UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
For the transition period to
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Commission File Number 0-31197
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Airbomb.com Inc.
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(Exact name of small Business Issuer as specified in its charter)
Delaware 51 - 0401121
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(State or other jurisdiction of IRS Employer
incorporation or organization) Identification No.)
Suite 505 - 1155 Robson Street
Vancouver, British Columbia, Canada V6E 1B5
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 604-689-1659
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days [X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: 11,143,462 Shares of $.001 par value
Class A Common Stock outstanding as of June 30, 2000.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B, and,
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders" equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the three months ended June 30, 2000 are not necessarily
indicative of the results that can be expected for the year ending March 31,
2001.
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
JUNE 30 MARCH 31
2000 1999
--------------------------------------------------------------------------------
ASSETS
Current
Cash $ 210,421 $ 3,624
Accounts receivable 40,809 833
Inventory 211,790 158,994
Prepaid expenses and deposits 12,025 5,840
-------------------------
475,045 169,291
Capital Assets (Note 3) 95,339 5,322
-------------------------
$ 570,384 $ 174,613
================================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 172,378 $ 167,272
Current portion of loans and advances payable 57,720 42,358
-------------------------
230,098 209,630
Share Subscriptions (Note 6(a)) 232,858 -
Loans And Advances Payable (Note 4) - 3,523
-------------------------
462,956 213,153
-------------------------
SHARE CAPITAL AND DEFICIT
Share Capital (Note 5)
Authorized:
June 30, 2000
100,000,000 common shares, par value of
$0.001 per share
June 30, 1999
10,000,000 Class A voting common shares
without par value
10,000,000 Class B non-voting common shares
without par value
10,000,000 Class C non-voting common shares
without par value
Issued and Outstanding:
11,143,462 common shares at June 30, 2000 and
100 Class A voting common shares at June
30, 1999 853,112 70
Special Warrants (Note 6) 28,890 -
Deficit (774,574) (38,610)
-------------------------
107,428 38,540
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$ 570,384 $ 174,613
================================================================================
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(Unaudited)
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
JUNE 30 JUNE 30
2000 1999
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Sales $ 328,454 $ 93,119
-------------------------
Cost Of Sales
Opening inventory 141,106 54,468
Purchases 353,478 190,651
Less: Ending inventory (211,790) (158,994)
-------------------------
Cost of sales 282,794 86,125
-------------------------
Gross Profit 45,660 6,994
-------------------------
Expenses
Advertising and promotion 28,982 54
Amortization 8,611 443
Auto and travel 4,817 964
Bank charges, interest and foreign exchange 8,624 2,619
Consulting 2,052 2,218
Corporate finance fee 33,988 -
Investor relations 40,172 -
Management fees 5,092 -
Office and sundry 28,354 2,066
Professional fees 36,276 1,426
Regulatory and transfer agent 3,048 -
Rent and utilities 7,361 1,043
Telephone and internet 7,367 3,175
Wages and contract labour 79,557 4,921
-------------------------
294,301 18,929
-------------------------
Loss For The Period (248,641) (11,935)
Deficit, Beginning Of Period (525,933) (26,675)
Deficit, End Of Period $ (774,574) $ (38,610)
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Loss Per Share $ (0.03) $ (0.01)
================================================================================
Weighted Average Shares Outstanding 9,729,462 100
================================================================================
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Stated in U.S. Dollars)
--------------------------------------------------------------------------------
THREE THREE
MONTHS MONTHS
ENDED ENDED
JUNE 30 JUNE 30
2000 1999
--------------------------------------------------------------------------------
Cash Flows From Operating Activities
Loss for the period $ (248,641) $ (11,935)
Adjustment for:
Amortization 8,611 443
-------------------------
(240,030) (11,492)
Changes in non-cash working capital
Increase in accounts receivable (8,655) 5,730
Increase in inventory (70,684) (104,526)
Increase in prepaid expenses and deposits (459) (5,840)
Increase in accounts payable and accrued
liabilities 69,131 102,435
-------------------------
(250,697) (13,693)
-------------------------
Cash Flows From Investing Activity
Purchase of capital assets (10,205) -
-------------------------
Cash Flows From Financing Activities
Share subscriptions 232,858 -
Issue of common shares 1,494 -
Loans payable (30,079) 13,330
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204,273 13,330
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Increase (Decrease) In Cash (56,629) (363)
