the foreseeable future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 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.
RESULTS OF OPERATIONS
The following table sets forth, for the six months ended June 30, 2000 and
for the period from our inception (May 13, 1999) through December 31, 1999,
certain data from our statements of income and the percentage of such data to
net revenues. This data has been derived from and should be read in conjunction
with the unaudited consolidated financial statements of VerticalBuyer, Inc. as
of and for the six months ended June 30, 2000 and the audited financial
statements as of and for the period from May 13, 1999 to
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December 31, 1999 of our subsidiary, Lightseek Limited which are presented
elsewhere in this prospectus. The operating results are not necessarily
indicative of the results that may be expected for any future period.
<TABLE>
<CAPTION>
PERIOD FROM
MAY 13, 1999
SIX MONTHS ENDED TO
JUNE 30, 2000 DECEMBER 31, 1999
-------------------- ------------------
<S> <C> <C> <C> <C>
Net revenues...................................................... $ 24,545 100.0% $ 21,945 100.0%
Cost of net revenues.............................................. 23,010 93.7% 22,025 100.4%
Gross profit...................................................... 1,535 6.3% (80) (0.4)%
Operating expenses:
Sales and marketing............................................. 97,615 397.7% 3,165 14.4%
Product development............................................. 66,232 269.8% 13,686 62.4%
General and administrative...................................... 447,399 1822.8% 8,342 38.0%
Total operating expenses.......................................... 611,246 2490.3% 25,193 114.8%
(Loss) from operations............................................ (609,711) (2484.1)% (25,273) (115.2)%
Interest income (expense), net.................................... 27,469 111.9% 0 0.0%
Net (loss)........................................................ $(582,242) (2372.1)% $(25,273) (115.2)%
</TABLE>
Revenues
Revenues were $24,545 and $21,945 for the six months ended June 30, 2000
and the period ended December 31, 1999, 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.
Cost of Sales
Cost of sales were $23,010 and $22,025 for the six months ended June 30,
2000 and the period ended December 31, 1999, respectively. These costs consist
of Internet service provider connectivity charges and the amortization of
purchased hardware and software.
Sales and Marketing Expense
Sales and marketing expenses were $97,615 and $3,165 for the six months
ended June 30, 2000 and the period ended December 31, 1999, respectively. These
costs primarily consist of expenditures for sales and marketing activity,
including advertising, and other promotional costs.
Product Development Expense
Product development expenses were $66,232 and $13,686 for the six months
ended June 30, 2000 and the period ended December 31, 1999, 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".
General and Administrative Expense
Our general and administrative expenses amounted to $447,399 and $8,342 for
the six months ended June 30, 2000 and the period ended December 31, 1999,
respectively. This expense category includes principally consulting and
professional fees for development and marketing of the websites since we have no
employees other than Tim Rosen and Leslie Kent. Other expenses include
compensation and travel and entertainment reimbursements paid to Tim Rosen and
Leslie Kent for business development, contract negotiations, and other general
corporate purposes.
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
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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 $169,571 and
$46,382 during the six months ended June 30, 2000 and the period ended
December 31, 1999, respectively.
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.
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BUSINESS
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in these forward-looking statements. Factors that may cause such a
difference include, but are not limited to, those discussed in "Risk Factors."
OUR BUSINESS
We are a business-to-business company specializing in the creation of
web-based news portals and marketplaces. We refer to this kind of website as a
vertical portal--a website dedicated to a specific industry for use by companies
in that particular industry to buy and sell products and services.
Our first vertical portal we have developed is for the commercial lighting
industry. Our news portal, www.lightseek.com, is an Internet database where
buyers, such as electrical contractors, lighting designers, or architects can
search for product information from suppliers of commercial lighting products.
This website also provides instant access to a comprehensive database on a wide
variety of pertinent topics, such as:
o News and analysis--this provides recent news of interest to the
commercial lighting industry;
o Lighting design commercial case studies--this provides access to
information on recent projects in creative lighting design; and
o Employment opportunities--this posts job opportunities in the commercial
lighting industry.
Our auction website for the commercial lighting industry is
www.lightingbuyer.com, a leading global online marketplace for professional
buyers and sellers of commercial lighting equipment. This website brings
together businesses to buy and sell commercial lighting equipment in all major
product categories, using flexible, online transaction capabilities.
We have also developed other websites as discussed under "Our Websites."
We intend to develop other vertical portals in other industries and
geographic regions that we believe has been underserved. We are currently
looking at industries in which we own website domain names, such as:
o www.electricalbuyer.com;
o www.constructionbuyer.com;
o www.autopartsbuyer.com;
o www.aviationbuyer.com;
o www.marinebuyer.com; and
o www.shippingbuyer.com.
We have not as yet started the development of any additional sites and
cannot predict which business sites will be developed. However, the underlying
software architecture of both our lighting news site and lighting auction
exchange site can be easily adapted for any industry. Thus, we can rapidly
deploy additional sites with a minimum of further software development.
Our technology permits us to offer to buyers and sellers a variety of
transaction methods including fixed price sales, auctions and electronic
procurement. Our technology can be applied and customized across a broad
spectrum of industries. We seek to generate revenue from transaction fees as
well as from advertising on our news portals.
We intend to spread our administrative and logistical functions across a
broad range of markets. Thus, the marginal cost of entering new markets is small
since one of the major costs associated with establishing Internet sites on
which products are purchased and sold is the capital cost of developing the core
technology architecture. Our management approach is for each of our vertical
market sites to be led by an industry expert whose principal responsibility will
be to focus on business development. Operational tasks are the responsibility of
our central operations facilities based in Kingston upon Thames, England.
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OUR STRATEGY
The key elements of our strategy are:
o growing the community of buyers and sellers so that we become the
preferred method of purchasing and selling excess inventory in the areas
in which we develop websites;
o expanding the number and product categories in each of our websites so as
to attract additional buyers and sellers;
o increasing buyers' trust through checking of sellers' credibility,
verification of user and insurance;
o enhancing the features and functionality of our websites;
o expanding value-added services, such as scanning and uploading
photographs of listed items, arranging shipping of purchased goods and
arranging financing of purchases; and
o developing international markets by actively marketing and promoting our
website in selected countries.
In addition to developing new vertical markets, we intend to pursue
acquisition opportunities, strategic alliances and act as an incubator for
ventures. However, we have not as yet identified any potential business to
acquire.
OUR WEBSITES
Lightseek
Our website, www.lightseek.com, provides business-to-business online
services that facilitate the exchange of information within the global lighting
industry. This site is initially focused on providing news, articles, industry
forums, recruitment services and product information for the lighting industry.
Its revenues have been derived from advertising fees.
This site presently consists of a buyers' guide containing contact
information for
o most UK lighting companies,
o shop fronts where advertisers can display information about their
product lines,
o contacts to their websites, and
o information where they can receive online inquiries from their
prospective buyers.
The site also contains a message forum where industry professionals can
exchange opinions and ask questions of their peers. It also contains an events
diary of industry expositions and conferences. Since inception, the focus of
lightseek.com has shifted its focus from the UK to international. The major
change has been to feature international news in particular news from the United
States on the site. The site is also accepting international buyers' guide
listings.
LightingBuyer
We facilitate the buying and selling of surplus stock for the lighting
industry through our website located at www.lightingbuyer.com. We intend to
provide related services in inventory evaluation, inventory cataloging and the
private sale or auction of surplus equipment. Listings on this website originate
largely from overstocked, never-used inventories held by companies based mainly
in the United States.
We expect that transaction fees will constitute our principal source of
revenue. Clients seeking to accelerate the sale of surplus inventories can
arrange for on-line auctions through our website. In a general auction, bidding
is permitted on equipment and products of multiple sellers for a listed period
of time, and sales are consummated for the items listed at the close of bidding.
Users can browse the site and review auction listings. However, we require
buyers and seller to register in order to participate in the auction process.
Upon registration, buyers may place bids on products immediately. We check
sellers' credentials, including credit history, in an approval process that can
take up to 48 hours. Sellers can list their products for sale on our site which
guides them through the protocols of listing items for auction sale, providing
details such as product description, asking price and
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<PAGE>
shipping details. Sellers may enter additional information such as product
images, reserve pricing, product dimensions and weight. A seller can publish an
auction listing when the seller is satisfied with the content of the listing.
The website provides comprehensive categories of lighting products, such as
bulbs, fixtures, ballasts (the supports for fluorescent lighting fixtures),
components and controls along with detailed subcategories.
Originally, the site permitted prospective buyers to bid only in a standard
auction format in which the buyer with the highest bid wins the auction. In
April and May, 2000, we began to offer an additional auction format known as a
reverse auction which allows buyers to place requests for products on which
suppliers are invited to bid.
In a reverse auction, a buyer sets a maximum price it wishes to pay for an
item. Sellers then bid in amounts below the maximum set by the buyer. The
bargain is struck at lowest price accepted by the buyer.
Unlike many business-to-business or business-to-consumer auction sites, we
facilitate the transaction between buyers and sellers once there has been a
successful bid. We believe that, left to their own devices, seller and buyers
fail to complete transactions even when there is active bidding and a successful
bid above a seller's reserve, or minimum, price. Consequently, we provide, as
part of our site, calculation of shipping costs, online assistance in arranging
shipment, and, if requested, access to the online software integrated to the
United Parcel Service.
We are also able to arrange the flow of capital between buyer and seller so
that both parties are protected. We have established an escrow account into
which buyers may deposit the purchase proceeds. We release funds to the seller
only when the buyer is satisfied with the goods. To avoid intractable disputes,
we also offer arbitration by independent arbitrators and, where required, we
will organize third party valuations and inspections of stock.
In order to avoid uncertainty with the system and to reassure buyers and
sellers, we also offer online customer service support in a live chat room. We
intend in the near future to offer additional personal services to private
auction clients including consolidation of stock from various distribution
centers to a single site and repackaging and relabeling to maintain branded
standards on an international basis.
