UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORTS OF SMALL BUSINESS ISSUERS
[X] Quarterly report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2001
[ ] Transition report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number
E-AUCTION GLOBAL TRADING INC.
-----------------------------
(Exact name of small business issuer as specified in its charter)
Nevada
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(State or other jurisdiction)
Pending
-------
(IRS Employer of incorporation or organization Identification No.)
220 King Street West, Suite 200 Toronto, Ontario, M5H 1K4 Canada.
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(Address of principal executive offices)
416-214-1587
(Issuer's telephone number)
Check whether the issuer:
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 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.
Yes...X...No........
Applicable only to corporate issuers:
As of May 14, 2001 there were 66,350,915 shares of the Issuer's common stock
outstanding.
Transitional Small Business Disclosure Format (check one);
Yes......No....X....
E-AUCTION GLOBAL TRADING INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements 3
Consolidated Balance Sheet at March 31, 2001 and December 31, 2000 4
Consolidated Statements of Operations, Deficit and Comprehensive Loss for the three 5
months ended March 31, 2001 and 2000
Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Managements' Discussion and Analysis of Financial Condition and Results of Operations 12
Part II. Other Information 14
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
ITEM 1. Financial Statements
E-AUCTION GLOBAL TRADING INC.
(a Nevada Corporation)
Consolidated Financial Statements
MARCH 31, 2001
(expressed in U.S. dollars)
E-AUCTION GLOBAL TRADING INC.
CONSOLIDATED BALANCE SHEET
AS AT MARCH 31, 2001 AND DECEMBER 31, 2000
(expressed in U.S. dollars)
MARCH 31, DECEMBER 31,
2001 2000
$ $
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents 4,039,187 6,205,169
Accounts receivable 1,832,823 1,600,871
Inventory 648,493 608,537
Prepaid expenses 130,574 121,819
-----------------------------------------
6,651,077 8,536,396
INVESTMENT 692,866 514,835
FIXED ASSETS 1,957,829 1,732,521
ACQUIRED WORKFORCE 153,351 161,351
ACQUIRED CORE TECHNOLOGY 1,156,620 1,226,920
GOODWILL 8,705,050 9,239,748
-----------------------------------------
19,316,793 21,411,771
-----------------------------------------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness 379,499 423,432
Accounts payable and accrued liabilities 2,670,120 2,703,079
Due to related parties 843,891 944,728
Deferred revenue 1,454,906 1,323,874
Current portion of long-term debt 231,032 255,571
-----------------------------------------
5,579,448 5,650,684
DUE TO RELATED PARTIES 375,063 375,063
LONG-TERM DEBT 429,240 392,718
NON-CONTROLLING INTEREST 3,531 3,742
-----------------------------------------
6,387,282 6,422,207
-----------------------------------------
MANDATORILY REDEEMABLE SHARES OF COMMON STOCK 4,574,364 4,574,364
-----------------------------------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL
62,714,551 (December 31, 2000 - 62,714,551) shares of common stock - $0.001 par value 62,715 62,715
ADDITIONAL PAID-IN CAPITAL 19,047,204 18,735,673
ACCUMULATED OTHER COMPREHENSIVE LOSS (60,236) (124,822)
DEFICIT (10,694,536) (8,258,366)
-----------------------------------------
8,355,147 10,415,200
-----------------------------------------
19,316,793 21,411,771
-----------------------------------------
CONTINGENCIES (note 10)
GOING CONCERN (note 1)
The accompanying notes form an integral part of these financial statements.
4
E-AUCTION GLOBAL TRADING INC.
