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, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________________________ to
_________________________________
Commission File Number: 000-14356
VIRTUALSELLERS.COM, INC.
------------------------
(Exact name of registrant as specified in its charter)
Canada 911353658
------ ---------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
Suite 1000 - 120 North LaSalle Street, Chicago, IL 60602
---------------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(312) 920-9120
(Registrant's telephone number, including area code)
not applicable
--------------
(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 2, 2001, there were 127,559,748 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 for the
quarter ended November 30, 2000 include all adjustments necessary in order to
ensure that the financial statements are not misleading.
Chicago, Illinois /s/ Dennis Sinclair
Date: January 15, 2001 Director of the Company
Consolidated Financial Statements of
VIRTUALSELLERS.COM, INC.
(Expressed in U.S. Dollars)
Three months ended November 30, 2000 and
Nine months ended November 30, 2000
(Unaudited)
<PAGE>
<TABLE>
<CAPTION>
VIRTUALSELLERS.COM, INC.
Consolidated Balance Sheets
(Expressed in U.S. dollars)
(Unaudited)
November 30, February 29,
2000 2000
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 1,073,939 $ 447,844
Accounts receivable . . . . . . . . . . . . . . . . . . . . . 820,893 72,029
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 38,265 50,850
Prepaid expenses and advances . . . . . . . . . . . . . . . . 113,024 242,310
2,046,121 813,033
--------------------------------------------------------------
Capital assets, net (note 4). . . . . . . . . . . . . . . . . 4,902,352 1,926,857
--------------------------------------------------------------
$ 6,948,473 $ 2,739,890
=============================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities. . . . . . . . . . . $ 973,842 $ 693,250
Stockholders' equity:
Common shares, no par value (note 5):
Authorized:
200,000,000 common shares
Issued and outstanding:
127,554,749 shares at November 30, 2000
and 123,001,503 shares at February 29, 2000 . . . . . . . 107,555,782 102,492,038
Shares to be issued (notes 2 and 3). . . . . . . . . . . . . . 3,928,000 -
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (105,509,151) (100,445,398)
--------------------------------------------------------------
5,974,631 2,046,640
--------------------------------------------------------------
$ 6,948,473 $ 2,739,890
=============================================================
See accompanying notes to consolidated financial statements.
On behalf of the Board:
/s/ Dennis Sinclair /s/ Raymond Mol
Director Director
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VIRTUALSELLERS.COM, INC.
Consolidated Statements of Operations and Deficit
(Expressed in U.S. dollars)
(Unaudited)
Three months ended Nine months ended
November 30, November 30,
-------------------------- -------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . $ 886,751 $ 220,230 $2,115,254 $ 546,978
Costs and expenses:
Cost of goods sold. . . . . . . . 167,863 85,277 456,856 217,537
Selling, general and
administrative expenses . . . . . 1,835,037 1,131,576 5,585,581 2,691,969
Depreciation and amortization . . 456,084 44,423 1,098,433 80,451
---------------------------------------------------------
2,458,984 1,261,276 7,140,870 2,989,957
---------------------------------------------------------
Loss before other income. . . . . 1,572,233 1,041,046 5,025,616 2,442,979
Other income (expense):
Interest revenue. . . . . . . . . 9,935 2,194 75,320 22,863
Foreign exchange gains (losses) . 820 2,226 (51,076) 90,804
Miscellaneous . . . . . . . . . . (79,607) 5,008 (62,381) 1,162,595
(68,852) 9,428 (38,137) 1,276,262
---------------------------------------------------------
Net loss for the period . . . . . 1,641,085 1,031,618 5,063,753 1,166,717
---------------------------------------------------------
Net loss for the period per share $ (0.01) $ (0.01) $ (0.04) $ (0.01)
=========================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
VIRTUALSELLERS.COM, INC.
Consolidated Statements of Stockholders' Equity
(Expressed in U.S. dollars)
(Unaudited)
Number of Common
common share Shares to Accumulated
shares amount be issued deficit
<S> <C> <C> <C> <C>
Balance, February 28, 1999. . . . . . . . . . . . . . . . . . $ 77,097,110 $ 95,524,122 $ - $ (95,752,168)
Shares issued during the year:
For employees' and directors'
compensation. . . . . . . . . . . . . . . . . . . . . . . . . 7,541,888 2,496,669 - -
Issued on acquisition of
VirtualSellers. . . . . . . . . . . . . . . . . . . . . . . . 500,000 50,000 - -
Issued on acquisition of Call
Direct. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 202,716 - -
Exercise of CCAA warrants . . . . . . . . . . . . . . . . . . 495,525 - - -
Conversion of 2000
convertible debentures. . . . . . . . . . . . . . . . . . . . 11,605,000 1,125,835 - -
For services received . . . . . . . . . . . . . . . . . . . . 5,644,335 580,654 - -
For cash pursuant to private
placements. . . . . . . . . . . . . . . . . . . . . . . . . . 18,668,837 2,590,493 - -
Shares returned and
cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . (51,191) - - -
Issued on acquisition of
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 87,000 - -
Share issue costs . . . . . . . . . . . . . . . . . . . . . . - (165,451) - -
Loss for the year . . . . . . . . . . . . . . . . . . . . . . - - - (4,693,230)
----------------------------------------------------------
Balance, February 29, 2000. . . . . . . . . . . . . . . . . . 123,001,504 102,492,038 - (100,445,398)
Shares issued during the period:
Exercise of CCAA warrants . . . . . . . . . . . . . . . . . . 1,170,060 - - -
For cash pursuant to private
placements. . . . . . . . . . . . . . . . . . . . . . . . . . 1,730,375 4,310,800 - -
For employees' and directors'
compensation. . . . . . . . . . . . . . . . . . . . . . . . . 1,315,000 802,600 - -
For settlement of debt. . . . . . . . . . . . . . . . . . . . 49,629 19,344 - -
For consulting services . . . . . . . . . . . . . . . . . . . 88,181 6,000 - -
Issued on acquisition of
Sullivan Park (note 2). . . . . . . . . . . . . . . . . . . . 200,000 375,000 - -
Shares to be issued on
acquisition of Sullivan
Park (note 2) . . . . . . . . . . . . . . . . . . . . . . . . - - 2,700,000 -
Shares to be issued on
acquisition of Gold
Paint (note 3). . . . . . . . . . . . . . . . . . . . . . . . - - 188,000 -
Shares to be issued cash
pursuant to private
placements. . . . . . . . . . . . . . . . . . . . . . . . . . - - 1,040,000 -
Share issue costs (note 7). . . . . . . . . . . . . . . . . . - (450,000) - -
Loss for the period . . . . . . . . . . . . . . . . . . . . . - - - (5,063,753)
---------------------------------------------------------
Balance, November 30, 2000. . . . . . . . . . . . . . . . . . 127,554,749 $107,555,782 $3,928,000 $(105,509,151)
=========================================================
See accompanying notes to consolidated financial statements.