LightingNews
In October, 1999, we approached Philips Lighting Company, a division of
Philips Electronics North America Corporation, with a concept to create a global
newswire service for the commercial lighting industry. Philips agreed to sponsor
an online news forum entitled "www.lightingnews.com" which was launched in the
second quarter of 2000. It allows lighting companies and suppliers to post their
press releases on a continuous as needed basis, initially free of charge. In the
future, charges will be made for adding product images, website links and other
information. The site has been designed to be simple to use. Client companies or
their public relations firms are able to post material directly to the site.
Registered users of the site can search by product category, application
(for example, lighting for industry, institutions or residences), people or
corporation. Users can personalize the site to take account of individual
preferences. They can also customize a newsletter entitled My Lighting News
which contains news alerts and set the frequency at which they receive it. Users
can receive information via email in the categories they have selected and at
the frequency at which they wish to receive it. The software is scalable in that
it allows for a virtually unlimited increase in subscribers or users and also
permits added functionality and the creation of sites for additional vertical
industry sectors.
FinanceBuyer
Our website www.financebuyer.com is an online market for instant small
business financing. We have entered into an agreement with SierraCities, Inc.,
an online financial institution which allows visitors to this website to apply
for loans and equipment leases online and to obtain action on the financing
request within a few minutes. We receive a commission on all financing placed
through the site.
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Other web sites
We have recently introduced two additional sites:
o www.voicedatanews.com--an on-line news service for the global voice data
industry; and
o www.electricaltimes.com--an on-line news service for the global
electrical industry.
MARKETING
We have retained KCSA, Inc. a New York City-based public relations and
investor relations advisory firm. KCSA provides trade public relations in order
to attract a critical mass of buyers and sellers initially to our websites and
provides investor relations cousultancy. KCSA intends to place press releases
and articles in trade and business publications.
We have purchased, and intend to continue to purchase, banner
advertisements and key words on related trade websites and search engines. We
also plan a print advertising campaign in trade journals. In addition, we intend
to undertake a direct mail campaign targeted to sellers and buyers, participate
in trade shows and hire a sales force to make sales calls on leading companies
in the industry.
COMPETITION
We believe that we compete favorably with competing sites because of the
functionality of our e-commerce software and support services. We differentiate
ourselves from many of our market competitors through the expertise of our
strategic partners and internal management and operations expertise. Our
management believes that the companies that operate certain competing websites
do not have the management experience within the industries their websites seek
to penetrate. Many of these Internet companies base their competitive strength
on their technology. We believe that our strength is based on our experience
within the targeted industry and our strategic alliance partners.
Other companies do operate Internet websites that currently list lighting
parts and equipment for sale and auction. To the best of our knowledge, these
companies do not have the business skills, business methodologies or industry
related expertise that we provide.
Competitive websites include the following:
o Tradeout.com is a general auction site spanning many industries in that
it is not industry specific or buyer targeted.
o i2i.com is a new auction/exchange site. It has very few listings and is
not targeting specific categories of the business audience.
o GE SupplyLight.com is the GE Lighting e-commerce site. It only stocks GE
lamps from normal stock.
o Grainger.com sells a broad range of industrial products. Its site is
essentially an online catalog.
EMPLOYEES
As of August 15, 2000, we had no employees but employed consultants or
consultant companies. We have employed Tim Rosen, our President, and Leslie
Kent, our Chief Financial Officer, since April, 2000.
FACILITIES
We have use of facilities located in the premises of CSPI, Billerica,
Massachusetts under a securities purchase and facilities agreement. These
facilities are provided to us free of charge until September 2000. Our marketing
and research and development office is located in an office of 800 square feet
at 7 Gough House, 57 Eden Street, Kingston-Upon-Thames, England pursuant to an
oral agreement with Tim Rosen, our President, at the rate of one pound annually.
We believe that our existing facilities are adequate to meet our needs for the
immediate future and that future growth can be accommodated by leasing
additional or alternative space near our current facilities. We have a sales and
administrative office in the Chrysler Building, New York New York. The monthly
rent is approximately $4,000.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding our executive
officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION SINCE
------------------------------------------------ --- ------------------------------------------------ ------
<S> <C> <C> <C>
Timothy Neil David Rosen ....................... 43 President, Chief Executive 2/2000
405 Lexington Avenue, Suite 2505 Officer and a Director
New York, New York 10174
Leslie Kent .................................... 45 Secretary, Chief Financial Officer and a 2/2000
405 Lexington Avenue, Suite 2505 Director
New York, New York 10174
Joseph Donahue(1)(2) ........................... 53 Director 2/2000
83 Meadow Road West
Trumbull, Connecticut 06611
Alexander R. Lupinetti(1)(2) ................... 54 Director 2/2000
40 Linell Circle
Billerica, Massachusetts 01821
</TABLE>
------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Tim Rosen has been Commercial Director of Lightseek since its inception in
May, 1999 and President and Chief Executive Officer of our company since
February, 2000. From 1988 to date, he has been a partner, with Leslie Kent, our
Chief Financial Officer, in Rosen & Kent, a management consultancy. The
partnership also incubates new business ventures. Since 1988, he has also been a
director of Litech Ltd., a specialist fiber optic lighting provider for the
commercial lighting industry. From 1983 to 1988, Mr. Rosen was a director of
OmniMedia plc, a digital video and CD-ROM publisher/developer which traded on
the Alternative Investment Market of the London Stock Exchange. From 1983 to
1988, Mr. Rosen was a director of Oxford House College, a London-based computer
training and language school which was sold to its employees. He was also a
director, from 1983 to 1988 of Catalyst Communications Group plc, a marketing
and media group quoted on the London Stock Exchange which was sold to another
public company, Holmes & Marchant plc. Rosen & Kent founded Homeshield Warranty,
Co. in 1982 as a joint venture with Pentland Industries plc, an English public
company. Homeshield marketed extended warranties for household appliances and
was sold to a trade buyer in 1984. Mr. Rosen served as an account supervisor at
Craton Lodge and Knight plc, a new product development agency, from 1981 to 1982
and at Grey Advertising from 1979 to 1981. He is a member of the National
Association of Auctioneers. Mr. Rosen received his B.Sc (Econ.) Magna cum Laude
in Business Administration from the Institute of Science and Technology,
University of Wales in 1979.
Leslie John Kent has been Marketing Director of Lightseek since its
inception in May, 1999 and Chief Financial Officer of our company since
February, 2000. From 1988 to 1999, he was a partner, with Tim Rosen, our
President, in Rosen & Kent, a management consultancy. The partnership also
incubates new business ventures. Since 1988, he has also been a director in
Litech Ltd., a specialist fiber optic lighting provider for the commercial
lighting industry. From 1983 to 1988, Mr. Kent was a director of OmniMedia plc,
a digital video and CD-ROM publisher/developer which traded on the Alternative
Investment Market of the London Stock Exchange. From 1983 to 1988, Mr. Kent was
a director of Oxford House College, a London- based computer training and
language school which was sold to its employees. He was also a director, from
1983 to 1988 of Catalyst Communications Group plc, a marketing and media group
quoted on the London Stock Exchange which was sold to another public company,
Holmes & Marchant plc. Rosen & Kent founded Homeshield Warranty, Co. Ltd. in
1982 as a joint venture with Pentland Industries plc, an English public company.
Homeshield marketed extended warranties for household appliances and was sold to
a trade buyer in 1984. In 1981, Mr. Kent was an advertising account manager at
Boase Massimi Pollity plc, from 1979 to 1981 for Grey Advertising and from 1977
to 1979 for Ted Bates. He is an associate member of the Institution of Lighting
Engineers and Secretary of The Fibre Optic Lighting Association. Mr. Kent
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received his Master of Arts in Philosophy, Politics and Economics from St.
Edmund Hall, Oxford University, in 1977.
Joseph Donahue has been principal and President since 1994 of Donahue &
Associates, Trumbull, Connecticut, a financial consultancy which initiates and
arranges acquisitions. From 1982 to 1994, he was Executive Vice-President,
Corporate Finance of Sterling & Company, Los Angeles, California, an
international investment banking firm. He received his B.A. in European History
from the University of California at San Diego in 1973 and attended University
of Mexico in 1971 and San Diego City College in 1970.
Alexander R. Lupinetti has been Chief Executive Officer and President and a
director of CSPI, Inc., a software developer and marketer, since 1996. Since
1998, he has been CSPI's Chairman of the Board. From 1987 to 1996, Mr Lupinetti
was President and Chief Executive Officer of each of TCAM Systems Inc., Shared
Systems Corporation and SoftCom Systems, Inc., subsidiaries of Stratus Computer
Inc., a computer hardware and software company.
BOARD COMMITTEES
The Audit Committee of our Board consists of Joseph Donahue and Alexander
Lupinetti. The Audit Committee reviews our financial statements and accounting
practices, makes recommendations to our board regarding the selection of
independent auditors and reviews the results and scope of the audit and other
services provided by our independent auditors. The Compensation Committee of our
Board consists of Joseph Donahue and Alexander Lupinetti. The Compensation
Committee makes recommendations to the Board concerning salaries and incentive
compensation for our officers and employees and administers our employee benefit
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee of our board was at any
time since our formation one of our officers or employees.
DIRECTOR COMPENSATION
Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable expenses for attending board
and board committee meetings.
EXECUTIVE COMPENSATION
The following table shows compensation earned during fiscal 1999 by our
President. The information in the table includes salaries, bonuses, stock
options granted and other miscellaneous compensation. No executive officer who
held office at December 31, 1999 received total annual compensation in excess of
$100,000 in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM AND
OTHER COMPENSATION
--------------------------
ANNUAL COMPENSATION NUMBER OF
----------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND 1999 PRINCIPAL POSITIONS YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION
------------------------------------------ ------ ------ -------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tim Rosen, President...................... 1999 None None None None None
</TABLE>
The following executive officers received grants of options in 2000
pursuant to the Year 2000 Stock Option Plan.
