UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 1999
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------------------- to
- --------------------------------
Commission File Number:
VIRTUALSELLERS.COM, INC.
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(Exact name of registrant as specified in its charter)
CANADA 911353658
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Suite 1000 - 120 North LaSalle Drive, Chicago, IL 60602
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(Address of principal executive offices) (Zip Code)
(312) 920-9999
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
As of January 13, 2000, there were 104,935,447 shares of the Registrant's Common
Shares issued and outstanding.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1: Financial Statements
DISCLOSURE
----------
To: The Shareholders of
VirtualSellers.com, Inc.
It is the opinion of management that the interim financial statements
ended November 30, 1999, include all adjustments necessary in order
to make the financial statements not misleading.
Chicago, Illinois /s/ Dennis Sinclair
January 14, 2000 --------------------
Director of the Company
<PAGE>
Consolidated Interim Financial Statements of
VIRTUALSELLERS.COM
(Formerly Suncom Telecommunications, Inc.)
(Expressed in United States dollars)
Three months ended November 30, 1999 and 1998 and
Nine months ended November 30, 1999 and 1998
(Unaudited - Prepared by Management)
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VIRTUALSELLERS.COM
(Formerly Suncom Telecommunications, Inc.)
Consolidated Balance Sheets
(Expressed in United States dollars)
(Unaudited - Prepared by Management)
November 30, February 28,
1999 1999
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents. . . . . . . . $ 51,853 $ 75,763
Accounts receivable. . . . . . . . . . . 118,507 29,864
Inventories. . . . . . . . . . . . . . . 26,149 -
Prepaid expenses and advances. . . . . . 376,624 14,408
573,133 120,035
Investment . . . . . . . . . . . . . . . - 1
Capital assets . . . . . . . . . . . . . 973,373 97,800
$ 1,546,506 $ 217,836
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 293,973 $ 173,019
Current portion of long-term debt. . . . - 272,861
293,973 445,880
Obligations under capital leases . . . . 7,343 -
Shareholders' equity:
Share capital. . . . . . . . . . . . . . 11,435,073 8,795,122
Retained earnings. . . . . . . . . . . . (10,189,883) (9,023,166)
1,245,190 (228,044)
$ 1,546,506 $ 217,836
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VIRTUALSELLERS.COM
(Formerly Suncom Telecommunications, Inc.)
Consolidated Interim Quarterly Statements of Operations and Deficit
(Expressed in United States dollars)
(Unaudited - Prepared by Management)
Three months ended November 30, Nine months ended November 30,
------------------------------- ------------------------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenue. . . . . . . . . . . . . . $ 220,230 $ 55,527 $ 546,978 $ 144,207
Costs and expenses:
Cost of goods sold . . . . . . . . 85,277 141,901 217,537 141,901
Selling, general and
administrative expenses. . . . . . 1,131,576 486,557 2,691,969 1,234,930
Depreciation and amortization. . . 44,423 6,754 80,451 14,124
1,261,276 635,212 2,989,957 1,390,955
Loss before other income . . . . . 1,041,046 579,685 2,442,979 1,246,748
Other income (expense):
Interest revenue . . . . . . . . . 2,194 8,359 22,863 38,450
Foreign exchange gains . . . . . . 2,226 30,948 90,804 40,280
Income tax interest and
penalties . . . . . . . . . . . . - - - (14,812)
Miscellaneous. . . . . . . . . . . 5,008 17,450 1,162,595 49,681
9,428 56,757 1,276,262 113,599
Net income (loss) for the period. (1,031,618) (522,928) (1,166,717) (1,133,149)
Deficit, beginning of period . . . (9,158,265) (8,037,910) (9,023,166) (7,427,689)
Deficit, end of period . . . . . . $(10,189,883) $(8,560,838) $(10,189,883) $(8,560,838)
Net income (loss) per common share $ (0.01) $ (0.01) $ (0.01) $ (0.01)
</TABLE>
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<TABLE>
<CAPTION>
VIRTUALSELLERS.COM
(Formerly Suncom Telecommunications, Inc.)
