AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 2001
REGISTRATION NO.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ABIDON INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHAPTER)
DELAWARE 6510 36-4340367
---------------- ---------------------------- -------------------
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
---------------
5301 E. STATE STREET, SUITE 215
ROCKFORD, ILLINOIS 61108
(815) 226-8700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
HOWARD P. MILLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
5301 E. STATE STREET, SUITE 215
ROCKFORD, ILLINOIS 61108
(815) 226-8700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
============================================================================
PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED OFFERING PRICE (1) FEE
Common Stock, par value
$0.001 per share $90,000,000 $21,510.00
============================================================================
(1) Estimated pursuant to Rule 457(o) solely for the purpose of calculating
the amount of the registration fee.
---------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OF AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
ABIDON INC.
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OF THE COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING.
(PAR VALUE $.0001 PER SHARE)
[LOGO OF ABIDON]
Of the 4,500,000 shares of Common Stock offered hereby, all 4,500,000 shares
are being sold by Abidon Inc. Prior to the offering, there has been no
public market for the Common Stock of the Company. For factors considered
in determining the initial public offering price, see "Determination of
Offering Price."
SEE "RISK FACTORS" FOR MATERIAL RISKS RELEVANT TO AN INVESTMENT IN THE
COMMON STOCK.
The shares of Common Stock have not been approved for quotation on the
NASDAQ National Market.
These securities have not been approved or disapproved by the securities and
exchange commission or any state securities commission nor has the
securities and exchange commission or any state securities passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT COMPANY
Per Share $18.00 $1.26 $16.74
Total $81,000,000 $5,670,000.00 $75,330,000.00
1. After deducting estimated expenses of $6,300,000.00 payable by the
Company.
2. The Company has granted an additional 500,000 shares at the initial
public offering price per share solely to cover over-allotments and
proceeds to the Company will be $83,700,000, which includes the over-
allotment.
The shares offered hereby are offered severally by the Corporation, as
specified herein.
The Company is seeking an underwriter.
TABLE OF CONTENTS
Page
Prospectus Summary..................................... 1
Risk Factors........................................... 12
Use of Proceeds........................................ 30
Dividend Policy........................................ 31
Capitalization......................................... 32
Dilution............................................... 33
Selected Consolidated Financial Data................... 34
Selected Pro Forma Consolidated Financial Data......... 36
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 42
Business............................................... 45
Management............................................. 58
Certain Transactions................................... 61
Principal Stockholders................................. 62
Description of Capital Stock........................... 64
Shares Eligible for Future Sale........................ 65
Legal Matters.......................................... 66
Experts................................................ 66
Additional Information................................. 68
Index to Financial Statements.......................... F-1
Unaudited Financial Statement.......................... F-2
Underwriting.............................................. U-1
THROUGH AND INCLUDING JANUARY 14, 2002 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
============================================================================
SHARES
ABIDON, INC.
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
[LOGO]
The date of this Prospectus is December 20, 2001.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Pro Forma Financial Information and
Notes thereto appearing elsewhere in this Prospectus, including the
information under "Risk Factors."
THE COMPANY
The corporation, Abidon Inc., is in the business of leasing office and
retail space, operates Abidon Inc. dba East State Antiques Mall, Abidon
internet auction services, community page, stores, advertising on the site,
and offers many other services on the internet.
Abidon is an online auction site offering a place for the public to sell or
buy many different products. We also have online stores specializing in
antiques and collectibles for people who prefer not to have to bid. On our
online stores, people can immediately purchase items that are available and
they can make an offer to the seller as well. Between both of these sites,
this adds up to thousands of items for sale and continues to build our
customer base. The sellers on our auction site and on our online stores
establish their selling price.
There are 3,053 categories and thousands of items available for purchase.
Hundreds of thousands of people are talking about Abidon and are able to
find products that they are interested in. Our sites are very "customer
friendly." Tremendous growth is expected in our products and our customer
base.
The Company's principal executive offices are located at 5301 E. State
Street, Suite 215, Rockford, Illinois. The phone number is 815-226-8700.
The Web site is located at www.abidon.com. Information contained on the
Company's Web site shall not constitute a part of this Prospectus.
INFORMATION WITH RESPECT TO REGISTRANT
DESCRIPTION OF BUSINESS
On December 19, 1985 Howard P. Miller incorporated Rockford Investors Inc.,
an Illinois Corporation. The corporation was formed to build a commercial
building of 60,000 square foot located at 5411 E. State Street, Rockford,
Illinois. Authorized shares of the corporation was 10,000,000 without Par
Value. On January 3, 1986 at a special meeting of the Board of Directors a
resolution was passed to issue 41 shares of stock to Howard Miller and it
was approved by Howard Miller, sole director. The 41 shares of stock were
issued in exchange for 4-1/4 acres of land located at 5411 E. State Street,
Rockford, Illinois. On February 5, 1986 a resolution was passed to sell 40
shares of common stock at $10,000 per share. Howard Miller then purchased
an additional 9 shares of the 40 shares of stock that were available for
sale. The remaining 31 shares were sold to 9 local investors, including 11
shares that were sold to Howard Miller's brother, Stanley Miller, and 6
shares sold to a cousin, Irvin Miller. The building was completed in
December of 1986. The corporation was changed to an Illinois Partnership on
June 29, 1988. On January 3, 2000 it was changed from a Partnership to an
Illinois corporation and was merged into UBuy2 Inc. on January 24, 2000
(later changed to Abidon Inc., a Delaware corporation). Rockford Investors
Inc. stockholders received 20,250 shares of stock. The name was amended to
Abidon Inc. on April 4, 2000. The mortgage balance on the commercial
building as of September 1, 2001 was $129,785. A quarterly dividend of $500
per share was paid on all of the 81 outstanding shares from 1995 through
January 6, 2000, except for one quarter in 1995 and one quarter in 1998 when
$400 per share was paid.
On June 8, 1989 Howard Miller incorporated State Street Investors of
Rockford Inc., an Illinois corporation. Authorized shares of the
corporation was 1,000 without Par Value. On September 20, 1989 a resolution
was passed by the sole director, Howard Miller to have two classes of stock,
Class A voting stock and Class B, non voting stock with no Par Value on
either class of stock, being 40 shares of Class A voting stock and 120
shares of Class B non voting stock. The 40 shares of Class A voting stock
were issued to Howard Miller and a reverse split of the 40 shares of stock
(2 for 1), which left 20 shares of Class A voting stock. Then 90 shares of
Class B non voting stock were sold at $20,000 per share and were sold to 30
investors. On October 4, 1989 the corporation purchased 6.55 acres of land
located at 5301 E. State Street, Rockford, Illinois from Howard Miller for
$450,000. The corporation constructed a 160,000 square foot office and
retail building. Howard Miller and Stanley Miller were General Contractors
for the corporation and it was completed October 1990. Of the 90 shares of
stock that were sold 20 shares were purchased by Stanley Miller (the brother
of President Howard Miller) and a cousin, Irvin Miller, purchased 6 shares.
A stockholder meeting was held on January 18, 2000. A resolution was passed
on January 24, 2000 to merge into UBuy2 Inc., a Delaware corporation, for
55,000 shares of stock. Mortgage balance on the commercial building as of
September 1, 2001 was $1,279,131. A quarterly dividend of $1,000 per share
was paid on all the 110 outstanding shares from 1994 through January 11,
2000, except for one quarter in October 1995 of $950.00 per share.
In December 1986 Howard Miller, dba East State Antique Mall, Rockford,
Illinois opened their doors at 5411 E. State Street with 20,000 square feet
of retail space. In December 1990 they expanded to a second location at
5301 E. State Street, Rockford, Illinois in 40,000 square feet of retail
space. The business obtained as high as 320 antique dealers leasing space
in the two locations. The business was incorporated in the State of
Illinois under the name of East State Antique Mall, Inc. an Illinois
corporation on November 9, 1999. (Authorized shares of 1,000 with no Par
Value.) On November 15, 1999 Howard Miller, President, and Stanley Miller,
Secretary, passed a resolution to issue 10 shares of stock to Howard Miller
and 10 shares of stock to Stanley Miller (Howard Miller's brother). On
January 20, 2000 a resolution to merge with UBuy2 Inc., a Delaware
corporation, was passed in exchange for 10,000 shares of UBuy2 Inc. stock.
The merger was completed on January 24, 2000. The name was changed to
Abidon Inc. on April 4, 2000.
On January 18, 2000, Howard Miller and Stanley Miller incorporated UBuy2
Inc., a Delaware corporation. UBuy2 Inc. consisted of the merger of the
following three corporations: State Street Investors of Rockford Inc.
(55,000 shares), East State Antique Mall Inc. (10,000 shares), and Rockford
Investors Inc. (20,250 shares) for a total outstanding shares of stock of
the corporation of 85,250 shares of common stock. A resolution was passed
by the corporation on January 20, 2000 for a stock split of 200 to 1. There
are 17,050,000 shares of common stock outstanding today.
As of now the corporation, Abidon Inc., is in the business of leasing office
and retail space, operates Abidon dba East State Antique Mall, Abidon
internet auction service, community page, stores, advertising on the site,
and offers many other services on the internet.
DESCRIPTION OF PROPERTY
5411 E. State Street, Rockford, Illinois, is a three story office and retail
commercial building with 60,000 square feet, located on a 4-1/2 acre parcel
of land. It is a steel structure with steel bar joists and masonry exterior
walls. The interior has oak doors, suspended ceilings, interior walls are
dry walled with steel studs, and carpeted or tiled floors on upper 2 floors.
The building has an elevator and is sprinkled. Lower level has only lattice
dividers and exposed bar joist ceilings with concrete floors. The East
State Antique Mall is located in the lower level with approximately 100
dealers and consisting of 20,000 square feet of space. The building also
has approximately 20 office and retail businesses. The mortgage balance on
the building as of September 1, 2001 is $129,785 with an interest rate of
7.87%. The monthly payments are $5,300, and will pay off in 2003. The
mortgage is with Bank One, Illinois, NA, 1 East Old State Capitol Plaza,
Springfield, IL 62794 (Customer Number: 7606830004).
5301 E. State Street, Rockford, Illinois is a four story office and retail
commercial building with 160,000 square feet, located on a 6-1/2 acre parcel
of land. It is a steel structure with steel bar joists and masonry exterior
walls. The interior has oak doors, suspended ceilings, interior walls are
drywalled with steel studs, and carpeted or tiled floors on upper 3 floors.
The main entrance has an open staircase with marble floors. There is a 4
acre parking lot. The lower level has only lattice walls and exposed bar
joist ceilings and concrete floors. The East State Antique Mall is located
in the lower level with approximately 200 antique dealers in 37,500 square
feet of space and also the Abidon Internet site with 2,500 square feet of
space. There are 60 leasers of retail and office space in the remainder of
the building on the upper three floors. The building has an elevator and is
sprinkled. The mortgage balance on the building as of September 1, 2001 is
$1,279,131 with an interest rate of 7.5% and will pay off in September 2008.
Monthly payments are $19,251.74. The mortgage is with Associated Commercial
Mortgage Inc., 401 East Kilbourn Ave., Suite 350, Milwaukee, WI 53202 (800-
622-3836). Account No. 687-0687-6163157-5555.
The following information pertains to the two real estate properties owned
by Abidon Inc.:
Rockford, Illinois is the second largest city in Illinois. It is located
about 80 miles Northwest of Chicago, near the Wisconsin border. There are
more than 600 industries making over 300 different products distributed
throughout the world. Adequate schools, churches and recreational
facilities are well located throughout the city. Bus transportation serves
all areas of the city. Interstate Highway 90, Northwest Tollway, permits
fast transportation to Chicago and O'Hare Airport, as well as North to
Minneapolis and St. Paul. Interstate I-39 affords travel North and South.
Rockford has many truck and freight lines, an outstanding airport facility,
and is served by several railroads. East State Street is a major East-West
highway, intercity Route 20, connecting the central downtown business
district with Interstate I-90, continuing East to Belvidere. Mulford Road,
just East, is one of the major North-South community highways connecting the
general Northeast residential areas with those in the Southeast, continuing
South in to the county. Automobile traffic is very heavy. This location is
in the center of one of the fastest growing commercial and residential areas
of the city. The properties surrounding are mixed and include numerous fast
food outlets, several automobile agencies, gasoline service stations, and
several large retail centers. A large hospital complex is Northeast across
East State Street and a private liberal arts college, Rockford College, is
1,000 feet North.
Complete List Of All Equipment And Computers
Owned Free And Clear By
Abidon, Inc.
Quantity Description Category
-------- ----------- --------
27 Monitors Computer
25 Work Stations Computer
2 Accelera Credit Card/Check Verification 000-8900 Credit Card
2 MS Cash Drawers Credit Card
2 Star TSP 55011 Receipt Printer Credit Card
2 Veriphone Credit Card Receipt Printer 250 Credit Card
1 Veriphone Credit Card Receipt Printer Credit Card
5 Sony MVC-FD73 Digital Camera Imaging
1 3Com Officeconnect Hub 16 Port Network
4 Belkin Category 5e 12 Port Patch Panel Network
2 Belkin Category 5e 24 Port Patch Panel Network
1 Cisco 1605R Router Network
3 APC Back-Ups 300 Power
1 APC Smart-Ups 1250 Power
1 APC Smart-Ups 1400 Power
1 D-Link Printer Server 3-port Printer
2 Epson LQ-570+ Dot Matrix Printer Printer
1 HP Color Copier 190 Printer
1 HP DeskJet 612c Inkjet Printer Printer
3 Lexmark z11 Inkjet Printer Printer
1 Lexmark z32 Inkjet Printer Printer
1 Panasonic KX-P1123 Dot Matrix Printer Printer
1 Acer AcerScan 620U Scanner
1 Genius ColorPage - Vivid III V2 Scanner
1 Umax Astra 1200S Scanner
1 Avocent Switchview KVM 4-port Server
1 Custom File/Security Server Server
1 Custom Web/SQL Server Server
1 Cybernet Firewall Pro Suite v3.2 Software
1 Ipswitch Imail Server v7.0 Software
1 Microsoft SQL Server 7 with 5 Clients Software
1 Microsoft Windows 2000 Server with 25 Clients Software
1 Microsoft Windows 2000 Server with 5 Clients Software
28 Microsoft Windows 98SE Software
1 Veritas Backup Exec v8.6 Software
1 AT&T Cordless 900MHz Phone Telephony
3 AT&T Digital Answering Machine Telephony
1 Brother IntelliFax 1270 Telephony
1 Castio TA-145 Answering Machine Telephony
3 GE 12 Memory Speaker Phone Telephony
2 Uniden 900 MHz Cordless Phones Telephony
1 Uniden Cordless speaker Phone w/Answering Machine Telephony
1 Uniden EXP7901 900MHz Cordless Telephone telephony
BUSINESS COMBINATIONS
On February 1, 2000, the Company entered into a plan of merger with State
Street Investors of Rockford, Inc., Rockford Investors, Inc., and East State
Street Antiques Mall, Inc. Pursuant o the plan of merger, the stockholders
of the three companies received 85,250 shares of common stock of the
company. The stockholders of State Street Investors of Rockford, Inc.,
Rockford Investors, Inc., and East State Street Antiques Mall, Inc., and the
percentage of stock they owned were identical to the ownership they owned in
the company. Based on the common control of State Street Investors of
Rockford, Inc., Rockford Investors, Inc., and East State Street Antiques
Mall, Inc., and the Company, the combinations were accounted for similar to
a pooling of interest.
The following statements show the results of operations from 1994 through
1999 for Rockford Investors Partnership and State Street Investors of
Rockford, Inc. Rockford Investors Partnership was originally Rockford
Investors, Inc. Incorporated on December 19, 1985 consisting of 81 shares
of stock. State Street Investors of Rockford, Inc., was incorporated on
June 8, 1989 and consisted of 110 shares of stock.
East State Street Antiques Mall was started in 1986 by Howard Miller dba The
East State Street Antiques Mall. It was incorporated November 9, 1999 and
issued twenty shares of stock. These three corporations merged into UBuy2
Inc. on January 24, 2000.
The name was changed from UBuy2 Inc. to Abidon, Inc. on April 6, 2000.