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<PAGE>
OPTION GRANTS DURING 2000
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM(2)
UNDERLYING EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME OPTIONS GRANTED(1) DURING 2000 SHARE DATE 0%
--------------------------- ------------------ ----------- --------- ---------- ---------------------
<S> <C> <C> <C> <C> <C>
Tim Rosen.................. 250,000 25% $1.00 4 Years 0
Leslie Kent................ 250,000 25% $1.00 4 Years 0
Joseph Donahue............. 250,000 25% $1.00 4 Years 0
Alexander Lupinetti........ 250,000 25% $1.00 4 Years 0
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE APPRECIATION
FOR OPTION TERM(2)
----------------------------------------------
NAME 5% 10%
--------------------------- --------------------- ---------------------
<S> <C> <C>
Tim Rosen.................. 53,877 116,025
Leslie Kent................ 53,877 116,025
Joseph Donahue............. 53,877 116,025
Alexander Lupinetti........ 53,877 116,025
</TABLE>
------------------
(1) Options granted in 2000 were granted under the Year 2000 Plan. All options
granted were immediately exercisable and were either nonstatutory stock
options. These options were granted by our board of directors and vested
immediately.
(2) Since we are not public, the market price as of the date of issuance is
assumed to be $1.00.
COMPENSATION ARRANGEMENTS
We have not entered into employment contracts with any of our management
employees. Mr. Rosen and Mr. Kent have received salaries at the rate of $150,000
per annum since March 1, 2000. Both also receive health insurance and a vehicle
allowance.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. As permitted by the Delaware General
Corporation Law, our amended certificate of incorporation includes a provision
that eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any breach
of the director's duty of loyalty to our company or our stockholders, (2) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (3) under section 174 of the Delaware General
Corporation Law (regarding unlawful dividends and stock purchases) or (4) for
any transaction from which the director derived an improper personal benefit.
As permitted by the Delaware General Corporation Law, our Bylaws provide
that we are required to indemnify our directors and officers, consultants and
employees to the fullest extent permitted by the Delaware General Corporation
Law. Subject to certain very limited exceptions, we are required to advance
expenses, as incurred, in connection with a legal proceeding to the fullest
extent permitted by the Delaware General Corporation Law, subject to certain
very limited exceptions. The rights conferred in our Bylaws are not exclusive.
We have not obtained directors' and officers' liability insurance.
CERTAIN RELATED PARTY TRANSACTIONS
On March 2, 2000, we purchased all the capital stock of Lightseek from its
owners, including Tim Rosen, our President, and Leslie Kent, our Chief Financial
Officer, for an aggregate of 14,250,000 shares. On that date, we also paid for
consulting services, including structuring our acquisition of LightSeek,
introduction to CSPI and structuring the relationship with CSPI, for 375,000
shares of our common stock, 150,000 Class D warrants and $140,000, of which
Joseph Donahue, a Director, received the 375,000 shares of common stock and
$70,000. We have awarded an aggregate of 1,000,000 nonqualified stock options
exercisable at $1.00 pursuant to our Year 2000 Option Plan to our directors and
an aggregate of 250,000 options to members of our Technical Committee, an
advisory committee to our Board, which is comprised of the members of CSPI's
board of directors, other than Alexander Lupinetti, and CSPI's controller.
On March 2, 2000, we sold 2,000,000 shares of our common stock and common
stock purchase warrants (Class A, Class B, Class C and Class D) carrying the
right to purchase in the aggregate 3,075,000 of our shares to
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<PAGE>
CSPI. The options are exercisable at $1.00 and expire two years after the date
of an effective registration statement relating to the underlying shares of our
common stock. The Class A warrants are redeemable in the event there is an
effective registration statement relating to the underlying shares of our common
stock; the Class B warrants are redeemable if the closing price of our common
stock on the market on which it trades exceeds $2.00 for a period of twenty
consecutive days; and the Class C warrants are redeemable if the closing price
of our common stock on the market on which it trades exceeds $3.00 for a period
of twenty consecutive days. CSPI intends to distribute as a dividend 717,483 of
our shares ratable to the holders of its common stock. The Class D warrants are
not redeemable, but are otherwise identical to the other classes of warrants.
Tim Rosen, President, and Leslie Kent, Treasurer, have each received a
salary of $150,000 per annum since March 1, 2000.
We believe that these transactions were on terms as favorable as could have
been obtained from an unaffiliated third party. All future transactions we enter
into with our directors, executive officers and other affiliated persons will be
on terms no less favorable to us than can be obtained from an unaffiliated party
and will be approved by a majority of independent, disinterested members of our
board of directors, and who had access, at our expense, to our or independent
legal counsel.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of August 15, 2000 by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock, each of our directors and executive officers and all executive officers
and directors as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK BENEFICIALLY OWNED(1)
---------------------------------------------------
NAME NUMBER PERCENT
------------------------------------------------ ---------------------- ----------------------
<S> <C> <C>
Tim Rosen(2).................................... 7,225,000 42.7%
Leslie Kent(2).................................. 7,225,000 42.7%
Joseph Donahue(2)............................... 625,000 3.7%
Alexander Lupinetti(2).......................... 250,000 1.4%
CSP Inc.(3)..................................... 5,075,000 25.7%
Directors and officers
(4 persons)................................... 15,325,000 86.7%
</TABLE>
------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Unless otherwise indicated
below, the persons and entity named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of our common stock
underlying warrants or options that are currently exercisable or exercisable
within 60 days of August 15, 2000 are deemed to be outstanding and to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person. The above table does not include shares underlying bonus
options since no such options are exercisable within 60 days of August 15,
2000.
The percentage of beneficial ownership is based on 16,675,000 shares of our
common stock outstanding as of August 15, 2000.
(2) Includes stock options to acquire up to 250,000 shares of common stock.
(3) Includes 717,483 shares of our common stock to be distributed by CSPI
ratably to its stockholders and 75,000 shares of common stock underlying
Class D warrants to be distributed ratably to its stock option holders
shortly after the effective date of the registration statement of which this
prospectus is a part.
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<PAGE>
DESCRIPTION OF SECURITIES
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock, $.001 par
value per share, of which 16,675,000 shares are issued and outstanding as of the
date of the prospectus. Each outstanding share of common stock is entitled to
one vote, either in person or by proxy, on all matters that may be voted upon by
their holders at meetings of the stockholders.
Holders of our common stock (i) have equal ratable rights to dividends from
funds legally available therefor, if declared by our board of directors; (ii)
are entitled to share ratably in all of our assets available for distribution to
holders of common stock upon our liquidation, dissolution or winding up; (iii)
do not have preemptive, subscription or conversion rights, or redemption or
sinking fund provisions; and (iv) are entitled to one non-cumulative vote per
share on all matters on which stockholders may vote at all meetings of our
stockholders. Cumulative voting for the election of directors is not provided
for in our amended certificate of incorporation, which means that the holders of
a majority of the shares voted can elect all of the directors then standing for
election.
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of our common stock
are entitled to receive dividends out of legally available funds at such times
and in such amounts as our board of directors may from time to time determine.
Each stockholder is entitled to one vote for each share of our common stock held
on all matters submitted to a vote of stockholders. Our common stock is not
entitled to preemptive rights and is not subject to conversion or redemption.
Upon a liquidation, dissolution or winding-up, the assets legally available for
distribution to stockholders are distributable ratably among the holders of our
common stock and any participating preferred stock outstanding at that time
after payment of liquidation preferences, if any, on any outstanding preferred
stock and payment of other claims of creditors. Each outstanding share of our
common stock is, and all shares of common stock to be outstanding upon exercise
of the warrants will be, fully paid and nonassessable.
PREFERRED STOCK
We may, subject to limitations prescribed by Delaware law, provide for the
issuance of up to 5,000,000 shares of our preferred stock in one or more series,
to establish from time to time the number of shares to be included in each such
series, to fix the rights, preferences and privileges of the shares of each
wholly unissued series and any qualifications, limitations or restrictions
thereon, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding) without any
further vote or action by the stockholders. Our board of directors may authorize
the issuance of preferred stock with voting or conversion rights that could
adversely affect the voting power or other rights of the holders of our common
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, have the effect of delaying, deferring or preventing a change in
control and may adversely affect the market price of the common stock and the
voting and other rights of the holders of common stock. We have no current plans
to issue any shares of preferred stock.
COMMON STOCK PURCHASE WARRANTS
We have issued to CSPI four classes of redeemable common stock warrants.
Each class is exercisable for a period of two years commencing the date of the
prospectus. Each warrant entitles the holder to purchase one share of our common
stock at an exercise price of $1.00. The common stock underlying the warrants
will, upon exercise of the warrants, be validly issued, fully paid and
non-assessable. Three classes of warrants will be subject to redemption, at any
time, for $0.001 per warrant, upon 30 days' prior written notice under the
following circumstances: as to the "A" warrants, in the event there is an
effective registration statement relating to the shares underlying the "A"
warrants; as to the "B" warrants in the event there is an effective registration
statement relating to the shares underlying the "B" warrants and, in addition,
if the bid closing price on the market in which our common stock trades for a
period of twenty consecutive days exceeds $2.00
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<PAGE>
per share ending within ten days prior to the date of the notice of redemption;
and as to the "C" warrants, in the event there is an effective registration
statement relating to the shares underlying the "C" warrants and, in addition,
if the bid closing price on the market in which our common stock trades for a
period of twenty consecutive days exceeds $3.00 per share ending within ten days
prior to the date of the notice of redemption.
We have issued to CSPI and certain consultants our Class "D" Warrants. We
may not redeem these warrants, but otherwise they are identical to the other
classes of warrant.
The warrants can only be exercised when there is a current effective
registration statement covering the underlying shares of common stock. If we do
not obtain or are unable to maintain a current effective registration statement,
warrantholders will be unable to exercise them and they may become valueless.