Consolidated Interim Quarterly Statements of Cash Flows
(Expressed in United States dollars)
(Unaudited - Prepared by Management)
Three months ended November 30, Six months ended November 30,
------------------------------- -----------------------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Cash provided by (used in):
Operations:
Net income (loss) for the year . . . . . . . . . $(1,031,618) $(522,928) (1,166,717) $(1,133,149)
Items not involving cash:
Depreciation and amortization. . . . . . . . . . 44,423 6,754 80,451 14,124
Non-cash compensation. . . . . . . . . . . . . . 62,657 - 642,488 -
Non-cash administration expenses . . . . . . . . 140,786 - 505,219 -
Change in non-cash operating working capital:
Accounts receivable. . . . . . . . . . . . . . . 17,750 (5,223) (88,480) (6,843)
Inventories. . . . . . . . . . . . . . . . . . . 14,227 - (26,267) --
Prepaid expenses and advances. . . . . . . . . . 61,083 398 (363,589) (5,931)
Assets held for resale . . . . . . . . . . . . . - - - --
Accounts payable and accrued liabilities . . . . 51,525 (198,042) 118,232 (261,505)
(693,167) (719,041) (298,663) (1,393,304)
Financing:
Issuance of common shares. . . . . . . . . . . . 100,358 383,984 950,117 893,803
Proceeds from issuance of notes. . . . . . . . . - 7,730 - 17,755
Capital lease obligations. . . . . . . . . . . . - - 7,376 -
100,358 391,714 957,493 911,558
Investments:
Restricted cash held in trust. . . . . . . . . . - 90,346 - -
Loans receivable . . . . . . . . . . . . . . . . - - - -
Acquisition of capital assets. . . . . . . . . . 35,230 (13,111) (706,457) (14,679)
35,230 77,235 (706,457) (14,679)
Increase (decrease) in cash and cash equivalents (503,579) (250,092) (24,180) (533,120)
Foreign currency effect on cash. . . . . . . . . (16,210) (23,421) 23,447 (36,695)
Cash and cash equivalents, beginning of period . 571,642 483,007 75,763 742,614
Cash and cash equivalents, end of period . . . . $ 51,853 $ 209,494 $ 51,853 $ 209,494
</TABLE>
<PAGE>
VIRTUALSELLERS.COM
(Formerly Suncom Telecommunications, Inc.)
Summarized Notes to Consolidated Interim Quarterly Statements
(Expressed in United States dollars)
(Unaudited - Prepared by Management)
1. BASIS OF PRESENTATION
These interim consolidated financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission (the
"Commission"). Accordingly, the interim consolidated financial statements do
not include all of the information and footnotes in the Company's audited
consolidated financial statements for the year ended February 28, 1999 included
in the Company's Annual Report on Form 20-F for the fiscal year ended February
28, 1999 as filed with the Commission. In the opinion of management, these
consolidated interim financial statements reflect all required adjustments,
including those of a normal recurring nature, which are, in the opinion of
management, necessary to provide a fair statement of the results for the interim
periods presented.
The results of operations for the three month and nine month periods ended
November 30, 1999 are not necessarily indicative of the results to be expected
for the full year or for the succeeding period.
These interim consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles and in U.S. dollars. The
Company's annual consolidated financial statements for the year ended February
28, 1999 included in the Company's Annual Report on Form 20-F were prepared in
accordance with Canadian generally accepted accounting principles and in
Canadian dollars with a reconciliation to U.S. generally accepted accounting
principles included in the notes to the consolidated financial statements . The
Company is no longer considered a foreign private issuer and thus, has prepared
its consolidated financial statements in accordance with U.S. generally accepted
accounting principles and in U.S. dollars. The change in reporting currency
from Canadian to U.S. dollars has been applied retroactively commencing March 1,
1997.