Total
<S> <C>
Balance, February 28, 1999. . . . . . . . . . . . . . . . . . $ (228,046)
Shares issued during the year:
For employees' and directors'
compensation. . . . . . . . . . . . . . . . . . . . . . . . . 2,496,669
Issued on acquisition of
VirtualSellers. . . . . . . . . . . . . . . . . . . . . . . . 50,000
Issued on acquisition of Call
Direct. . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,716
Exercise of CCAA warrants . . . . . . . . . . . . . . . . . . -
Conversion of 2000
convertible debentures. . . . . . . . . . . . . . . . . . . . 1,125,835
For services received . . . . . . . . . . . . . . . . . . . . 580,654
For cash pursuant to private
placements. . . . . . . . . . . . . . . . . . . . . . . . . . 2,590,493
Shares returned and
cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . -
Issued on acquisition of
equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 87,000
Share issue costs . . . . . . . . . . . . . . . . . . . . . . (165,451)
Loss for the year . . . . . . . . . . . . . . . . . . . . . . (4,693,230)
--------------
Balance, February 29, 2000. . . . . . . . . . . . . . . . . . 2,046,640
Shares issued during the period:
Exercise of CCAA warrants . . . . . . . . . . . . . . . . . . -
For cash pursuant to private
placements. . . . . . . . . . . . . . . . . . . . . . . . . . 4,310,800
For employees' and directors'
compensation. . . . . . . . . . . . . . . . . . . . . . . . . 802,600
For settlement of debt. . . . . . . . . . . . . . . . . . . . 19,344
For consulting services . . . . . . . . . . . . . . . . . . . 6,000
Issued on acquisition of
Sullivan Park (note 2). . . . . . . . . . . . . . . . . . . . 375,000
Shares to be issued on
acquisition of Sullivan
Park (note 2) . . . . . . . . . . . . . . . . . . . . . . . . 2,700,000
Shares to be issued on
acquisition of Gold
Paint (note 3). . . . . . . . . . . . . . . . . . . . . . . . 188,000
Shares to be issued cash
pursuant to private
placements. . . . . . . . . . . . . . . . . . . . . . . . . . 1,040,000
Share issue costs (note 7). . . . . . . . . . . . . . . . . . (450,000)
Loss for the period . . . . . . . . . . . . . . . . . . . . . (5,063,753)
--------------
Balance, November 30, 2000. . . . . . . . . . . . . . . . . . $ 5,974,631
==============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VIRTUALSELLERS.COM, INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
(Unaudited)
Three months ended Nine months ended
November 30, November 30,
------------------------- -------------------
2000 1999 2000
<S> <C> <C> <C>
Cash provided by (used in):
Operating activities:
Net loss for the year. . . . . . . . . . . . . . . . . . . . $ (1,641,085) $ (1,031,618) $(5,063,753)
Items not involving cash:
Depreciation and amortization. . . . . . . . . . . . . . . . 456,084 44,423 1,098,433
Non-cash compensation. . . . . . . . . . . . . . . . . . . . - 62,657 802,600
Non-cash administration
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 140,786 25,344
Change in non-cash operating
working capital:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . (190,227) 17,750 (521,330)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 3,310 14,227 12,585
Prepaid expenses and
advances . . . . . . . . . . . . . . . . . . . . . . . . . . 26,111 61,083 129,986
Accounts payable and
accrued liabilities. . . . . . . . . . . . . . . . . . . . . 370,076 51,525 191,351
---------------------------------------------------------
(969,731) (639,167) (3,324,784)
Investing activities:
Cash acquired on acquisitions. . . . . . . . . . . . . . . . (2,477) - 771
Acquisition of capital assets. . . . . . . . . . . . . . . . (73,843) 35,230 (950,692)
---------------------------------------------------------
(76,320) 35,230 (949,921)
Financing activities:
Issuance of common shares. . . . . . . . . . . . . . . . . . 2,450 100,358 4,310,800
Share issue costs. . . . . . . . . . . . . . . . . . . . . . - - (450,000)
Shares to be issued. . . . . . . . . . . . . . . . . . . . . 1,040,000 - 1,040,000
Capital lease obligations. . . . . . . . . . . . . . . . . . - - -
---------------------------------------------------------
1,042,450 100,358 4,900,800
---------------------------------------------------------
Increase (decrease) in cash and cash equivalents . . . . . . (3,601) (503,579) 626,095
Foreign currency effect on cash. . . . . . . . . . . . . . . - (16,210) -
Cash and cash equivalents,
beginning of period. . . . . . . . . . . . . . . . . . . . . 1,077,540 571,642 447,844
---------------------------------------------------------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . . . . . . . . . . . . $ 1,073,939 $ 51,853 $ 1,073,939
=========================================================
Non-cash transactions and supplemental disclosures - note 5.
See accompanying notes to consolidated financial statements.
Nine months ended
November 30,
------------------
1999
<S> <C>
Cash provided by (used in):
Operating activities:
Net loss for the year. . . . . . . . . . . . . . . . . . . . $(1,166,717)
Items not involving cash:
Depreciation and amortization. . . . . . . . . . . . . . . . 80,451
Non-cash compensation. . . . . . . . . . . . . . . . . . . . 642,488
Non-cash administration
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 505,219
Change in non-cash operating
working capital:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . (88,480)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . (26,267)
Prepaid expenses and
advances . . . . . . . . . . . . . . . . . . . . . . . . . . (363,589)
Accounts payable and
accrued liabilities. . . . . . . . . . . . . . . . . . . . . 118,232
--------------
(298,663)
Investing activities:
Cash acquired on acquisitions. . . . . . . . . . . . . . . . -
Acquisition of capital assets. . . . . . . . . . . . . . . . (706,457)
--------------
(706,457)
Financing activities:
Issuance of common shares. . . . . . . . . . . . . . . . . . 950,117
Share issue costs. . . . . . . . . . . . . . . . . . . . . . -
Shares to be issued. . . . . . . . . . . . . . . . . . . . . -
Capital lease obligations. . . . . . . . . . . . . . . . . . 7,376
--------------
957,493
--------------
Increase (decrease) in cash and cash equivalents.. . . . . . (47,627)
Foreign currency effect on cash. . . . . . . . . . . . . . . 23,447
Cash and cash equivalents,
beginning of period. . . . . . . . . . . . . . . . . . . . . 75,763
--------------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . . . . . . . . . . . . $ 51,583
==============
Non-cash transactions and supplemental disclosures - note 5.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
VIRTUALSELLERS.COM, INC.