SUMMARY OF FINANCIAL INFORMATION
State St Investors of Rockford, Inc
Income Statement
Dec. 31, 1999
12 mos. ended 12 mos. Ended 12 mos. ended 12 mos. ended
Dec. 31, 1999 Pct Dec. 31, 1998 Pct Dec. 31, 1997 Pct Dec. 31, 1996 Pct
------------ ----- ------------ ----- ------------ ----- ------------ -----
Income
Rents - Mall 1,001,488.45 76.0 839,278.63 62.9 952,261.92 73.6 919,339.21 72.9
Rents - Antique Mall 316,358.55 24.0 494,662.62 37.1 340,865.35 26.4 342,209.80 27.1
Construction Income 0.00 0.0 1,105.96 0.1 335.00 0.0 .00 0.0
------------ ----- ------------ ----- ------------ ----- ------------ -----
Total Income 1,317,847.00 100.0 1,335,047.21 100.0 1,293,462.27 100.0 1,261,549.01 100.0
Cost of Sales
Rent Rebate 40,000.00 3.0 48,000.00 3.6 10,000.00 0.8 40,000.00 3.2
Freight 0.00 0.0 0.00 0.0 0.00 0.0 35.00 0.0
Sub Contract 0.00 0.0 11,541.00 0.9 8,624.00 0.7 0.00 0.0
Commission & Management Fee 75,479.84 5.7 61,482.30 4.6 86,870.89 6.7 59,944.25 4.8
------------ ----- ------------ ----- ------------ ----- ------------ -----
Total Cost of Sales 115,479.84 8.8 121,023.30 9.1 105,494.89 8.2 99,979.25 7.9
------------ ----- ------------ ----- ------------ ----- ------------ -----
Gross Profit 1,202.367.19 91.2 1,214,023.91 90.9 1,187,967.38 91.8 1,161,569.76 92.1
General Expenses
Accounting & Legal 20,617.00 1.6 18,657.60 1.4 20,222.10 1.6 23,172.00 1.8
Director Fees 3,600.00 0.3 0.00 0.0 1,800.00 0.1 1,600.00 0.1
Auto & Truck Exp. 2,953.47 0.2 2,310.03 0.2 2,538.57 0.2 1,914.97 0.2
Advertising 16,004.95 1.2 8,179.08 0.6 47,095.23 3.6 24,643.37 2.0
Amortization 0.00 0.0 0.00 0.0 0.00 0.0 1,239.34 0.1
Appraisal Fees 0.00 0.0 850.00 0.1 0.00 0.0 112.50 0.0
Bank Charges 185.92 0.0 219.76 0.0 415.33 0.0 358.71 0.0
Bonus 0.00 0.0 2,000.00 0.1 1,500.00 0.1 0.00 0.0
Building Permits 0.00 0.0 0.00 0.0 150.00 0.0 0.00 0.0
Depreciation 134,459.87 10.2 134,383.36 10.1 133,171.97 10.3 132,271.36 10.5
Donations 0.00 0.0 35.00 0.0 0.00 0.0 0.00 0.0
Dues & Subscriptions 376.25 0.0 158.50 0.0 93.50 0.0 103.50 0.0
Entertainment 427.73 0.0 0.00 0.0 499.30 0.0 506.10 0.0
Equipment Rental 0.00 0.0 0.00 0.0 0.00 0.0 26,900.00 2.1
Franchise Tax 1,875.00 0.1 0.00 0.0 1,875.00 0.1 1,865.00 0.1
Interest Exp. 106,358.07 8.1 134,289.12 10.1 130,329.14 10.1 145,409.75 11.5
Insurance Exp. 11,376.00 0.9 7,583.25 0.6 6,348.74 0.5 7,967.00 0.6
License & Taxes 0.00 0.0 1,875.00 0.1 100.00 0.0 100.00 0.0
Misc. Taxes 0.00 0.0 0.00 0.0 903.33 0.1 0.00 0.0
Office Expense 3,757.37 0.3 4,368.73 0.3 691.55 0.1 3,400.44 0.3
Postage 551.00 0.0 536.00 0.0 440.00 0.0 504.00 0.0
Real Estate Taxes 204,698.26 15.5 202,602.34 15.2 197,535.30 15.3 180,679.44 14.3
Repairs & Maintenance 214,526.82 16.3 128,666.95 9.6 125,251.04 9.7 149,896.34 11.9
Remodel 0.00 0.0 5,305.82 0.4 0.00 0.0 0.00 0.0
Sales Tax 7,326.00 0.6 0.00 0.0 0.00 0.0 0.00 0.0
Supplies 2,854.92 0.2 3,243.47 0.2 1,289.17 0.1 1,522.14 0.1
Trash Collection 0.00 0.0 1,325.57 0.1 2,243.99 0.2 0.00 0.0
Telephone 7,293.33 0.6 4,793.24 0.4 4,351.52 0.3 4,632.92 0.4
Utilities 64,577.18 4.9 64,707.00 4.8 57,518.65 4.4 61,944.38 4.9
------------ ----- ------------ ----- ------------ ----- ------------ -----
Total General Expenses 803,819.14 61.0 726,089.82 54.4 736,363.43 56.9 770,743.26 61.1
------------ ----- ------------ ----- ------------ ----- ------------ -----
Net Profit from Operations 398,548.02 30.2 487,934.09 36.5 451,603.95 34.9 390,826.50 31.0
------------ ----- ------------ ----- ------------ ----- ------------ -----
Other Income
Interest Income 1,883.38 0.1 1,459.42 0.0 1,179.41 0.1 497.90 0.0
Sale of Assets 0.00 0.0 0.00 0.0 10.75 0.0 0.00 0.0
------------ ----- ------------ ----- ------------ ----- ------------ -----
Total Income 1,883.38 0.1 1,459.42 0.1 1,190.16 0.1 497.90 0.0
------------ ----- ------------ ----- ------------ ----- ------------ -----
Net Profit before taxes 400,431.40 30.4 489,393.51 36.7 452,794.11 35.0 391,324.40 31.0
------------ ----- ------------ ----- ------------ ----- ------------ -----
Net Income per share $ 3,640.29 $ 4,449.04 $ 4,116.31 $ 3,557.50
------------ ------------ ------------ ------------
Basic 110 110. 110 110
------------ ------------ ------------ ------------
Dividend Paid per share $ 4,000.00 $ 4,000.00 $ 4,000.00 $ 4,000.00
------------ ------------ ------------ ------------
Unaudited
State Street Investors of Rockford, Inc.
Income Statement
December 31, 1996
12 months Ended 12 Months Ended
Dec. 31, 1995 Pct Dec. 31, 1994 Pct
Income
Rents-Mall 916,552.18 74.2 826,882.80 73.4
Rent-Antique Mall 318,730.28 25.8 299,063.48 26.6
Construction Income 0.00 0.0 0.00 0.0
------------ ----- ------------ -----
Total Income 1,235,282.46 100.0 1,125.946.28 100.0
Cost of Sales
Refunds 0.00 0.0 20,000.00 1.8
Rent Rebate 40,000.00 3.2 0.00 0.0
Freight 0.00 0.0 0.0 0.0
Sub Contract 0.00 0.0 0.00 0.0
Commissions & Management Fee 55,156.00 4.5 49,089.75 4.4
------------ ----- ------------ -----
Total Cost of Sales 95,156.00 7.7 69,089.75 6.1
------------ ----- ------------ -----
Gross Profit 1,140,126.46 92.3 1,056,856.53 93.9
General Expenses
Accounting & Legal 20,449.50 1.7 18,468.00 1.6
Director Fees 1,400.00 0.1 3,800.00 0.3
Auto & Truck Exp 2,467.90 0.2 5,926.65 0.5
Advertising 8,595.86 0.7 16,334.80 1.5
Amortization 1,487.20 0.1 5,743.56 0.5
Appraisal Fees 200.00 0.0 0.00 0.0
Bank Charges 138.50 0.0 26.26 0.0
Depreciation 131,492.51 10.6 130,857.39 11.6
Donations 0.00 0.0 60.00 0.0
Dues & Subscriptions 58.50 0.0 224.00 0.0
Entertainment 462.24 0.0 508.74 0.0
Equipment Rental 13,400.00 1.1 13,400.00 1.2
Franchise Tax 1,865.00 0.2 1,865.00 0.2
Interest Exp 138,275.21 11.2 163,445.17 14.5
Insurance Exp 12,820.50 1.0 5,591.00 0.5
License & Taxes 0.00 0.0 0.00 0.0
Office Expense 317.93 0.0 3,426.85 0.3
Postage 529.00 0.0 479.00 0.0
Real Estate Taxes 176,938.06 14.3 118,580.34 10.5
Repairs & Maintenance 81,173.02 6.6 91,891.87 8.2
Sales Promotion 0.00 0.0 0.00 0.0
Security 0.00 0.0 41.19 0.0
Supplies 2,524.84 0.2 1,176.24 0.1
Telephone 3,504.08 0.3 2,969.88 0.3
Utilities 61,263.68 5.0 46,992.34 4.2
------------ ----- ------------ -----
Total General Expenses 659,363.53 53.4 631,808.28 56.1
Net Profit from Operations 480,762.93 38.9 425,048.25
------------ ----- ------------
Other Income
Interest Income 0.00 0.0 0.00
Total Income 0.00 0.0 0.00
------------ ----- ------------
Net Profit before taxes 480,762.93 38.9 425,048.25
------------ ----- ------------
Allowance for Income Tax
State Income Tax 6,365.00 0.5 5,445.00
------------ ----- ------------
Total Taxes 6,365.00 0.5 5,445.00
------------ ----- ------------
Net Profit after Tax 474,397.93 38.4 419,603.25
============ ===== ============
Net income per share $ 4,312.71 $ 3,414.58
------------ ------------
Basic 110 110
------------ ------------
Dividend paid per share $ 3,950.00 $ 4,000.00
------------ ------------
Unaudited
SUMMARY OF FINANCIAL INFORMATION
Rockford Investors Partnership
Income Statement
Dec. 31, 1999
12 mos. ended 12 mos. ended 12 mos. ended 12 mos. ended
Dec. 31, 1999 Pct Dec. 31, 1998 Pct Dec. 31, 1997 Pct Dec. 31, 1996 Pct
------------ ----- ------------ ----- ------------ ----- ------------ -----
Income
Rents - Mall 201,205.77 42.0 182,495.75 39.4 176,464.60 40.9 173,699.36 39.4
Rents - Antique Mall 277,219.73 57.8 280,863.71 60.6 254,731.76 59.1 267,131.07 60.6
Construction Income 1,000.00 0.2 0.00 0.0 0.00 0.0 0.00 0.0
------------ ----- ------------ ----- ------------ ----- ------------ -----
Total Income 479,425.50 100.0 463,359.46 100.0 431,196.36 100.0 440,830.43 100.0
Cost of Sales
Rent Rebate 20,000.00 4.2 24,000.00 5.2 5,000.00 1.2 8,000.00 1.8
Sub Contract 0.00 0.0 0.00 0.0 781.00 0.2 0.00 0.0
Commission & Management Fee 11,552.95 2.4 14,434.00 3.1 5,000.00 1.2 24,787.42 5.6
------------ ----- ------------ ----- ------------ ----- ------------ -----
Total Cost of Sales 31,552.95 6.6 38,434.00 8.3 10,781.00 2.5 32,787.42 7.4
------------ ----- ------------ ----- ------------ ----- ------------ -----
Gross Profit 447,872.55 93.4 424,925.46 91.7 420,415.36 97.5 408,043.01 92.6
General Expenses
Accounting & Legal 9,773.00 2.0 9,815.40 2.1 9,342.00 2.2 9,450.00 2.1
Advertising 22,870.00 4.8 25,854.71 5.6 13,665.00 3.2 16,940.50 3.8
Amortization 70.72 0.0 70.72 0.0 70.72 0.0 70.72 0.0
Appraisal Fees 0.00 0.0 700.00 0.2 0.00 0.0 112.50 0.0
Bank Charges 0.00 0.0 0.00 0.0 195.52 0.0 347.21 0.1
Casual Labor 0.00 0.0 3,552.00 0.8 0.00 0.0 0.00 0.0
Depreciation 48,642.58 10.1 48,825.21 10.5 48,736.16 11.3 50,550.63 11.5
Dues & Subscriptions 182.00 0.0 0.00 0.0 0.00 0.0 0.00 0.0
Equipment Rental 0.00 0.0 0.00 0.0 0.00 0.0 3,600.00 0.8
Interest Exp. 14,183.09 3.0 22,382.82 4.8 25,647.28 5.9 31,778.16 7.2
Insurance Exp. 3,417.00 0.7 6,408.00 1.4 1,590.00 0.4 3,580.00 0.8
License & Taxes 0.00 0.0 2,420.00 0.5 0.00 0.0 0.00 0.0
Office Expense 186.38 0.0 370.25 0.1 118.12 0.0 256.01 0.1
Postage 308.50 0.1 64.00 0.0 671.20 0.2 332.00 0.1
Real Estate Taxes 60,545.18 12.6 59,945.58 12.9 62,045.82 14.4 49,501.08 11.2
Rent 0.00 0.0 2,170.00 0.5 0.00 0.0 10,000.00 2.3
Repairs & Maintenance 80,961.83 16.9 56,331.31 12.2 45,641.65 10.6 48,093.07 10.9
Sales Tax 1,925.00 0.4 0.00 0.0 0.00 0.0 1,870.00 0.4
Security 0.00 0.0 0.00 0.0 65.00 0.0 0.00 0.0
Supplies 0.00 0.0 611.32 0.1 0.00 0.0 0.00 0.0
Trash Collection 0.00 0.0 1,233.84 0.3 1,682.94 0.4 0.00 0.0
Telephone 3,077.02 0.6 3,057.95 0.7 3,175.14 0.7 3,686.08 0.8
Utilities 31,659.23 6.6 31,112.09 6.7 24,083.28 5.6 27,427.79 6.2
------------ ----- ------------ ----- ------------ ----- ------------ -----
Total General Expenses 277,801.53 57.9 274,925.20 59.3 236,729.83 54.9 257,595.75 58.4
------------ ----- ------------ ----- ------------ ----- ------------ -----
Net Profit from Operations 170,071.02 35.5 150,000.26 32.4 183,685.53 42.6 150,447.26 34.1
------------ ----- ------------ ----- ------------ ----- ------------ -----
Net Income per share $ 2,099.65 $ 1,851.86 $ 2,267.73 $ 1,857.38
------------ ------------ ------------ ------------
Basic 81 81 81 81
------------ ------------ ------------ ------------
Dividend Paid per share $ 2,000.00 $ 1,900.00 $ 2,000.00 $ 2,000.00
------------ ------------ ------------ ------------
Unaudited
Rockford Investors Partnership
Income Statement
December 31, 1995
12 months 12 Months
Ended Pct Ended Pct
Dec. 31, 1995 Dec. 31, 1994
Income
Rents-Antique Mall 174,818.90 41.3 179,697.76 43.5
Rents-Other 248,831.94 58.7 233,274.47 56.5
------------ ----- ------------ -----
Total Income 423,650.84 100.0 412,972.23 100.0
Cost of Sales
Rent Rebate 10,000.00 2.4 10,000.00 2.4
Commissions & Management Fee 20,500.00 4.8 25,000.00 6.1
------------ ----- ------------ -----
Total Cost of Sales 30,50000 7.2 35,000.00 8.5
------------ ----- ------------ -----
Gross Profit 393,150.84 92.8 377,972.23 91.5
General Expenses
Accounting & Legal 9,247.50 2.2 7,228.00 1.8
Auto & Truck Exp 1,726.90 0.4 60.00 0.0
Advertising 12,476.50 2.9 13,210.55 3.2
Amortization 70.72 0.0 6,853.04 1.7
Appraisal Fees 900.00 0.2 0.00 0.0
Bank Charges 155.84 0.0 163.05 0.0
Depreciation 52,803.66 12.5 55,174.51 13.4
Equipment Rental 3,600.00 0.8 2,700.00 0.7
Interest Exp 32,643.59 7.7 38,032.73 9.2
Insurance Exp 4,461.50 1.1 3,803.00 0.9
Lease Expense 0.00 0.0 0.00 0.0
License & Taxes 15.00 0.0 0.00 0.0
Office Expense 2,248.30 0.5 1,214.81 0.3
Postage 504.00 0.1 461.00 0.1
Real Estate Taxes 64,041.32 15.1 26,649.10 6.5
Rent 0.00 0.0 0.00 0.0
Repairs & Maintenance 30,745.91 7.3 40,504.50 9.8
Sales Tax 2,006.00 0.5 0.00 0.0
Supplies 0.00 0.0 0.00 0.0
Trash Collection 1,310.00 0.3 700.00 0.2
Telephone 3,542.14 0.8 2,156.68 0.5
Utilities 25,830.03 6.1 22,696.16 5.5
------------ ----- ------------ -----
Total General Expenses 248,328.91 58.6 221,607.13 53.7
------------ ----- ------------ -----
Net Profit from Operations 144,821.93 34.2 156,365.10 37.9
------------ ----- ------------ -----
Net income per share $ 1,787.93 $ 1,930.44
------------ ------------
Basic 81 81
------------ ------------
Dividend paid per share $ 1,900.00 $ 2,000.00
------------ ------------
Unaudited
THE OFFERING
Common Stock offered by the Company 5,000,000 shares
Common Stock to be outstanding
after this offering............... 22,050,00 shares
Use of proceeds.................... For general corporate purposes,
including to fund working capital,
See "Use of Proceeds."
Proposed Nasdaq Symbol............. ABID
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended 9 months ended
December 31 September 30
------------------------------------
1999 2000 2000 2001
------------------------------------
STATEMENT OF INCOME DATA:
Net Revenues $3878 $3826 $2867 $2869
Gross Profit 1972 1943 1301 1632
Income from operations 107 (119) (97)
Net income 494 154 58 141
Net income per share $5.79 $.009 ($.025) $.008
Shares Basic 85 85 85 17,050
September 30, 2001
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------------------------------------------
BALANCE SHEET DATA:
Cash and cash equivalents $0 $0
Working capital
Total assets 4,272 4,272
Debt and long-term liability 1,210 1,210
Total stockholders' equity 2,561 2,561
RISK FACTORS
This offering involves a high degree of risk. In addition to the other
information set forth in this Prospectus, the following risk factors should
be considered carefully in evaluating the Company and its business before
purchasing any of the shares of Common Stock of the Company. This
Prospectus contains certain forward-looking statements that involve risks
and uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. When used in this Prospectus, the words
"expects," "anticipates," "intends," and "plans" and similar expressions are
intended to identify certain of these forward-looking statements. The
cautionary statements in this Prospectus should be read as being applicable
to all related forward-looking statements wherever they appear in this
Prospectus. The Company's actual results could differ materially from those
discussed in this Prospectus. Factors that could cause or contribute to
such differences include those discussed below, as well as those discussed
elsewhere in this Prospectus.