Moreover, if the shares of common stock underlying the warrants are not
registered or qualified for sale in the state in which a warrantholder resides,
such holder might not be permitted to exercise any warrants.
Warrants may be exercised by surrendering the warrant certificate, with the
form of election to purchase printed on the reverse side of the warrant
certificate properly completed and executed, together with payment of the
exercise price, to us. Warrants may be exercised in whole or from time to time
in part. If less than all of the warrants evidenced by a warrant certificate are
exercised, a new warrant certificate will be issued for the remaining number of
unexercised warrants.
Warrantholders are protected against dilution of the equity interest
represented by the underlying shares of common stock upon the occurrence of
certain events, including, but not limited to, issuance of stock dividends. If
we merge, reorganize or are acquired in such a way as to terminate the warrants,
they may be exercised immediately prior to such action. In the event of
liquidation, dissolution or winding up, holders of the warrants are not entitled
to participate in our assets.
For the life of the warrants, holders are given the opportunity to profit
from a rise in the market price of our common stock. The exercise of the
warrants will result in the dilution of the then book value of our common stock
and would result in a dilution of the percentage ownership of then existing
stockholders. The terms upon which we may obtain additional capital may be
adversely affected through the period in which the warrants remain exercisable.
The holders of these warrants may be expected to exercise them at a time when we
would, in all likelihood, be able to obtain equity capital on terms more
favorable than those provided for by the warrants.
CSPI VOTING AGREEMENT
As part of CSPI's investment, Tim Rosen, our President, and Leslie Kent,
our Chief Financial Officer, agreed to vote all of the shares they own in our
common stock to elect one person designated by CSPI to our board of directors.
Currently, Mr. Rosen and Mr. Kent own more than one-half of our outstanding
common stock, even after the exercise of all outstanding options and warrants.
As a result, CSPI is guaranteed the ability to appoint one member of our board
of directors. CSPI chose Alexander Lupinetti, Chairman of the Board of Directors
and President of CSPI, as its designee to our board. The voting agreement
terminates upon the exercise, redemption or expiration of each of the Class A
warrant, Class B warrant and Class C warrant.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement between us and CSPI, dated
March 2, 2000, we agreed to file a registration statement relating to the shares
of our common stock issued to CSPI and the shares of our common stock underlying
the warrants issued to CSPI. We agreed to assume all registration expenses
pursuant to the registration rights agreement. In the event, the registration
statement is not effective within 90 business days of the date of the agreement,
we have agreed to issue to CSPI additional shares of our common stock equal to
one percent of the shares purchased by CSPI for each full month, prorated daily,
after 90 business days, continuing through the date the registration statement
is declared effective by the SEC. Our obligations will expire upon the earlier
of the effectiveness of the
29
<PAGE>
registration statement or the date all of the shares covered by the registration
rights agreement may be sold by under Rule 144 under the Securities Act without
volume restrictions.
FUTURE FINANCING
In the event the proceeds of warrant exercise are not sufficient for the
development and growth of our business, we may seek additional financing. At
this time we believe that the proceeds of exercise of existing warrants will be
sufficient for such purpose and therefore do not expect to issue any additional
securities at this time. However, we may issue additional securities, incur debt
or procure other types of financing if needed. We have not entered into any
agreements, plans or proposals for such financing and as of present have no
plans to do so. If we require additional financing, there is no guarantee that
such financing will be available to us or if available that such financing will
be on terms acceptable to us.
REPORTS TO STOCKHOLDERS
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable after the end of each fiscal
year. Our fiscal year ends on December 31st.
TRANSFER AGENT
We have appointed Continental Stock Transfer & Trust Company, 2 Broadway,
New York, New York 10004 as transfer agent for our shares of common stock and
our warrants.
30
<PAGE>
SELLING STOCKHOLDERS
All of the shares of VerticalBuyer common stock offered under this
prospectus may be sold by the holders who either have previously acquired their
shares or who will acquire such shares from VerticalBuyer upon the exercise of
warrants. We will not receive any of the proceeds from sales of shares offered
under this prospectus, but will receive the exercise price upon the exercise of
the warrants described above.
All costs, expenses and fees in connection with the registration of the
selling stockholders' shares will be borne by us. All brokerage commissions, if
any, attributable to the sale of shares by selling stockholders will be borne by
such holders.
The selling stockholders are offering a total of 4,482,517 shares of
VerticalBuyer common stock. The following table sets forth:
o the name of each person who is a selling stockholder;
o the number of securities owned by each such person at the time of this
offering; and
o the number of shares of common stock such person will own after the
completion of this offering.
The following table assumes the exercise of all warrants beneficially owned
by each such holder. The column "Shares Owned Prior to the Offering" includes
shares of common stock issuable upon exercise of all currently exercisable
warrants. The column "Shares Owned After the Offering" gives effect to the sale
of all the shares of common stock being offered by this prospectus.
<TABLE>
<CAPTION>
SHARES OWNED PRIOR TO SHARES OWNED AFTER
NUMBER OF THE OFFERING THE OFFERING
SHARES --------------------- ---------------------
SELLING STOCKHOLDER OFFERED NUMBER PERCENT NUMBER PERCENT
---------------------------------------------------- --------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
CSP Inc............................................. 4,282,517(1) 4,282,517 22.8% 0 0%
Anthony Gentile..................................... 50,000(2) 50,000 (3) 0 0%
Joel Pensley........................................ 50,000(2) 50,000 (3) 0 0%
George Weast........................................ 50,000(2) 50,000 (3) 0 0%
KGL Investments Ltd................................. 50,000 50,000 (3) 0 0%
</TABLE>
------------------
(1) Excludes 717,483 shares of common stock to be distributed ratably by CSPI to
its stockholders and 75,000 shares of common stock underlying Class D
warrants to be distributed ratably by CSPI to its stock option holders
shortly after the effective date of the registration statement of which this
prospectus is a part. Includes 3,000,000 shares of common stock issuable
upon exercise of Class A, Class B and Class C warrants.
(2) Issuable upon the exercise of Class D warrants.
(3) Indicates less than one percent of the total outstanding common stock.
31
<PAGE>
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time by the selling stockholders. The term "selling stockholders" includes
donees, pledgees, transferees or other successors-in-interest selling shares
received after the date of this prospectus from a selling stockholder as a gift,
pledge, partnership distribution or other non-sale related transfer. The selling
stockholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. Such sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
in negotiated transactions. The selling stockholders may sell their shares by
one or more of, or a combination of, the following methods:
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o block trades in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o in privately negotiated transactions; and
o in options transactions.
In addition, any shares that qualify for sale pursuant to Rule 144 may be
sold under Rule 144 rather than pursuant to this prospectus.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. In connection with
distributions of the shares or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers or other financial institutions.
In connection with such transactions, broker-dealers or other financial
institutions may engage in short sales of the common stock in the course of
hedging the positions they assume with the selling stockholders. The selling
stockholders may also sell the common stock short and redeliver the shares to
close out such short positions. The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
which require the delivery to such broker-dealer or other financial institution
of shares offered by this prospectus, which shares such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction). The selling stockholders may also pledge
shares to a broker-dealer or other financial institution, and, upon a default,
such broker-dealer or other financial institution, may effect sales of the
pledged shares pursuant to this prospectus (as supplemented or amended to
reflect such transaction).
In effecting sales, broker-dealers or agents engaged by the selling
stockholders may arrange for other broker-dealers to participate. Broker-dealers
or agents may receive commissions, discounts or concessions from the selling
stockholders in amount to be negotiated immediately prior to the sale.
In offering the shares covered by this prospectus, the selling stockholders
and any broker-dealers who execute sales for the selling stockholders may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales. Any profits realized by the selling stockholders and
the compensation of any broker-dealer may be deemed to be underwriting discounts
and commissions.
In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling stockholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.
32
<PAGE>
At the time a particular offer of shares is made, if required, a prospectus
supplement will be distributed that will set forth the number of shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public.
We have agreed to indemnify the selling stockholders against certain
liabilities, including certain liabilities under the Securities Act.
We have agreed with the selling stockholders to keep the Registration
Statement of which this prospectus constitutes a part effective until the
earlier of:
o such time as all of the shares covered by this prospectus have been
disposed of pursuant to and in accordance with the Registration Statement
or
o August 2002.
33
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon exercise of the warrants, assuming no exercise of outstanding options,
we will have outstanding 19,900,000 shares of our common stock. Of these shares,
5,275,000 shares, or shares underlying warrants, when exercised, will be freely
tradable without restriction under the Securities Act unless held by our
"affiliates" as that term is defined in Rule 144 under the Securities Act. These
shares will be eligible for sale in the public market, subject to certain volume
limitations and the expiration of applicable holding periods under Rule 144
under the Securities Act. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated) who has beneficially owned
restricted shares for at least one year (including the holding period of any
prior owner except an affiliate) would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of
(1) 1% of the number of shares of common stock then outstanding (which will
equal approximately 199,000 shares assuming all the warrants are exercised) or
(2) the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been an affiliate of
us at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. We have not
filed a registration statement relating to the shares subject to outstanding
options under our Year 2000 Option Plan.
We can offer no assurance that an active public market in our shares will
develop. Future sales of substantial amounts of our shares (including shares
issued upon exercise of outstanding options) in the public market could
adversely affect market prices prevailing from time to time and could impair
our ability to raise capital through the sale of our equity securities.
WHERE YOU CAN FIND MORE INFORMATION
We have not previously been required to comply with the reporting
requirements of the Securities Exchange Act. We have filed with the SEC a
registration statement on Form SB-2 to register the securities offered by this
prospectus. The prospectus is part of the registration statement, and, as
permitted by the SEC's rules, does not contain all of the information in the
registration statement. For further information about us and the securities
offered under this prospectus, you may refer to the registration statement and
to the exhibits and schedules filed as a part of this registration statement.