<PAGE>
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
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As reported on the Company's Quarterly Report on Form 10-Q for the fiscal period
ended August 30, 1999, the management of the Company has reviewed its status as
a "foreign private issuer" and has determined that the Company no longer meets
the requirements of a "foreign private issuer". Accordingly, the Company is be
treating itself as a "domestic issuer" for the purposes of its filings required
under the Securities and Exchange Act of 1934.
TAME Software
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The Company's proprietary programming software language called TAME (Tag
Activated Markup Enhancement) uses an interpretative language that is Unix,
Linax and Microsoft Windows NT compatible, thereby simplifying the entire
approach to Web development and enterprise infrastructure development over
existing solutions, and at the same time maintaining its compatibility through
links to Java and JavaScript . TAME enables applications to communicate with
each other in a very unique way within the Web's infrastructure, and more
importantly provides a framework for connecting websites and applications to
create dynamic TAME enabled web services. TAME has the economic effect of
reducing bandwidth requirements and saving coding time when compared to other
competing software languages. In addition, XML is embedded in the language
thereby reducing the time required to develop tags. TAME can access many
dissimilar databases from different operating systems and provide a common
interface to display the data. The key advantage is that TAME is relatively
simple to implement and is not tied to any operating system, programming
language, or browser.
TAME includes a dynamic Web page engine and provides Web access to databases
giving developers the ability to easily create solutions that can be deployed on
all major operating systems and server environments resolving the common
problems associated with many of today's non-XML browsers. Through its use of
TAME, the Company and its development partners will be able to deliver
end-to-end e-business solutions based on an open, component-based, scalable
architecture provided by the TAME development environment. This ensures that
its existing business processes, intelligence and technology can be easily
Web-enabled and integrated to support new online and offline initiatives. If,
in the future, a decision is made to move to a different operating system, TAME
can be installed on the new hardware and the application can simply be moved to
its new home.
TAME enabled Web services link sites and applications together to perform
functions that individual components alone are not able to perform. For
example, www.webshoppersclub.com, a site built with TAME, provides data in 13
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languages and uses 24 currencies. Rather than replicating the same site in
multiple languages, TAME allows the user to specify the parameters of the
information desired such as language, currency, products, etc., and then
retrieves the data and delivers it to the user. The result is an application
that dynamically gathers, translates and displays on the fly, rather than
accessing an existing page or converting existing content into fit the request.
TAME provides an underlying mechanism for each of these services to expose its
<PAGE>
features and communicate with other services. With TAME, you can link the
services together as components and build an application very quickly.
The Company will have an exhibit at the upcoming LinuxWorld Conference & Expo to
be held in New York City on February 1 through 4. The Company's exhibit at the
expo will present the latest technical updates pertaining to its recent launch
of TAME version 4.0. The Company will also distribute demonstration copies of
TAME on compact disc. LinuxWorld Conference & Expo is the premier event for
supporters, investors and enthusiasts of the Linux operating system. The
Company anticipates that the expo will help to create brand equity for TAME as
the expo presents invaluable opportunity to expose TAME to avid Linux users, as
well as the financial community and others who have a strong interest in this
dependable operating system.*
The Company anticipates completion of its licensing program of TAME by the end
of January, 2000.* As a server side solution, TAME will be licensed such that
it will allow for affordable scalability of applications. Licensing will be
based on the number of CPU's within the user's computer system (e.g. single,
dual, or quad processor servers) and the number of websites being hosted on a
given server. End users will be able to acquire the TAME licensed product
directly from the Company or any of the value added retailers that will
distribute the TAME product. By approaching the original equipment manufacturer
market, many manufacturers of hardware will have the opportunity to sell their
products with TAME as a pre-installed option. Finally, developers and
integrators will be able to use TAME to develop new applications. Whenever such
new applications are sold for use by others, TAME will be required to be
installed on the end users server in order to deploy such new applications. To
accomplish this sale and distribution of new applications, developers and
integrators will be able to provide TAME licenses to their clients. Regardless
of how each end user acquires the TAME software license, such licenses will
always originate with the Company.