LIMITED OPERATING HISTORY
Since the Company has only a limited operating history on which to base an
evaluation of its business and prospects, the Company's prospects must be
considered in light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in their early stages of development,
particularly companies in new and rapidly evolving markets such as online
commerce. To address these risks and uncertainties, the Company must, among
other things, increase the number of its registered users, items listed on
its service, completed auctions, maintain and enhance its brand, implement
and execute its business and marketing strategy successfully, continue to
develop and upgrade its technology and information-processing systems,
continue to enhance Abidon service to meet the needs of a changing market,
provide superior customer service, respond to competitive developments and
attract, integrate, retain and motivate qualified personnel, and the
Company's ability to maintain and increase its present level of real estate
leases and the antique mall leases. There can be no assurance that the
Company will be successful in accomplishing all of these things, and the
failure to do so could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NO ASSURANCE OF CONTINUED PROFITABILITY
The Company believes that its continued growth and profitability will depend
in large part on its ability to (i) increase its brand name awareness, (ii)
provide its customers with superior community and trading experiences, (iii)
maintain sufficient transaction volume to attract buyers and sellers and
(iv) increase the Company's real estate holdings. Accordingly, the Company
intends to invest heavily in marketing and promotion, further development of
Abidon auction Web site, technology and operating infrastructure
development. Although the Company has experienced significant revenue
growth and significant growth in the number of its registered users and
items listed for auction in recent periods, such growth rates may not be
sustainable and might decrease in the future. In view of the rapidly
evolving nature of the Company's business and its limited operating history,
the Company believes that period-to-period comparisons of its operating
results are not necessarily meaningful and should not be relied upon as
indications of future performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
POTENTIAL FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company's operating results have varied on a quarterly basis during its
short operating history and may fluctuate significantly as a result of a
variety of factors, many of which are outside the Company's control.
Factors that may affect the Company's quarterly operating results include:
(a) the Company's ability to manage the number of items listed on its
service; (b) price competition; (c) increasing consumer confidence in and
acceptance of the Internet and other online services for commerce and, in
particular, the trading of products such as those listed on Abidon; (d) the
Company's ability to retain an active user base, attract new users who list
items for sale and who complete transactions through its service, and
maintain customer satisfaction; (e) the level of use of the Internet and
online services; (f) the announcement or introduction of new sites, services
and products by the Company or its competitors; (g) consumer confidence in
the security of transactions over the Internet; (h) the success of the
Company's brand building and marketing campaigns; (i) the volume of items
listed on the Company's Web site; (j) the Company's ability to upgrade and
develop its systems and infrastructure to accommodate growth; (k) the
timing, cost and availability of advertising in traditional media and on
other Web sites and online services; (l) volume, size, timing and completion
rate of trades on Abidon; (m) the Company's ability to attract new personnel
in a timely and effective manner; (n) technical difficulties or service
interruptions; (o) the amount and timing of operating costs and capital
expenditures relating to expansion of the Company's business, operations and
infrastructure; (p) governmental regulation by Federal or local governments;
(q) general economic conditions as well as economic conditions specific to
the Internet and online commerce industries, and consumer trends popularity
of certain categories of collectible items; (r) the Company's ability to
increase its real estate holdings and also to lease the space at a profit.
As a result of the Company's limited operating history and the emerging
nature of the markets in which it competes, it is difficult for the Company
to forecast its revenues or earnings accurately. In addition, the Company
has no backlog and a significant portion of the Company's net revenues for a
particular quarter are derived mainly from real estate holdings. The
Company's current and future expense levels are based largely on its
investment plans and estimates of future revenues and are, to a large
extent, fixed. The Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues relative to the Company's planned
expenditures would have an immediate adverse effect on the Company's
business, results of operations and financial condition. Further, as a
strategic response to changes in the competitive environment, the Company
from time to time make certain pricing, service or marketing decisions that
could have a material adverse effect on its business, results of operations
and financial condition.
Due to the foregoing factors, the Company's quarterly revenues and operating
results are difficult to forecast. The Company believes that period-to-
period comparisons of its operating results may not be meaningful and should
not be relied upon as an indication of future performance. In addition, it
is likely that in one or more future quarters the Company's operating
results will fall below the expectations of securities analysts and
investors. In such event, the trading price of the Common Stock would
almost certainly be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
SEASONAL FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company has considerable experience in sales regarding antiques,
collectibles, and architectural items. There is a fluctuation in sales.
However, the Company has little experience in seasonal fluctuation in sales
on the Internet with the short history of the site.
MANAGEMENT OF POTENTIAL GROWTH
The Company is currently experiencing a period of significant expansion and
anticipates that further expansion will be required to address potential
growth in its customer base and market opportunities. This expansion has
placed, and is expected to continue to place, a significant strain on the
Company's management, operational and financial resources. The Company has
expanded from 14 to 25 employees. The President and Secretary are the
driving force behind the Company. They are the founders of all three
corporations that merged and formed Abidon Inc. The Company's new employees
include a number of key managerial, marketing, planning, technical and
operations personnel who have not yet been fully integrated into the
Company, and the Company expects to add additional key personnel in the near
future. To manage the expected growth of its operations and personnel, the
Company will be required to improve existing and implement new transaction
processing, operational and financial systems, procedures and controls, and
to expand, train and manage its growing employee base. The Company also
will be required to expand its finance, administrative and operations staff.
Further, the Company may be required to enter into relationships with
various strategic partners, Web sites and other online service providers and
other third parties necessary to the Company's business.
There can be no assurance that the Company's current and planned personnel,
systems, procedures and controls will be adequate to support the Company's
future operations, that management will be able to hire, train, retain,
motivate and manage required personnel or that Company management will be
able to identify, manage and exploit existing and potential strategic
relationships and market opportunities. The failure of the Company to
manage growth effectively could have a material adverse effect on the
Company's business results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Employees."
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the continued
services and on the performance of its senior management and other key
personnel. The Company's performance also depends on the Company's ability
to retain and motivate its other officers and key employees and could have a
material effect on the Company's business, results of operations and
financial condition. The Company does not have long-term employment
agreements with any of its key personnel and maintains no "key person" life
insurance policies. The Company's future success also depends on its
ability to identify, attract, hire, train, retain and motivate other highly
skilled technical, managerial, marketing and customer service personnel.
Competition for such personnel is intense, and there can be no assurance
that the Company will be able to successfully attract, integrate or
retain sufficiently qualified personnel. In particular, the Company has
encountered difficulties in attracting a sufficient number of qualified
software developers for its Web site and transaction processing systems, and
there can be no assurance that the Company will be able to retain and
attract such developers. The failure to retain and attract the necessary
personnel could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business--Employees"
and "Management."
DEPENDENCE ON CONTINUED GROWTH OF DEVELOPING ONLINE PERSON-TO-PERSON
COMMERCE MARKET
The market for the sale of goods over the Internet, particularly through
person-to-person trading, is proven. The Company's future revenues and
profits are substantially dependent upon the continued use and acceptance of
the Internet and other online services as a medium for commerce by
consumers. Rapid growth in the use of and interest in the Web, the Internet
and other online services is a recent phenomenon and there can be no
assurance that this acceptance and use will continue to develop or that a
sufficiently broad base of consumers will adopt, and continue to use, the
Internet as a medium of commerce. Demand and market acceptance for recently
introduced services and products over the Internet are subject to a high
level of uncertainty. Growth in the Company's user base relies on obtaining
consumers who have historically used traditional means of commerce to
purchase goods. For the Company to be successful, it must obtain a larger
user base.
In addition, the Internet may not be commercially viable in the long term
for a number of reasons, including potentially inadequate development of the
necessary network infrastructure or delayed development of enabling
technologies, performance improvements and security measures. To the extent
that the Internet continues to experience significant growth in the number
of users, their frequency of use or their bandwidth requirements, there can
be no assurance that the infrastructure for the Internet and other online
services will be able to support the demands placed upon them. In addition,
the Internet or other online services could lose their viability due to
delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet or other online service
activity, or due to increased governmental regulation. Changes in or
insufficient availability of telecommunications services to support the
Internet or other online services also could result in slower response times
and adversely affect usage of the Internet and other online services
generally and the Abidon service in particular. If use of the Internet and
other online services does not continue to grow or grows more slowly than
expected, if the infrastructure for the Internet and other online services
does not effectively support growth that may occur, or if the Internet and
other online services do not become a viable commercial marketplace, the
Company's business, results of operations and financial condition would be
materially adversely affected.
RISK OF CAPACITY CONSTRAINTS
The Company seeks to generate a high volume of traffic and transactions on
Abidon service. Accordingly, the satisfactory performance, reliability and
availability of the Company's Web site, processing systems and network
infrastructure are critical to the Company's reputation and its ability to
attract and retain large numbers of users who bid for or sell items on its
service while maintaining adequate customer service levels. The Company's
revenues depend on the number of items listed by users, the volume of user
auctions that are successfully completed and the final prices paid for the
items listed. Any system interruptions that result in the unavailability of
the Company's service or reduced customer activity would reduce the volume
of items listed and auctions completed and could affect the average selling
price of the items. Interruptions of service may also diminish the
attractiveness of the Company and its services. The Company has experienced
periodic system interruptions, which it believes will continue to occur from
time to time. Any substantial increase in the volume of traffic on the
Company's Web site or in the number of auctions being conducted by customers
will require the Company to expand and upgrade its technology, transaction
processing systems and network infrastructure. There can be no assurance
that the Company will be able to accurately project the rate or timing of
increases, if any, in the use of the Abidon service or timely expand and
upgrade its systems and infrastructure to accommodate such increases in a
timely manner. Any failure to expand or upgrade its systems could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company uses internally developed systems to operate its service and for
transaction processing, including billing and collections processing. The
Company must continually enhance and improve these systems in order to
accommodate the level of use of Abidon. Furthermore, in the future, the
Company may add additional features and functionality to its services that
would result in the need to develop or license additional technologies. The
Company's inability to add additional software and hardware or to develop
and further upgrade its existing technology, transaction processing systems
or network infrastructure to accommodate increased traffic on the Abidon
service or increased transaction volume through its processing systems or to
provide new features or functionality may cause unanticipated system
disruptions, slower response times, degradation in levels of customer
service, impaired quality of the user's experience on the Abidon service,
and delays in reporting accurate financial information. There can be no
assurance that the Company will be able in a timely manner to effectively
upgrade and expand its systems or to integrate smoothly any newly developed
or purchased technologies with its existing systems. Any inability to do so
would have a material adverse effect on the Company's business, results of
operations and financial condition. See "Risk of System Failures" and
"Business--Operations and Technology."
RISK OF SYSTEM FAILURES
The Company's success, and in particular its ability to facilitate trades
successfully and provide high quality customer service, depends on the
efficient and uninterrupted operation of its computer and communications
hardware systems. Substantially all of the Company's computer hardware for
operating Abidon service is currently located at the Company's facility at
5301 E. State Street, Rockford, Illinois. These systems and operations are
vulnerable to damage or interruption from earthquakes, floods, fires, power
loss, telecommunication failures, break-ins, sabotage, intentional acts of
vandalism and similar events. The Company does not presently have fully
redundant systems, a formal disaster recovery plan or alternative providers
of hosting services and does not carry sufficient business interruption
insurance to compensation it for losses that may occur. Despite any
precautions taken by, and planned to be taken by the Company, the occurrence
of a natural disaster or other unanticipated problems could result in
interruptions in the services provided by the Company. In addition, the
failure to provide the data communications capacity required by the Company,
as a result of human error, natural disaster or other operational
disruption, could result in interruptions in the Company's service. Any
damage to or failure of the systems of the Company could result in
reductions in, or terminations of the Abidon service, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
In the case of frequent or persistent system failures, the Company's
reputation and name brand could be materially adversely affected. Although
the Company has implemented certain network security measures, its servers
are also vulnerable to computer viruses, physical or electronic break-ins
and similar disruptions, which could lead to interruptions, delays, loss of
data or the inability to complete customer auctions. In addition, although
the Company works to prevent unauthorized access to Company data, it is
impossible to eliminate this risk completely. The occurrence of any and all
of these events could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business-
Operations and Technology" and "--Facilities."
INTENSE COMPETITION
The market for person-to-person trading over the Internet is rapidly
evolving and intensely competitive, and the Company expects competition to
intensify further in the future. Barriers to entry are relatively low, and
current and new competitors can launch new sites at a relatively low cost
using commercially available software. The Company currently or potentially
competes with a number of other companies. The Company's direct competitors
include various online person-to-person auction services including Yahoo!,
Amazon and eBay and a large number of other small services including those
that serve specialty markets. The Company also competes indirectly with
business-to-consumer online auction services such as Wal-Mart, Ford, and
General Motors. The Company potentially faces competition from a number of
large online communities and services that have expertise in developing
online commerce and in facilitating online person-to-person interactions.
Other large companies with strong brand recognition and experience in online
commerce may also seek to compete in the online auction market. Competitive
pressures created by any one of these companies, or by the Company's
competitors collectively, could have a material adverse effect on the
Company's business, results of operations and financial condition.
RISK ASSOCIATED WITH BRAND DEVELOPMENT
The Company believes that its historical growth has been largely
attributable to word-of-mouth. Despite this historical organic growth, the
Company believes that continuing to strengthen its brand is critical to
achieving widespread acceptance of Abidon particularly in light of the
competitive nature of the Company's market. Promoting and positioning its
brand will depend largely on the success of the Company's marketing efforts
and the ability of the Company to provide high quality services. In order
to promote its brand, the Company will need to increase its marketing budget
and otherwise increase its financial commitment to creating and maintaining
brand loyalty among users. There can be no assurance that brand promotion
activities will yield increased revenues or that any such revenues would
offset the expenses incurred by the Company in building its brand. Further,
there can be no assurance that any new users attracted to Abidon will
conduct transactions over Abidon on a regular basis. If the Company fails
to promote and maintain its brand or if the Company's existing or future
strategy relationships fail to promote the Company's brand or increase brand
awareness, the Company's business, results of operations and financial
condition would be materially adversely affected. See "Business-Abidon
Strategy."
RAPID TECHNOLOGICAL CHANGE
The market in which the company competes is characterized by rapidly
changing technology, evolving industry standards, frequent new service and
product announcements, introductions and enhancements and changing customer
demands. These market characteristics are exacerbated by the emerging
nature of the Web and the apparent need of companies from a multitude of
industries to offer Web-based products and services. Accordingly, the
Company's future success will depend on its ability to adapt to rapidly
changing technologies, to adapt its services to evolving industry standards
and to continually improve the performance, features and reliability of its
service in response to competitive service and product offerings and
evolving demands of the marketplace. The failure of the Company to adapt to
such changes would have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the widespread
adoption of new Internet, networking or telecommunications technologies or
other technological changes could require substantial expenditures by the
Company to modify or adapt its services or infrastructure, which could have
a material adverse effect on the Company's business, results of operations
and financial condition. See "Business-Operations and Technology."
RISKS ASSOCIATED WITH NEW SERVICES, FEATURES AND FUNCTIONS
The Company plans to expand its operations by developing and promoting new
or complementary services, products or transaction formats or expanding the
breadth and depth of services. There can be no assurance that the Company
would be able to expand its operations in a cost-effective or timely manner
or that any such efforts would maintain or increase overall market
acceptance. Furthermore, any new business or service launched by the
Company that is not favorably received by consumers could damage the
Company's reputation and diminish the value of its brand name. Expansion of
the Company's operations in this manner would also require significant
additional expenses and development, operations and other resources and
would strain the Company's management, financial and operational resources.
The lack of market acceptance of such services or the Company's inability to
generate satisfactory revenues from such expanded services to offset their
cost could have a material adverse effect on the Company's business, results
of operations and financial condition.
RISKS RELATED TO CONSUMER TRENDS
The Company derives substantially all of its revenues from real estate
holdings. The Company's future revenues will depend upon continued demand
for the types of goods that are listed by users of the Abidon service and
real estate holdings. The popularity of certain categories of items, such
as toys, advertising, architectural and memorabilia, among consumers may
vary over time due to perceived scarcity, subjective value, and societal and
consumer trends in general. A decline in the popularity of, or demand for,
certain collectibles or other items sold through the Abidon service could
reduce the overall volume of transactions on the Abidon service, resulting
in reduced revenues. In addition, certain consumer "fads" temporarily
inflate the volume of certain types of items listed on the Abidon service,
placing a significant strain upon the Company's infrastructure and
transaction capacity. These trends may also cause significant fluctuations
in the Company's operating results from one quarter to the next. Any
decline in demand for the goods offered through the Abidon service as a
result of changes in consumer trends could have a material adverse effect on
the Company's business, results of operations and financial condition.
RISKS ASSOCIATED WITH CERTAIN ACTIVITIES ON THE COMPANY'S SERVICE
The law related to the liability of provider of online services for
activities of their users on the service is currently unsettled. While the
Company does not pre-screen the types of goods offered on Abidon, the
Company is aware that certain goods, such as alcohol, tobacco, firearms,
adult material, illegal drugs, and other goods that may be subject to
regulation by local, state or federal authorities might have been traded on
the Abidon service. There can be no assurance that the Company will be able
to prevent the unlawful exchange of goods on its service or that it will
successfully avoid civil or criminal liability for unlawful activities
carried out by users through the Company's service. The imposition upon the
Company of potential liability for unlawful activities of users of the
Abidon service could require the Company to implement measures to reduce its
exposure to such liability, which may require, among other things, the
Company to spend substantial resources and/or to discontinue certain service
offerings. Any costs incurred as a result of such liability or asserted
liability could have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business-Government
Regulation."