Notes to Consolidated Financial Statements
(Expressed in U.S. dollars)
Three months ended November 30, 2000 and
Nine months ended November 30, 2000
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES:
(a) Basis of presentation:
These unaudited interim consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. Except as disclosed in note 17 of the Company's annual audited
consolidated financial statements as at February 29, 2000, these principles do
not differ materially from accounting principles generally accepted in the
Canada.
These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All subsidiaries were acquired from unrelated
parties and have been accounted for using the purchase method. Their results of
operations have been included from the respective effective dates of
acquisition. All significant intercompany balances and transactions have been
eliminated.
Canadian subsidiaries United States subsidiaries
---------------------- ----------------------------
Canadian-American Communications Inc. Northnet Telecommunications Inc.
Canadian Northstar Transmission Systems Ltd. eCommerce Solutions Inc.
Preferred Telemanagement Inc. ("PTI")
CAM-NET Cellular Inc.
(b) Net income (loss) per common share:
Basic net income (loss) per common share is computed based on the weighted
average number of common shares outstanding during the period, which were are
follows:
2000 126,724,730
1999 90,668,069
Diluted earnings per share has not been presented as the impact of outstanding
convertible securities would be to reduce the loss per share.
<PAGE>
2. ACQUISITION OF THE BUSINESS OF SULLIVAN PARK, LLC:
On May 19, 2000, and amended on June 1, 2000, the Corporation entered into an
agreement with Sullivan Park to acquire the net assets of Sullivan Park for
$2,700,000, payable no later than May 19, 2001 in common shares of
Virtualsellers based on the closing market price of the Vitualsellers common
shares. These shares are to be registered and issued in one instalment on the
earlier of (i) May 19, 2001 and (ii) date at which the shares are registered.
In addition, the Company entered into an employment agreement with the managing
member of Sullivan Park whereby the managing member will receive a monthly
salary of $10,000 and 200,000 common shares of Virtualsellers as a signing
bonus. Virtualsellers can terminate the employment agreement by giving three
months written notice. As the Corporation acquired control over the net assets
of Sullivan Park, the acquisition is accounted for using the purchase method.
The purchase price is allocated to the identifiable assets acquired and
liabilities assumed based upon their fair values at the effective date. The
residual balance is allocated to goodwill.
Details of the acquisition are as follows:
<TABLE>
<CAPTION>
<S> <C>
Net assets acquired:
Cash. . . . . . . . . . . . . . . . . . . . . . $ 3,248
Accounts receivable . . . . . . . . . . . . . . 92,134
Fixed assets. . . . . . . . . . . . . . . . . . 21,379
Goodwill. . . . . . . . . . . . . . . . . . . . 3,019,137
------------
3,135,898
Accounts payable and accrued liabilities. . . . 60,898
------------
Net assets acquired . . . . . . . . . . . . . . $3,075,000
============
Consideration:
Shares to be issued under acquisition agreement $2,700,000
Shares to be issued under employment agreement. 375,000
------------
$3,075,000
============
</TABLE>
<PAGE>
3. ACQUISITION OF THE BUSINESS OF GOLD PAINT INTERNET SERVICES INC.:
On October 1, 2000, the Company entered into an agreement to acquire the
business of Gold Paint Internet Services Inc. ("Gold Paint") for 200,000 common
shares of the Company. As the Corporation acquired control over the net assets
of Gold Paint, the acquisition is accounted for using the purchase method.
The purchase price is allocated to the identifiable assets acquired and
liabilities assumed based upon their fair values at the effective date. The
residual balance is allocated to goodwill. Details of the acquisition are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Net assets acquired:
Cash. . . . . . . . . . . . . . . . . . . . . . $ (2,477)
Accounts receivable . . . . . . . . . . . . . . 135,408
Prepaid expenses. . . . . . . . . . . . . . . . 700
Fixed assets. . . . . . . . . . . . . . . . . . 26,004
Goodwill. . . . . . . . . . . . . . . . . . . . 56,721
----------
216,356
Accounts payable and accrued liabilities. . . . 28,356
---------
Net assets acquired . . . . . . . . . . . . . . $188,000
Consideration:
Shares to be issued under acquisition agreement $188,000
</TABLE>
4. CAPITAL ASSETS, NET:
<TABLE>
<CAPTION>
Accumulated Net book
NOVEMBER 30, 2000 Cost depreciation value
<S> <C> <C> <C>
Office equipment. . . . $ 1,085,056 $ 406,791 $ 678,265
Computer hardware . . . 1,598,612 453,707 1,144,905
Computer software . . . 164,793 34,296 130,497
Leasehold improvements. 311,269 14,234 297,035
Goodwill (note 2) . . . 3,154,840 503,190 2,651,650
---------------------------------------
$ 6,314,570 $ 1,412,218 $4,902,352
Accumulated Net book
FEBRUARY 29, 2000 . . . Cost depreciation value
Office equipment. . . . $ 886,016 $ 153,031 $ 732,985
Computer hardware . . . 958,275 99,918 858,357
Computer software . . . 126,603 27,882 98,721
Leasehold improvements. 262,564 25,770 236,794
----------------------------------------
$ 2,233,458 $ 306,601 $1,926,857
========================================
</TABLE>
5. SHARE CAPITAL:
(a) Authorized:
200,000,000 common stock without par value
150,000,000 class A preference stock without par value
150,000,000 class B preference stock without par value
(b) Commitments to issue common shares:
The Company has committed to issue 13,000,000 shares to former creditors under a
reorganization plan as disclosed in note 3. As at August 31, 2000, 9,849,022
(February 29, 2000 - 8,678,862) shares have been issued to creditors leaving an
outstanding commitment to issue 3,150,978 (February 29, 1999 - 4,321,138)
shares.
<PAGE>
5. SHARE CAPITAL (CONTINUED):
(c) Warrants and options:
At November 30, 2000, the Company has 361,710 share purchase warrants
outstanding which expire on April 26, 2001. Each warrant entitles the holder to
purchase one common share for Cdn. $1.50. The Company also has 1,000,000 share
purchase warrants outstanding which expire on June 30, 2001. Each warrant
entitles the holder to purchase one common share for Cdn. $1.00. A new one year
held period will commence on the shares issued as a result of the exercise of
these warrants. The Company also had 77,255 warrants outstanding which expired
on September 8, 2000. Each warrant entitles the holder to purchase one common
share for no additional consideration. These warrants were issued to creditors
of CallDirect to settle outstanding indebtedness. The Company has 100,000 stock
options outstanding at an exercise price of $1.28, expiring January 31, 2001.