CONSOLIDATED STATEMENT OF OPERATIONS, DEFICIT AND COMPREHENSIVE LOSS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
(expressed in U.S. dollars)
2001 2000
$ $
(Unaudited)
REVENUE 1,966,175 1,028,836
COST OF GOODS SOLD 1,001,509 717,688
-----------------------------------------
964,666 311,148
-----------------------------------------
EXPENSES
Selling, general and administrative 2,518,766 728,646
Depreciation and amortization 737,832 384,332
Research and development costs 415,265 -
-----------------------------------------
3,671,863 1,112,978
-----------------------------------------
LOSS BEFORE THE UNDER-NOTED (2,707,197) (801,830)
SHARE OF INCOME OF EQUITY INVESTMENT 178,031 -
INTEREST INCOME 94,843 2,871
-----------------------------------------
LOSS BEFORE INCOME TAXES AND NON-CONTROLLING INTEREST (2,434,323) (798,959)
INCOME TAX EXPENSES (1,847) (2,944)
NON-CONTROLLING INTEREST - 41,053
-----------------------------------------
LOSS FOR THE PERIOD (2,436,170) (760,850)
ACCRETION OF MANDATORILY REDEEMABLE COMMON STOCK TO
REDEMPTION VALUE - (234,500)
-----------------------------------------
LOSS AVAILABLE TO COMMON SHAREHOLDERS (2,436,170) (995,350)
DEFICIT - BEGINNING OF PERIOD (8,258,366) (2,654,432)
-----------------------------------------
DEFICIT - END OF PERIOD (10,694,536) (3,649,782)
-----------------------------------------
BASIC AND DILUTED LOSS PER SHARE (0.04) (0.01)
-----------------------------------------
LOSS FOR THE PERIOD (2,436,170) (760,850)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS AND OTHER COMPREHENSIVE LOSS 64,586 -
-----------------------------------------
COMPREHENSIVE LOSS (2,371,584) (760,850)
-----------------------------------------
SHARES USED IN COMPUTING BASIC AND FULLY DILUTED EARNINGS PER SHARE 62,714,551 55,620,226
The accompanying notes form an integral part of these financial statements.
5
E-AUCTION GLOBAL TRADING INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
(expressed in U.S. dollars)
2001 2000
$ $
(Unaudited)
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Loss for the period (2,436,170) (760,850)
Add: Items not affecting cash
Depreciation and amortization 737,832 384,332
Foreign exchange 60,210 -
Stock based compensation 311,531 -
Non-controlling interest - (41,053)
Share of income of equity investment (178,031) -
Net change in non-cash working capital (124,494) (554,336)
-----------------------------------------
(1,629,122) (971,907)
-----------------------------------------
FINANCING ACTIVITIES
Bank indebtedness (16,524) -
Due to related parties (100,837) (266,140)
Issuance of share capital - 2,461,328
Long-term debt 49,570 46,891
Cash contribution of minority investor - 918,499
Non-controlling interest (211) -
-----------------------------------------
(68,002) 3,160,578
-----------------------------------------
INVESTING ACTIVITIES
Purchase of fixed assets (441,214) (93,962)
Purchase of businesses - net of cash acquired - (2,687,109)
-----------------------------------------
(441,214) (2,781,071)
-----------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD (2,138,338) (592,400)
EFFECT OF FOREIGN EXCHANGE ON CASH (27,644) (29,378)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 6,205,169 4,179,394
-----------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD 4,039,187 3,557,616
-----------------------------------------
The accompanying notes form an integral part of these financial statements.
6
E-AUCTION GLOBAL TRADING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(expressed in U.S. dollars)
1. NATURE OF BUSINESS AND GOING CONCERN
The company is currently developing e-business services for perishable commodity
marketplaces primarily in Europe. In addition, through its newly acquired
subsidiaries Schelfhout Computer Systemen N.V., Kwatrobox B.V. and I-Three Inc.
the company is engaged in the installation and maintenance of auction clock and
cooling systems for traditional auction halls and the development of software
for auctions, including Internet-based auction systems.
These financial statements are prepared on a going concern basis which assumes
that the company will realize its assets and discharge its liabilities in the
normal course of business. The company incurred an operating loss of $2,436,170
for the three months ended March 31, 2001 (2000 - $760,850). In addition,
projected cash flows from the company's current operations may not be sufficient
to finance the company's working capital requirements over the next year. These
circumstances lend significant doubt as to the ability of the company to
continue in the normal course of operations.
In recognition of these concerns, management are considering various revenue and
cost management alternatives and may consider raising additional cash through
external financing activities. It is not possible at this time to predict with
any assurance the success of these initiatives.
The ability of the company to continue as a going concern is dependent upon
effective implementation of revenue and cost management alternatives and the
success of potential future external financing initiatives. Should the company
be unable to continue as a going concern, assets and liabilities would require
restatement on a liquidation basis, which could differ materially from the going
concern basis.
2. UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited consolidated balance sheet as at March 31, 2001 and the unaudited
consolidated statements of operations and deficit and comprehensive loss and
cash flows for the three months ended March 31, 2001 and 2000 have been prepared
in the opinion of management on the same basis as the audited consolidated
financial statements as at December 31, 2000 and include all adjustments
necessary for the fair statement of the results of the interim periods. All
adjustments reflected in the financial statements are of a normal recurring
nature. The data disclosed in the notes to the financial statements for this
period is also unaudited. Results for the three months ended March 31, 2001 are
not necessarily indicative of the results to be expected for the full year.