In addition, the Company's success depends largely upon seller's reliability
to deliver and accurately represent the listed goods and buyers paying the
agreed purchase price. The Company takes no responsibility for delivery of
payment or goods to any user of the Abidon service. The Company has
received in the past, and anticipates that it will receive in the future,
communications from users who did not receive the purchase price or the
goods that were to have been exchanged. While the Company can suspend the
accounts of users who fail to fulfill their delivery obligations to other
users, the Company, beyond crediting sellers with the amount of their fees
in certain circumstances, does not have the ability to otherwise require
users to make payments or deliver goods and the Company does not compensate
users who believe they have been defrauded by other users. The Company also
from time to time receives complaints from buyers as to the quality of the
goods purchased. Although the transactions or other claims related to the
quality of the purchased goods the Company may in the future receive
additional requests from users requesting reimbursement or threatening legal
action against the Company if no reimbursement is made. Any resulting
litigation could be costly for the Company, divert management attention and
could result in increased costs of doing business, or otherwise have a
material adverse effect on the Company's business, results of operations and
financial condition. Any negative publicity generated as a result of
fraudulent or deceptive conduct by users of Abidon could damage the
Company's reputation and diminish the value of its brand name, which could
have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company does not pre-screen the goods that are listed by users on
Abidon.com or the contents of their listings, which may include text and
images. The Company has received in the past, and anticipates that it will
receive in the future, communications alleging that certain items sold
through the Abidon service infringe third-party copyrights, trademarks or
other intellectual property rights. While the Company's user policy
prohibits the sale of goods which may infringe third-party intellectual
property rights and the Company is empowered to suspend the account of any
user who infringes third-party intellectual property rights, there can be no
assurance that an allegation of infringement will not result in litigation
against the Company. Any such litigation could be costly for the company
and could result in increased costs of doing business, or could in some
other manner have a material adverse effect on the Company's business,
results of operations and financial condition. See "Business-The Abidon
Service."
ONLINE COMMERCE SECURITY RISKS
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. Currently, a
significant number of Abidon users authorize the Company to bill their
credit card accounts directly for all transaction fees charged by the
Company. The Company relies on encryption and authentication technology to
effect secure transmission of confidential information, including customer
credit card numbers. There can be no assurance that advances in computer
capabilities, new discoveries in the field of cryptography, or other events
or developments will not result in a compromise or breach of the technology
used by the Company to protect customer transaction data. If any such
compromise of the Company's security were to occur, it could have a material
adverse effect on the Company's reputation, and therefore, on its business,
results of operations and financial condition. Furthermore, a party who is
able to circumvent the Company's security measures could misappropriate
proprietary information or cause interruptions in the Company's operations.
The Company may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of transactions
conducted on the Internet and other online services and the privacy of users
may also inhibit the growth of the Internet and other online services
generally, and the Web in particular, especially as a means of conducting
commercial transactions. To the extent that activities of the Company
involve the storage and transmission of proprietary information, such as
credit card numbers, security breaches could damage the Company's reputation
and expose the Company to a risk of loss or litigation and possible
liability. The Company's insurance policies carry low coverage limits,
which may not be adequate to reimburse the Company for losses caused by
security breaches. There can be no assurance that the Company's security
measures will prevent security breaches or that failure to prevent such
security breaches will not have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business-
Operations and Technology."
RISKS ASSOCIATED WITH ACQUISITIONS
If appropriate opportunities present themselves, the Company intends to
acquire businesses, technologies, services or products that the Company
believes are strategic. The Company currently has no understandings,
commitments or agreements with respect to any other material acquisition and
no other material acquisition is currently being pursued. There can be no
assurance that the Company will be able to identify, negotiate or finance
future acquisitions successfully, or to integrate such acquisitions with its
current business. The process of integrating an acquired business,
technology, service or product in the Company may result in unforeseen
operating difficulties and expenditures and may absorb significant
management attention that would otherwise be available for ongoing
development of the Company's business. Moreover, there can be no assurance
that the anticipated benefits of any acquisition will be realized. Future
acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities and/or
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, results of
operations and financial condition. Any such future acquisitions of other
businesses, technologies, services or products might require the Company to
obtain additional equity or debt financing, which might not be available on
terms favorable to the Company, or at all, and such financing, if available,
might be dilutive. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
DEPENDENCE ON THE WEB INFRASTRUCTURE
The success of Abidon service will depend in large part upon the development
and maintenance of the Web infrastructure, such as a reliable network
backbone with the necessary speed, data capacity and security, or timely
development and complementary products such as high speed modems, for
providing reliable Web access and services. Because global commerce and the
online exchange of information is new and evolving, it is difficult to
predict with any assurance whether the Web will prove to be a viable
commercial marketplace in the long term. The Web has experienced, and is
expected to continue to experience, significant growth in the numbers of
users and amount of traffic. To the extent that the Web continues to
experience increased numbers of users, frequency of use or increased
bandwidth requirements of users, there can be no assurance that the Web
infrastructure will continue to be able to support the demands placed on it
by this continued growth or that the performance or reliability of the Web
will not be adversely affected. Furthermore, the Web has experienced a
variety of outages and other delays as a result of damage to portions of its
infrastructure, and could face such outages and delays in the future,
including outages and delays that could adversely affect the level of Web
usage and also the level of traffic and the processing of auctions on
Abidon.com. In addition, the Web could lose its viability due to delays in
the development or adoption of new standards and protocols to handle
increased levels of activity or due to increased governmental regulation.
There can be no assurance that the infrastructure or complementary products
or services necessary to make the Web a viable commercial marketplace for
the long term will be developed or that if they are developed, that the Web
will become a viable commercial marketplace for services such as those
offered by the Company. If the necessary infrastructure, standard or
protocols or complementary products, services or facilities are not
developed, or if the Web does not become a viable commercial marketplace,
the Company's business, results of operations and financial condition will
be materially and adversely affected. Even if the infrastructure, standards
and protocols or complementary products, services or facilities are
developed and the Web becomes a viable commercial marketplace in the long
term, the Company might be required to incur substantial expenditures in
order to adapt its service to changing Web technologies, which could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business-Industry Background."
RISKS ASSOCIATED WITH INFORMATION DISSEMINATED THROUGH THE COMPANY'S SERVICE
The law relating to the liability of online services companies for
information carried on or disseminated through their services is currently
unsettled. It is possible that claims could be made against online services
companies under both United States and foreign law for defamation, libel,
invasion of privacy, negligence, copyright or trademark infringement, or
other theories based on the nature and content of the materials disseminated
through their services. Several private lawsuits seeking to impose such
liability upon other online services companies are currently pending. In
addition, legislation has been proposed that imposes liability for or
prohibits the transmission over the Internet of certain types of
information. The Abidon service features a Feedback Forum, which includes
information from users regarding the reliability of other users in promptly
paying or delivering goods sold in an auction transaction. Although all
such feedback is generated by users and not by the Company, it is possible
that a claim of defamation or other injury could be made against the Company
for content posted in the Feedback Forum. The imposition upon the Company
and other online services providers of potential liability for information
carried on or disseminated through their services could require the Company
to implement measures to reduce its exposure to such liability, which may
require the Company to expend substantial resources and/or to discontinue
certain service offerings. In addition, the increased attention focused
upon liability issues as a result of these lawsuits and legislative
proposals could impact the growth of Internet use. While the Company
carries liability insurance, it may not be adequate to fully compensate the
Company in the event the Company becomes liable for information carried on
or disseminated through its service. Any costs not covered by insurance
incurred as a result of such liability or asserted liability could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business--Government Regulation" and "--Privacy
Policy."
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES
The Company is subject to direct federal, state or local regulation, and
laws or regulations applicable to access to or commerce on the Internet
applicable to businesses generally. However, due to the increasing
popularity and use of the Internet and other online services, it is possible
that a number of laws and regulations may be adopted with respect to the
Internet or other online services covering issues such as user privacy,
freedom of expression, pricing, content and quality of products and
services, taxation, advertising, intellectual property rights and
information security. The nature of legislation and the manner in which it
may be interpreted and enforced cannot be fully determined and, therefore,
legislation similar to the CDA could subject the Company and/or its
customers to potential liability, which in turn could have a material
adverse effect on the Company's business, results of operations and
financial condition. The adoption of any such laws or regulations might also
decrease the rate of growth of Internet use, which in turn could decrease
the demand for the Abidon service or increase the cost of doing business or
in some other manner have a material adverse effect on the Company's
business, results of operations and financial condition. In addition,
applicability to the Internet of existing laws governing issues such as
property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. In addition,
numerous states have regulations regarding the manner in which "auctions"
may be conducted and the liability of "auctioneers" in conducting such
auctions. Several states have also proposed legislation that would limit
the uses of personal user information gathered online or require online
services to establish privacy policies. Changes of existing laws or the
passage of new laws intended to address these issues, including some
recently proposed changes, could create uncertainty in the marketplace that
could reduce demand for the services of the Company or increase the cost of
doing business as a result of litigation costs or increased service delivery
costs, or could in some other manner have a material adverse effect on the
Company's business, results of operations and financial condition. In
addition, because the Company's services are accessible worldwide, and the
Company facilitates sales of goods to users worldwide, other jurisdictions
may claim that the Company is required to qualify to do business as a
foreign corporation in a particular state or foreign country. The Company
is qualified to do business in two states in the United States, and failure
by the Company to qualify as a foreign corporation in a jurisdiction where
it is required to do so could subject the Company to taxes and penalties for
the failure to qualify and could result in the inability of the Company to
enforce contracts in such jurisdictions. Any such new legislation or
regulation, or the application of laws or regulations from jurisdictions
whose laws do not currently apply to the Company's business, could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Business--Government Regulation" and "--Privacy
Policy."
SALES AND OTHER TAXES
The Company does not collect sales or other similar taxes in respect of
goods sold by users through Abidon service. The exception to this is only
when the East State Antique Mall lists an item for sale and it is sold to a
buyer that resides in Illinois and does not have a resale certificate
number. At that time the Illinois sales tax of 6-1/4% is collected. On all
out of state sales no taxes are collected. However, one or more states may
seek to impose sales tax collection obligations on out-of-state companies
such as the Company which engage in or facilitate online commerce, and a
number of proposals have been made at the state and local level that would
impose additional taxes on the sale of goods and services through the
Internet. Such proposals, if adopted, could substantially impair the growth
of electronic commerce, and could adversely affect the Company's opportunity
to derive financial benefit from such activities. Moreover, a successful
assertion by one or more states or any foreign country that the Company
should collect sales or other taxes on the exchange of merchandise on its
system could have a material adverse effect on the Company's business,
results of operations and financial condition.
Legislation limiting the ability of the states to impose taxes on Internet-
based transactions has been proposed in the U.S. Congress. There can be no
assurance that this legislation will ultimately be enacted into law or that
the final version of this legislation will not contain a limited time period
in which such tax moratorium will apply. In the event that the tax
moratorium is imposed for a limited time period, there can be no assurance
that the legislation will be renewed at the end of such period. Failure to
enact or renew this legislation could allow various states to impose taxes
on Internet-based commerce and the imposition of such taxes could have a
material adverse effect on the Company's business, results of operations and
financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
A component of the Company's strategy is to expand internationally.
Expansion into the international markets will require management attention
and resources. The Company has limited experience in localizing its
service, and the Company believes that many of its competitors are also
undertaking expansion into foreign markets. There can be no assurance that
the Company will be successful in expanding into international markets. In
addition to the uncertainty regarding the Company's ability to generate
revenues from foreign operations and expand its international presence,
there are certain risks inherent in doing business on an international
basis, including, among others, regulatory requirements, legal uncertainty
regarding liability, tariffs, and other trade barriers, difficulties in
staffing and managing foreign operations, longer payment cycles, different
accounting practices, problems in collecting accounts receivable, political
instability, seasonal reductions in business activity and potentially
adverse tax consequences, any of which could adversely affect the success of
the Company's international operations. To the extent the Company expands
its international operations and has additional portions of its
international revenues denominated in foreign currencies, the Company could
become subject to increased risks relating to foreign currency exchange rate
fluctuations. There can be no assurance that one or more of the factors
discussed above will not have a material adverse effect on the Company's
future international operations and, consequently, on the Company's
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and "Business--Abidon Strategy."
PROTECTION AND ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
The Company regards the protection of its copyrights, service marks,
trademarks, trade dress and trade secrets as critical to its future success
and relies on a combination of copyright, trademark, service mark and trade
secret laws and contractual restrictions to establish and protect its
proprietary rights in products and services. The Company has entered into
confidentiality and invention assignment agreements with its employees and
contractors, and nondisclosure agreements with parties with whom it conducts
business in order to limit access to and disclosure of its proprietary
information. There can be no assurance that these contractual arrangements
or the other steps taken by the Company to protect its intellectual property
will prove sufficient to prevent misappropriation of the Company's
technology or to deter independent third-party development of similar
technologies. The Company pursues the registration of its trademarks and
service marks in the U.S. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which the
Company's services are made available online. The Company has licensed in
the past, and expects that it may license in the future, certain of its
proprietary rights, such as trademarks or copyrighted material, to third
parties. While the Company attempts to ensure that the quality of the
Abidon brand is maintained by such licensees, there can be no assurance that
such licensees will not take actions that might materially adversely affect
the value of the Company's proprietary rights or reputation, which could
have a material adverse effect on the Company's business, results of
operations and financial condition. The Company also relies on certain
technologies that it licenses from third parties such as Microsoft, the
supplier of key database technology, the operating system and specific
hardware components for the service. There can be no assurance that these
third-party technology licenses will continue to be available to the Company
on commercially reasonable terms. The loss of such technology could require
the Company to obtain substitute technology of lower quality or performance
standards or at greater cost, which could materially adversely affect the
Company's business, results of operations and financial condition.
There can be no assurance that third parties will not claim infringement by
the Company with respect to past, current or future technologies. The
Company expects that participants in its markets will be increasingly
subject to infringement claims as the number of services and competitors in
the Company's industry segment grows. Any such claim, whether meritorious
or not, could be time-consuming, result in costly litigation, cause service
upgrade delays or require the Company to enter into royalty or licensing
agreements. Such royalty or licensing agreements might not be available on
terms acceptable to the Company or at all. As a result, any such claim
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business--Intellectual Property
Rights."
POSSIBLE VOLATILITY OF STOCK PRICE
The trading price of the Common Stock is likely to be highly volatile and
could be subject to wide fluctuations in response to factors such as actual
or anticipated variations in the Company's quarterly operating results,
announcements of technological innovations, or new services by the Company
or its competitors, changes in financial estimates by securities analysts,
conditions or trends in the Internet and online commerce industries, changes
in the market valuations of other Internet or online service companies,
announcements by the Company or its competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments, additions or
departures of key personnel, sales of Common Stock or other securities of
the Company in the open market and other events or factors, many of which
are beyond the Company's control. Further, the stock market in general has
experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of such
companies. The trading prices of many technology companies' stocks are at
or near historical lows. These broad market and industry factors may
materially and adversely affect the market price of the Common Stock,
regardless of the Company's operating performance. Market fluctuations, as
well as general political and economic conditions such as recession or
interest rate or currency rate fluctuations, may also adversely affect the
market price of the Common Stock. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such company. Such
litigation, if instituted, could result in substantial costs and a diversion
of management's attention and resources, which would have a material adverse
effect on the Company's business, results of operations and financial
condition.
CONTROL BY PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS
Upon completion of this offering, the Company's executive officers and
directors (and their affiliates) will, in the aggregate, own approximately
(54.5%) of the Company's outstanding Common Stock (53.4% if the
Underwriters' over-allotment option is exercised in full). As a result,
such persons, acting together, will have the ability to control all matters
submitted to stockholders of the Company for approval (including the
election and removal of directors and any merger, consolidation or sale of
all or substantially all of the Company's assets) and to control the
management and affairs of the Company. Accordingly, such concentration of
ownership may have the effect of delaying, deferring or preventing a change
in control of the Company, impede a merger, consolidation, takeover or other
business combination involving the Company or discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain
control of the Company, which in turn could have an adverse effect on the
market price of the Company's Common Stock. See "Management" and "Principal
and Selling Stockholders."
FUTURE CAPITAL NEEDS
The Company currently anticipates that the net proceeds of this offering,
together with its available funds, will be sufficient to meet its
anticipated needs for working capital, capital expenditures and business
expansion through at least the next 5 years. Thereafter, the Company may
need to raise additional funds. The Company may need to raise additional
funds sooner in order to fund more rapid expansion, to develop new or
enhanced services or products, to respond to competitive pressures or to
acquire complementary products, businesses or technologies. If additional
funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of the stockholders of the Company will
be reduced, stockholders may experience additional dilution and such
securities may have rights, preferences and privileges senior to those of
the Company's Common Stock. There can be no assurance that additional
financing will be available on terms favorable to the Company or at all. If
adequate funds are not available or are not available on acceptable terms,
the Company may not be able to fund its expansion, take advantage of
unanticipated acquisition opportunities, develop or enhance services or
products or respond to competitive pressures. Such inability could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations--Liquidity and
Capital Resources."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Company's Common Stock (including shares
issued upon the exercise of outstanding options) in the public market after
this offering could adversely affect the market price of the Common Stock.
Such sales also might make it more difficult for the Company to sell equity
or equity-related securities in the future at a time and price that the
Company deems appropriate. In addition to the 4,500,000 shares of Common
Stock offered hereby (assuming no exercise of the over-allotment option), as
of the date of this Prospectus, there will be 17,050,000 shares of Common
Stock outstanding, all of which are restricted securities ("Restricted
Securities") under the Securities Act of 1933, as amended (the "Securities
Act"). If such holders sell in the public market, such sales could have a
material adverse effect on the market price of the Company's Common Stock.
NO PRIOR MARKET FOR COMMON STOCK
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market
will develop or be sustained after this offering or that investors will be
able to sell the Common Stock should they desire to do so. The initial
public offering price was determined by a consensus of the Board of
Directors.
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price is substantially higher than the net
tangible book value per outstanding share of Common Stock. Purchasers of
the Common Stock in this offering will suffer immediate and substantial
dilution of $14.09 per share in the net tangible book value of the
Common Stock from the initial public offering price. To the extent that
outstanding options to purchase the Company's Common Stock are exercised,
there may be further dilution. See "Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 4,500,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$75,330,000 ($83,700,000 if the over-allotment option is exercised in full).