The Company plans to serve as a developers haven for information sharing and
product/technology education, by developing and sponsoring a highly interactive
TAME online community. The Company also intends on developing and hosting
introductory and educational conferences in order to build brand image and
recognition for the TAME software.
eCommerce Solutions Inc doing business as VirtualSellers.com
- ------------------------------------------------------------------
VirtualSellers.com provides turnkey e-commerce transaction processing and
customer services to small and medium size businesses. With no monthly fees and
small set-up charges, VirtualSellers.com can provide these businesses with
immediately available, customized, secure and complete e-commerce services so
that these businesses can retail their products over the Internet.
VirtualSellers.com earns its revenues by charging the businesses a percentage of
each transaction conducted over the Internet. VirtualSellers.com has added 80
new websites in the last quarter and the number of websites is again expected to
increase by end of the forth quarter.*
Preferred Telemangement Inc. doing business as CallDirect Enterprises
- ----------------------------------------------------------------------------
CallDirect is a catalogue reseller of telephone related products and will soon
be a provider of transaction processing and customer services. The Company
intends to use its Call Center to provide customer service functions for
CallDirect. The Company has also developed a website with e-commerce transaction
processing capabilities which will enable CallDirect to retail its products over
the Internet.
Although CallDirect's revenue is stable, CallDirect incurred a small loss from
operations of approximately $42,250 for the quarter ended November 30, 1999.
For the quarter, CallDirect incurred a negative cash flow of approximately
$6,000 per month. The Company anticipates that CallDirect will be operating on
a positive cash flow basis by February, 2000.* The Company anticipated that
CallDirect's first catalog would be published by November 1, 1999, but the
Company's management decided to delay publication of the catalog until after the
holiday season. Accordingly, the Company anticipates that the catalog will be
distributed by the end of January, 2000.* Most of CallDirect's current
customers are government entities or larger corporations which are established
customers of CallDirect and as a result, a significant portion of CallDirect's
revenue in generated by reorders from such established customers. The Company
expects that the release of the catalog will result in expanded sales from
established and new customers.*
NorthNet Telecommunications Inc. doing business as NorthStar Telesolutions
- --------------------------------------------------------------------------------
NorthStar Telesolutions is the Company's subsidiary that operates the Call
Center. The Call Center provides transaction processing, centralized billing,
customer service and dispatch functions for cable companies in the United
States. During the quarter, the Call Center increased the number of subscribers
it serves by approximately 25% over last quarter.
<PAGE>
Results from Operations
Nine Months Ended November 30, 1999 Compared to Nine Months Ended November 30,
- --------------------------------------------------------------------------------
1998
- ----
Revenues from operations increased 279% from $144,207 for the nine months ended
November 30, 1998 to $546,978 for the nine months ended November 30, 1999. The
increase is due to the acquisitions of the operations of Virtualsellers.com on
April 15, 1999 and CallDirect Enterprises on May 6, 1999, as well as a 450%
increase in the subscriber base for Northstar Telesolutions.
Costs and expenses increased 115% from $1.390,955 for the nine months ended
November 30, 1998 to $2,989,957 for the nine months ended November 30, 1999.
The increase is due to the acquisitions referred to above and an increase in
general and administrative costs required to support the Company's expansion.
The Company also incurred significant legal, accounting and consulting costs in
conjunction with the other income earned during the period as discussed below.
Other income (expense) increased 978% from $113,599 for the nine months ended
November 30, 1998 to $1,276,262 for the nine months ended November 30, 1999.
The increase is due to:
$975,000 received on the settlement of a trademark lawsuit filed by the Company
over the use of the name "Suncom". The terms of the settlement required that
the Company change its name and the Company selected Virtualsellers.com;
$145,000 received from the sale of intercompany loans receivable from former
subsidiaries. These loans had been fully provided for as an allowance for
doubtful collection as they were used to fund prior year operating losses of the
former subsidiaries when owned by the Company;
$50,524 increase in foreign exchange gains caused by the change in the U.S.
dollar relative to the Canadian dollar; and
The remaining $105,738 change is due to other miscellaneous income from
consulting projects.