These options were originally granted in fiscal 1997. On August 31, 2000 the
Company issued 2,255,000 options to employees entitling the employees to acquire
2,255,000 common shares of the Company at $1.31 per share expiring on July 28,
2010. On September 25, 2000, the Company issued 3,800,000 options to employees
and directors entitling the employees and directors to acquire 3,800,000 common
shares of the Company at $1.31 expiring at various dates between July 28, 2010
and September 25, 2010. On October 23, 2000, the Company issued 1,000,000
options to an employee entitling the employee to acquire 1,000,000 common shares
of the Company at $0.56 expiring October 23, 2010. On November 1, 2000, the
Company issued 650,000 options to employees and directors entitling the
employees and directors to acquire 650,000 common shares of the Company at $0.56
expiring November 1, 2010. On November 1, 2000, the Company reduced the
exercise price for options issued at $1.31 and $0.71 to $0.56.
6. SEGMENTED INFORMATION:
The Company has three operating segments - a call center division, a catalogue
division ("CallDirect") and an e'commerce division ("Virtualsellers.com"). The
call center and e'commerce segments are located in the United States and the
catalogue segment is located in British Columbia, Canada.
2000:
----
<TABLE>
<CAPTION>
(a) Operating segments:
Call Center Catalogue e'commerce Segment
segment segment segment eliminations Total
<S> <C> <C> <C> <C> <C>
Gross revenue. . . . $ 475,004 $ 251,755 $ 1,388,495 $ $2,115,254
Segment loss . . . . $ 81,577 $ 112,103 $ 2,577,222 $ $2,770,902
Corporate loss . . . 2,292,851
------------------------------------------------------------------
Loss for the year $ 81,577 $ 112,103 $ 2,577,222 $ $5,063,753
==================================================================
Segment assets . . . $ 207,732 $ 186,381 $ 5,607,309 $ $6,001,422
Corporate assets . . 947,051
------------------------------------------------------------------
Total assets $ 207,732 $ 186,381 $ 5,607,309 $ $6,948,473
==================================================================
Equipment additions:
Equipment $ $ $ 938,998 $ $ 938,998
Corporate assets 11,674
------------------------------------------------------------------
$ $ $ 938,998 $ $ 950,672
==================================================================
</TABLE>
<TABLE>
<CAPTION>
6. SEGMENTED INFORMATION (CONTINUED):
2000 (CONTINUED):
-----------------
(a) Operating segments (continued):
Call Center Catalogue e'commerce Segment
segment segment segment eliminations Total
<S> <C> <C> <C> <C> <C>
Depreciation and amortization
expense:
Equipment. . . . . . . . . . . $ 13,866 $ 47,214 $ 529,283 $ $ 590,363
Goodwill . . . . . . . . . . . 503,190 503,190
Corporate assets . . . . . . . 4,880
$ 13,866 $ 47,214 $ 1,032,473 $ $1,098,433
(b) Geographic segments:
United Segment
Canada States eliminations Total
Gross revenue. . . . . . . . . $ 251,755 $1,863,499 $ $ 2,115,254
Location of assets:
Equipment. . . . . . . . . . . $ 44,021 $2,206,681 $ $ 2,250,702
Goodwill . . . . . . . . . . . 2,651,650 2,651,650
$ 44,021 $4,858,331 $ $ 4,902,352
</TABLE>
<TABLE>
<CAPTION>
1999:
----
(a) Operating segments:
Call Center Catalogue e'commerce Segment
segment segment segment eliminations Total
<S> <C> <C> <C> <C> <C>
Gross revenue . . . $ 222,444 $ 162,838 $ 161,696 $ $ 546,978
Segment loss. . . . $ 142,404 $ 42,248 $ 873,113 $ $1,057,765
Corporate expenses. 108,952
Loss for the period $ 142,404 $ 42,248 $ 873,113 $ $1,166,717
Segment assets. . . $ 104,716 $ 268,962 $ 1,055,619 $ $1,429,297
Corporate assets. . 117,210
Total assets $ 104,716 $ 268,962 $ 1,055,619 $ $1,546,507
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
6. SEGMENTED INFORMATION (CONTINUED):
1999 (CONTINUED):
-----------------
(a) Operating segments (continued):
Call Center Catalogue e'commerce Segment
segment segment segment eliminations Total
<S> <C> <C> <C> <C> <C>
Depreciation and amortization
expense:
Equipment. . . . . . . . . . . $ 9,686 $ $ 70,765 $ $80,451
Corporate assets
--------------------------------------------------------------------------
$ 9,686 $ $ 70,765 $ $80,451
(b) Geographic segments:
United Segment
Canada States eliminations Total
Gross revenue. . . . . . . . . $ 162,838 $ 384,140 $ $ 546,978
Location of assets:
Equipment. . . . . . . . . . . $ 132,563 $ 840,811 $ $ 973,374
</TABLE>
7. RELATED PARTY TRANSACTIONS:
Included in accounts receivable at August 31, 2000 is $96,548 (February 29, 2000
- $nil) due from employees of the Company. Payments totalling $450,000 were
made to the Company's President (and Director) and Concept 10 Inc., a
wholly-owned subsidiary of the Company's President (and Director), during the
nine months ended November 30, 2000 (1999 - $nil) for services rendered in
connection with a private placement of common shares.
<PAGE>
<TABLE>
<CAPTION>
8. NON-CASH TRANSACTIONS AND SUPPLEMENTAL DISCLOSURES:
The Company had the following material non-cash transactions:
2000 1999
<S> <C> <C>
Issuance of shares for:
Employee and director compensation $ 802,600 $579,831
Settlement of debt . . . . . . . . 19,344 -
Acquisition of Sullivan Park . . . 375,000 -
Services received. . . . . . . . . 6,000 364,433
---------------------
$1,202,944 $944,264
=====================
</TABLE>
In addition, the Company is committed to issue $2,700,000 in common shares for
the acquisition of Sullivan Park (note 2) and $188,000 in common shares for the
acquisition of Gold Paint (note 3).
ITEM 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations
All figures are in United States Dollars unless otherwise stated.
VIRTUALSELLERS.COM
During the quarter ended November 30, 2000, Virtualsellers.com continued to
provide turnkey e-commerce transaction processing and customer services to small
and medium-sized businesses. With the addition of GoldPaint Internet Services
Inc., Virtualsellers.com's portfolio of products and services has increased,
providing a larger customer base and marketing edge.
Additional internal development has provided Virtualsellers.com with a new
product offering, TAME Wizard technology, allowing multi-store environment
implementation with simple to use templates. Together with other value-added
services such as transaction processing, help desk and customer service,
Virtualsellers.com continues to strengthen its position as a solutions provider.
Some of the recent highlights and accomplishments of Virtualsellers.com include:
- introduced the TAMExchange product that allows buyers and sellers of both
standard and non-standard products to participate in multi-lateral purchase/sale
negotiations;
- introduced the Virtualsellers.com Content Manager providing a Web/wireless
data collaboration tool;
- increased senior management staff;
- increased transaction processing revenue by 66% over the second quarter;
<PAGE>
- launched several websites, including transaction procession for
DailyMetalQuotes.com and FarrellTrading.com; and
- contracted for professional services to Edmonton Development Authority to
create a portal for the purpose of offering e-commerce connectivity and
communication for their customers and suppliers worldwide and to reduce business
costs per transaction.