The primary purposes of this offering are to obtain additional capital,
create a public market for the Common Stock and increase its real estate
holdings.
The Company intends to use at least $3,000,000 of the net proceeds of this
offering for capital expenditures. The Company intends to use the net
proceeds, over time, for general corporate purposes, including working
capital. If less than all of the shares registered in this registration are
sold the funds will be used as follows: first, $3,000,000 for capital
expenditures by the end of 2002; second, $1,000,000 to invest in technology,
products, and services; third, $5,000,000 general corporate business
including working capital; fourth, $2,000,000 to acquire or invest in
businesses; and fifth, $10,000,000 to invest in real estate. The Company
has no present plans or commitments and is not currently engaged in any
negotiations with respect to such transactions that are material. Pending
such uses, the Company intends to invest the net proceeds from this offering
in short-term, interest-bearing, investment-grade securities. The Company
will have significant discretion as to the use of the net proceeds from this
offering. See "Risk Factors-Future Capital Needs" and "Broad Management
Discretion Over Allocations of Proceeds."
BROAD MANAGEMENT DISCRETION OVER ALLOCATIONS OF PROCEEDS
The net proceeds to the Company from the sale of the 4,500,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$75,330,000 (approximately $83,700,000 if the over-allotment option is
exercised in full). The primary purposes of this offering are to obtain
additional capital, create a public market for the Common Stock and
facilitate future access to public markets. The Company intends to use at
least $3,000,000 of the net proceeds of this offering for capital
expenditures. The Company intends to use a portion of the net proceeds,
over time, for general corporate purposes, including working capital. The
Company may also use a portion of the net proceeds, currently intended for
general corporate purposes, to acquire or invest in businesses,
technologies, products or services that are complementary to the Company's
business. Accordingly, the Company's management will retain broad
discretion as to the allocation of the proceeds of this offering. The
failure of management to apply such funds effectively could have a material
adverse effect on the Company's business, results of operations and
financial condition. See "Use of Proceeds."
DETERMINATION OF OFFERING PRICE
The following factors were taken into consideration to determine the
offering price: dilution to the new shareholders, the percentage of the
corporation that the new stockholders would own, the amount of funds needed
by the corporation to be a successful venture, and the price of other IPO
offerings. Also, consideration was given to the projected growth of the
corporation.
SELLING SECURITY HOLDERS
All of the securities to be registered are to be offered by the Registrant.
PLAN OF DISTRIBUTION
The Registrant intends to offer the stock to the public without using
any Underwriters. The stock will be offered for sale on our website,
"www.abidon.com", newspaper ads and magazine publications, television, by
mail, and investment meetings. The stock will be offered on a continuous
basis until the offering is sold out. The plan is to be implemented by the
Board of Directors immediately after the effective date of this Registration
Statement.
DIVIDEND POLICY
The Company paid a cash dividend on January 15, 2001 of $.005 per share of
common stock and the Company does not anticipate paying any cash dividends
again until 2002.
BUSINESS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from
the results discussed in these forward-looking statements. Factors that may
cause such a difference include, but are not limited to, those discussed in
"Risk Factors."
CAPITALIZATION
ABIDON, INC.
BALANCE SHEET
As of September 30, 2001
Assets
CURRENT ASSETS
Rent Receivable 9,504
Total Current Assets 9,504
PROPERTY AND EQUIPMENT
Buildings 5,727,668
Furniture, Fixt & Equip 111,146
Land 535,070
Accumulated Depreciation (2,114,862)
Net Property and Equipment 4,259,022
OTHER ASSETS
Loan Fees 4,243
Other 1,114
Less: Accumulated amortization (1,367)
Total Other Assets 3,990
TOTAL ASSETS 4,272,516
Liabilities
CURRENT LIABILITIES
Accounts Payable 5,265
Accrued Payroll Taxes 12,166
Accrued Sales Tax 7,055
Deferred Revenues 39,950
Accrued Income Tax 79,422
Real estate taxes payable 185,710
Current portion L/T Debt 171,505
Total Current Liabilities 501,073
LONG-TERM LIABILITIES
Long-Term Debt less current portion 1,210,170
Total Long-Term Liabilities 1,210,170
STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value per share
40,000,000 shares authorized
17,050,000 shares issued and outstanding 1,705
Additional paid-in capital 1,916,295
Retained Earnings 643,273
Total Stockholders' Equity 2,561,273
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 4,272,516
DILUTION
The pro forma net tangible book value of the Company as of September 30,
2001 is $2,561,000, or $0.15 per share of Common Stock. "Pro forma net
tangible book value per share" is determined by dividing the pro forma
number of outstanding shares of Common Stock (assuming the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock) into the
net tangible book value of the Company (total tangible assets less total
liabilities). After giving effect to the receipt of the estimated net
proceeds from the sale by the Company of the 5,000,000 shares of Common
Stock offered by the Company hereby (after deducting the underwriting
discount and estimated offering expenses), the pro forma net tangible book
value of the Company as of September 30, 2001 is approximately $86,261,000,
or $3.91 per share. This represents an immediate increase in pro forma net
tangible book value of $3.76 per share to existing stockholders and an
immediate dilution of $14.09 per share to new investors purchasing shares at
the initial public offering price. The following table illustrates the per
share dilution:
Initial public offering price per share $18.00
Pro forma net tangible book value per
share as of Sept 30, 2001 $0.15
Increase per share attributable to new investors $3.76
Pro forma net tangible book value per
share after the offering $3.91
Dilution per share to new investors $14.09
======
The following table summarizes as of September 30, 2001, on the pro forma
basis described above, the number of shares of Common Stock purchased from
the Company, and the total consideration paid to the Company. The following
table is after deducting the Underwriters discount.
Shares Purchased Total Consideration Average
Number Percent Amount Percent Price/Share
---------- ------ ---------- ------ ------
Existing
stockholders 17,050,000 77.32% 2,561,000 3.03% $ 0.15
New investors 5,000,000 22.68% 83,700,000 96.97% $ 18.00
---------- ------ ---------- ------
TOTAL 22,050,000 100% 86,261,000 100%
========== ====== ========== ======
The estimated other offering expenses to prepare the stock offering are
$500,000. The Underwriters discount is $6,300,000, for a total estimate
expense of $6,800,000.
After the closing of the offering, the Corporation is authorized to issue
more shares, not to exceed a total of 30,000,000 shares outstanding. Shares
to be used for buyouts, mergers, and advertising and includes 1,500,000
shares for employee incentive option plan. Included in employee incentives
are dealers leasing space in the E. State Antique Mall, 5301 and 5411 E.
State Street, Rockford, Illinois. No set plan of distribution for stock
incentives has been made at this time. Plan is to be implemented after the
closing of this stock offering up to 1,500,000 shares of stock are to be
offered to employees at a cost of $1.00 per share. The president is to
determine the procedure for the employee stock incentive plan.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, the Consolidated
Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing
elsewhere in this Prospectus. The consolidated statement of income data for
the years ended December 31, 1998, 1999, and 2000 and the consolidated
balance sheet data at December 31, 1998, 1999, and 2000 are derived from,
and are qualified by reference to, the audited consolidated financial
statements of the Company included elsewhere in this Prospectus. The
consolidated statement of income data for the nine months ended September
30, 2001 and the consolidated balance sheet data at September 30, 2001 have
been derived from the unaudited consolidated financial statements included
elsewhere in this Prospectus. The unaudited consolidated financial
statements have been prepared on substantially the same basis as the audited
consolidated financial statements and include all adjustments, consisting
only of normal recurring adjustments that the Company considers necessary
for a fair presentation of the financial position and results of operations
for the period. Operating results for the nine months ended September 30,
2001 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2001. Statements for 1996 and 1997 are
unaudited.
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The Company was incorporated January 18, 2000. The Company assets consist
of the pooling of the assets of the following three Illinois corporations:
State Street Investors of Rockford Inc., Rockford Investors Inc., and East
State Antiques Mall Inc. The calculations before the corporation was formed
on January 1, 2000 are made as follows: 85,250 shares of stock outstanding.
Year Ended Nine Months Ended
December 31, Sept. 30,
2000 2001
(In Thousands, Except Per Share Data)
PRO FORMA CONSOLIDATED STATEMENT OF
INCOME DATA:
Net revenues $ 3,826 $ 2,869
Cost of new revenues 1,883 1,236
------- -------
Gross profit 1,943 1,632
------- -------
Operating expenses
sales and marketing 1,642 1,190
Total operating expenses 1,642 1,190
------- -------
Income (loss) from operations
Interest and other income, net (120) (97)
------- -------
Income (loss) before income taxes 181 230
Provisions for income taxes 26 89
------- -------
Net income (loss) $ 154 $ 141
======= =======
pro forma net income (loss) per
share (1):
Basic $ 180 $ .008
======= =======
Weighted average shares-basic 85 17,050
======= =======
Diluted $ .009 $ .006
======= =======
Weighted average shares-diluted 17,050 22,050
======= =======
Nine Months Ended Year Ended
September 30 December 31
CONSOLIDATED STATEMENT OF INCOME DATA: 2000 2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Lease revenues $1195 $1264 $1783 $1782 $1807 $1618 $1661
Antique Mall Sales 1329 1568 1969 2095 2420 2547 2542
Internet Auction Service Revenues -- 37 74 -- -- -- --
---- ---- ---- ---- ---- ---- ----
Total Revenues 2525 2869 3826 3877 4227 4165 4203
---- ---- ---- ---- ---- ---- ----
COST OF GOODS SOLD
Paid to Antique Mall Dealers 1191 1213 1814 1905 2254 2203 2181
Internet Auction Service Consignments 49 23 69 -- -- -- --
---- ---- ---- ---- ---- ---- ----
Total Cost of Goods Sold 1240 1236 1883 1905 2254 2203 2181
---- ---- ---- ---- ---- ---- ----
Gross Profit 1285 1633 1943 1972 1972 1962 2022
OPERATING EXPENSES 1215 1190 1642 1340 1115 1179 1259
---- ---- ---- ---- ---- ---- ----
Operating Income 70 327 300 632 857 783 763
---- ---- ---- ---- ---- ---- ----
OTHER INCOME (EXPENSE)
Interest Income
Interest Expense (101) (97) (120) (129) (143) 155 177
Other Income -- -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ----
Net Other Expense (101) (97) (119) (127) (140) (155) (177)
---- ---- ---- ---- ---- ---- ----
Income Before Income Taxes (31) 230 181 504 717 628 586
PROVISION FOR INCOME TAXES (12) (90) 26 10 9 9 7
---- ---- ---- ---- ---- ---- ----
NET INCOME (43) 141 $154 $494 $707 $619 $579
---- ---- ---- ---- ---- ---- ----
Net Income per Share (2): $(.51) $.008 $1.80 $5.79 $8.29 $7.26 $6.79
Basic ---- ---- ---- ---- ---- ---- ----
Weighted Average shares-basic 85 17,050 85 85 85 85 85
---- ---- ---- ---- ---- ---- ----
Diluted $(.025) $.008 $.009 $5.79 $8.29 $7.26 $6.74
---- ---- ---- ---- ---- ---- ----
Weighted average shares diluted 17,050 17,050 17,050 85 85 85 85
---- ---- ---- ---- ---- ---- ----
Long Term Liabilities 1,392 1,210 $1,520 $1,692 $1,853 $1,978 $2,148
---- ---- ---- ---- ---- ---- ----
CONSOLIDATED FINANCIAL DATA
ABIDON, INC.
BALANCE SHEETS
December 31, 2000 and 1999
ASSETS
2000 1999
---------- ----------
CURRENT ASSETS
Cash $ 85,539 $ 112,872
Rent receivable 2,526 4,224
Total Current Assets 88,065 117,096
---------- ----------
PROPERTY AND EQUIPMENT 4,352,141 4,477,706
---------- ----------
OTHER ASSETS
Loan fees 4,243 4,243
Other 1,114 --
Less: Accumulated amortization (1,367) (407)
Net Other Assets 3,990 3,836
---------- ----------
TOTAL ASSETS $ 4,444,196 $ 4,598,638
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 86,658 $ 93,056
Wages payable 9,357 3,674
Payroll taxes and withholdings payable 17,096 8,522
Sales tax payable 6,481 8,175
Deferred revenues 39,950 33,361
Income taxes payable 26,313 8,310
Real estate taxes payable 247,613 263,208
Current portion of long-term debt 171,505 159,016
---------- ----------
Total Current Liabilities 604,973 577,322
LONG-TERM LIABILITIES
Long-Term debt, less current portion 1,333,833 1,520,161
---------- ----------
Total Liabilities 1,938,806 2,097,483
---------- ----------
STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value per share 1,705 1,705
40,000,000 shares authorized
17,050,000 shares issued and outstanding
Additional paid-in capital 1,916,295 1,916,295
Retained earnings 587,390 583,155
---------- ----------
Total Stockholders' Equity 2,505,390 2,501,155
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,444,196 $4,598,638
========== ==========
CONSOLIDATED FINANCIAL DATA
ABIDON, INC.
BALANCE SHEET
As of September 30, 2001
Assets
CURRENT ASSETS
Rent Receivable 9,504
Total Current Assets 9,504
PROPERTY AND EQUIPMENT
Buildings 5,727,668
Furniture, Fixt & Equip 111,146
Land 535,070
Accumulated Depreciation (2,114,862)
Net Property and Equipment 4,259,022
OTHER ASSETS
Loan Fees 4,243
Other 1,114
Less: Accumulated amortization (1,367)
Total Other Assets 3,990
TOTAL ASSETS 4,272,516
Liabilities
CURRENT LIABILITIES
Accounts Payable 5,265
Accrued Payroll Taxes 12,166
Accrued Sales Tax 7,055
Deferred Revenues 39,950
Accrued Income Tax 79,422
Real estate taxes payable 185,710
Current portion L/T Debt 171,505
Total Current Liabilities 501,073
LONG-TERM LIABILITIES
Long-Term Debt less current portion 1,210,170
Total Long-Term Liabilities 1,210,170
STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value per share
40,000,000 shares authorized
17,050,000 shares issued and outstanding 1,705
Additional paid-in capital 1,916,295
Retained Earnings 643,273
Total Stockholders' Equity 2,561,273
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 4,272,516
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, certain data from
the Company's consolidated statement of income, such data as a percentage of
net revenues and certain supplemental operating data. The consolidated
statement of income data has been derived from the Company's unaudited
consolidated financial statements, which, in management's opinion, have been
prepared on substantially the same basis as the audited consolidated
financial statements and include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
information for the periods presented. This information should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included elsewhere in this Prospectus. The operating results in any quarter
are not necessarily indicative of the results that may be expected for any
future period.
QUARTERLY RESULTS OF OPERATIONS
--------------------------------------------------------------------------
Three Months Ended
Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30
(IN THOUSANDS, EXCEPT PERCENTAGES
1999 2000 2000 2000 2000 2001 2001 2001
---- ---- ---- ---- ---- ---- ---- ----
Net revenues $1013 $693 $942 $890 $1016 $889 $975 $1003
Cost of net revenues 417 436 469 465 502 519 484 562
---- ---- ---- ---- ---- ---- ---- ----
Gross Profit 560 257 473 425 514 370 491 441
---- ---- ---- ---- ---- ---- ---- ----
Total operating expenses 267 203 494 490 417 338 444 444
---- ---- ---- ---- ---- ---- ---- ----
Income from operations 293 203 494 490 417 338 444 444
Interest and other income, net -- -- -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ----
Income before income taxes 293 53 (21) (65) 97 32 29 14
Provision for income taxes (64) (6) (6) -- -- (7) (6) (3)
---- ---- ---- ---- ---- ---- ---- ----
Net Income $229 $47 ($27) ($65) $97 $25 $23 $11
===== ==== ===== ===== ===== ==== ==== ====
AS A PERCENTAGE OF NET REVENUES:
Net revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of net revenues 41.16 62.91 47.78 52.24 49.40 58.38 48.64 56.03
---- ---- ---- ---- ---- ---- ---- ----
Gross profit 58.84 37.09 50.22 47.76 50.60 41.62 50.36 43.97
---- ---- ---- ---- ---- ---- ---- ----
Total operating expenses 26.35 29.29 52.44 55.05 81.12 38.02 45.53 44.26
---- ---- ---- ---- ---- ---- ---- ----
Income from operations 32.49 7.80 (2.22) (7.29) 30.52 3.60 4.83 (.29)
Interest and other income, net -- -- -- -- -- -- -- --
---- ---- ---- ---- ---- ---- ---- ----
Income before income taxes 32.49 7.80 (2.22) (7.29) 30.52 3.60 4.83 (.29)
Provision for income taxes (6.31) (.86) (.63) -- -- (.79) (1.06) (.06)
---- ---- ---- ---- ---- ---- ---- ----
Net income 26.18% 6.94% (2.85%) (7.29%) 30.52% 2.81% 3.77% .23%
===== ==== ===== ===== ===== ==== ==== ====
The Company was incorporated January 18, 2000. The Company assets consist
of the pooling of the assets of the following three Illinois corporations:
State Street Investors of Rockford, Inc., Rockford Investors, Inc., and East
State Antiques Mall, Inc. The calculations before the corporation was
formed on January 18, 2000 are made as follows: 85,250 shares of stock
outstanding.
Years ended December 31, 1999 and 2000 and 9 months ended September 30, 2000
and 2001.
The following table sets forth, for the periods presented, certain data from
the Company's consolidated statement of income as a percentage of net
revenues. The information for the nine month periods has been derived from
the Company's unaudited consolidated financial statements, which in
management's opinion, have been prepared on substantially the same basis as
the audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information for the periods presented. This
information should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.