You can review the registration statement and its exhibits at the public
reference facility maintained by the SEC at Judiciary Plaza, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
SEC at 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The registration statement is also available electronically on the World
Wide Web at http://www.sec.gov.
LEGAL PROCEEDINGS
We are not a party to nor are we aware of any existing, pending or
threatened lawsuits or other legal actions.
LEGAL MATTERS
Certain legal matters, including the legality of the issuance of the shares
of common stock offered herein, are being passed upon for us by our counsel,
Kaplan Gottbetter & Levenson, LLP, 630 Third Avenue, New York, New York 10017.
EXPERTS
The financial statements of Lightseek Limited, a development stage company,
as of December 31, 1999 and for the period from May 13, 1999 (inception) through
December 31, 1999, have been included herein and in the registration statement
in reliance upon the report of Leslie Sufrin & Company, P.C., independent
certified public accountants, appearing elsewhere herein, and upon the authority
of that firm as experts in accounting and auditing.
34
<PAGE>
INDEX TO FINANCIAL STATEMENTS
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<S> <C>
Auditor's Report............................................................................................ F-1
Balance Sheet as of December 31, 1999....................................................................... F-2
Statement of Operations for the period from May 13, 1999 (inception) through
December 31, 1999......................................................................................... F-3
Statement of Stockholder's Equity for the period from May 13, 1999 (inception) through
December 31, 1999......................................................................................... F-4
Statement of Cash Flows for the period from May 13, 1999 (inception) through
December 31, 1999......................................................................................... F-5
Notes to Financial Statements......................................................................F-6 through F-8
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
Consolidated Balance Sheet (unaudited) as of June 30, 2000.................................................. F-9
Consolidated Statements of Income and Other Comprehensive Income (unaudited) for the six months ended
June 30, 2000 and for the period from May 13, 1999 (inception) through June 30, 2000...................... F-10
Consolidated Statements of Stockholders' Equity (unaudited) for
the period from May 13, 1999 (inception) through June 30, 2000............................................ F-11
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2000 and
for the period from May 13, 1999 (inception) through June 30, 2000........................................ F-12
Notes to Consolidated Financial Statements.......................................................F-13 through F-15
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
Unaudited Pro Forma Combined Financial Information.......................................................... F-16
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1999...................................... F-17
Notes to Unaudited Pro Forma Consolidated Balance Sheet..................................................... F-17
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1999...................................................................... F-18
</TABLE>
35
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders
Lightseek Limited
We have audited the accompanying balance sheet of Lightseek Limited (the
"Company") (a development stage company) as of December 31, 1999, and the
related statements of operations, stockholders' equity and cash flows for the
period from May 13, 1999 (inception) through December 31, 1999. These financial
statements are prepared in accordance with U.S. generally accepted accounting
principles and 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 in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
1999, and the results of its operations and its cash flows for the period then
ended in conformity with generally accepted accounting principles.
/s/ LESLIE SUFRIN AND COMPANY, P.C.
March 13, 2000
New York, New York
F-1
<PAGE>
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Accounts receivable.................................................................................. $ 1,565
Prepaid expenses..................................................................................... 7,591
---------
Total current assets................................................................................... 9,156
Purchased software, net of accumulated depreciation of $7,729.......................................... 38,653
---------
$ 47,809
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Cash overdraft....................................................................................... $ 423
Accrued expenses..................................................................................... 7,881
Due to affiliate (Note 4)............................................................................ 53,069
Deferred revenue..................................................................................... 10,094
---------
Total current liabilities.............................................................................. 71,467
Stockholders' equity (deficit):
Common stock, $1.61 par value; 100,000 shares authorized, 1,000 issued and outstanding............... 1,615
Retained deficit accumulated during the development stage............................................ (25,273)
---------
Total stockholders' (deficit).......................................................................... (23,658)
---------
$ 47,809
=========
</TABLE>
See accompanying notes.
F-2
<PAGE>
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MAY 13, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<S> <C>
Revenues............................................................................................... $ 21,945
Cost of sales.......................................................................................... 22,025
--------
Gross profit........................................................................................... (80)
--------
Operating expenses:
Sales and marketing.................................................................................. 3,165
Product development.................................................................................. 13,686
General and administrative........................................................................... 8,342
--------
Total operating expenses.......................................................................... 25,193
--------
Net (loss)............................................................................................. $(25,273)
========
</TABLE>
See accompanying notes.
F-3
<PAGE>
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM MAY 13, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ACCUMULATED
SHARES AMOUNT (DEFICIT) TOTAL
------ ------ ----------- --------
<S> <C> <C> <C> <C>
Balance, at inception................................................ 1,000 $1,615 $ -- $ 1,615
Net (loss)......................................................... -- -- (25,273) (25,273)
----- ------ --------- --------
Balance, December 31, 1999........................................... 1,000 $1,615 $ (25,273) $(23,658)
===== ====== ========= ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 13, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<S> <C>
Operating activities:
Net (loss)........................................................................................... $ (25,273)
Adjustments to reconcile net (loss) to net cash provided by operating activities:
Depreciation of property and equipment............................................................ 7,729
Change in operating assets and liabilities:
Accounts receivable............................................................................... (1,565)
Prepaid expenses.................................................................................. (7,591)
Accrued expenses.................................................................................. 7,881
Deferred revenue.................................................................................. 10,094
---------
Net cash provided by operating activities............................................................ (8,725)
---------
Investing activities:
Acquisition of property and equipment................................................................ (46,382)
---------
Net cash (used in) investing activities.............................................................. (46,382)
---------
Financing activities:
Proceeds from issuance of common stock............................................................... 1,615
Due to affiliate..................................................................................... 53,069
---------
Net cash provided by financing activities............................................................ 54,684
---------
Decrease in cash....................................................................................... (423)
Cash--beginning of period.............................................................................. --
---------
Cash--end of period.................................................................................... $ (423)
=========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................................................................. $ 20
=========
Income taxes......................................................................................... $ --
=========
</TABLE>
See accompanying notes.
F-5
<PAGE>
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1--ORGANIZATION AND NATURE OF BUSINESS
Lightseek Limited (the "Company") 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 Company," as it devotes substantially all its efforts to establishing a
new business. The Company's planned principal operations have not commenced and
revenue has not been recognized from the planned 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.
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.
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 fees paid to
third parties for Web-site hosting charges and the depreciation of purchased
software and computer equipment.
F-6
<PAGE>
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1999
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Product Development Expenses
Product development expenses are primarily attributable to consulting costs
related to enhancing the features and functionality of the Company's Web sites
and transaction-processing systems, as well as increased investment in systems
and telecommunications infrastructure and new product offerings. Product
development costs are generally expensed as incurred, except for certain costs
relating to the acquisition or development of internal-use software that are
capitalized in accordance with the American Institute of Certified Public
Accountant's Statement of Position No. 98-1 "Accounting for the costs of
computer software developed or obtained for internal use".
Foreign Currency Translation Gain or (Loss)
The Company'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
comprehensive income and accumulated as a separate component of stockholders'
equity. The weighted average exchange rate of the British Pound to the U.S.
Dollar for the period from May 13 through December 31, 1999 was virtually
identical to the year-end rate of exchange and, accordingly, there was no
transaction gain or loss for this period.
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--DUE TO AFFILIATE
At December 31, 1999, the Company owed an affiliated entity $53,069 for
cash advances and certain software acquisitions paid on its behalf. This
affiliate payable is non-interest bearing.
NOTE 4--COMMITMENTS
The Company has an agreement with an investment banking firm under which it
has agreed to pay a fund raising fee of 7% of all funds raised as a result of
such firms direct involvement in all successful issues, including convertible
securities, debt, cash injections and equity issues. In future successful fund
raising efforts whereby the investment banking firm is indirectly involved in an
intermediary position, the fee will be reduced to 1.5% of the amount raised.
NOTE 5--SUBSEQUENT EVENTS
On February 24, 2000, the Company acquired certain Domain Names and a
Web-site with the URL lightingbuyer.com from the shareholders of the Company in
exchange for 13,250 shares of the Company's authorized common stock.
On March 1, 2000, the Company was acquired by and became a wholly-owned
subsidiary of VerticalBuyer, Inc., a Delaware corporation ("VerticalBuyer"). On
that date, VerticalBuyer issued
F-7
<PAGE>
LIGHTSEEK LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1999
NOTE 5--SUBSEQUENT EVENTS--(CONTINUED)
14,250,000 shares of its common stock to the shareholders of the Company in
exchange for all of the outstanding common stock of the Company. The acquisition
will be accounted for as a pooling of interests.
On March 2, 2000, VerticalBuyer entered into a Securities Purchase and
Facilities Agreement (the "Agreement") with CSP Inc., a U.S. publicly traded
company ("CSPI"), under which CSPI purchased 2,000,000 shares of VerticalBuyer's
common stock and redeemable warrants to purchase up to an additional 3,075,000
shares of such stock for an aggregate purchase price of $2 million. The warrants
entitle CSPI, subject to certain conditions and the occurrence of certain
events, to purchase up to 3,075,000 shares of VerticalBuyer's common stock at an
exercise price of $1 per share. The warrants are exercisable for a period of two
years beginning on the effective date of a registration statement covering the
underlying shares. In a Memorandum of Understanding that was executed in
connection with the Agreement, CSPI agreed to provide VerticalBuyer free of
charge approximately 1,000 square feet of office space and various accounting
services for a period of six months. After the six-month period, VerticalBuyer
and CSPI will negotiate a fee structure for the ongoing use of the office space
and accounting services.