Subsequent to the fiscal quarter ended November 30, 2000, we contracted for
professional services with SportsCombine.com for the development of the online
registration and tracking of the Nike Junior Tennis Tour for its members and
tournaments.
SULLIVAN PARK
We continued to operate the business of Sullivan Park ("Sullivan Park")
under a subsidiary called Sullivan Park, Inc. Sullivan Park's clients include
Internet start-ups in its accelerator program and Fortune 500 companies
outsourcing their Web site development and e-commerce solutions. Sullivan Park
promotes our goal of expanding TAME's market penetration in the existing
customer base and with new customers by using the language to build Web site,
database management and supply chain solutions. Our goal of increasing
transaction processing revenue is met by Sullivan Park's development of a
portfolio of clients whose businesses benefit from using VirtualSellers.com's
e-commerce services.
By partnering with start-up Internet companies at an early stage, Sullivan Park
gives its clients the ability to leverage their resources to the fullest extent.
Instead of raising a significant amount of start-up capital for equipment,
infrastructure and personnel expenses, start-ups can engage Sullivan Park at a
fraction of this cost, deploying their products or services to market faster and
proving their business model in advance of seeking initial financing. Sullivan
Park consults at the outset, providing business analysis and technical analysis
that fully model the client's business and processes. Site development, when
commenced, can then be accelerated through the use of the TAME language. Upon
launch, the client's e-commerce requirements are managed by VirtualSellers.com,
which provides its hosting, transaction processing, customer support, billing
and collection services. In addition to receiving an equity position in its
clients, Sullivan Park generates revenue from consulting and application
development fees.
Subsequent to the fiscal quarter ended November 30, 2000, Sullivan Park
continued to build alliances with key technology companies whose products
directly integrate and complement the TAME application server as part of the
effort to expand TAME's market penetration and provide its customers with a full
suite of services. Sullivan Park was recently accepted into SpeedStart, a
program jointly developed by Compaq Computer Corp., Microsoft Corp. and Intel
Corp., that is designed to accelerate speed-to-market for Internet start-up
companies. Sullivan Park will seek to work with SpeedStart enrollees as a Web
integrator, incubator and service provider. Web applications will be developed
on the TAME platform, which has been optimized to work on Compaq and Intel
hardware running Windows 2000 Server.
Sullivan Park's accelerator program continues to grow with the recent addition
of several high profile projects. Sullivan Park will assist SportsCombine.com
in developing the online registration and tracking of the Nike Junior Tennis
Tour.
<PAGE>
The highly anticipated StoryDigger.com launch will occur in the current quarter,
providing a stream of transaction revenue through VirtualSellers.com's
e-commerce infrastructure.
In addition to the success of its accelerator program, Sullivan Park is
realizing significant growth in its core professional services business.
Sullivan Park has more than doubled its large company clients in the current
quarter, and seeks to maintain this aggressive growth throughout 2001. Many
high profile companies have closed their Los Angeles offices, while Sullivan
Park has successfully increased its growth and revenue.
NORTHSTAR TELESOLUTIONS
NorthStar TeleSolutions ("NorthStar") has been providing services to cable
television, Internet Service Providers ("ISP's") and other large
subscriber-based businesses for over 2 years. These services include 24 hours a
day, 7 days a week transaction processing, customer service, centralized
billing, payment processing, order entry, order fulfilment, help desk services,
dispatch functions, customer and technical support, dispatching, bill
collections and marketing.
NorthStar enables such businesses to significantly reduce billing management and
back-office costs through a proven and efficient outsource service.
Since the average fee per cable subscriber is $3.50, the cost savings for most
small and medium size cable operators is substantial; approximately 50%.
NorthStar achieves this savings for its clients through a package of services
that can improve the customer service and billing operation of most cable and
ISP's. As an added benefit, NorthStar will provide all of these services for a
flat per-subscriber monthly rate so that clients can quantify their billing
management expenses in advance.
In the quarter, NorthStar grew its subscriber base by 65% to over 40,000
subscribers. NorthStar has nearly 5,000 subscribers under contract which are
expected to generate revenue which will be recorded in the upcoming quarter.
The revenue generated from the management of these subscribers has increased by
over 60%. NorthStar's growth during this past year can primarily be attributed
to work it has done to position itself as a leader of transaction processing
services for the emerging broadband service industry. NorthStar has exhibited
its services at 2 industry shows in the past 6 months with additional
appearances slated for the near future.
NorthStar has already invested the necessary capital in the technology
infrastructure to support well over 100,000 subscribers.
NorthStar's marketing plan includes the use of direct mail, telemarketing, bill
inserts, magazine advertisements and exhibiting at trade shows. In addition,
NorthStar has chosen strategic partners that will provide marketing to their
existing clients that align with NorthStar's business model. The management
team of NorthStar expects to grow its subscriber base to 50,000 subscribers by
the end of this fiscal year.
On January 12, 2001, subsequent to the third fiscal quarter, NorthStar entered
into a 3-year agreement with Skyway Partners, a provider of telecommunications
services to multiple dwelling
<PAGE>
buildings and communities. Skyway Partners is a network edge integrated digital
services provider for multiple dwelling units in the U.S. Skyway Partners'
services include high-speed data and Internet access, principally utilizing
Digital Subscriber Line technology, local dial tone, long-distance telephone,
principally utilizing Voice Over Internet Protocol technology, digital
television and audio content via satellite and cable, and content-based services
such as portals and e-commerce. Skyway Partners delivers these services to its
subscribers under its trade name of "HotPipe.net". HotPipe.net's multiple
dwelling unit building-centric service approach consists of developing
customized in-building broadband networks that Skyway Partners designs, installs
and operates, and providing focused sales and customer services. By managing
the initial provisioning and ongoing delivery of complete customer care and
convenient single statement billing, HotPipe.net alleviates its customer's need
to interface with multiple communications providers, and is able to maximize
subscriber retention.
NorthStar's comprehensive billing and customer care solutions created
specifically for providers of broadband services will support Skyway Partners'
billing and customer care needs. NorthStar's back-office solutions include
customer service, billing and collection, payment processing, marketing support
and dispatch. Skyway Partners will bring an additional subscriber base of 2,500
to NorthStar. Skyway Partners plans to continue its expansion through the
development of new systems, and will substantially increase its subscriber base
over the next 18 months. NorthStar currently has more than 40,000 subscribers
that are currently under contract through numerous telecommunications companies.
CALLDIRECT
CallDirect's e-commerce Web site is accessible directly through
www.CallDirect.com or through www.VirtualSellers.com. CallDirect completed and
mailed its latest catalogue in November, 2000. A number of new wireless
products have been added to the products in the catalogue. CallDirect is
expecting an increase in its revenues for the final quarter of this fiscal year.