Cash, Beginning Of Period 267,050 3,987
-------------------------
Cash, End Of Period $ 210,421 $ 3,624
================================================================================
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
<TABLE>
<CAPTION>
COMMON SHARES SPECIAL WARRANTS
--------------------------------------------
NUMBER AMOUNT NUMBER AMOUNT DEFICIT TOTAL
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issue of common shares 100 $ 70 - $ - $ - $ 70
Loss for the period - - - - (27,694) (27,694)
------------------------------------------------------------------------------
Balance, March 31, 1998 100 70 - - (27,694) (27,624)
Net income for the year - - - - 1,019 1,019
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Balance, March 31, 1999 100 70 - - (26,675) (26,605)
Adjustment to number of
common shares issued
and outstanding as a
result of the reverse
take-over transaction
Sports Link Direct
Marketing Ltd. (100) - - - - -
Airbomb.com Marketing
Ltd. 5,412,962 - - - - -
Ascribed value of
common shares and
special warrants
issued in connection
with the acquisition
of Sports Link Direct
Marketing Ltd.
2,300,000 63,479 620,000 35,849 - 99,328
Issue of common shares 602,500 116,061 - - - 116,061
Issue of special warrants - - 2,700,000 665,049 - 665,049
Loss for the year - - - - (499,258) (499,258)
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Balance, March 31, 2000 8,315,462 179,610 3,320,000 700,898 (525,933) 354,575
Exercise of special
warrants - - (2,820,000) (672,008) - (672,008)
Issue of common shares 2,828,000 673,502 - - - 673,502
Loss for the period - - - - (248,641) (248,641)
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Balance, June 30, 2000 11,143,462 $ 853,112 500,000 $ 28,890 $ (774,574) $ 107,428
==============================================================================
</TABLE>
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
1. NATURE OF OPERATIONS
The unaudited consolidated financial statements as of June 30, 2000 included
herein have been prepared without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with United States generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
It is suggested that these consolidated financial statements be read in
conjunction with the March 31, 2000 audited consolidated financial
statements and notes thereto.
Airbomb.com Marketing Ltd., through its subsidiary, Sports Link Direct
Marketing Ltd., is in the business of retailing sporting goods, specifically
bicycles, through the Internet. Sports Link Direct Marketing Ltd. markets
products acquired from a variety of suppliers, and also distributes its own
"Airbomb" line of products, which are acquired from established
manufacturers and labelled with the Company's "Airbomb" label.
These financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes the realization of
assets and discharge of liabilities in the normal course of business. During
the period ended June 30, 2000, the Company incurred a loss of $248,641. The
Company's ability to continue its operations on a going concern basis is
dependent upon obtaining additional financing and the support of creditors.
There is no assurance that the Company will be successful in achieving any,
or all, of these objectives over the coming year. These financial statements
do not give effect to any adjustments that would be necessary should the
Company be unable to continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Consolidation
These financial statements include the accounts of the Company and its
wholly owned Canadian subsidiary, Sports Link Direct Marketing Ltd.
b) Inventory
Inventory is recorded at the lower of cost and net realizable value.
c) Revenue Recognition
Revenue from sale of products is recognized at the time of shipment.
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
d) Amortization of Capital Assets
Computers and office furniture and equipment are stated at cost,
amortization is provided at the following rates:
Computer equipment 30% on the declining balance method
Computer software 100% on the declining balance method
Furniture and equipment 20% on the declining balance method
Goodwill related to the acquisition of Sports Link Direct Marketing
Ltd. is recorded at cost and is amortized on a straight line basis over
three years.
e) Foreign Currency Translation
The Company's functional currency is the U.S. dollar. Transactions in
foreign currencies are translated at the exchange rates in effect on
the transaction dates. Monetary assets and liabilities resulting from
such transactions are adjusted to reflect the exchange rates in effect
at the balance sheet date and the resulting gain or loss is recognized
in the statement of earnings.
f) Non-Monetary Transactions
Shares of common stock of the Company issued for non-monetary
consideration are valued at the quoted market price per share at the
close of trading on the date of completion of the transaction except
for those circumstances where, in the opinion of the Company and due to
the nature of the transaction, the trading price does not fairly
represent the value of the transaction. In such circumstances, the
value of the shares is determined based on the estimated fair value of
the consideration received.
g) Income Taxes
The Company has adopted Statement of Financial Accounting Standards No.