F-8
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and equivalents.............................................................................. $1,182,527
Accounts receivable............................................................................... 56,429
Prepaid expenses.................................................................................. 9,114
----------
Total current assets........................................................................... 1,248,070
Property and equipment, net of accumulated depreciation of $42,855.................................. 173,098
Security deposit.................................................................................... 50,000
----------
$1,471,168
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities............................................................................... $ 139,699
Deferred revenue.................................................................................. 76,619
----------
Total current liabilities...................................................................... 216,318
Stockholders' equity:
Common stock, $.001 par value; 50,000,000 shares authorized, 16,625,000 issued
and outstanding................................................................................ 16,625
Additional paid-in capital........................................................................ 1,845,740
Accumulated other comprehensive income............................................................ 13,618
Retained deficit accumulated during the development stage......................................... (621,133)
----------
Total stockholders' equity..................................................................... 1,254,850
----------
$1,471,168
==========
</TABLE>
See accompanying notes.
F-9
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND THE
PERIOD FROM MAY 13, 1999 (INCEPTION) THROUGH JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 13, 1999
SIX MONTHS (INCEPTION)
ENDED THROUGH
JUNE 30, 2000 JUNE 30, 2000
------------- -------------
<S> <C> <C>
Revenues......................................................................... $ 24,545 $ 46,490
Cost of sales.................................................................... 23,010 45,035
--------- ---------
Gross profit..................................................................... 1,535 1,455
--------- ---------
Operating expenses:
Sales and marketing............................................................ 97,615 100,780
Product development............................................................ 66,232 79,918
General and administrative..................................................... 447,399 455,741
--------- ---------
Total operating expenses.................................................. 611,246 636,439
--------- ---------
(Loss) from operations........................................................... (609,711) (634,984)
Interest income (expense), net................................................... 27,469 27,469
--------- ---------
Net (loss)....................................................................... (582,242) (607,515)
Other comprehensive income (loss):
Foreign currency translation adjustment........................................ (13,618) (13,618)
--------- ---------
Comprehensive income (loss)...................................................... $(595,860) $(621,133)
========= =========
</TABLE>
See accompanying notes.
F-10
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
PERIOD FROM MAY 13, 1999 (INCEPTION) THROUGH JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT ACCUMULATED
COMMON STOCK ADDITIONAL ACCUMULATED OTHER
-------------------- PREFERRED PAID-IN IN DEVELOPMENT COMPREHENSIVE
SHARES AMOUNT STOCK CAPITAL STAGE INCOME TOTAL
---------- ------- --------- ---------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Recapitalization of Lightseek
Limited...................... 14,250,000 $14,250 $-- $ (12,635) $ -- $ -- $ 1,615
Issuance of common stock:
CSP, Inc..................... 2,000,000 2,000 -- 1,998,000 -- -- 2,000,000
Others....................... 375,000 375 -- (375) -- -- --
Acquisition of warrants........ -- -- -- 750 -- -- 750
Fund raising fees.............. -- -- -- (140,000) -- -- (140,000)
Foreign currency translation
adjustment................... -- -- -- -- -- 13,618 13,618
Net loss for the period from
May 13, 1999 through
June 30, 2000................ -- -- -- -- (621,133) -- (621,133)
---------- ------- --- ---------- ---------- ------- ----------
Balance at June 30, 2000....... 16,625,000 $16,625 $-- $1,845,740 $ (621,133) $13,618 $1,254,850
========== ======= === ========== ========== ======= ==========
</TABLE>
See accompanying notes.
F-11
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND THE
PERIOD FROM MAY 13, 1999 (INCEPTION) THROUGH JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
MAY 13, 1999
SIX MONTHS (INCEPTION)
ENDED THROUGH
JUNE 30, 2000 JUNE 30, 2000
-------------- --------------
<S> <C> <C>
Operating activities:
Net (loss)...................................................................... $ (595,860) $ (621,133)
Adjustments to reconcile net (loss) to net cash (used) by operating activities:
Depreciation of property and equipment....................................... 35,126 42,855
Change in operating assets and liabilities:
Accounts receivable........................................................ (54,114) (55,679)
Prepaid expenses........................................................... (1,523) (9,114)
Security deposit........................................................... (50,000) (50,000)
Accrued expenses........................................................... 89,318 97,199
Deferred revenue........................................................... 66,525 76,619
---------- ----------
Net cash (used) by operating activities................................. (510,528) (519,253)
---------- ----------
Investing activities:
Acquisition of property and equipment........................................... (169,571) (215,953)
---------- ----------
Net cash (used) by investing activities................................. (169,571) (215,953)
---------- ----------
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.................. 13,618 13,618
---------- ----------
Increase in cash and cash equivalents............................................. 1,182,950 1,182,527
Cash and cash equivalents--beginning of period.................................... (423) --
---------- ----------
Cash and cash equivalents--end of period.......................................... $1,182,527 $1,182,527
========== ==========
</TABLE>
See accompanying notes.
F-12
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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.
F-13
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 2000
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
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.
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 fees paid
for Web-site hosting and hardware maintenance along with 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--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 2,000,000 shares of
F-14
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
JUNE 30, 2000
NOTE 4--STOCKHOLDERS' EQUITY--(CONTINUED)
VerticalBuyer's common stock and redeemable warrants to purchase up to an
additional 3,075,000 shares of such stock for an aggregate purchase price of $2
million. The warrants entitle CSPI, subject to certain conditions and the
occurrence of certain events, to purchase up to 3,075,000 shares of
VerticalBuyer's common stock at an exercise price of $1 per share. These
warrants, along with 150,000 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.
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 $140,000
representing 7% of the funds raised.
F-15
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Effective February 24, 2000, VerticalBuyer acquired all the outstanding
shares of Lightseek. The acquisition has been accounted for as a "reverse
takeover" by Lightseek, and characterized as a recapitalization of Lightseek for
accounting purposes.
The following Unaudited Pro Forma Consolidated Financial Information (the
"Pro Forma Financial Information") is based on the historical financial
statements of Lightseek Limited and has been prepared to illustrate the effects
of the Recapitalization. See "Recapitalization."
The Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1999
has been prepared as if the Recapitalization had occurred on that date. The
Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1999 gives effect to the Recapitalization as if it also had
occurred as of December 31, 1999.
The Pro Forma Financial Information is not necessarily indicative of the
actual results of operations or financial position of the Company at and for the
year ended December 31, 1999 and does not purport to represent the Company's
results of operations for future periods or its future financial position.
The Pro Forma Financial Information should be read in conjunction with the
Historical Financial Statements of Lightseek Limited and notes thereto which are
included elsewhere in this Prospectus. In management's opinion, the Pro Forma
Financial Information includes all adjustments necessary to reflect the effects
of the Merger and other transactions described below.
F-16
<PAGE>
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
LIGHTSEEK PRO FORMA
LIMITED ADJUSTMENTS PRO FORMA
--------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ -- $ 1,860,000 $1,860,000
Accounts receivable.................................................... 1,565 -- 1,565
Prepaid expenses....................................................... 7,591 -- 7,591
------- ----------- ----------
Total current assets................................................ 9,156 1,860,000 1,869,156
Property and equipment, net.............................................. 38,653 -- 38,653
------- ----------- ----------
$47,809 $ 1,860,000 $1,907,809
======= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft......................................................... $ 423 $ -- $ 423
Accrued expenses....................................................... 7,881 -- 7,881
Due to affiliate....................................................... 53,069 -- 53,069
Deferred revenue....................................................... 10,094 -- 10,094
------- ----------- ----------
Total current liabilities........................................... 71,467 -- 71,467
Stockholders' equity:
Common stock........................................................... 1,615 15,010(a) 16,625
Additional paid-in capital............................................. -- 1,844,990(a) 1,844,990
Retained earnings...................................................... (25,273) -- (25,273)
------- ----------- ----------
Total stockholders' equity.......................................... (23,658) 1,860,000 1,836,342
------- ----------- ----------
$47,809 $ 1,860,000 $1,907,809
======= =========== ==========
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the impact on cash and stockholders' equity of the following:
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN
STOCK CAPITAL TOTAL
------- ---------- ----------
<S> <C> <C> <C> <C>
(i) the acquisition of Lightseek with the exchange of 14,250,000 shares
of VerticalBuyer's common stock for all of the common stock of
Lightseek......................................................... $12,635 $ (12,635) $ --
(ii) the issuance of VerticalBuyer's common stock and warrants to CSP
Inc. ("CSPI")..................................................... 2,000 1,998,000 2,000,000
(iii) the issuance of 375,000 shares of VerticalBuyer's common stock in
payment of certain consulting fees incurred in connection with
raising capital................................................... 375 (375) 0
(iv) to record fund raising fees payable equal to 7% of the $2 million
stock acquisition by CSPI......................................... 0 (140,000) (140,000)
------- ---------- ----------
$15,010 $1,844,990 $1,860,000
======= ========== ==========
</TABLE>
F-17
<PAGE>
VERTICALBUYER, INC.
(A DEVELOPMENT STAGE COMPANY)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
LIGHTSEEK PRO FORMA
LIMITED ADJUSTMENTS PRO FORMA
--------- ----------- ---------
<S> <C> <C> <C>
Revenues................................................. $ 21,945 $ -- $ 21,945
Cost of sales............................................ 22,025 -- 22,025
--------- ------- ---------
Gross profit........................................ (80) -- (80)
Operating expenses....................................... 25,193 -- 25,193
--------- ------- ---------
Net (loss)............................................... $ (25,273) $ -- $ (25,273)
========= ======= =========
</TABLE>
F-18
<PAGE>
ALTERNATE PROSPECTUS PAGE--PROSPECTUS COVER
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
VERTICALBUYER, INC.
717,483 SHARES OF COMMON STOCK
75,000 CLASS D WARRANTS
In this distribution, CSP, Inc. will distribute 717,483 of its shares of
our common stock on a pro rata basis to the holders of CSPI common stock and
75,000 of our Class D warrants on a pro rata basis to the holders of CSPI's
stock options. If you are a holder of CSPI common stock, you will receive 0.2
shares of our common stock for each share of CSPI common stock that you held at
the close of business on July 7, 2000, the record date for the distribution. If
you are a holder of CSPI stock options, you will receive our Class D warrants to
purchase shares of our common stock for each share of CSPI common stock
issuable upon exercise of CSPI stock options that you held at the close of
business on July 7, 2000.