3. ACCOUNTING POLICY
RESEARCH AND DEVELOPMENT
Research and development costs are charged as expenses until technical
feasibility has been established.
7
E-AUCTION GLOBAL TRADING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(expressed in U.S. dollars)
4. PRO FORMA RESULTS
The company acquired Kwatrobox B.V. and I-Three Inc. in the fourth quarter of
2000.
The following table sets forth the pro forma consolidated results for the three
months ended March 31, 2001 and 2000 and net assets at March 31, 2001 as if
Kwatrobox B.V. and I-Three Inc. had been acquired on January 1, 2000:
2001 2000
$ $
Revenue 1,966,175 2,026,032
Loss (2,436,170) (4,284,869)
Loss per share 0.04 0.06
Net assets 8,355,147 7,187,493
5. SHARE CAPITAL
Authorized
250,000,000 shares of common stock with a par value of $0.001
ADDITIONAL
PAID IN
NUMBER AMOUNT CAPITAL TOTAL
OF SHARES $ $ $
Balance - December 31, 1999 39,820,000 39,820 (39,819) 1
Issued shares of common stock (i) 7,625,916 7,626 3,657,799 3,665,425
Issued on exchange of warrants (i) 8,965,899 8,966 4,300,528 4,309,494
Issued as commission (i) 327,878 328 157,268 157,596
Issued as a financing fee (ii) 197,219 197 999,803 1,000,000
Acquisition of Kwatrobox 1,250,000 1,250 1,308,750 1,310,000
Private placement (iii) 4,072,639 4,073 7,410,927 7,415,000
Acquisition of I-Three Inc. 455,000 455 217,945 218,400
Dilution gain - - 708,003 708,003
Stock-based compensation expense - - 14,469 14,469
--------------------------------------------------------------
Balance - December 31, 2000 62,714,551 62,715 18,735,673 18,798,388
Stock-based compensation - - 311,531 311,531
--------------------------------------------------------------
Balance - March 31, 2001 62,714,551 62,715 19,047,204 19,109,919
--------------------------------------------------------------
i.) On January 7, 2000, through a private placement, the company issued
7,625,916 shares of common stock and 8,965,899 share purchase warrants,
net of cash costs of $163,391 and an additional 327,878 shares of common
stock issued as a commission to an agent to the transaction. The company
raised net cash proceeds of $4,319,557 of which $1,858,229 was received in
1999. In addition the company issued shares to five companies that
collectively settled the company's debt with a face value of $3,812,958.
The 8,965,899 share purchase warrants were immediately exchanged for
shares of common stock on a basis of one common share for each share
purchase warrant. The investors included a related party and four parties
related to this party through common shareholdings.
ii.) In consideration for a loan of $1 million provided on August 13, 1999 by
Millennium Investors Inc. to e-Auction, Millennium received 197,219 shares
of common stock of the company with a fair value of $1,000,000 as a
financing and interest fee. These shares were issued in January 2000.
iii.) On June 22, 2000, the company completed a private placement of 4,072,639
shares at $1.842 per share of common stock for proceeds of $7,415,000, net
of costs of $85,000.
8
E-AUCTION GLOBAL TRADING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(expressed in U.S. dollars)
STOCK OPTIONS
On March 1, 1999, as amended on March 13, 2000, the company adopted a stock
option plan that reserved 9,000,000 shares. The options have a term of ten
years, and the exercise price is set at the estimated fair market value at the
date of grant. There were no options issued prior to March 1, 1999. No
additional options have been granted in the three months period ended March 31,
2001. The following table summarizes the continuity of stock options:
OPTIONS FOR WEIGHTED AVERAGE
EXERCISE PRICE
SHARES OF COMMON PER SHARE
STOCK $
Balance - December 31, 1999 4,300,000 0.90
Cancelled (845,000) (0.01)
Cancelled (3,050,000) (0.85)
Cancelled (250,000) (5.00)
Issued - December 30, 2000 8,058,000 0.35
---------------------
Balance - December 31, 2000 8,213,000 0.34
Cancelled (20,000) (0.35)
---------------------
Balance - March 31, 2001 8,193,000 0.34
---------------------
6. CHANGE IN NON-CASH WORKING CAPITAL
3 MONTHS ENDED MARCH 31,
------------------------------------------
2001 2000
$ $
Accounts receivable (325,859) (363,945)
Inventory (72,789) (58,237)
Prepaid expenses (15,800) (4,760)
Accounts payable and accrued liabilities 94,822 (50,584)
Deferred revenue 195,132 (76,810)
------------------------------------------
(124,494) (554,336)
------------------------------------------
7. SEGMENTED INFORMATION
The company operates in one operating segment, this being the installation
of auction clocks and cooling systems.