109 - "Accounting for Income Taxes" (SFAS 109). This standard requires
the use of an asset and liability approach for financial accounting and
reporting on income taxes. If it is more likely than not that some
portion, or all, of a deferred tax asset will not be realized, a
valuation allowance is recognized.
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
h) Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
By their nature, these estimates are subject to measurement
uncertainty, and the effect on the financial statements of changes in
such estimates in future periods could be significant.
i) Stock Based Compensation
The Company measures compensation cost for stock based compensation
using the intrinsic value method of accounting as prescribed by A.P.B.
Opinion No. 25 - "Accounting for Stock Issued to Employees". The
Company has adopted those provisions of Statement of Financial
Accounting Standards No. 123 - "Accounting for Stock Based
Compensation", which requires disclosure of the pro-forma effect on net
earnings and earnings per share as if compensation cost had been
recognized based upon the estimated fair value at the date of grant for
options awarded.
j) Net Loss Per Share
Net loss per share is based on the weighted average number of common
shares outstanding during the period plus common share equivalents,
such as options, warrants and certain convertible securities. This
method requires primary earnings per share to be computed as if the
common share equivalents were exercised at the beginning of the period
or at the date of issue, and as if the funds obtained thereby were
used to purchase common shares of the Company at its average market
value during the period.
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
3. CAPITAL ASSETS
Capital assets and related accumulated amortization consist of the
following:
2000 1999
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Accumulated Net Book Net Book
Cost Amortization Value Value
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Computer equipment $ 31,235 $ 7,367 $ 23,868 $ 3,757
Computer software 5,076 2,601 2,475 206
Furniture and equipment 7,589 1,506 6,083 1,359
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43,900 11,474 32,426 5,322
Goodwill 75,495 12,582 62,913 -
---------------------------------- -----------
$ 119,395 $ 24,056 $ 95,339 $ 5,322
================================== ===========
4. LOANS AND ADVANCES PAYABLE
2000 1999
-----------------------
a) Loans payable due May 8, 2001, with interest
at 12% per annum commencing November 8, 1999 $ 17,665 $ 3,523
b) Loans and advances payable to a director,
with no specified terms of repayment 35,236 9,499
c) Advances from a director 4,819 32,859
-----------------------
57,720 45,881
Less: Current portion 57,720 42,358
-----------------------
$ - $ 3,523
=======================
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
5. SHARE CAPITAL
a) During the period, the Company changed its authorized capital to
100,000,000 shares with a par value of $0.001, and the Company became
domesticated as a Delaware Corporation.
b) As at June 30, 2000, there were outstanding incentive stock options for
the purchase of:
170,000 shares at $0.73 CDN to January 27, 2005
105,000 shares at $0.81 CDN to January 28, 2005
167,000 shares at $0.45 CDN to November 11, 2004
150,000 shares at $0.28 CDN to December 20, 2004
125,000 shares at $1.31 CDN to March 1, 2005
100,000 shares at $0.59 CDN to January 25, 2005
25,000 shares at $1.43 CDN to February 18, 2005
10,000 shares at $0.29 CDN per share to April 8, 2004
25,000 shares at $0.49 CDN per share to June 8, 2005
15,000 shares at $0.49 CDN per share to June 8, 2002
c) As at June 30, 2000 there were outstanding share purchase warrants for
the purchase of:
700,000 shares at $0.17 CDN per share to October 30, 2000
1,500,000 shares at $0.50 CDN per share to January 5, 2001
or at $0.75 CDN per share to January 5, 2002
1,200,000 shares at $0.50 CDN per share to February 21, 2001
or at $0.65 CDN per share to February 21, 2002
6. SPECIAL WARRANTS
a) As at June 30, 2000, the Company has 500,000 special warrants
outstanding, issued in connection with the Sports Link Direct Marketing
Ltd. acquisition.
b) The Company has negotiated the private placement of 1,000,000 special
warrants at a price of $0.50 CDN per special warrant. Each special
warrant is exercisable without additional consideration into one common
share and one share purchase warrant entitling the holder to purchase
an additional common share at $0.55 CDN for a two year period. As at
June 30, 2000, the Company has received special warrant subscription
proceeds of $232,858.