We are sending you this prospectus to describe the distribution. We expect
the distribution to occur on , 2000. On or shortly after the
, 2000 distribution date:
o holders of record of CSPI common stock on the record date will receive a
certificate for their proportionate number of shares of VerticalBuyer
common stock; and
o holders of record of CSPI stock options on the record date will receive a
certificate for their proportionate number of VerticalBuyer Class D
warrants.
No general stockholder vote is required for the distribution to occur. No
stockholder action is necessary for you to receive the shares of our common
stock or Class D warrants to which you are entitled in the distribution. This
means that:
o you do not need to pay any consideration to CSPI or to VerticalBuyer;
o you do not need to surrender any shares of CSPI common stock to receive
your shares of our common stock; and
o you do not need to surrender any CSPI stock options to receive your
Class D warrrants.
Before , 2000, there was no trading market for our common
stock. On that date, trading of shares of our common stock on a "when issued"
basis began. Our common stock trades on the Over the Counter Bulletin Board
under the ticker symbol "VERB."
AS YOU REVIEW THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE MATTERS
DESCRIBED IN "RISK FACTORS" BEGINNING ON PAGE 6.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is , 2000.
<PAGE>
ALTERNATE PROSPECTUS PAGE 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 6
Cautionary Note Regarding Forward Looking Information...................................................... 15
Use of Proceeds............................................................................................ 16
Capitalization............................................................................................. 16
Dividend Policy............................................................................................ 16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................................................ 17
Business................................................................................................... 20
Our Business............................................................................................. 20
Our Strategy............................................................................................. 21
Our Websites............................................................................................. 21
Marketing................................................................................................ 23
Competition.............................................................................................. 23
Employees................................................................................................ 23
Facilities............................................................................................... 23
Management................................................................................................. 24
Certain Related Party Transactions......................................................................... 26
Principal Stockholders..................................................................................... 27
Description of Securities.................................................................................. 28
The Distribution........................................................................................... 31
Federal Income Tax Considerations.......................................................................... 32
Shares Eligible for Future Sale............................................................................ 34
Where You Can Find More Information........................................................................ 34
Legal Proceedings.......................................................................................... 34
Legal Matters.............................................................................................. 34
Experts.................................................................................................... 34
Index to Financial Statements.............................................................................. 35
Financial Statements....................................................................................... F-1
</TABLE>
------------------------
You may rely only on the information contained in this prospectus. We have
not authorized anyone to provide information different from that contained in
this prospectus. Neither the delivery of this prospectus nor distribution of the
securities means that information contained in this prospectus is correct after
the date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these securities in any circumstances under
which the offer or solicitation is unlawful.
2
<PAGE>
ALTERNATE PROSPECTUS PAGE 4
THE DISTRIBUTION
The following is a brief summary of the terms of the distribution:
<TABLE>
<S> <C>
Distributing Company............................ CSP, Inc. After the distribution, CSPI will own 1,282,517
shares of our common stock, a Class A warrant to purchase up to
1,000,000 shares of our common stock, a Class B warrant to
purchase up to 1,000,000 shares of our common stock and a
Class C warrant to purchase up to 1,000,000 shares of our
common stock.
Distributed Company............................. VerticalBuyer, Inc.
Shares of common stock to be distributed........ 717,483 shares of VerticalBuyer common stock
Class D warrants to be distributed.............. Class D warrants to purchase up to 75,000 shares of Vertical
Buyer common stock
Exercise price of Class D warrants.............. $1.00 per share
Distribution Ratio:
For our common stock.......................... 0.2 shares of our common stock for each share of CSPI common
stock that you hold at the close of business on July 7, 2000.
For our Class D warrants...................... Class D warrants for each share of CSPI common stock that
you may purchase under stock options you hold at the close of
business on July 7, 2000.
Record Date..................................... July 7, 2000 (close of business)
Distribution Date............................... , 2000
Proposed OTC Bulletin Board symbol.............. "VERB"
Trading Market.................................. Before , 2000, there was no trading market for our common
stock. On that date, trading of shares of our common stock on a
"when issued" basis began.
Delivery of Shares
VerticalBuyer Common Stock.................... CSPI will distribute VerticalBuyer common stock share
certificates to each record holder of CSPI common stock at the
close of business on the record date representing the number of
whole shares such holder receives in the distribution. If you
hold your shares of CSPI common stock through a stockbroker,
bank or other nominee, then you are not a record holder of
those shares and your broker, bank or nominee will receive the
shares in the distribution on your behalf.
VerticalBuyer Class D Warrants................ CSPI will distribute VerticalBuyer Class D warrant certificates
to each record holder of CSPI stock options at the close of
business on the record date representing the number of Class D
warrants such holder receives in the distribution.
Tax Consequences................................ Generally, you will be subject to tax at ordinary income rates
on the fair market value of our shares or Class D warrants
that you receive in the distribution.
Distribution Agent and Transfer Agent........... The distribution agent for our common stock and Class D
warrants and the transfer agent for our common stock is
Continental Stock Transfer & Trust Company.
Use of Proceeds................................. There will be no proceeds from the distribution of our common
stock. We will use the proceeds from the exercise of the
Class D warrants for working capital and general corporate
purposes.
</TABLE>
4
<PAGE>
ALTERNATE PROSPECTUS PAGE 31
THE DISTRIBUTION
THE INVESTMENT BY CSPI
In March 2000, we sold to CSPI, for $2,000,000:
o 2,000,000 shares of our common stock to CSPI,
o a Class A warrant to purchase up to 1,000,000 shares of our common stock,
o a Class B warrant to purchase up to 1,000,000 shares of our common stock,
o a Class C warrant to purchase up to 1,000,000 shares of our common stock,
and
o 75,000 Class D warrants, each Class D warrant to purchase one share of
our common stock.
DESCRIPTION OF THE DISTRIBUTION OF VERTICALBUYER COMMON STOCK
CSPI will effect the distribution on or about , 2000 by
distributing on a pro rata basis a portion of the shares of VerticalBuyer common
stock that it owns (717,483 shares) to holders of record of CSPI common stock at
the close of business on July 6, 2000, the record date for the distribution.
Based on the total number of shares of CSPI common stock outstanding at the
close of business on the record date for the distribution (3,587,415 shares),
each record holder of CSPI common stock will receive 0.2 shares of our common
stock for each share of CSPI common stock held at the close of business on the
record date.
DESCRIPTION OF THE DISTRIBUTION OF VERTICALBUYER CLASS D WARRANTS
At the same time, CSPI will effect the distribution on or about
, 2000 by distributing on a pro rata basis all of the VerticalBuyer
Class D warrants that it owns (75,000 Class D warrants) to holders of record of
CSPI stock options at the close of business on July 6, 2000, the record date for
the distribution.
Based on the total number of shares of CSPI common stock issuable upon
exercise of outstanding CSPI stock options at the close of business on the
record date for the distribution ( shares), each record holder of CSPI
stock options will receive Class D warrants for each share of CSPI common
stock issuable upon exercise of each outstanding stock option held at the close
of business on the record date.
DELIVERY OF CERTIFICATES
We expect the distribution to occur on , 2000. On or shortly
after the , 2000 distribution date:
o holders of record of CSPI common stock on the record date will receive a
certificate for their proportionate number of shares of VerticalBuyer
common stock; and
o holders of record of CSPI stock options on the record date will receive a
certificate for their proportionate number of VerticalBuyer Class D
warrants.
No general stockholder vote is required for the distribution to occur. No
stockholder action is necessary for you to receive the shares of our common
stock or Class D warrants to which you are entitled in the distribution. This
means that:
o you do not need to pay any consideration to CSPI or to VerticalBuyer;
o you do not need to surrender any shares of CSPI common stock to receive
your shares of our common stock; and
o you do not need to surrender any CSPI stock options to receive your
Class D warrrants.
Fractional shares will be aggregated and sold in the open market at
then prevailing prices on behalf of holders who would otherwise receive
fractional shares. These holders will receive cash payments in the amount of
their proportionate share of the total sale proceeds from the sale of the
aggregated fractional shares, based upon the average gross selling price per
share of VerticalBuyer common stock.
31
<PAGE>
ALTERNATE PROSPECTUS PAGE 32
CSPI will bear the cost of commissions incurred in connection with these
sales. We anticipate that these sales will occur as soon after the date of the
distribution as practicable. Neither we or CSPI will guarantee any minimum sale
price for the fractional shares. Neither we nor CSPI will pay any interest on
the proceeds from the sale of fractional shares.
You will receive one or more certificates for all whole shares of
VerticalBuyer common stock or Class D warrants that you are entitled, and, if
applicable, cash for any fractional interest. Continental Stock Transfer & Trust
Company, our transfer agent, will mail you certificates representing your
proportionate number of whole shares of our common stock or Class D warrants as
soon after the distribution date as practicable.
For those holders of CSPI common stock who hold their shares through a
broker, bank or other nominee, you will receive credit for the shares of our
common stock to the accounts of those nominees who are registered holders, who,
in turn, will credit their customers' accounts with our common stock. We and
CSPI anticipate that brokers, banks and other nominees will generally credit
their customers' accounts with VerticalBuyer common stock on or shortly after
, 2000.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a brief discussion of the material United States federal
income tax consequences regarding the distribution of our common stock. This
discussion does not consider the specific circumstances of any particular
investors, some of which may be subject to special rules. This summary is based
on the tax laws of the United States as in effect on the date of this
prospectus, which are subject to change or changes in interpretation, possibly
with retroactive effect.
You are urged to consult with your tax advisor concerning the consequences
of the distribution and the ownership and sale of our common stock and the
ownership and exercise of our Class D Warrants under federal, state, local and
foreign tax laws, including the effect of possible changes in tax law.