GEOGRAPHIC INFORMATION
3 MONTHS ENDED MARCH 31,
------------------------------------------
2001 2000
$ $
Revenue
Canada 76,571 -
Belgium 882,119 1,028,836
9
E-AUCTION GLOBAL TRADING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(expressed in U.S. dollars)
Netherlands 1,007,485 -
------------------------------------------
1,966,175 1,028,836
------------------------------------------
MARCH 31, DECEMBER 31,
2001 2000
$ $
Long-lived assets
Canada 3,258,869 1,147,883
Belgium 5,937,649 7,658,629
Netherlands 2,776,331 3,554,029
------------------------------------------
11,972,849 12,360,541
------------------------------------------
8. LOSS PER COMMON SHARE
The weighted average number of shares of common stock used for calculating the
basic loss per share is 62,714,551 (2000 - 55,620,226). Fully diluted loss per
share is the same as the basic loss per share for the period ended March 31,
2001 and 2000. Loss per share is determined based on the loss available to
common shareholders as presented in the statement of operations, deficit and
comprehensive loss.
The 8,193,000 outstanding stock options and 200,000 contingently issuable shares
were not included in the computation of earnings per share as they are
anti-dilutive for the periods presented.
9. SUPPLEMENTAL NON-CASH INFORMATION
During the three months ended March 31, 2000, the company issued 3,636,364
shares of mandatorily redeemable common stock with a fair value of $3,636,364 in
connection with the acquisition of Schelfhout Computer Systemen N.V.
In January 2000, the company issued 197,219 shares of common stock with a fair
value of $1,000,000 to Millennium Inc. as payment of a financing and interest
fee.
The company issued 7,625,916 shares of common stock in January 2000, for which
the proceeds were paid to various creditors, and cash was not received by the
company. Debts settled totalled $3,812,958. The company also issued 327,878
shares with a fair value of $157,596 to pay commission on a private placement.
10
E-AUCTION GLOBAL TRADING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(expressed in U.S. dollars)
10. CONTINGENCIES
a) A competitor of SCS has filed three claims totalling approximately,
$150,000 (FRF1,000,000) against SCS during 2000. At present, there is
insufficient information available to ascertain the likelihood of these
claims being successful. Accordingly, no recognition of this contingent
loss has been made.
b) Certain customers of a subsidiary have filed claims totalling $70,000
against the subsidiary company. At present, there is insufficient
information available to ascertain the likelihood of these claims being
successful. Accordingly, no recognition of this contingent loss has
been made.
c) A shareholder derivative action was brought against the company, its
subsidiaries and two of its directors for claims totalling $100
million.
The action was stayed on November 29, 1999 as a result of the
plaintiff's filing for Chapter 11 Bankruptcy protection in the United
States Bankruptcy Court, therefore, there is no recognition of the
contingent loss in the period.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOUR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: ALL STATEMENTS, OTHER THAN
HISTORICAL FACTS, INCLUDED IN THIS REPORT REGARDING E-AUCTION'S BUSINESS
STRATEGY AND PLANS OF MANAGEMENT FOR FUTURE OPERATIONS ARE "FORWARD LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE STATEMENTS, WHICH
INCLUDE, BUT ARE NOT LIMITED TO, WORDS SUCH AS "EXPECT," "ANTICIPATE," "PLAN,"
"ESTIMATE," "PROJECT" AND "INTEND" ARE BASED ON MANAGEMENT'S BELIEFS AND
ASSUMPTIONS, AND ON INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT.