Nine Months Ended
Year Ended Dec. 31 September 30
------------------ -----------------
1999 2000 2000 2001
----- ----- ----- -----
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of net revenues 49.1 49.5 49.1 43.0
----- ----- ----- -----
Gross profit 50.9 50.5 50.9 57.0
----- ----- ----- -----
Total operating expenses 34.6 42.9 31.7 41.4
----- ----- ----- -----
Income from operations 16.3 7.8 18.2 11.3
Interest and other income, net (3.3) (3.1) (2.6) (33.8)
----- ----- ----- -----
Income before income taxes 13.0 4.7 (0.8) 8.0
Provision for income taxes 0.3 0.7 (0.3) 3.1
----- ----- ----- -----
Net income 12.7% 4.0% (1.1)% 4.9%
----- ----- ----- -----
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Abidon is very new and has only been in operation since April 4, 2000 and as
of September 30, 2001 has a staff of 25 employees engaged in developing
advertising, promoting the site, improving customer relations, obtaining
users, acquiring companies that will list their entire catalog of products
on the site, operating the antique mall and the real estate buildings.
Abidon has been able to develop the online service with 25 employees without
showing a corporation loss.
Substantially all of the Company's revenues come from income from real
estate rentals in the two buildings and sales from the antique mall. Abidon
charges no fees to buyers and, to date, has sold some advertising on the Web
site.
The Company has only a limited operating history on Internet/online service
to base an evaluation of its business and prospects. The Company's
prospects must be considered in light of the risks, uncertainties, expenses
and difficulties frequently encountered by companies in their early stages
of development, particularly companies in new and rapidly evolving markets
such as online commerce.
FACTORS AFFECTING RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Abidon is very new and thus has only a limited operating history on which to
base an evaluation of its business and prospects. The Company's prospects
must be considered in light of the risks, uncertainties, expenses and
difficulties frequently encountered by companies in their early stages of
development, particularly companies in new and rapidly evolving markets such
as online commerce. To address these risks and uncertainties, the Company
must, among other things, maintain and increase the number of its registered
users, items listed on its service and completed auctions, maintain and
enhance its brand, implement and execute its business and marketing strategy
successfully, continue to develop and upgrade its technology and
information-processing systems, continue to enhance the Abidon.com service
to meet the needs of a changing market, provide superior customer service,
respond to competitive developments, and attract, integrate, retain and
motivate qualified personnel. The Company must increase its real estate
holdings. There can be no assurance that the Company will be successful in
accomplishing all of these things, and the failure to do so could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company believes that its continued growth will depend in large part on
its ability to: (i) increase its brand name awareness, (ii) provide its
customers with superior community and trading experiences and (iii) maintain
sufficient transaction volume to attract buyers and sellers. Accordingly,
the Company intends to invest heavily in marketing and promotion, site
development, technology and operating infrastructure development. Although
the Company has experienced significant revenue growth and significant
growth in the number of its registered users and items listed for auction by
its users in recent periods, such growth rates may not be sustainable and
may decrease in the future. In view of the rapidly evolving nature of the
Company's business and its limited operating history, the Company believes
that period-to-period comparisons of its operating results are not
necessarily meaningful and should not be relied upon as indications of
future performance.
The Company's operating results have varied on a quarterly basis during its
short operating history and may fluctuate significantly as a result of a
variety of factors, many of which are outside the Company's control. Sales
from the Antique Malls and the ability to keep the real estate office/retail
buildings leased could affect the profitability. Other factors that may
affect the Company's quarterly operating results include: (a) the Company's
ability to manage the number of items listed on its service; (b) price
competition; (c) increasing consumer confidence and acceptance of the
Internet and other online services for commerce and, in particular, the
trading of products such as those listed on Abidon; (d) the Company's
ability to retain an active user base, attract new users who list items for
sale and who complete transactions through its service and maintain customer
satisfaction; (e) the level of use of the Internet and online services; (f)
the announcement or introduction of new sites, services and products by the
Company or its competitors; (g) consumer confidence in the security of
transactions over the Internet; (h) the success of the Company's brand
building and marketing campaigns; (i) the volume of items listed on the
Company's Web site; (j) the Company's ability to upgrade and develop its
systems and infrastructure to accommodate growth; (k) the timing, cost and
availability of advertising in traditional media and on other Web sites and
online services; (l) volume, size, timing and completion rate of trades on
Abidon; (m) the Company's ability to attract new personnel in a timely and
effective manner; (n) technical difficulties or service interruptions; (o)
the amount and timing of operating costs and capital expenditures relating
to expansion of the Company's business, operations and infrastructure; (p)
governmental regulation by Federal or local governments; (q) general
economic conditions as well as economic conditions specific to the Internet
and online commerce industries, and consumer trends and popularity of
certain categories of collectible items.
As a result of the Company's limited operating history and the emerging
nature of the markets in which it competes, it is difficult for the Company
to forecast its revenues or earnings accurately. In addition, the Company
has no backlog and a significant portion at he Company's net revenues for a
particular quarter are derived mostly from real estate holdings. The
Company's current and future expense levels are based largely on its
investment plans and estimates of future revenues and are, to a large
extent, fixed. The Company may be unable to adjust spending in a timely
manner to compensate for any unexpected revenue shortfall. Accordingly, any
significant shortfall in revenues relative to the Company's planned
expenditures would have an immediate adverse effect on the Company's
business, results of operations and financial condition. Further, as a
strategic response to changes in the competitive environment, the Company
may from time to time make certain pricing, service or marketing decisions
that could have a material adverse effect on its business, results of
operations and financial condition.
The Company believes that its results of operations from Internet sales are
somewhat seasonal in nature, with fewer auctions around the Thanksgiving and
Christmas holidays in the fourth quarter. The Company's limited operating
history, however, makes it difficult to fully assess the impact of these
seasonal factors or whether or not its business is susceptible to cyclical
fluctuations in the U.S. economy. In addition, the Company believes that
its rapid growth may have overshadowed whatever seasonal or cyclical factors
might have influenced its business to date. There can be no assurance that
seasonal or cyclical variations in the Company's operations will not become
more pronounced over time or that they will not materially adversely affect
its results of operations in the future. Moreover, consumer "fads" and
other changes in consumer trends may cause significant fluctuations in the
Company's operating results from one quarter to the next.
Due to the foregoing factors, the Company's quarterly revenues and operating
results are difficult to forecast. The Company believes that period-to-
period comparisons of its operating results may not be meaningful and should
not be relied upon as an indication of future performance. In addition, it
is likely that in one or more future quarters the Company's operating
results will fall below the expectations of securities analysts and
investors. In such event, the trading price of the Common Stock would
almost certainly be materially adversely affected.
BUSINESS
THE COMPANY
The corporation, Abidon Inc., is in the business of leasing office and
retail space, operates Abidon Inc. dba East State Antiques Mall, Abidon
internet auction services, community page, stores, advertising on the site,
and offers many other services on the internet.
Abidon.com is an online auction site offering a place for the public to sell
or buy many different products. We also have online stores specializing in
antiques and collectibles for people who prefer not to have to bid. On our
online stores, people can immediately purchase items that are available and
they can make an offer to the seller as well. Between both of these sites,
this adds up to thousands of items for sale and continues to build our
customer base. The sellers on our auction site and on our online stores
establish their selling price.
There are 3,053 categories and thousands of items available for purchase.
Hundreds of thousands of people are talking about Abidon and are able to
find products that they are interested in. Our sites are very "customer
friendly." Tremendous growth is expected in our products and our customer
base.
The Company's principal executive offices are located at 5301 E. State
Street, Suite 215, Rockford, Illinois. The phone number is 815-226-8700.
The Web site is located at www.abidon.com. Information contained on the
Company's Web site shall not constitute a part of this Prospectus.
INDUSTRY BACKGROUND
GROWTH OF INTERNET AND ONLINE COMMERCE
The Internet has emerged as a global medium enabling millions of people
worldwide to share information, communicate and conduct business
electronically. International Data Corporation (IDC) estimates that the
number of Web users is growing at a fast pace. This growth is expected to
be driven by the large and growing number of PCs installed in homes and
offices, the decreasing cost of PCs, easier, faster and cheaper access to
the Internet, improvements in network infrastructure, the proliferation of
Internet content and the increasing familiarity and acceptance of the
Internet by businesses and consumers. The Internet possesses a number of
unique characteristics that differentiate it from traditional media: users
communicate or access information without geographic or temporal
limitations; users access dynamic and interactive content on a real-time
basis; and users communicate and interact instantaneously with a single
individual or with entire groups of individuals. As a result of these
characteristics, Web usage is expected to continue to grow rapidly.
The growing adoption of the Web represents an enormous opportunity for
businesses to conduct commerce over the Internet. While companies initially
focused on facilitating and conducting transactions between businesses over
the Internet, a number of companies more recently have focused on
facilitating a wide variety of business-to-consumer transactions. These
companies typically use the Internet to offer standard products and services
that can be easily described with graphics and text and do no necessarily
require physical presence for purchase, such as books, CDs, videocassettes,
automobiles, home loans, airline tickets and online banking and stock
trading. The Internet gives these companies the opportunity to develop one-
to-one relationships with customers worldwide from a central location
without having to make the significant investments required to build a
number of local retail presences, manage a worldwide distribution
infrastructure or develop the printing and mailing infrastructure associated
with traditional direct marketing activities. While companies have
generally focused on applying these benefits in business-to-business and
business-to-consumer transactions, a significant market opportunity exists
to apply these same advantages to facilitate person-to-person trading over
the Internet.
THE PERSON-TO-PERSON TRADING MARKET OPPORTUNITY
The exchange of goods between individuals--person-to-person trading--has
traditionally been conducted through trading forums such as classified
advertisements, collectibles shows, garage sales and flea markets or through
intermediaries, such as auction houses and local dealer shops. These
markets are highly inefficient, making person-to-person trading difficult
for buyers and sellers. Their fragmented, regional nature makes it
difficult and expensive for buyer and sellers to meet, exchange information
and complete transactions. The localized nature of these markets also
results in a limited variety and breadth of goods available in any one
location. Buyers are limited to searching through local classified ads or
to traveling to numerous geographically dispersed flea markets, trade shows
or dealer shops in order to find items of interest. These markets often have
high transaction costs because intermediaries either mark up goods for
resale or charge a commission. Because these markets are information
inefficient, buyers and sellers lack a reliable and convenient means of
setting prices for sales or purchases with traditional person-to-person
trading while offering the benefits of Internet-based commerce to the
person-to-person trading market. An Internet-based centralized trading
place facilitates buyers and sellers meeting, listing items for sale,
exchanging information, interacting with each other and, ultimately,
consummating transactions. It allows buyers and sellers to trade directly,
bypassing traditional intermediaries and lowering costs for both parties.
This trading place is global in reach, offering buyers a significantly
broader selection of goods to purchase and providing sellers the opportunity
to sell their goods efficiently to a broader base of buyers. It offers
significant convenience, allowing trading at all hours and providing
continually-updated information. By leveraging the interactive nature of
the Internet, this trading place also facilitates a sense of community
through direct buyer and seller communication, thereby enabling the
interaction between individuals with mutual interests. In addition, this
community orientation, facilitation of direct buyer and seller communication
and efficient access to information on a particular buyer or seller's
trading history can help alleviate the risks of anonymous trading. As a
result, there exists a significant market opportunity for an Internet-based
centralized trading place that applies the unique attributes of the Internet
to facilitate person-to-person trading.
THE ABIDON SOLUTION
Abidon.com utilizes person-to-person trading of a wide range of goods over
the Internet using an efficient and entertaining auction format. The core
Abidon service permits sellers to list items for sale, buyers to bid for and
purchase items of interest and all Abidon users to browse through listed
items from any place in the world at any time. Abidon offers buyers a large
selection of new and used items that can be difficult and costly to find
through traditional means such as classified advertisements, collectibles
shows, garage sales and flea markets or through intermediaries, such as
auction houses and local dealer shops. Abidon also enables sellers to reach
a larger number of buyers more cost-effectively than traditional person-to-
person trading forums. Abidon also has real estate holdings and operates
the E. State Antique Malls.
UBuy2, Inc., now Abidon, Inc., a Delaware corporation, was originally
introduced on January 18, 2000 to create an efficient marketplace for
individuals to trade with one another. Abidon began as an online trading
community. Abidon primarily attracts buyers and sellers through TV ads,
trade magazines, newspapers, web pages, and links, and by providing buyers
and sellers with a place to trade goods with one another. The number of
categories under which Abidon lists goods for auction has grown to over
3000.
COMPELLING TRADING ENVIRONMENT. Abidon has created a distinctive trading
environment by utilizing an entertaining auction format, establishing
procedural rules and promoting community values that are designed to
facilitate trade and communications between buyers and sellers, without the
need for Abidon to intervene and play a significant role in the trading
process. The auction format creates a sense of urgency among buyers to bid
for goods because of the uncertain future availability of a unique item on
the site. Similarly, by accepting multiple bids at increasing prices, its
auction format provides sellers a more efficient means of obtaining a
maximum price for their products.
The Company encourages every Abidon user to provide comments and feedback on
other Abidon users with whom they interact and offers user profiles that
provide feedback ratings and incorporate these comments. The Company
believes that this Feedback Forum helps make users more comfortable with
dealing with an unknown trading partner over the Web. In addition, Abidon
provides guidelines for trade, helps provide information to resolve user
disputes, responds to reports of misuse of the Abidon service and, if
necessary, suspends users who violate the terms of the Company's user
agreement.
COST EFFECTIVE, CONVENIENT TRADING. Abidon allows its buyers and sellers to
bypass traditionally expensive, regionally-fragmented intermediaries and
carries no inventory, sellers bypass costly traditional intermediaries thus
allowing for lower selling costs and increasing the sellers' likelihood of
finding buyers willing to pay his or her target price. To list an item on
Abidon, sellers pay no placement fee. As a result, sellers for the first
time can sell relatively inexpensive items which had previously been
prohibitively expensive to list through most traditional trading forums. By
allowing sellers to conveniently reach a broad range of buyers, Abidon also
ameliorates the time-consuming, logistical inconvenience of individual
selling. Buyers have access to a broad selection of items and avoid the
need to pay expensive markups or commission to intermediaries. Buyers are
not charged for trading through Abidon. The critical mass of items listed
on Abidon provides a mutual benefit for buyers and sellers to more
effectively determine the appropriate price for an item.
STRONG COMMUNITY AFFINITY. The Company believes that fostering direct
interaction between buyers and sellers with similar interests has enabled it
to create a loyal, active community of users. Abidon has introduced a
variety of features and services designed to strengthen this sense of
community among Abidon users. The Company facilitates communications
between buyers and sellers by offering customer support assistance from
Abidon personnel and other Abidon users and by providing community features
that are designed to encourage consumer loyalty and repeat usage.
INTUITIVE USER EXPERIENCE. Abidon's service is a fully-automated,
topically-arranged, intuitive and easy-to-use online service that is
available on a 24 hour a day, seven day a week basis. Within minutes of
completing a simple online form, a seller can immediately list items for
sale on the service, and buyers can submit bids for items quickly and
easily. Buyers can easily search the thousands of items listed by category
or specific item. During the course of the auction, bidders are notified by
email of the status of their bids and are notified immediately if they are
outbid. Sellers and successful bidders are automatically notified when an
auction is completed. To assist users further, the Company offers customer
support via email.
ABIDON STRATEGY
The Company's objective is to build on its position as an online person-to-
person trading community. The key elements of Abidon's strategy are:
GROW THE ABIDON COMMUNITY AND THE ABIDON BRAND. The Company believes that
building greater awareness of the Abidon brand within and beyond the Abidon
community is critical to expanding its user base and to maintaining the
vitality of the Abidon community. The Company's historical growth has been
largely attributable by word-of-mouth, through TV ads, trade magazines,
newspapers, web pages, links and banners. The Company intends to build its
user base and its brand name aggressively. The Company has prepared a
substantial national advertising campaign, both in traditional media and
online, that is designed to attract new Abidon users. The campaign will
include advertising in targeted publications, strategic advertising and
sponsorship placements on high-traffic Web sites, radio and television
advertising campaigns and active participation in other forums such as
selected trade shows.
BROADEN THE ABIDON TRADING PLATFORM. The Company intends to pursue a multi-
pronged strategy for growing the Abidon platform within existing product
categories, across new product categories and internationally. The Company
will target key vertical markets in its user programs and marketing
activities. The Company also intends to grow existing product categories by
introducing category-specific bulletin boards and chat rooms, integrating
category-specific content, advertising its service in targeted publications
and participating in targeted trade shows. In addition, the Company intends
to broaden the range of products offered on its trading platform by seeking
to attract new users from the general audience of Internet users and adding
product categories, content and other services or features to meet this new
user demand. The Company believes that there are significant opportunities
for person-to-person trading worldwide and therefore intends to leverage the
service and brand name internationally by developing Abidon for selected
international markets and marketing and promoting these services actively.
ENHANCE FEATURES AND FUNCTIONALITY. The Company intends to update and
enhance the features and functionality of Abidon frequently in order to
continue to improve the user trading experience through Abidon. The Company
recently introduced personalization features such as a customizable user
interface that tracks a user's recent auction activity and account balance
information and highlights auctions of specified items. The Company intends
to introduce other features such as new auction formats, online stores and
online want ads, category-specific content and other features designed to
enhance the Abidon experience. The Company will continue to provide rapid
system response and transaction processing time by investing in its
infrastructure in order to accommodate additional users, content and
auctions.