In January, 2001, subsequent to the third fiscal quarter, CallDirect purchased a
business mailing list and mailed approximately 35,000 of its product catalogues
in an effort to expand its customer base. The quality of this mailing list
included such reputable businesses as Southam's Small Business, Daytimers of
Canada, Canadian Travel Press, Canadian Bankers & Stockbrokers, and
Informationweek. CallDirect expects an increase in revenue and an expansion of
its customer base as a direct result of the mailing.
TAME
We have implemented significant upgrades and improvements to the internal
structure of TAME which are currently in final testing. We initially focused on
the Linux/Unix versions of the TAME software, although specific improvements
were also added to the Windows NT operating system as well. We have now
implemented a server version of TAME that executes a fast CGI process on an
Apache server or can improve the SmartHeap (Microquill) libraries so that we may
offer high performance SMP (Semetrical Multi-Processor) support without the
typical memory contention problems associated with the standard libraries. In
conjunction with this work, a general enhancement of the TAME software is
allowing us to open up our architecture by
<PAGE>
modularizing the system. These developments provide the stage for our current
XML applications and subsequent developments.
GOLDPAINT INTERNET SERVICES INC.
We completed the purchase of all the assets and business of GoldPaint Internet
Services, Inc., doing business as ClickShop, on November 21, 2000, and we have
continued the operations of ClickShop. ClickShop continues to develop and
market e-commerce applications using "Tame Lite" and specializing in developing
turnkey solutions such as the "Web Wizard". This application is a browser-based
tool that employs user-friendly menu wizards to allow rapid creation of online
stores or e-commerce enabled Web sites. This allows the average person to build
and maintain a storefront on the Web in a matter of minutes. The "Web Wizard"
technology is required by ISP's as a solution to enhance their existing products
and services. We expect to start selling a full-blown version for approximately
$10,000 by the beginning of the next year.
ClickShop will also expand its existing client base of 350 customers by
contacting new and old clients by phone and offering both ClickShop's and
VirtualSellers' new products and services. We feel we now have a full range of
products and services to offer, such as "Tame Lite", the "Web Wizard",
transaction processing, billing and collections, and new software solutions.
This effort will improve customer relations and give us the opportunity to
upsell new products and services.
ClickShop will continue to improve and update the clickshop.com Web site as a
marketing tool for the TAME software and related services. We believe that
using the ClickShop Web site is the best overall marketing strategy for the TAME
family of software products and services. It can easily compete with the
handful of programming languages already out there and can give us a strong and
credible presence on the Internet, which will help bring the TAME language into
the mainstream.
ClickShop's marketing plan includes bundling NorthStar's e-commerce solutions,
which will dramatically cut an ISP's costs in those areas and allow an ISP to
focus its efforts on growing its customer base. ClickShop can now offer
software solutions to ISP's, which are seeking e-commerce solutions for their
ever-growing customer base. As ClickShop expands into the marketplace, new
transaction revenue will be generated from the sales of its products, along with
leads for VirtualSellers.com's traditional transaction processing business.
RESULTS OF OPERATIONS
Revenues for the three month period ended November 30, 2000 ("Quarter 2000") of
$886,751, increased $666,521, an increase of 303% from the revenues of $220,230
for the three month period ended November 30, 1999 ("Quarter 1999"). Revenues
for the nine months ended November 30, 2000 ("Nine Months 2000") of $2,115,254
increased $1,568,276, an increase of 287% from the revenues of $546,978 for the
nine months ended November 30, 1999 ("Nine Months 1999"). The increase in
revenues in the quarter and nine months to date is due primarily to increased
revenues in our e-commerce division, Virtualsellers.com.
<PAGE>
At the Call Center division, Quarter 2000 revenues increased to $230,112
compared to $91,416 for Quarter 1999 while the Nine Months 2000 revenues
increased to $475,004 compared to $222,444 for Nine Months 1999. The Call
Center generates revenue providing transaction processing and backroom services
including inbound and outbound telemarketing, customer and technical support,
customer order entry, centralized billing and collection, order fulfilment,
customer dispatch functions and other related services. The increase in
revenues from 1999 is due to an increase in the number of cable service
customers which has been partially offset by lower monthly fees which have
declined due to competitive pressures.
We acquired CallDirect effective May 15, 1999. Revenues for Quarter 2000 of
$86,394 compare to revenues for Quarter 1999 of $43,860 while Nine Month 2000
revenues increased to $251,755 compared to $162,838 for Nine Months 1999.
CallDirect generates revenue primarily from the resale of telephone related
equipment and secondly, from the resale of products such as multimedia,
entertainment, travel, security and computer accessories for offices and
residences. The increase in revenues for Nine Months 2000 is due to nine months
of sales in 2000 compared to only six months of sales in Nine Months 1999. The
increase in revenues for Quarter 2000 is due to the timing of the issuance of a
new catalogue which occurred in the third quarter in fiscal 2001 versus the
second quarter in fiscal 2000.
We acquired Virtualsellers.com effective April 23, 1999, Sullivan Park effective
June 1, 2000 and Gold Paint effective November 19, 2000. These three business
form our e-commerce business segment. Revenues for Quarter 2000 of $570,245
compare to revenues for Quarter 1999 of $84,954, while revenues for Nine Months
2000 increased to $1,388,495 compared to $161,696 for Nine Months 1999. The
e-commerce segment generates revenue from the e-commerce transaction processing
and Web site development, maintenance and hosting services to businesses. The
increase in revenues for Nine Months 2000 and Quarter 2000 is due to an increase
in the investments made in fiscal 2000 including an increase in the number of
our employees and an increase in infrastructure costs. In addition, revenues
for Nine Months 1999 included seven months of revenues whereas Nine Months 2000
included nine months due to the acquisition occurring in 1999.
Direct product costs in Quarter 2000 were $167,863 compared to direct costs of
$85,277 in Quarter 1999, a increase of $82,586 while direct product costs for
Nine Months 2000 increased to $456,856 from $217,537 in Nine Months 1999. The
increase is due to an increase in product sales at the CallDirect division in
the third quarter as discussed above and by an increase in mall sales at the
e-commerce division. The Call Center division primarily sells services and thus
has no direct product costs.
Selling, general and administrative expenses for Quarter 2000 increased to
$1,835,037 from $1,131,576 in Quarter 1999, an increase of $703,461 or 62%.