The loss for the nine months increased from $1,133,149 to $1,166,717 due to the
factors noted above.
Cash flow from operations improved significantly from an outflow of $1,393,304
for the nine months ended November 30, 1998 to a cash outflow of $298,663 for
the nine months ended November 30, 1999. The improvement is due to non-cash
compensation and administration expenses paid for by the issuance of shares.
Three Months Ended November 30, 1999 Compared to Three Months Ended November 30,
- --------------------------------------------------------------------------------
1998
- ----
The results for the three months ended November 30, 1999 compared to the three
months ended November 30, 1998 are consistent with the nine month results
discussed above. The increase in the loss for the period from $522,928 to
$1,031,618 is due to an increase in selling, general and administrative costs as
the Company integrates its acquired operations and markets its products in order
to expand its customer base.
<PAGE>
Liquidity and Capital Resources
The Company improved its financial position considerably over the nine months
ended November 30, 1999. Cash and cash equivalents decreased from $75,763 at
December 31, 1998 to $51,853 at November 30, 1999. The decrease in cash is due
to funding of the operating loss for the nine months and acquisitions of capital
assets, somewhat offset by the conversion of long-term debt to share capital and
the issuance of shares for cash. Non-cash working capital increased from a net
obligation position of $128,747 to net working capital assets of $227,307 due
primarily to the increase in prepaid expenses and advances. The Company issued
shares for rent and certain payroll obligations which are being amortized over
the terms of the related agreements.
Subsequent to November 30, 1999, the Company has received in excess of
$2,000,000 in private placements which will be used to finance the Company's
expansion and integration of recently acquired operations.
Capital assets increased from $97,800 at December 31, 1998 to $973,373 due to
the acquisitions of the assets of CallDirect and Virtualsellers.com and due to
investments in software, hardware, office and telecommunications equipment. The
Company expects that these acquisitions will improve the Company's ability to
generate revenues and cash flows in the future.
Obligations under capital lease in the amount of $7,343 were acquired on the
acquisition of the operations of Call Direct.
Shareholders' equity increased from a deficiency in assets of $228,044 to
shareholders' equity of $1,245,190. The increase is due to the issuance of
shares on the conversion of long-term debt and the issuance of shares for cash
consideration, offset by the loss for the period of $1,166,717.
On November 15, 1999, Stephen M. Meade commenced a lawsuit in the Illinois
Circuit of Cook County Department, Chancery Division, against Dororthy A. Tomek,
Kevin A. Weilgus, Dennis Sinclair, Michael Krawitz, VirtualSellers.com, Inc. (an
Illinois corporation) and the Company. This lawsuit is in connection with the
acquisition of certain assets of VirtualSellers.com, Inc. by the Company.
Details of the lawsuit can be found under the section entitled "Legal
Proceedings".
The Company does not believe that the lawsuit has any merit as it relates to the
Company or Dennis Sinclair, the Company's President and Chief Executive
Officer.* At the time of purchasing certain assets from VirtualSellers.com,
Inc. (a different company than the issuer), the Company was provided with
documentation showing Stephen Meade sold his interests in VirtualSellers.com,
Inc. back to that company and its two other founders. In addition, Stephen
Meade was represented by counsel during the time when the Company negotiated for
and acquired certain assets of the Vendor.
<PAGE>
FORWARD LOOKING STATEMENTS
- ----------------------------
Statements identified with a "*" are forward looking statements. When used in
this document, the words "expects", "anticipates", "intends", "plans" and
similar expressions are also intended to identify other forward-looking
statements. Those forward-looking statements involve risks and uncertainties.
The Company's actual results could differ materially from those discussed in the
forward-looking statements found in this document. Factors, risks and
uncertainties that could cause or contribute to such differences include those
specific risks and uncertainties discussed below and those discussed in the
Company's Form 20-F for the period ended February 28, 1999. The cautionary
statements made in this document should be read as being applicable to all
related forward-looking statements wherever they appear in this document.