EXPAND VALUE-ADDED SERVICES. In order to offer an "end-to-end" person-to-
person trading service, the Company intends to offer a variety of pre- and
post-trade services to enhance the user experience. The Company intends to
introduce services to facilitate the exchange of goods so that buyers and
sellers will feel more comfortable sending money or goods to an unknown
trading partner. It is anticipated that these services may include pre-
trade services, such as services to facilitate scanning and uploading of
photographs of listed items, and post-trade services, such as third-party
escrow services and arrangements with shippers to help sellers ship their
products more easily. The Company may pursue strategic relationships with
third parties to provide many of these value-added services.
REGISTRATION. While any visitor to Abidon can browse through the Abidon
service and view the items listed for auction, in order to bid for an item
or to list an item for sale, buyers and sellers must first register with
Abidon. Users register by completing a short online form and thereafter can
immediately bid for an item or list an item for sale.
BUYING ON ABIDON. Buyers typically enter Abidon.com through its home page,
which contains a listing of product categories that allows for easy
exploration of current auctions. Bidders can search for specific items by
browsing through a list of auctions within a category or subcategory and
then "click through" to a detailed description for a particular item.
Bidders can also search specific categories or the entire database of
auction listings using keywords to describe the types of products in which
they are interested, and Abidon's search engine will generate a list of
relevant auctions with links to the detailed descriptions. Each auction is
assigned a unique identifier so that users can easily search for and track
specific auctions.
Once a bidder has found an item of interest and registered with Abidon.com,
the bidder enters the maximum amount he or she is willing to pay at that
time. In the event of competitive bids, the Abidon service automatically
increases bidding in increments based upon the then current highest bid for
the item, up to the bidder's maximum price. As Abidon encourages direct
interaction between buyers and sellers, bidders wishing additional
information about a listed item can access the seller's email address and
contact the seller for additional information. The company believes that
this interaction between bidders and sellers leverages the personal, one-to-
one nature of person-to-person trading on the Web and is an important
element of the Abidon experience. Once each bid is made, a confirmation is
sent to the bidder via email, an outbid notice is sent to the next highest
bidders and the item's auction status is automatically updated. Bidders are
notified of the status of their bids via email and are notified immediately
after they are outbid. Bidders are not charged for making bids or purchases
through Abidon.
HOW TRANSACTIONS ARE COMPLETED. At the end of an auction period, if a bid
exceeds the minimum price and, if one is set, the reserve price, Abidon
automatically notifies the buyer and seller via email and the buyer and
seller can then consummate the transaction independently of Abidon. The
buyer and seller must independently arrange for the shipment of and payment
for the item, with the buyer typically paying for shipping. Possession is
taken of items only if they are being sold on consignment through the East
State Antique Mall and fees are then collected in the mall for these items
when they are sold. Under the terms of the Company's user agreement, if a
seller receives one or more bids above the stated minimum or reserve price,
whichever is higher, the seller is obligated to complete a transaction
although the Company has no power to force the seller or bidder to complete
the transaction other than to suspend them from using the Abidon service.
WHAT CAN BE PURCHASED OR SOLD ON ABIDON.COM. The Abidon service has grown
to offering over 3000 categories as of September, 2001. As the number of
product categories has grown, the Company periodically organizes the
categories under different headings to reflect the major types of items
currently listed. These product categories are currently organized under
the following headings:
Antiques Architectural Antiques
Art Books, Movies, Music
Coins, Stamps Collectibles
Computers Dolls, Figurines
Health & Beauty Jewelry, Gemstones
Motor Vehicles Photo & Electronics
Pottery, Glass Real Estate
Sports Memorabilia Tools
Toys and Games Miscellaneous
Each category has numerous subcategories. The Company also is currently
selling advertising banners and other types of advertising on the site.
The most popular items sold on Abidon are relatively standardized or are
well-represented with a photo (and therefore can be evaluated to some degree
without a physical inspection), are small and easily shippable, and are
relatively inexpensive. As the Abidon community grows and additional items
are listed, the Company will continue to organize auctions under additional
categories to respond to the needs of the Abidon community.
COMMUNITY SERVICES. Beyond providing a convenient means of trading Abidon
has devoted substantial resources to building an online person-to-person
trading community, which the Company believes is one of the strongest on the
Web. Key components of the Company's community philosophy are maintaining
an honest and open marketplace and treating individual users with respect.
The Company offers a variety of community and support features that are
designed to solidify the growth of the Abidon community and to build Abidon
user affinity and loyalty.
Abidon facilitates email communications between buyers and sellers.
MARKETING
Abidon marketing strategy is to promote its brand and attract buyers and
sellers to the Abidon service. To attract users to its site, Abidon
historically has relied on banners, TV ads, trade magazines, newspapers, web
pages, and links and, to a lesser extent, on distribution or sponsorship
relationships with high traffic Web sites. Today, the Company employs a
variety of methods to promote its brand and attract potential buyers
and sellers. Currently, Abidon utilizes strategic purchases of online
advertising to place advertisements in areas in which it believes it can
reach its target audience. The Company also engages in a number of
marketing activities in traditional media such as advertising in print media
and at shows and other events.
OPERATIONS AND TECHNOLOGY
Abidon has built a robust, scalable user interface and transaction
processing system. The Company's system maintains data records and all
other aspects of the auction process including notifying users via email
when they initially register, they place a successful bid, they are outbid,
they place an item for sale and an auction ends. The system maintains user
registration information, current auctions and historical listings. All
information is regularly archived to a data warehouse. The system updates a
text-based search engine hourly with the titles and descriptions of new
items, as well as pricing and bidding updates for active items.
The Company's system has been designed around industry standard
architectures and has been designed to reduce downtime in the event of
outages or catastrophic occurrences. The Abidon service provides 24 hour a
day, seven day a week availability. System hardware is hosted at the
Company's facility in Rockford, Illinois, which provides redundant
communications lines and emergency power backup. The Company's system
consists of database servers running SQL relational database management
systems and a suite of Pentium III Xeon based Microsoft E-Commerce servers
accessed via Terminal Servers running on a Windows 2000 server operating
system. The Company's Internet servers also utilize Equifax Secure digital
certificates to help it conduct secure communications and transactions.
The Company anticipates that it will continue to devote significant
resources to product development in the future as it adds new features and
functionality to the Abidon service. The market in which the Company
competes is characterized by rapidly changing technology; evolving industry
standards, frequent new service and product announcements, introductions and
enhancements and changing customer demands. Accordingly, the Company's
future success will depend on its ability to adapt to rapidly changing
technologies, to adapt its services to evolving industry standards and to
continually improve the performance, features and reliability of its service
in response to competitive service and product offerings and evolving
demands of the marketplace. The failure of the Company to adapt to such
changes would have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the widespread
adoption of new Internet, networking or telecommunications technologies or
other technological changes could require substantial expenditures by the
Company to modify or adapt its services or infrastructure which could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Risk Factors--Rapid Technological Change; Risks
Associated with New Services, Features and Functions."
COMPETITION
The market for person-to-person trading over the Internet is rapidly
evolving and intensely competitive, and the Company expects competition to
intensify further in the future. Barriers to entry are relatively low, and
current and new competitors can launch new sites at a relatively low cost
using commercially available software. The Company currently or potentially
competes with a number of other companies. The Company's direct competitors
include various online person-to-person auction services, including Yahoo!,
eBay, Amazon, Onsale; and a number of other small services, including those
that serve specialty markets. The Company potentially faces competition
from a number of large online communities and services that have expertise
in developing online commerce and in facilitating online person-to-person
interaction. Some of these potential competitors, including AOL and
Microsoft, currently offer a variety of business-to-consumer trading
services and classified ad services, and some of these companies may
introduce person-to-person trading to their larger user populations. Other
large companies with strong brand recognition and experience in online
commerce, such as large newspaper or media companies may also seek to
compete in the online auction market. Competitive pressures created by any
one of these companies, or by the Company's competitors collectively, could
have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company believes that the principal competitive factors in its market
are volume and selection of goods, population of buyers and sellers,
community cohesion and interaction, customer service, reliability of
delivery and payment by users, brand recognition, Web site convenience and
accessibility, price, quality of search tools and system reliability. Many
of the Company's potential competitors have longer operating histories,
larger customer bases and greater brand recognition in other business and
Internet markets and significantly greater financial, marketing, technical
and other resources than the Company. In addition, other online trading
services may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of Internet and other online services increases.
Therefore, some of the Company's competitors may be able to devote greater
resources to marketing and promotional campaigns, adopt more aggressive
pricing policies or may try to attract traffic by offering services for free
and devote substantially more resources to Web site and systems development
than the Company. Increased competition may result in reduced operating
margins, loss of market share and diminished value in the Company's brand.
There can be no assurance that the Company will be able to compete
successfully against current and future competitors. Further, as a
strategic response to changes in the competitive environment, the Company
may, from time to time, make certain pricing, service or marketing decisions
or acquisitions that could have a material adverse effect on its business,
results of operations and financial condition. New technologies and the
expansion of existing technologies may increase the competitive pressures on
the Company by enabling the Company's competitors to offer a lower cost
service. Certain Web based applications that direct Internet traffic to
certain Web sites may channel users to trading services that compete with
the Company. Although the Company has established Internet traffic
arrangements with several large online services and search engine companies,
there can be no assurance that these arrangements will be renewed on
commercially reasonable terms or that they will otherwise continue to result
in increased users of the Abidon service. In addition, companies that
control access to transactions through network access or Web browsers could
promote the Company's competitors or charge the Company substantial fees for
inclusion. Any and all of these events could have a material adverse effect
on the Company's business, results of operations and financial condition.
See "Risk Factors--Intense Competition."
INTELLECTUAL PROPERTY
The Company regards the protection of its copyrights, service marks,
trademarks, trade dress and trade secrets as critical to its future success
and relies on a combination of copyright, trademark, service mark and trade
secret laws and contractual restrictions to establish and protect its
proprietary rights in products and services.
There can be no assurance that these contractual arrangements or the other
steps taken by the Company to protect its intellectual property will prove
sufficient to prevent misappropriation of the Company's technology or to
deter independent third-party development of similar technologies. The
Company pursues the registration of its trademarks and service marks in the
U. S. There can be no assurance that these third-party technology licenses
will continue to be available to the Company on commercially reasonable
terms. The loss of such technology could require the Company to obtain
substitute technology of lower quality or performance standards or at
greater cost, which could materially adversely affect the Company's
business, results of operations and financial condition.
To date, the Company has not been notified that its technologies infringe
the proprietary rights of third parties, but there can be no assurance that
third parties will not claim infringement by the Company with respect to
past, current or future technologies. The Company expects that participants
in its markets will be increasingly subject to infringement claims as the
number of services and competitors in the Company's industry segment grows.
Any such claim, whether meritorious or not, could be time-consuming, result
in costly litigation, cause service upgrade delays or require the Company to
enter into royalty or licensing agreements. Such royalty or licensing
agreements might not be available on terms acceptable to the Company or at
all. As a result, any such claim could have a material adverse effect upon
the Company's business, results or operations and financial condition. See
"Risk Factors--Protection and Enforcement of Intellectual Property Rights."
PRIVACY POLICY
The Company believes that issues relating to privacy and use of personal
information relating to Internet users are becoming increasingly important
as the Internet and its commercial use grow. The Company has adopted a
detailed privacy policy that outlines how Abidon uses information concerning
its users and the extent to which other registered Abidon users may have
access to this information. Users must acknowledge and agree to this policy
when registering for the Abidon service. The Company does not sell or rent
any personally identifiable information about its users to any third party,
however, the Company does disclose information to sellers and winning
bidders that contains the seller's and winning bidder's name, email address
and telephone number. The Company also uses information about its users for
internal purposes only in order to improve marketing and promotional
efforts, to analyze site usage statistically, and to improve content,
product offerings and site layout. The Company is a member of the TRUSTe
program, a non-profit independent organization which audits Web sites'
privacy statements and audits their adherence thereto.
GOVERNMENT REGULATION
The Company is not currently subject to direct federal, state or local
regulation, and laws or regulations applicable to access to or commerce on
the Internet, other than regulations applicable to businesses generally.
However, due to the increasing popularity and use of the Internet and other
online services, it is possible that a number of laws and regulations may be
adopted with respect to the Internet or other online services covering
issues such as user privacy, freedom of expression, pricing, content and
quality of products and services, taxation, advertising, intellectual
property rights and information security. Although sections of the CDA
that, among other things, proposed to impose criminal penalties on anyone
distributing "indecent" material to minors over the Internet, were held to
be unconstitutional by the U.S. Supreme Court, there can be no assurance
that similar laws will not be proposed and adopted. Certain members of
Congress have recently discussed proposing legislation that would regulate
the distribution of "indecent" material over the Internet in a manner that
they believe would withstand challenge on constitutional grounds. The
nature of such similar legislation and the manner in which it may be
interpreted and enforced cannot be fully determined and, therefore,
legislation similar to the CDA could subject the Company and/or its
customers to potential liability, which in turn could have an adverse effect
on the Company's business, results of operations and financial condition.
The adoption of any such laws or regulations might also decrease the rate of
growth of Internet use, which in turn could decrease the demand for the
Abidon service or increase the cost of doing business or in some other
manner have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, applicability to the
Internet or existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel,
obscenity and personal privacy is uncertain. The vast majority of such laws
were adopted prior to the advent of the Internet and related technologies
and, as a result, do not contemplate or address the unique issues of the
Internet and related technologies. In addition, numerous states have
regulations regarding the manner in which "auctions" may be conducted and
the liability of "auctioneers" in conducting such auctions.
Several states have proposed legislation that would limit the use of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address
these issues, including some recently proposed changes, could create
uncertainty in the marketplace that could reduce demand for the services of
the Company or increase the cost of doing business as a result of litigation
costs or increased service delivery costs, or could in some other manner
have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, because the Company's
services are accessible worldwide and the Company facilitates sales of goods
to users worldwide, other jurisdictions may claim that the Company is
required to qualify to do business as a foreign corporation in a particular
state or foreign country. The Company is qualified to do business in two
states in the United States, and failure by the Company to qualify as a
foreign corporation in a jurisdiction where it is required to do so could
subject the Company to taxes and penalties for the failure to qualify and
could result in the inability of the Company to enforce contracts in such
jurisdictions. Any such new legislation or regulation, or the application
of laws or regulations from jurisdictions whose laws do not currently apply
to the Company's business, could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Risk Factors-Governmental Regulation and Legal Uncertainties."
EMPLOYEES
As of September 1, 2001 the Company had 25 employees. The Company had never
had a work stoppage, and no employees are represented under collective
bargaining agreements. The Company considers its relations with its
employees to be good. The Company believes that its future success will
depend in part on its continued ability to attract, integrate, retain and
motivate highly qualified technical and managerial personnel, and upon the
continued service of its senior management and key technical personnel, none
of whom is bound by an employment agreement. Competition for qualified
personnel in the Company's industry and geographical location is intense,
and there can be no assurance that the Company will be successful in
attracting, integrating, retaining and motivating a sufficient number of
qualified personnel to conduct its business in the future. See "Risk
Factors-Dependence on Key Personnel."
FACILITIES
The Company's principal administrative, marketing and product development
facilities are located in approximately 3,000 square feet of office space at
5301 E. State Street, Rockford, Illinois. Currently, this facility is owned
by the Company.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company:
Name Age Position
Howard Miller 64 President, Chief Executive Officer
and a Director
Stanley Miller 66 Secretary and Director
Cloyd Dowell 55 Director
John Frisella 51 Director
Harvey Bokath 76 Director
Evelyn Carlyle 75 Director
Each director will hold office until the next Annual Meeting of Stockholders
and until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Each officer serves a the discretion of the
Board of Directors (the "Board").
EXECUTIVE OFFICERS AND DIRECTORS
MANAGEMENT
Howard Miller has been President and CEO of Abidon Inc. (formerly UBuy2
Inc., a Delaware corporation) since its inception on January 18, 2000. He
is 64 years old. Prior to forming Abidon Inc. he was President and founder
of State Street Investors of Rockford Inc., an Illinois corporation, a real
estate development of commercial and office space and leasing from 1991
through 1999. He was President of Rockford Investors Inc., an Illinois
corporation, from its inception on December 19, 1985. The company developed
commercial real estate and leased commercial and office space. Howard
Miller was the originator and owner of the East State Antique Mall in
Rockford, Illinois. The business was started in 1985 as Howard Miller, dba
East State Antique Mall, and was incorporated on November 9, 1999. For the
past 14 years it has leased space to from 300 to 320 antique dealers. On
January 24, 2000 State Street Investors of Rockford Inc., Rockford Investors
Inc., and East State Antique Mall Inc. merged into Abidon Inc., formerly
UBuy2 Inc., a Delaware corporation. He was President of Miller Bros. Inc.,
an Illinois corporation, from 1967 to July 1984. This company was general
contractors building and selling family residences (built over 1,000 single
family homes), subdividing land, and construction of commercial real estate.
He was President of Miller Bros. Real Estate Inc., an Illinois corporation,
in the business of selling real estate, from 1970 through 1977, in the sales
and closing of real estate, and held a Real Estate Brokers license. He was
President and sole owner of a chain of 4 laundry and drycleaners, Mr. Clean
Cleaners Inc., an Illinois corporation, in Rockford, Illinois and Loves
Park, Illinois, from 1960 to August 1994. He is a graduate of Queen City
High School, Queen City, Missouri. He attended Rockford School of Business
and obtained an Illinois Real Estate Brokers License in March 1967. Howard
Miller is the brother of a Director, Stanley Miller, who is Secretary of the
corporation.
Stanley Miller has been Secretary of Abidon Inc. (formerly UBuy2 Inc., a
Delaware corporation) since January 20, 2000. He is the Manager of
Operations, including leasing and construction. Prior to the formation of
Abidon Inc. he was Secretary of State Street Investors of Rockford Inc., an
Illinois corporation, a real estate development of commercial and office
space and leasing from 1991 through 1999 and was Manager of Operations,
including leasing and construction. The company was developers of
commercial real estate and leasing of commercial and office space. On
January 24, 2000 State Street Investors of Rockford Inc., Rockford Investors
Inc. and East State Antique Mall merged into Abidon Inc. (formerly UBuy2
Inc., a Delaware corporation). Stanley Miller was Secretary of Miller Bros.