Selling, general and administrative expenses for the Nine Months 2000 increased
to $5,585,581 from $2,691,969 for the Nine Months 1999, an increase of
$1,017,982 or 1,265%. Selling, general and administrative expenses at the Call
Center division for Nine Months 2000 increased to $547,306 from $357,453. The
increase is due to an increase in the number of the Call Center's customers
which increased the number of employees required to service the customers and
related costs such as telephone, rent and office costs. Selling, general and
administrative expenses at CallDirect for the Nine Months 2000 were $155,542,
consisting primarily of payroll costs, office rent,
<PAGE>
telephone, printing and postage and delivery expenses. Selling general and
administrative expenses at the e-commerce division were $2,249,462, consisting
primarily of payroll costs, office rent, telephone and Internet fees. Corporate
general and administrative expenses for Nine Months 2000 increased to $2,258,151
from $2,027,534. The increase is due primarily to an increase in cash expenses
including compensation paid to officers and directors, marketing, travel and
entertainment expenses and other administrative expenses.
Depreciation and amortization for Quarter 2000 increased to $456,084 from
$44,423 in Quarter 1999, an increase of $411,661 or 927%. Depreciation and
amortization for Nine Months 2000 increased to $1,098,433 from $80,451 for Nine
Months 1999, an increase of $1,017,982 or 1,265%. The increase in Quarter 2000
and Nine Months 2000 is due primarily to additions of computer hardware and
software at the e-commerce division since acquisition and the amortization of
goodwill acquired on the acquisition of Sullivan Park in June, 2000.
Other income (expense) for Quarter 2000 decreased to income of $68,852 compared
to income of $9,428 in Quarter 1999, a decrease of $78,280. Other income
(expense) for Nine Months 2000 decreased to income of $38,137 from income of
$1,276,262 for Nine Months 1999, a decrease of $1,314,399. The decrease is due
to unusual items recorded in Nine Months 1999 - $975,000 received on the
"Suncom" trade name and $146,000 received from conditional sales proceeds on the
sale of our former subsidiaries, which were not reported in the Nine Months
2000.
For Quarter 2000, we recognized a loss of $1,641,085 or $0.01 per share,
compared to a loss of $1,031,618 or $0.01 per share for the Quarter 1999. For
Nine Months 2000, we recognized a loss of $5,063,753 or $0.04 per share,
compared to a loss of $1,166,717 or $0.01 per share for Nine Months 1999. The
increase in the losses is due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
As at November 30, 2000, we have net working capital of $1,072,279 and capital
assets of $4,902,352 for net equity of $5,974,631. We do not have any long-term
debt nor other long-term obligations.
During Nine Months 2000, we used $3,324,784 in cash to fund operations, used
$949,916 in cash to fund investing activities which consisted primarily of
capital asset and received $4,900,800 in cash from financing activities for a
net increase in cash of $626,095 additions at our e-commerce division.
During the three months ended November 30, 2000, we used $969,731 in cash to
fund operations, used $76,320 in cash to fund investing activities which
consisted primarily of capital asset additions at Virtualsellers.com and
received $1,042,450 in cash from financing activities for a net decrease in cash
of $3,601.00. Cash at November 30, 2000 was $1,073,939.
We have historically funded operations through the issuance of common shares in
our capital or through the issuance of convertible debentures which are
convertible into common shares in our capital. We expect to fund future
operations and investments through the issuance of common shares.
<PAGE>
We estimate that our cash requirements for capital asset additions for the
remainder of fiscal 2001 will be less than $200,000. We will continue to search
for appropriate acquisitions to compliment its existing operations. Where
possible, we will pay for acquisitions through the issuance of common shares in
our capital.
Effective November 21, 2000, we acquired GoldPaint Internet Services Inc. doing
business as ClickShop. We intend to continue the operations of ClickShop,
including the development and marketing of e-commerce applications using "Tame
Light" and the development of turnkey solutions such as the "Web Wizard". In
addition, ClickShop will also expand its existing client base. As compensation
for the acquisition of GoldPaint, we are committed to issue an aggregate of
200,000 common shares valued at $188,000 to finalize the acquisition.
Effective June 1, 2000, we acquired all the assets and business of Sullivan
Park, LLC. which comprised of an internet services business involved in the
development of on-line stores in California. We issued 200,000 common shares
valued at $375,000 to the former owner of Sullivan Park in conjunction with an
employment agreement entered into as part of the acquisition and will issue
common shares at a market value of $2,700,000 for total proceeds of $3,075,000.
Goodwill of $3,000,000 was recorded on the acquisition and is being amortized
over the years.
FORWARD LOOKING STATEMENTS
----------------------------
Much of the information included in this Quarterly Report on Form 10-Q includes
or is based upon estimates, projections or other "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and are subject to the "safe harbor"
created by those sections. When used in this document, the words "expects",
"anticipates", "intends", "plans" and similar expressions are intended to
identify other forward-looking statements. While such forward-looking
statements, and any assumptions upon which they are based, are made in good
faith and reflect our current judgment regarding the direction of our business,
actual results will almost always vary, sometimes materially, from any
estimates, predictions, projections, assumptions, or other future performance
suggested herein. Those forward-looking statements also involve certain risks
and uncertainties. Factors, risks and uncertainties that could cause or
contribute to such differences include those specific risks and uncertainties
discussed below and those discussed in our Form 10-K Annual Report for the year
ended February 29, 2000. 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 our ability to generate revenue and on our 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 may be affected by our ability
to develop and implement an acceptable license agreement by that time. In
addition, the success of TAME will depend on our ability to protect the
intellectual property rights associated with TAME. While we have applied for
patent protection of TAME, no such protection has yet been obtained or
<PAGE>
granted. There is no assurance that such registration or protection will be
available, and therefore we may have little or no protection for our
intellectual property assets, comprising a significant asset.
Our TAME software and our other intellectual property is important to our
continued operations and success. Our efforts to protect this intellectual
property may not be adequate. Unauthorized parties may infringe upon or
misappropriate our TAME software. In the future, litigation may be necessary to
protect and enforce our intellectual property rights or to determine the
validity and scope of our intellectual property, which could be time consuming
and costly. We 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 our attention from our continued
operations. If we become liable to any third parties for such claims, we could
be required to pay a substantial damage award or to develop comparable
non-infringing intellectual property and systems.
The markets in which we compete are characterized by rapidly changing
technology, evolving technological standards in the industry, frequent new Web
sites, services and products and changing consumer demands. Our future success
will depend on our ability to adapt to these changes and to continuously improve
the performance, features and reliability of our service as compared to
competitive services and products and the evolving demands of the marketplace,
which we may not be able to do. In addition, the widespread adoption of new
Internet, networking or telecommunications technologies or other technological
changes could necessitate that we incur substantial expenditures to modify or
adapt our services or infrastructure, which might impact our ability to become
or remain profitable.
We anticipate that it will be necessary to continue to invest in and continue to
develop the TAME software on a timely basis to maintain our competitiveness.