Specifically, the projections and expectations in connection with the TAME
software could be affected by a number of factors, which could have an adverse
effect on the Company's ability to generate revenue and on its continued
operations. Those factors include acceptance of the TAME software by end users,
developers and the computer software community in general, continued use of the
Internet and computers as a tool for conducting business and other financial
situations. The completion of the licensing program of TAME by the end of
January, 2000 may be affected by the ability of the Company to develop and
implement an acceptable license agreement by that time. In addition, the
success of TAME will depend on the ability of the Company to protect the
intellectual property rights associated with TAME. While the Company has
applied for patent protection of TAME, no such protection has yet been obtained
or granted. There is no assurance that such registration or protection will be
available, and therefore the Company may have little or no protection for its
intellectual property assets, comprising a significant asset of the Company.
The Company's TAME software and its other intellectual property is important to
the Company's continued operations and success. The Company's efforts to
protect this intellectual property may not be adequate. Unauthorized parties
may infringe upon or misappropriate its TAME software. In the future,
litigation may be necessary to protect and enforce the Company's intellectual
property rights or to determine the validity and scope of its intellectual
property, which could be time consuming and costly. The Company could also be
subject to intellectual property infringement claims as the numbers of
competitors grows. These claims, even if not meritorious, could be expensive
and divert the Company's attention from its continued operations. If the
Company becomes liable to any third parties for such claims, it could be
required to pay a substantial damage award or to develop comparable
non-infringing intellectual property and systems.
<PAGE>
The markets in which the Company compete are characterized by rapidly changing
technology, evolving technological standards in the industry, frequent new
websites, services and products and changing consumer demands. The Company's
future success will depend on its ability to adapt to these changes and to
continuously improve the performance, features and reliability of its service in
response to competitive services and products and the evolving demands of the
marketplace, which it may not be able to do. In addition, the widespread
adoption of new Internet, networking or telecommunications technologies or other
technological changes could require the Company to incur substantial
expenditures to modify or adapt its services or infrastructure, which might
impact its ability to become or remain profitable.
The Company anticipates that it will be necessary to continue to invest in and
continue to develop the TAME software on a timely basis to maintain its
competitiveness. Significant capital expenditures may be required to keep its
technology up to date. Investments in technology and future investments in
upgrades and enhancements to software may not necessarily maintain the Company's
competitiveness. The Company's business is highly dependent upon its computer
and software systems, and the temporary or permanent loss of such equipment or
systems, through casualty, operating malfunction or otherwise, could have a
material adverse effect upon the Company.
In connection with the number of websites to be added by VirtualSellers.com,
there are a number of factors which could have an adverse effect on the
Company's ability to generate revenue and on its continued operations.
Continued use of the Internet as a way of carrying on business is crucial to the
continued success of VirtualSellers.com. The Company's success is dependent
upon achieving significant market acceptance of its website, products and
services by business who want to retain their products and services over the
internet. It cannot guarantee that such businesses will accept
VirtualSellers.com, or even the Internet, as a replacement for traditional
methods of retailing their products and services. Market acceptance of
VirtualSellers.com depends upon continued growth in the use of the Internet
generally and, in particular, as a method of business selling and retailing
their products. The Internet may not prove to be a viable channel for these
services because of inadequate development of necessary infrastructure, such as
reliable network backbones, or complimentary services, such as high-speed modems
and security procedures for the transmission of confidential and private
information, the implementation of competitive technologies, government
regulation or other reasons. Failure to achieve and maintain market acceptance
of VirtualSellers.com would seriously harm the Company's business.
The revenues expected to be generated by the operation of the CallCenter and
CallDirect could be affected by a number of factors, which could have an adverse
effect on the Company's ability to generate revenue and on its continued
operations. Those factors include: any changes in the demands for the services
offered by the Call Center or the products offered by CallDirect, the loss of
any significant clients of either the Call Center or CallDirect, increased
competition in either of these industries, any problems encountered with the
Call Center's sophisticated and specialized telecommunications, network and
computer technology.