U.S. STOCKHOLDERS
If you are a U.S. stockholder, you will include the fair market value of
the shares of our common stock received in the distribution in gross income as
ordinary dividend income only to the extent of your share of CSPI's current or
accumulated tax earnings and profits through the end of CSPI's 2000 tax year.
Although CSPI does not expect that it will have any accumulated earnings and
profits at the end of its 2000 tax year, CSPI expects that it will have
sufficient current earnings and profits so that a substantial part of the
distribution will be a taxable dividend. The exact amount of CSPI's earnings and
profits depends upon a variety of factors and cannot be determined until the end
of its 2000 tax year. To the extent the value of our common stock on the
distribution date exceeds CSPI's per share earnings and profits, if you are a
U.S. stockholder, you will be required to reduce your basis in your shares of
the CSPI common stock by the excess. If you are a U.S. stockholder and your
basis in your shares of CSPI common stock is reduced to zero, you will recognize
capital gain equal to the amount of any remaining value of our common stock that
you receive. Your holding period in our common stock will begin on the day after
the distribution date.
A U.S. stockholder that is a corporation will, subject to generally
applicable limitations, be entitled to a dividends received deduction in an
amount equal to 70% of the amount of the distribution received by it that is a
dividend.
FOREIGN STOCKHOLDERS
If you are a foreign stockholder you will be subject to United States
withholding tax equal to 30% of the gross amount to be received by you in the
distribution unless the receipt of our common stock is effectively connected
with the foreign stockholder's United States trade or business or you, if you
are a foreign stockholder, are eligible for a lower rate under an applicable
treaty. A foreign stockholder who is subject to withholding tax upon the
distribution may file a claim for refund to the extent of the withholding tax
that has been imposed on the portion of the distribution representing amounts in
excess of our current and accumulated tax earnings and profits.
32
<PAGE>
ALTERNATE PROSPECTUS PAGE 33
THIS PAGE INTENTIONALLY LEFT BLANK
33
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law provides for the indemnification of
the officers, directors and corporate employees and agents of VerticalBuyer,
Inc. (the "Registrant") under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstance of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending any civil,
criminal, administrative or investigative action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized in this
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section. Such expenses including attorneys' fees incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
(f) The indemnification and advancement expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, 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 of such person.
Articles Ninth and Tenth of the Registrant's certificate of incorporation
provide as follows:
NINTH
The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of Section 102 of the Delaware General Corporation Law, as
the same may be amended and supplemented.
TENTH
The Corporation shall, to the fullest extent permitted by the provisions of
Section 145 of the Delaware General Corporation Law, as the same may be amended
and supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his 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
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<PAGE>
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Article XII of the Registrant's by-laws provides as follows:
ARTICLE XII--INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. Indemnification. The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, trustee, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, by itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interest of the corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was lawful.
2. Derivative Action. The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in the corporation's favor by reason of the fact that such person is or
was a director, trustee, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, trustee, officer,
employee or agent of any other corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation; provided, however, that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for gross negligence or
willful misconduct in the performance of such person's duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as such court shall deem proper. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, by itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interest of the corporation.
3. Successful Defense. To the extent that a director, trustee, officer,
employee or agent of the corporation has been successful, on the merits or
otherwise, in whole or in part, in defense of any action, suit or proceeding
referred to in paragraphs 1 and 2 above, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
4. Authorization. Any indemnification under paragraph 1 and 2 above
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
trustee, officer, employee or agent is proper in the circumstances because such
person has met the applicable standard of conduct set forth in paragraph 1 and 2
above. Such determination shall be made (a) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, (b) by independent legal counsel (selected by one or
more of the directors, whether or not a quorum and whether or not disinterested)
in a written opinion, or (c) by the stockholders. Anyone making such a
determination under this paragraph 4 may determine that a person has met the
standards therein set forth as to some claims, issues or matters but not as to
others, and may reasonably prorate amounts to be paid as indemnification.
5. Advances. Expenses incurred in defending civil or criminal actions,
suits or proceedings shall be paid by the corporation, at any time or from time
to time in advance of the final disposition of such action, suit or proceeding
as authorized in the manner provided in paragraph 4 above upon receipt of an
undertaking by or on
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behalf of the director, trustee, officer, employee or agent to repay such amount
unless it shall ultimately be determined by the corporation that the payment of
expenses is authorized in this Section.
6. Nonexclusivity. The indemnification provided in this Section shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled under any law, by-law, agreement, vote of stockholders or disinterested
director or otherwise, both as to action in such person's 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, trustee, officer, employee or
agent and shall insure to the benefit of the heirs, executors, and
administrators of such a person.
7. Insurance. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, trustee,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or agent of
any corporation, partnership, joint venture, trust or other enterprise, against
any liability assessed against such person in any such capacity or arising out
of such person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability.
8. "Corporation" Defined. For purpose of this action, references to the
"corporation" shall include, in addition to the corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had the power and authority to indemnify its directors, trustees, officers,
employees or agents, so that any person who is or was a director, trustee,
officer, employee or agent of such of constituent corporation will be considered
as if such person was a director, trustee, officer, employee or agent of the
corporation.
ITEM 25. EXPENSES OF ISSUANCE AND DISTRIBUTION.
The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............................ $ 1,392.60
Legal Fees..................................................................... 80,000.00
Accounting Fees................................................................ 20,000.00
Printing and Engraving......................................................... 10,000.00
Blue Sky Qualification Fees and Expenses....................................... 30,000.00
Transfer Agent Fee............................................................. 10,000.00
Miscellaneous.................................................................. 3,607.40
-----------
Total................................................................... $155,000.00
===========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The Registrant purchased all the issued and outstanding capital stock of
Lightseek Limited from four individuals, including Tim Rosen, President, and
Leslie Kent, Chief Financial Officer, having a book value as of December 31,
1999 of $(23,658) in exchange for an aggregate of 14,250,000 shares of its
common stock in February, 2000, and issued 375,000 shares of its common stock in
exchange for consulting services. In March, 2000, the Registrant issued
2,000,000 shares of its common stock and 3,075,000 common stock purchase
warrants for $2,000,000 to CSP Inc. and 150,000 warrants to certain consultants.
The warrants are exercisable at $1.00. In March, 2000, the Registrant also
issued 1,250,000 bonus options to 10 persons, including, Tim Rosen, President,
Leslie Kent, Chief Financial Officer, Joseph Donahue, a Director and Alexander
Lupinetti, a Director (each of whom received 250,000 options) pursuant to its
Year 2000 Option Plan. The options are exercisable at $1.00 for a period of
three years. 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. All purchasers represented in
writing that they acquired the securities for their own accounts. 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.
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<PAGE>
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---------- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 -- Certificate of Incorporation(1)
3.2 -- Amendment to the Certificate of Incorporation(1)
3.3 -- By-Laws(1)
4.1 -- Specimen Certificate of Common Stock(1)
4.2 -- Form of "A" Warrant(1)
4.3 -- Form of "B" Warrant(1)
4.4 -- Form of "C" Warrant(1)
4.5 -- Form of "D" Warrant(1)
5.1 -- Form of Opinion of Counsel
10.1 -- Securities Purchase and Facilities Agreement(1)
10.2 -- Registration Rights Agreement(1)
10.3 -- Voting Agreement(1)
21.1 -- List of Subsidiaries
23.1 -- Accountant's Consent
23.2 -- Counsel's Consent to Use Opinion (included in Exhibit 5.1)
27.1 -- Financial Data Schedule
</TABLE>
------------------
(1) Previously submitted with registration statement on Form SB-2 on April 5,
2000
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<PAGE>
ITEM 28. UNDERTAKINGS.
The Registrant undertakes:
(1) To file, during any period in which offers or sales are being
made, post-effective amendment to this registration statement (the
"Registration Statement"):
(i) To include any prospectus required by Section 10 (a) (3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the Effective Date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in this registration
statement, including (but not limited to) the addition of an
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be treated as a
new registration statement of the securities offered, and the offering of
the securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to any provisions contained in its Certificate of
Incorporation, or by-laws, or otherwise, the Registrant has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
IN ACCORDANCE WITH 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 OF FILING ON FORM SB-2 AND AUTHORIZED THIS SECOND AMENDMENT
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, IN
NEW YORK, NEW YORK ON AUGUST 17, 2000.
VERTICALBUYER, INC.
By: /s/ TIM ROSEN
----------------------------------
Tim Rosen
President and
Chief Executive Officer
/s/ LESLIE KENT
----------------------------------
Leslie Kent
Chief Financial Officer
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRATION STATEMENT WAS SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES STATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATED
------------------------------------------------ ------------------------------------- -------------------
<S> <C> <C>
/s/ TIM ROSEN President, Treasurer, Director August 17, 2000
------------------------------------------------
Tim Rosen
/s/ LESLIE KENT Chief Financial Officer, August 17, 2000
------------------------------------------------ Secretary, Director
Leslie Kent
/s/ JOSEPH DONAHUE Director August 17, 2000
------------------------------------------------
Joseph Donahue
/s/ ALEXANDER LUPINETTI Director August 17, 2000
------------------------------------------------
Alexander Lupinetti
</TABLE>
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EXHIBIT INDEX
3.1 Certificate of Incorporation(1)
3.2 Amendment to the Certificate of Incorporation(1)
3.3 By-Laws(1)
4.1 Specimen Certificate of Common Stock(1)
4.2 Form of "A" Warrant(1)
4.3 Form of "B" Warrant(1)
4.4 Form of "C" Warrant(1)
4.5 Form of "D" Warrant(1)
5.1 Form of Opinion of Counsel
10.1 Securities Purchase and Facilities Agreement(1)
10.2 Registration Rights Agreement(1)
10.3 Voting Agreement(1)
21.1 List of Subsidiaries
23.1 Accountant's Consent
23.2 Counsel's Consent to Use Opinion (included in Exhibit 5.1)
27.1 Financial Data Schedule
(1) Previously submitted with registration statement on Form SB-2 on April 5,
2000