Significant capital expenditures may be required to keep our technology up to
date. Investments in technology and future investments in upgrades and
enhancements to software may not necessarily maintain our competitiveness. Our
business is highly dependent upon our computer and software systems, and the
temporary or permanent loss of such equipment or systems, through casualty,
operating malfunction or otherwise, could have a materially adverse effect upon
us.
In connection with the continued expansion and success of the operations of
VirtualSellers.com, there are a number of factors which could have an adverse
effect on our ability to generate revenue and continue such operations.
Continued use of the Internet as a way of carrying on business is crucial to the
continued success of VirtualSellers.com. Our success is dependent upon
achieving significant market acceptance of our Web site, products and services
by businesses who want to retain their products and services over the Internet.
We 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
<PAGE>
reasons. Failure to achieve and maintain market acceptance of
VirtualSellers.com would seriously harm our 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 our ability to generate revenue and on our 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.
ITEM 3 Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
To our knowledge, no lawsuits were commenced against us during the quarter ended
November 30, 2000, nor did we commence any lawsuits during the same period.
ITEM 2 Changes in Securities and Use of Proceedings
Recent Sales of Unregistered Securities
During the quarter ended November 30, 2000, we issued the following securities,
none of which were registered under the Securities Act of 1933 (the "1933 Act"):
On September 25, 2000, we entered into Stock Option Agreements with two of our
directors, Mel Baillie and Raymond Mol, pursuant to which we granted an
aggregate of 300,000 options to purchase common shares in our capital at an
exercise price of $0.71 per share, exercisable until September 25, 2010. The
options were granted in an offshore transaction relying on Section 4(2) and
Regulation S promulgated under the 1933 Act.
On October 17, 2000, we issued an aggregate of 7,035 common shares at a deemed
price of CDN$0.50 per common share in an offshore transaction relying on
Regulation S promulgated under the 1933 Act to a former creditor of CallDirect
Enterprises, Inc., which indebtedness was assumed and settled by us as part of
our earlier acquisition of certain assets of CallDirect Enterprises, Inc.
On October 23, 2000, we entered into a Stock Option Agreement with one of our
employees, pursuant to which he was granted options to purchase 1,000,000 common
shares in our capital at an exercise price of $0.56 per share, exercisable until
October 23, 2010. The options were granted to the employee in a transaction
that was private in nature, in reliance on Section 4(2) and/or Rule 506 of
Regulation D promulgated under the 1933 Act.
<PAGE>
On November 1, 2000, we entered into Stock Option Agreements with the following
directors/employees:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
TO PURCHASE COMMON
NAME OF OPTIONEE SHARES EXERCISE PRICE EXPIRATION DATE
----------------- ------------------ --------------- ----------------
<S> <C> <C> <C>
John Urbanowitz
(employee). . . . 25,000 $ 0.56 November 1, 2010
------------------ --------------- ----------------
Mel Baillie
(director). . . . 200,000 $ 0.56 November 1, 2010
------------------ --------------- ----------------
Grayson Hand
(director). . . . 200,000 $ 0.56 November 1, 2010
------------------ --------------- ----------------
Raymond Mol
(director). . . . 200,000 $ 0.56 November 1, 2010
------------------ --------------- ----------------
Lou Severson
(employee). . . . 25,000 $ 0.56 November 1, 2010
------------------ --------------- ----------------
TOTAL OPTIONS . . 650,000
----------------- ------------------
</TABLE>
The options granted to Mel Baillie, Grayson Hand and Raymond Mol were granted in
an offshore transaction relying on Section 4(2) and Regulation S promulgated
under the 1933 Act. The options granted to John Urbanowitz and Lou Severson
were granted to these employees in a transaction that was private in nature, in
reliance on Section 4(2) and/or Rule 506 of Regulation D promulgated under the
1933 Act.
On November 8, 2000, pursuant to a Warrant issued to VME Corp. as of November
16, 1999, we issued an aggregate of 88,181 common shares to VME Corp., relying
on Section 4(2) and/or Rule 506 of Regulation D promulgated under the 1933 Act.
The Warrant was issued to VME Corp. pursuant to a Consulting Agreement dated
November 16, 1999.
ITEM 3 Defaults Upon Senior Securities
Not applicable.
ITEM 4 Submission of Matters To A Vote Of Security Holders
None.
ITEM 5 Other Information
None.
<PAGE>
ITEM 6 Exhibits and Reports on Form 8-K
Reports on Form 8-K
On December 6, 2000, we filed a Form 8-K Current Report with respect to the
acquisition on November 21, 2000 of assets owned by GoldPaint, pursuant to an
Asset Purchase Agreement Under the terms of the Asset Purchase Agreement, we
agreed to pay to GoldPaint 200,000 common shares in our capital stock, issued at
an agreed deemed value of $0.56 per share, for total proceeds of $112,000.
Exhibits
Exhibit
Number Exhibit Title
------ --------------
3 Articles of Incorporation and Bylaws
(The following exhibits are incorporated by reference into this Form 10-Q
from reports previously filed by with the Securities and Exchange
Commission)
3.1 Certificate of Continuance, dated January 11, 1991
3.2 Certificate of Amendment, dated June 14, 1995
3.3 Certificate of Amendment, dated September 14, 1995
3.4 Certificate of Amendment, dated December 22, 1995
3.5 Certificate of Amendment, dated March 23, 1999
3.6 Certificate of Amendment, dated May 31, 1999
3.7 Certificate of Amendment, dated July 18, 1997
3.8 By-laws of the Company
10 Material Contracts
10.1 Asset Purchase Agreement between Virtualsellers.com, Inc. and
GoldPaint Internet Services Inc., dated August 30, 2000
(incorporated by reference from the Form 8-K filed on December 6, 2000)
10.2 Intellectual Property Assignment between Virtualsellers.com, Inc. and
GoldPaint Internet Services, Inc., dated October 1, 2000
(incorporated by reference from the Form 8-K filed on December 6, 2000)
10.3 Assignment and Assumption Agreement between Virtualsellers.com, Inc.
and GoldPaint Internet Services, Inc., dated October 1, 2000
(incorporated by reference from the Form 8-K filed on December 6, 2000)
<PAGE>
10.4 Consulting Agreement between Virtualsellers.com, Inc. and VME Corp.
dated November 16, 1999
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act,
Virtualsellers.com, Inc. has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
VIRTUALSELLERS.COM, INC.
By: /s/ Dennis Sinclair
Dennis Sinclair, President/Director
Date: January 15, 2001
By: /s/ Ray Mol
Ray Mol/Director
Date: January 15, 2001
By: /s/ Mel Baillie
Mel Baillie/Director
Date: January 15, 2001
By: /s/ Grayson Hand
Grayson Hand/Director
Date: January 15, 2001
By: /s/ Pierre Prefontaine
Pierre Prefontaine/Director
Date: January 15, 2001
By: /s/ Kevin Wielgus
Kevin Wielgus/Secretary
Date: January 15, 2001