<PAGE>
AIRBOMB.COM INC.
(Formerly Airbomb.com Marketing Ltd.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
7. FINANCIAL INSTRUMENTS
The carrying amounts for cash, accounts receivable, prepaid expenses and
deposits, accounts payable and accrued liabilities, and loans and advances
payable approximate their respective fair values due to their short term
maturity or capacity of prompt liquidation.
8. RELATED PARTY TRANSACTIONS
During the period, the following amounts were paid to parties not dealing at
arm's length with the Company:
a) Companies controlled by a director were paid $18,000 for office rent
and administrative support services.
b) The Company's president was paid wages totalling $16,467.
9. SUBSEQUENT EVENT
Subsequent to June 30, 2000, the special warrant private placement referred
to in Note 6(b) closed and the 1,000,000 special warrants were issued.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Airbomb.com Inc., through its wholly-owned subsidiary, Sportslink Direct
Marketing Ltd., is an internet retailer of sporting goods, primarily bicycles
and related parts and accessories. Because of the Company's unique relationship
with original equipment manufacturers (OEMs), it is able to acquire a variety of
products at preferential prices and sell them to wholesalers, distributors or
consumers at a significant discount. The Company has developed strong
relationships with some of the largest component manufacturers in Asia and North
America. The retail market in the United States for bicycles and related parts
and accessories is approximately U.S. $5.4 billion, and globally is U.S. $25
billion.
The Company has applied for trademark protection in Canada for the brand
name "Airbomb", and anticipates filing for trademark protection in the
United States for the same brand name. The Company has four web sites. The
primary marketing of bicycles, bicycle components and outdoor sporting
equipment is conducted at www.airbomb.com; sunglass sales are conducted at
---------------
www.sunbomb.com; and cycling products are marketed in Canada at
---------------
http://store.airbomb.com/Can. The fourth web site is a secure, password-
----------------------------
protected site for wholesale transactions.
The first quarter of fiscal 2000/2001 ended June 2000 with the achievement of a
number of major milestones. The Company continued to grow rapidly during this
quarter. The Company expanded on its core strength with the importation of a
number of containers carrying items directly purchased from overseas
manufacturers. The Company moved into an expanded warehouse in Point Roberts,
Washington, to accommodate the inventory. Access to this type of supply chain
buying represents Airbomb.com's key competitive advantage and, for the first
time, it had a substantial impact on both sales and gross profit during this
quarter.
This quarter saw a growth in the Company's marketing efforts in ways management
feels offers both value and results. This included the development of an
international racing team outfitted with team uniforms, a focused promotion of
the referral program, and an expanded password-protected "B-to-B" dealer web
store. As well, the Company entered into an agreement with Cybersurf, a major
Canadian ISP, for a large-scale promotion directly to that company's customer
base. Canadian sales have seen a corresponding jump and, at present,
Airbomb.com dominates the Canadian market for online cycling sales.
The Company also delivered an unprecedented number of products ordered via
B-to-B, including an order from Mazda USA that had over 160 different Mazda
dealerships receiving bikes assembled by Airbomb.com. It is the growth of
B-to-B where the Company feels its competitive advantage will be most
successful.
<PAGE>
Results of Operations
Three Months Ended June 30, 2000 And June 30,1999.
Sales increased by 252.7 % or $ 235,335 to $ 328,454 during the period ending
June 30, 2000 compared to $ 93,119 for the period ending June 30, 1999. This
increase was due to a higher level of sales through the Company's web site
Sales.
Cost of goods sold increased by 228.4 % or $ 196,669 to $ 282,794 for the period
ending June 30, 2000, compared to $ 86,125 for the period ending June 30, 1999.