<PAGE>
ITEM 3: Quantitative and Qualitative Disclosure about Market Risk
Foreign Currency Risk
Currently the majority of the Company's sales and expenses are denominated in
U.S.dollars and as a result the foreign exchange gains and losses to date have
not been significant. While the Company is effecting some transactions in
foreign currencies during 1999, it does not expect that foreign exchange gains
or losses will be significant. As the Company expands internationally, foreign
currency risks may become more important. The Company has not engaged in foreign
currency hedging to date.
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings
On November 15, 1999, Stephen M. Meade commenced a lawsuit in the Illinois
Circuit Court of Cook County Department, Chancery Division, against Dorothy A.
Tomek, Kevin A. Weilgus, Dennis Sinclair, Michael Krawitz, VirtualSellers.com,
Inc. (an Illinois corporation) (the "Vendor") and the Company. This lawsuit is
in connection with the acquisition of certain assets of VirtualSellers.com, Inc.
by the Company. The Plaintiff claims that he was ousted from the Vendor and
forced to sell his shares and other interests in the Vendor to the other two
principals of the Vendor, Dorothy A. Tomek and Kevin A. Weilgus. The Plaintiff
alleges that Dorothy A. Tomek and Kevin Weilgus took various actions which
resulted in the Plaintiff being induced by fraud, duress and breach of fiduciary
duty into selling his interests in the Vendor. The Plaintiff further alleges
that Dorothy A. Tomek, Kevin Weilgus, Dennis Sinclair, Michael Krawitz and the
Company illegally conspired to oust the Plaintiff and concealed from the
Plaintiff the pending negotiations between Dorothy A. Tomek, Kevin Weilgus,
Dennis Sinclair and the Company regarding the Company making a substantial
investment in the Vendor or purchasing certain assets of the Vendor. The
Plaintiff is seeking the following relief:
(a) an order that the agreement whereby he agreed to sell his interests
in the Vendor is not a valid and binding agreement;
(b) damages against the Vendor for his share of the proceeds of the
sale of certain assets of the Vendor in an amount in excess of $1,000,000;
(c) an award against the Vendor of $175,000 in debt owed by the Vendor
to the Plaintiff;
(d) damages against Dorothy A. Tomek, Kevin Weilgus, the Vendor, Dennis
Sinclair, the Company, and Michael Krawitz for his share of the proceeds of the
sale of certain assets of the Vendor in an amount in excess of $1,175,000;
(e) punitive damages against Dorothy A. Tomek, Kevin Weilgus, the
Vendor, Dennis Sinclair, the Company, and Michael Krawitz in excess of
$3,000,000;
(f) an that a constructive trust be created in his favour and against
Dorothy A. Tomek, Kevin Weilgus, the Vendor, Dennis Sinclair, the Company, and
Michael Krawitz whereby those defendants are required to disgorge into the
constructive trust all of their unjust financial rewards obtained from the
alleged wrongful, inequitable and fraudulent conduct; and
<PAGE>
(g) prejudgment interest and costs.
Except as set forth above, no legal proceeding has been commenced by or against
the Company in the quarter for which this Form 10-Q is filed and here have been
no material developments in existing legal proceedings involving the Company
since the filing of the Company's Form 20F for the period ended February 28,
1999.