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE
CERTAIN KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE
THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE FACTORS INCLUDE, AMONG
OTHERS, E-AUCTION'S ABILITY TO SUCCESSFULLY INTEGRATE ANY PRIOR AND FUTURE
ACQUISITIONS; ANY UNCERTAINTIES RELATING TO BUSINESS AND ECONOMIC CONDITIONS IN
MARKETS IN WHICH E-AUCTION OPERATES; ANY UNCERTAINTIES RELATING TO CUSTOMER
PLANS AND COMMITMENTS; THE TIMELY DEVELOPMENT AND MARKET ACCEPTANCE OF
E-AUCTION'S PRODUCTS AND TECHNOLOGIES; AND THE HIGHLY COMPETITIVE ENVIRONMENT IN
WHICH E-AUCTION OPERATES. YOU ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS REPORT.
OVERVIEW
Please find enclosed the Consolidated Balance Sheet as at March 31, 2001 and
December 31, 2000 and the Consolidated Statement of Operations, Deficit and
Comprehensive Loss and Consolidated Statement of Cash Flows for the three months
ended March 31, 2001 and 2000 for e-Auction Global Trading Inc. (e-Auction).
e-Auction was originally incorporated in Nevada on January 8, 1998 under the
name Kazari International, Inc. On February 26, 1999, Kazari, e-Auction Global
Trading Inc. (Barbados) entered into a share exchange agreement. Pursuant to the
agreement, Kazari purchased e-Auction (Barbados) shares on a one for one basis.
Kazari had no viable business activities at the time of the share exchange
agreement. On June 10, 1999, Kazari amended its name to e-Auction Global Trading
Inc. During 2000, the company acquired Schelfhout Computer Systemen N.V.,
Kwatrobox B.V., and I-Three, Inc.
e-Auction currently has a wholly owned subsidiary, e-Auction (Barbados), which
in turn has one wholly owned subsidiary, Aucxis Corp. (Canada). The Company also
owns Aucxis Corp. (Belgium), directly, which in turn has one wholly owned
subsidiary, Schelfhout Computer Systemen N.V. ("Schelfhout"), a Belgium company.
Schelfhout has a 99% ownership interest in SDL Invest N.V. The Company also owns
V-Wholesaler B.V. and its wholly owned subsidiary, Kwatrobox B.V. and the
subsidiaries of Kwatrobox B.V., 100% of Automatiserngbureau Palm B.V., 80% of
Scoop Software B.V., 100% of Palm Veilingsystemen B.V., 100% of Nieaf Systems
B.V, and 100% of I-Three, Inc. The financial statements also include the
Company's 48.2% investment in Aucxis Ltd. (Australia), (formerly Hunter Capital
Limited) accounted for by the equity method.
SCHELFHOUT is a solutions provider for perishable commodity (fish, flower,
fruits and vegetables) auction houses. Over the past 17 years Schelfhout has
developed trading systems for numerous selling organizations all over the world.
Schelfhout provides the company with electronic trading hubs with billions of
dollars in annual turnover, including European trade of more than US $7 billion
dollars. Schelfhout delivers the tools to bring together supply and demand under
optimum conditions and thus create a better market situation. Schelfhout has
focused on two market sectors: (i) the computerization of auctions and (ii)
automation for the preservation of perishable products. As an ancillary to the
auction system, a modular graphic display panel was developed by Schelfhout in
1992 and added to the product range.
NIEAF SYSTEMS is a developer of electronic trading systems for perishable
commodity market places. The Company has over 100 years of experience developing
trading systems to the perishable commodity market and building relationships
within the industry. Based in the Netherlands, two of Holland's largest flower
auctions, Aalsmeer flower auction and Bloemenveiling Holland in Naaldwijk, are
customers of Nieaf Systems.
12
AUTOMATISERINGSBUREAU PALM B.V., with an installed base of over 400
applications, develops specialized enterprise resource planning (ERP) software
and IT Infrastructure Systems for Exporters and Wholesalers in the Dutch flower
industry. Palm Business Solutions (PBS) software allows its clients the ability
to manage the flow of produce from the auction floor to their respective
customers. PBS software divides, tracks, integrates, and supplies information to
client's back office systems. Palm integrates web-based logistic applications
and Internet trading systems to allow clients to have complete control over all
facets of their business.
I-THREE is an e-commerce solutions provider focused on delivering scaleable,
event driven applications for B2B enterprises that fully leverage the
opportunities of information gathering and sorting from the Internet. With
I-Three's existing line of B2B applications, and strategic partnerships with
industry leaders such as Sun-Netscape Alliance, TIBCO Software Inc. and Oracle,
we believe that I-Three will provide us with the capability to develop
internally our financial service and portal applications.