As part of its sales strategy, the Company continued to use low prices as a
means to attract new customers to the web site.
Inventory increased by 33.2 % or $ 52,796 to $ 211,790 for the period ending
June 30,2000, compared to $ 158,994 for the period ending June 30, 1999. An
increase in inventory was necessary to support growing sales and maintain
twenty-four hour turn-around times as much as possible.
General and administrative expenses increased by 1454.8 % or $ 275,372 to $
294,301 for the period ending June 30, 2000 compared to $ 18,929 for the period
ending June 30, 1999. The Company incurred higher costs in every category
primarily due to the acquisition of Sportslink Direct Marketing Ltd., because of
the process and expense of becoming a public company (listed on the Canadian
Venture Exchange) and by re-domiciling the Company into Delaware.
Advertising and Promotion costs rose by $ 28,928.
Amortization costs rose $ 8,168 to $ 8,611 for the period ending June 30, 2000
compared to $ 443 for the period ending June 30, 1999 and relates to the amount
of goodwill created as a result of the Sportslink acquisition. Interest and
foreign exchange rose $ 6,005 to $ 8,624 for the period ending June 30, 2000
compared to $ 2,619 for the period ending June 30, 1999. This is as a result of
the loss on conversion from Canadian to U.S. dollars advanced to fund the
operations of Sportslink and expansion of the business operations.
Investor relations is a new expense category now that the Company is a
publicly-traded company. For the period ending June 30, 2000, the Company
incurred expenses of $ 40,172.
Office and Sundry costs increased by 1272.4 % or $ 26,288 to $ 28,354 for the
period ending June 30, 2000 compared to 2,066 for the period ending June 30,
1999. These expenses support the increased costs of being a public company and
expansion of the business operations.
<PAGE>
Professional fees increased 2443.9 % or $ 34,850 to $ 36,276 for the period
ending June 30, 2000 compared to $ 1,426 for the period ending June 30, 1999.
Again, these expenses included the increased legal and accounting costs of being
a public company and the expansion of the business operations.
Wages and contract labor increased 1516.7 % or $74,636 to $79,557 for the period
ending June 30, 1999. The increase in staff was necessary to support the
Company's expansion.
Plan of Operations
The Company's marketing plans and strategies include:
- Expanding the product base and linking on-line buyers to suppliers' web
sites.
- Developing brand names that link on-line customers to the Company.
- Using the Company's web search engine to link to key search words, often
brand names, to bring on-line shoppers to the Company web site.
- Managing the customer database by matching client demographic information
to products, and conducting target e-mail campaigns.
- Working with suppliers to match customers to a supplier's target market.
- Offering a "weekly specials sheet" to attract buyers to special deals and
clear-out sales. This is attractive to both suppliers, who use the feature
to move inventory, and on-line buyers looking for special prices.
- Offering competitive prices.
- Continuing the "Tell-A-Friend" referral program.
- Continuing to sponsor a professional bike racing team.
- Publishing bi-monthly brochures and mailing to customer base.
- Continuing telephone customer service.
- Enter new markets via new online storefronts.
To be successful, the Company will have to develop marketing, brand development
and sales on a rapidly expanding basis. There is no guarantee that the Company
will be successful in managing such a complex strategy of marketing and sales or
that the Company will be able to do so soon enough to be successful.
The Company intends to derive substantially all of its revenues from the sale of
goods on the Internet. The Company's ability to generate revenues will depend
upon, among other factors, consumers' acceptance of the Web as an attractive and
sustainable medium, and development of a large base of repeat customers for the
Company's products. In addition, there is intense competition in the sale of
goods and services on the Internet, which makes it difficult to project the
future levels of Internet revenues that will be realized generally or by any
specific company. The future success of the Company is highly dependent on the
development of the Internet as a commercial medium.
To be successful, the Company plans to continue entering into strategic
partnerships with other local, national and international businesses to help in
a focused marketing effort and to provide operational support. The Company
cannot guarantee that it will be able to find strategic partners who will be
available and who are suitable for the Company's needs, or if enough strategic
<PAGE>
partners can be found to market the Company's products and support its
operations.