ITEM 2: Changes in Securities and use of Proceedings
Common shares of the Company sold by the Company during the period covered by
this form 10-Q that were not registered under the Securities Act of 1933, as
amended:
Full Name and Total
Residential Number of Price Per Purchase Exemption
Address of Securities Share Price from
Purchaser Sold Registration
- ---------------- ----------- ---------- --------- ------------
Mel Baillie 150,000 CDN$0.08 CDN$12,000 Section 4(2) of
Suite 505 Deemed Value Deemed Value the Securities
2525 Quebec Street Act of 1933
Vancouver, BC V5T 4R5
Everett J. Palmer 250,000 $0.10 $25,000 Section 4(2) of
113 Settlers Landing Deemed Value Deemed Value the Securities
Road Act of 1933
Suffolk, VA 23435
Shannon T. Squyres 750,000 $0.10 $75,000 Section 4(2) of
17586 Lebanon Circle Deemed Value Deemed Value the Securities
Irvine, CA USA 92614 Act of 1933
Raymond Mol 150,000 CDN$0.08 CDN$12,000 Section 4(2) of
9035-162A Street Deemed Value Deemed Value the Securities
Surrey, BC V4N 3L6 Act of 1933
Dr. Dennis Sinclair 150,000 CDN$0.08 CDN$12,000 Section 4(2) of
195 Harbour Drive Deemed Value Deemed Value the Securities
Chicago, IL USA 60602 Act of 1933
Pierre Prefontaine 150,000 CDN$0.08 CDN$12,000 Section 4(2) of
280-171 Water Street Deemed Value Deemed Value the Securities
Vancouver, BC V6B 1A7 Act of 1933
<PAGE>
Shannon T. Squyres 250,000 $0.10 $25,000 Section 4(2) of
17586 Lebanon Circle Deemed Value Deemed Value the Securities
Irvine, CA USA 92614 Act of 1933
TotalSource 200,000 $0.13 $26,000 Section 4(2) of
Financing.com Deemed Value Deemed Value the Securities
c/o Desmond Paden Act of 1933
Suite #307
Hilltop Executive
Center
1580 South Milwaukee Avenue
Libertyville, Illinois 60106
Total Source 200,000 $0.13 $26,000 Section 4(2) of
Financing.com Deemed Value Deemed Value the Securities
c/o Desmond Paden Act of 1933
Suite #307
1580 South Milwaukee Avenue
Libertyville, Illinois 60106
Matthew Hiitola 2,500 $0.13 $325 Section 4(2) of
1182 Grove Avenue Deemed Value Deemed Value the Securities
Bensonville, Illinois Act of 1933
60106
Erik Johnson 10,000 $0.13 $1,300 Section 4(2) of
17586 Lebanon Circle Deemed Value Deemed Value the Securities
Irvine, CA USA 92614 Act of 1933
Brian Keeve 5,000 $0.13 $650 Section 4(2) of
542 Buckingham Way Deemed Value Deemed Value the Securities
Boliingbrook, Illinois Act of 1933
60440
Sari Levy 10,000 $0.13 $1,300 Section 4(2) of
108 West Maryland Terrace Deemed Value Deemed Value the Securities
Addison, Illinois Act of 1933
60101
Lou Severson 10,000 $0.13 $1,300 Section 4(2) of
2411 Ogden Deemed Value Deemed Value the Securities
Unit #7 Act of 1933
Downers Grove
Illinois 60515
ITEM 3: Defaults Upon Senior Securities
Not applicable.
ITEM 4: Submission of Matters To A Vote Of Security Holders
Not applicable.
ITEM 5: Other Information
None.
ITEM 6: Exhibits and Reports on Form 8-K
27.01 Financial Data Schedule (EDGAR version only)
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated January 14, 2000
VirtualSellers.com, Inc.
Per: /s/ Dennis Sinclair
- --------------------------
Dennis Sinclair
Per: /s/ Raymond Mol
- --------------------------
Raymond Mol
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheet as of August 31, 1999 and
November 30, 1999
Condensed Consolidated Statement of Income for the six and nine months
ended November 30, 1998 and 1999
Condensed Consolidated Statement of Cash Flows for the nine months ended
November 30, 1998 and 1999.
Notes to Condensed Consolidated Financial Statements.
ITEM 2: Management's Discussion and Analysis of Financial Condition and
Results of Operation
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
PART II OTHER INFORMATION
ITEM 1: Legal Proceedings
ITEM 2: Changes in Securities and Use of Proceeds
ITEM 3: Default upon Senior Securities
ITEM 4: Submissions of Matters to a Vote of Security Holders
ITEM 5: Other Information
ITEM 6: Exhibits and Reports on Form 8-K
Signatures
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<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
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0
0
<COMMON> 11435073
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<SALES> 220230
<TOTAL-REVENUES> 229658
<CGS> 85277
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