The company is developing e-business services for perishable commodity
marketplaces primarily in Europe. In addition, through its subsidiaries
Schelfhout Computer Systemen N.V., Kwatrobox B.V. and I-Three Inc. the company
is engaged in the installation and maintenance of auction clock and cooling
systems for traditional auction halls and the development of software for
auctions, including Internet-based auction systems.
The attached financial statements are prepared on a going concern basis which
assumes that the company will realize its assets and discharge its liabilities
in the normal course of business. The projected cash flows for the company are
based upon assumptions which include, amongst others, a revenue stream from
e-business. Should these projects be delayed then the present working capital
would not be sufficient for the company to continue in the normal course of
operations.
In recognition of these concerns, management are considering various revenue and
cost management alternatives and may consider raising additional cash through
external financing activities. It is not possible at this time to predict with
any assurance the success of these initiatives.
HIGHLIGHTS OF THE QUARTER
Revenue for the three months ended March 31, 2001 was $1,966,175 compared to
$1,028,836 in the similar period in 2000. Increases in revenue were driven by
the Company's acquisition of Kwatrobox in November 2000 as well as continued
growth in the installation of auction clock systems. On a proforma basis, if
Kwatrobox had been acquired on January 1, 2000, the revenues for the three
months ended March 31, 2000 would have been $2,026,032. Schelfhout derives its
revenues from the development and installation of clock systems, cooling
installations and associated maintenance contracts for auction halls. Kwatrobox
derives its revenues as a provider of electronic auction infrastructure and
enterprise resource planning software. The interim financial statements disclose
the proforma revenues, loss and net assets as if Kwatrobox had been included in
operations for the first quarter. We purchased Schelfhout and Kwatrobox
primarily in order to obtain access to their existing customer base, their core
technology and their employees.
Selling, general and administrative for the quarter was $2,518,766 compared to
$728,646 in the corresponding period in 2000. The increase is due, in large
part, to the inclusion of Kwatrobox and I-Three in the 2001 quarter. The company
has incurred research and development costs in the quarter of $415,265 in
developing new products for auction customers. There were no such activities in
the quarter ending March 31, 2000.
Net loss for the three months was $2,436,170 compared to a loss of $760,850 in
the corresponding period in 2000. Included in the loss was$178,000 share of
income from Aucxis (Australia). Much of this income related to the sale of
mining tenements. We do not anticipate this to be a recurring part of the
operations and expect that Aucxis (Australia) will incur losses over the coming
quarters. The increase in net loss for the three months is partly attributable
to an increase in depreciation and amortization to $715,000 and the charge for
stock based compensation of $326,000. On a proforma basis, if Kwatrobox had been
acquired on January 1, 2000, the net loss for the three months ended March 31,
2000 would have been $4,248,869.
13
LIQUIDITY AND CAPITAL RESOURCES
As at March 31, 2001, the company had cash of $4.0 million. During the quarter
ended March 31, 2001, cash decreased by $2.1 million. Of this, approximately
$1.6 million was to fund ongoing operations, and accounts receivable increased
by approximately $325,000, accounts payable and accrued liabilities increased by
approximately $94,000, inventory increased by approximately $73,000 and deferred
revenues decreased by approximately $195,000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in a shareholder derivative action, as detailed in
the Company's report on Form 10-KSB for the year ended December 31, 2000 filed
with the Securities and Exchange Commission.
Schelfhout Computer Systemen N.V. and another of the Company's subsidiaries are
defendants in actions, as also detailed in the Company's report on Form 10-KSB
for the year ended December 31, 2000 filed with the Securities and Exchange
Commission.
Except as described above, management does not have knowledge of any material
litigation pending, threatened or contemplated, or unsatisfied judgments against
the Company or its affiliates, or any proceedings in which the Company or its
affiliates is a party. Similarly, management is without knowledge as to any
legal actions pending or threatened or judgments entered against the Company's
executive officers and directors in their capacity as such, other than to the
extent such individuals are named in the above actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote of securities holders during
the three months ended March 31, 2001.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT # EXHIBIT NAME
Exhibit10.1 Addendum dated December 1, 2000 between Luc Schelfhout, Hilde
de Laet, e-Auction Belgium N.V. and the Issuer
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 2001.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: May 14, 2001 e-Auction Global Trading Inc. (Registrant)
By: /s/ David W.A. Hackett
-----------------------------
David W.A. Hackett,
Chief Financial Officer (duly authorized officer)
15