The success of the Company cannot be guaranteed or accurately predicted. There
is no assurance that the Company will be able to operate profitably. Such
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered in the establishment of new product lines and retail
sales outlets in an emerging e-commerce market.
The Company has a limited operating history. There is no assurance that the
Company will be able to operate and manage on a profitable basis or that cash
flow from operations will be sufficient to pay the operating costs of the
Company. The Company anticipates that it will need to raise additional capital
to finance growth of its operations. The Company may seek additional financing
through debt or equity financings. There is no assurance that additional
financing will be available to the Company, or that, if available, the financing
will be on terms acceptable to the Company. There is no assurance that the
Company's estimate of its reasonably anticipated liquidity needs is accurate or
that new business developments or other unforeseen events will not occur that
will result in the need to raise additional funds. In the event that the
Company cannot raise needed capital, it will have a material adverse effect on
the Company.
Although the Company has based its web site upon commercially available software
and hardware, the Company will need to do substantial additional development in
order to offer the goods, services and user-friendly interfaces the Company
believes are needed to attract and retain customers.
The Company may incur significant operating losses and generate negative cash
flow from operating activities during the next several years while it develops
its web sites and services, and builds a customer and subscriber base. There is
no assurance that the Company will achieve or sustain profitability or positive
cash flow from operating activities in the future or that it will generate
sufficient cash flow to service any debt requirements.
To the extent that any financing involves the sale of the Company's equity
securities, the interests of the Company's then-existing shareholders could be
substantially diluted.
The Company's future success is dependent upon continued growth in the use of
the Internet. Rapid growth in the use of and interest in the Internet is a
recent phenomenon. There is no assurance that commerce over the Internet will
become widespread or that extensive content will continue to be provided over
the Internet. In addition, to the extent that the Internet continues to
experience significant growth in the number of users and level of use, there is
no assurance that the Internet infrastructure will continue to be able to
support the demands placed upon it by such potential growth. If use of the
Internet does not continue to grow, or if the Internet infrastructure does not
effectively support growth that may occur, the Company's business, results of
operations and financial condition would be materially and adversely affected.
As is typical in the case of a new and rapidly evolving industry, demand and
market acceptance for recently introduced products and services are subject to a
high level of uncertainty and risk. The Company does not know the extent to
<PAGE>
which additional customers will use its products and services. It is difficult
to predict the future growth rate, if any, and size of this market via Internet
sales. In order to sustain rapid growth rates, the Company will need to
continue increasing its share of the bicycle and other sporting goods markets.
There is no assurance either that the market for the Company's products and
services will grow or that the Company can successfully and rapidly expand its
market share. If the market fails to grow, grows more slowly than expected, or
becomes saturated with competitors, or if the Company's products and services do
not achieve or sustain market acceptance and expanded market share, the
Company's business, results of operations and financial condition will be
materially and adversely affected.
The Company will rely on a combination of common law, copyright and trademark
law, and nondisclosure agreements to establish and protect its proprietary
rights in its products and the content of its web sites. Others, however, might
successfully challenge these protections.
The Company has applied for trademark protection in Canada for the brand name
"Airbomb", and anticipates filing for trademark protection in the United States
for the same brand name. The Company is the owner of the web site domain names
http://www.airbomb.comhttp://www.airbomb.com and http://www.sunbomb.com and
-------------------------------------------- ----------------------
maintenance fees for the domain names have been paid and are up to date. The
Company may file applications for trademark protection of other intellectual
property. No assurance can be given that such trademark applications will be
accepted for registration. Furthermore, the possibility exists that the Company
could be found to infringe on patents, service marks, trademarks or copyrights
held by others. The Company's use of trademarks, service marks, trade names,
slogans, phrases and other expressions in the course of its business may be the
subject of dispute and possible litigation. Given the growth of business being
conducted on the Internet, electronic commerce and the use of domain names,
there can be no assurance that the Company will be able to continue to use its
current trade name, domain name and Internet and business identification. Such
changes could result in confusion to potential customers and negatively affect
the Company's business.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
<PAGE>
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AIRBOMB.COM INC.
Date: September 6, 2000
By: /s/ David Houston
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DAVID HOUSTON, Director, President
<PAGE>