Inc., an Illinois corporation, from 1967 to July 1984. This company was
general contractors building and selling single family residences (built
over 1,000 single family homes), subdividing land, and construction of
commercial real estate. He was Secretary of Miller Bros. Real Estate Inc.,
an Illinois corporation, in the business of selling real estate, from 1970
through 1977, in the sales and closing of real estate and holds an Illinois
Real Estate Brokers license. From May 1963 to 1967 Stanley Miller was the
owner, President and Secretary of Stanley Miller Building Contractor Inc.,
an Illinois corporation, a general contractor and developer of single family
homes. He graduated from high school in Unionville, Missouri and attended
N.E. Missouri State Teachers College. He attended Rockford School of
Business and obtained his Real Estate Brokers License in March 1967. He is
66 years old. Stanley Miller is the brother of the President of the
Company, Howard Miller.
Cloyd Dowell has been a Director of Abidon Inc., (formerly UBuy2 Inc., a
Delaware corporation) since January 20, 2000. He was also a Director of
State Street Investors of Rockford Inc., an Illinois corporation, from 1993
through 1999. He is President of Simplex Financial Services Inc., an
Illinois corporation, which he formed in 1991 and incorporated in 1993.
From 1980 through 1990 he was Finance Manager in Internal Leasing and
Finance for Rockwell International. From 1975 to 1980 he was Credit Manager
for Thomas J. Lipton Company. Prior to that, from 1970 to 1975, he was
Accounts Manager for the Bank of Colorado. Cloyd Dowell graduated from the
University of Colorado with a BA in Finance. He is 55 years old.
John Frisella is 51 years old. He has been a Director of Abidon Inc.,
(formerly UBuy2 Inc., a Delaware corporation) since January 20, 2000. He
was a Director of State Street Investors of Rockford Inc., an Illinois
corporation, from 1991 through 1999. Since 1974 he has owned and operated
John's Restaurant and Pizzeria in Rockford, Illinois. Prior to 1974 he
worked as a mason finisher for AA Construction for three years and for
Rockford Auto Glass for one year. He is a native of Italy, where he
graduated from high school, and came to the United States in 1969.
Harvey Bokath has been a Director of Abidon Inc., (formerly UBuy2 Inc., a
Delaware corporation) since January 20, 2000. He is 76 years old. He was a
Director of State Street Investors of Rockford Inc., an Illinois
corporation, from 1991 through 1999. He was Maintenance Supervisor for
Sundstrand Corp., Rockford, Illinois, from 1949 through 1980. From 1981 to
the present time he has been self-employed in general maintenance. In 1947
and 1948 he worked for Chippewa Falls Plumbing Company, Chippewa Falls,
Wisconsin. From 1940 through 1946 he was employed in an auto, gas, and
service station in Rib Lake, Wisconsin. He graduated from high school in
Rib Lake, Wisconsin.
Evelyn Carlyle is 75 years old and has been a Director of Abidon Inc.,
(formerly UBuy2 Inc., a Delaware corporation) since January 20, 2000. She
was a Director of State Street Investors of Rockford Inc., an Illinois
corporation, from 1991 through 1999. She was a Legal Secretary and
Paralegal for Attorney Hickey in Rockford, Illinois, from 1960 through 1986
and for Attorney Steven Nordberg from 1986 through 1990, when she retired.
She graduated from East High School in Rockford, Illinois.
EXECUTIVE COMPENSATION
Stanley Miller receives $6,000 per month compensation and also receives $200
for any Board of Directors meeting. Howard Miller receives $200 for any
Board of Directors meeting. Howard Miller also receives the use of 4,500
square feet of floor space in the East State Antique Mall, for a total of
$43,200 yearly in the form of free rent. All other Directors (Harvey
Bokath, Evelyn Carlyle, John Frisella, and Cloyd Dowell) receive $200 for
the annual Board of Directors meeting which is held in September of each
year. They also receive $200 for any additional Special Board of Directors
meetings. No other compensation is given to them.
CERTAIN TRANSACTIONS
Since inception January 18, 2000, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which the
Company was or is to be a party in which the amount involved exceeds $60,000
and in which any director, executive officer or holder of more than 5% of
the Common Stock of the Company had or will have a direct or indirect
interest other than compensation arrangements, which are described where
required under "Management."
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
Under the Delaware statute on the Company's Certificate of Incorporation,
the following statement is provided: "No director of the Corporation shall
be liable t the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for any breach
of the director's duty of loyalty to the Corporation or its stockholders,
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, or for any transaction from which
the director derived an improper personal benefit."
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of
September 30, 2001 by each stockholder known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, each
director of the Company, the named Executive Officer, and all executive
officers and directors as a group.
----------------------------------------------------------------------------
Title of Name and Address of Beneficial Amount of Percent of
Class Owner Beneficial Class
Ownership
----------------------------------------------------------------------------
Common Howard Miller 5,600,000 32.8%
1912 Wichita Drive
Rockford, IL 61108
Common Stanley/Delcie Miller 3,550,000 20.8%
5053 Painted Pony Lane
Loves Park, IL 61111
Common John/Maria Frisella 1,750,000 10.2%
1238 Barberry Lane
Belvidere, IL 61008
Common Harvey/Juletta Bokath 400,000 2.3%
6538 Carman Drive
Rockford, IL 61108
Common Cloyd/Janet Dowell 350,000 2.0%
440 E. Walnut Street
Roselle, IL 60172
Common Evelyn Carlye 100,000 *
622 Sunrise Lane
Rockford, IL 61107
Common All directors and executive 11,750,000 68.3%
officers as a group (6 persons)
----------------------------------------------------------------------------
* Represents beneficial ownership of less than 1%.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Unless otherwise indicated,
the persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of Common Stock subject to
options that are currently exercisable or exercisable within 60 days of
September 30, 2001, are deemed to be outstanding and to be beneficially
owned by the person holding such options for the purpose of computing the
percentage ownership of any other person.
This also assumes that the over-allotment option to purchase up to 500,000
shares from the Company is exercised.
SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING
NAME OF BENEFICIAL OWNER NUMBER OF
SHARES HELD
Norman/Gloria Akelaitis 300,000
Harvey/Juletta Bokath 400,000
Mary Lou Brandon/Shirley Sutherland 100,000
William/Dorothy Burgett 150,000
James/Marcia Byrne 200,000
Evelyn Carlyle 100,000
Ethel Chick 100,000
Cloyd/Janet Dowell 350,000
C. Mark Elder 200,000
James A. Falconer 300,000
James M. Falconer 100,000
John/Linda Falconer 100,000
John/Maria Frisella 1,750,000
Michael Fulling 200,000
Harris Trust 50,000
Eugene Hayenga 100,000
Ruth Hayenga 100,000
Jenny Kliebe 400,000
Robert/Jeannette Kliebe 200,000
Silva Ludwig 200,000
George Maurici 100,000
Carl/Cheryl Miller 100,000
Ernest/Inez Miller 100,000
Howard Miller 5,600,000
Irvin/Palma Miller 700,000
Stanley/Delcie Miller 3,550,000
Steve Noble 650,000
Nolan Rogers 100,000
Henry/Vernita Watts 50,000
Jerry/Harriet Wescott 200,000
Wayne/Dessie Whitlow 200,000
Douglas/Patricia Wilburn 100,000
Bobby Joe/Freida Whitlow 200,000
Total Shares 17,050,000
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, the authorized capital
stock of the Company will consist of 40,000,000 shares of Common Stock,
$0.0001 par value per share. As of September 30, 2001, there were
outstanding 17,050,000 shares of Common Stock held of record by 33
stockholders. All stock is Common Stock.
COMMON STOCK
The holder of Common Stock are entitled to receive dividends out of assets
legally available therefore at such times and in such amounts as the Board
of Directors may from time to time determine. Each stockholder is entitled
to one vote for each share of Common Stock held on all matters submitted to
a vote of stockholders. Cumulative voting for the election of directors is
not provided for in the Company's Certificate of Incorporation, which means
that the holders of a majority of the shares voted can elect all of the
directors then standing for election. The Common Stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon a
liquidation, dissolution or winding-up of the Company, the assets legally
available for distribution to stockholders are distributable ratably among
the holders of the Common Stock. Each outstanding share of Common Stock is,
and all shares of Common Stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.
DELAWARE STOCK
Upon the closing of this offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law (the
"Anti-Takeover Law") regulating corporate takeovers. The Anti-Takeover Law
prevents certain Delaware corporations, including those whose securities are
listed on the NASDAQ National Market, from engaging, under certain
circumstances, in a "business combination" (which includes a merger or sale
of more than 10% of the corporation's assets) with any "interested
stockholder" (a stockholder who owns 15% or more of the corporation's
outstanding voting stock, as well as affiliates and associates of any such
person) for three years following the date that such stockholder became an
"interested stockholder" unless (i) the transaction that resulted in the
stockholders' becoming an "interested stockholder" was approved by the board
of directors prior to the date the "interested stockholder" attained such
status, (ii) upon consummation of the transaction that resulted in the
stockholder's becoming an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding those shares
owned by (a) persons who are directors and also officers and (b) employee
stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer), or (iii) on or subsequent to such
date the "business combination" is approved by the board of directors and
authorized at an annual or special meeting of stockholders by affirmative
vote of at least two-thirds of the outstanding voting stock that is not
owned by the "interested stockholder." A Delaware corporation may "opt out"
of the Anti-Takeover Law with an express provision in its original
certificate of incorporation or an express provision in its certificate or
incorporation or bylaws resulting from a stockholders' amendment approved by
at least a majority of the outstanding voting shares. The Company has not
"opted out" of the provisions of the Anti-Takeover Law. The statute could
prohibit or delay mergers or other takeover or change-in-control attempts
with respect to the Company and, accordingly, may discourage attempts to
acquire the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is Abidon,
Inc.
LISTING
The shares of Common Stock to be submitted for approval on the NASDAQ
National Market under the trading symbol "Abidon" or "abid."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the
Company, and there can be no assurance that a significant public market for
the Common Stock will develop or be sustained after this offering. Future
sales of substantial amounts of Common Stock (including shares issued upon
exercise of outstanding options) in the public market after this offering
could adversely affect market prices prevailing from time to time and could
impair the Company's ability to raise capital through the sale of its equity
securities. As described below, no shares currently outstanding will be
available for sale immediately after this offering due to certain
contractual restriction on resale. Sales of substantial amounts of Common
Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company
to raise their equity capital in the future.
Upon completion of this offering, the Company will have outstanding
22,050,000 shares of Common Stock. Of these shares, the 5,000,000 shares
sold in this offering will be freely tradable without restriction under the
Securities Act unless purchased by "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act. The remaining shares held
by existing stockholders are subject to lock-up agreements generally
providing that, with certain limited exceptions, the stockholder will not
(i) offer to sell, sell, contract to sell, pledge or otherwise dispose of
any shares of Common Stock owned of record or beneficially prior to the
offering or any securities convertible into or exchangeable for such shares
of Common Stock, (ii) establish a "put equivalent position" with respect to
such Common Stock within the meaning of Rule 16a-1(h) under the Securities
Exchange Act of 1934, as amended, or (iii) publicly announce an intention to
take any of the actions set forth in (i) or (ii) for a period of 120 days
following the date of the final Prospectus for this offering without prior
written consent of Abidon, Inc. acting alone or each of the above listed
representatives acting together. As a result of these lock-up agreements;
notwithstanding possible earlier eligibility for sale under the provisions
of Rules 144, 144(k) and 701, none of these shares will be saleable until
121 days after the date of the final Prospectus. Beginning 121 days after
the date of the final Prospectus, 17,050,000 of these shares will be
eligible for sale in the public market, although a portion of such shares
will be subject to certain volume limitations pursuant to Rule 144. The
remaining Restricted Shares will become eligible for sale from time to time
thereafter upon expiration of applicable holding periods under Rule 144
under the Securities Act and the Company's right to repurchase unvested
shares. Common Stock of the Company is also subject to 120-day lock-up
agreements.
After the closing of the offering, the Corporation is authorized to issue
more shares, not to exceed a total of 30,000,000 shares outstanding. Shares
to be used for buyouts, mergers, and advertising includes 1,500,000 shares
for employee incentive option plan. Included in employee incentives are
dealers leasing space in the East State Antiques Mall, 5301 and 5411 E.
State Street, Rockford, Illinois. No set plan of distribution for stock
incentives has been made at this time. Plan is to be implemented after the
closing of this stock offering. Up to 1,500,000 shares of stock are to be
offered to employees at a cost of $1.00 per share. The president is to
determine the procedure for the employee stock incentive plan.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Trent & Butcher, whose address is 350
S. Schmale Road, Carol Stream, IL 60198 (telephone number 630-682-3100).
EXPERTS
The financial statements included in this Prospectus have been audited by
Virchow, Krause & Co., LLP, independent accountants. The companies and
periods covered by these audits are indicated in the individual reports of
Virchow, Krause, & Co., LLP. Such financial statements have been so
included in reliance on the reports of Virchow, Krause, & Co., LLP given on
the authority of said firm as experts in auditing and accounting. Their
address is 500 Midland Ct., Janesville, WI 53547 (telephone number 608-752-
5835).
LEGAL PROCEEDINGS:
The Company is not involved in any legal proceedings at this time.
COMMON EQUITY SECURITIES
There has been no public market for the Company's common stock. There are
33 stockholders and they are the holders of all of the 17,050,000 shares of
common stock outstanding. The Company paid a cash dividend on January 15,
2001 of $.005 per share of common stock. This is the only dividend paid
since the corporation was started in January 2000.
ACCOUNTING DISCREPANCIES
There have been no discrepancies with the Accountants.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the shares of Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits thereto. Statements contained in
this Prospectus regarding the contents of any contract or any other document
to which reference is made are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. A copy of the Registration
Statement and the exhibits thereto may be inspected without charge at the
offices of the Commission at Judiciary Plaza, 450 Fifth Street, Washington,
D.C. 20549, and copies of all or any part of the Registration Statement may
be obtained from the Public Reference Section of the Commission, Washington,
D.C. 20549 upon the payment of the fees prescribed by the Commission. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding
registrants, such as the Company, that file electronically with the
Commission.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Abidon Inc.
In our opinion, the accompanying balance sheet and the related statements of
income, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Abidon Inc. and the results of
its operations and its cash flows for the years ended 2000, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
F-1
ABIDON, INC.
Rockford, Illinois
FINANCIAL STATEMENTS
Including Independent Auditors' Report
December 31, 2000, 1999, and 1998
ABIDON, INC.
TABLE OF CONTENTS
----------------------------------------------------------------------------
Independent Auditors' Report 1
Financial Statements
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-12
Virchow, Krause & Company, LLP
----------------------------------------------------------------------------
Certified Public Accountants & Consultants
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Abidon, Inc.
Rockford, Illinois
We have audited the accompanying balance sheets of Abidon, Inc. as of
December 31, 2000 and 1999 and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 2000,
1999, and 1998. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence and supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Abidon, Inc. as of
December 31, 2000 and 1999, and the results of its operations and cash flows
for the years ended December 31, 2000, 1999, and 1998 in conformity with
accounting principles generally accepted in the United States of America.
Janesville, Wisconsin
July 18, 2001
ABIDON, INC.
BALANCE SHEETS
December 31, 2000 and 1999
----------------------------------------------------------------------------
ASSETS
2000 1999
---------- ----------
CURRENT ASSETS
Cash $ 85,539 $ 112,872
Rent receivable 2,526 4,224
---------- ----------
Total Current Assets 88,065 117,096
---------- ----------
PROPERTY AND EQUIPMENT 4,352,141 4,477,706
---------- ----------
OTHER ASSETS
Loan fees 4,243 4,243
Other 1,114 -
Less: Accumulated amortization (1,367) (407)
---------- ----------
Net Other Assets 3,990 3,836
---------- ----------
TOTAL ASSETS $ 4,444,196 $ 4,598,638
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 86,658 $ 93,056
Wages payable 9,357 3,674
Payroll taxes and withholdings payable 17,096 8,522
Sales tax payable 6,481 8,175
Deferred revenues 39,950 33,361
Income taxes payable 26,313 8,310
Real estate taxes payable 247,613 263,208
Current portion of long-term debt 171,505 159,016
---------- ----------
Total Current Liabilities 604,973 577,322
LONG-TERM LIABILITIES
Long-term debt, less current portion 1,333,833 1,520,161
---------- ----------
Total Liabilities 1,938,806 2,097,483
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value per share 1,705 1,705
40,000,000 shares authorized
17,050,000 shares issued and outstanding
Additional paid-in capital 1,916,295 1,916,295
Retained earnings 587,390 583,155
---------- ----------
Total Stockholders' Equity 2,505,390 2,501,155
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,444,196 $ 4,598,638
========== ==========
ABIDON, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 2000, 1999, and 1998
------------------------------------------------------------------------------
2000 1999 1998
---------- ---------- ----------
REVENUES
Lease revenues $ 1,783,510 $ 1,782,746 $ 1,807,410
Antique mall sales 1,968,555 2,095,795 2,420,209
Internet auction service revenues 74,400 - -
---------- ---------- ----------
Total Revenues 3,826,465 3,878,541 4,227,619
---------- ---------- ----------
COST OF GOODS SOLD
Paid to antique mall dealers 1,814,081 1,905,789 2,254,753
Internet auction service consignments 69,066 - -
---------- ---------- ----------
Total Cost of Goods Sold 1,883,147 1,905,789 2,254,753
---------- ---------- ----------
Gross Profit 1,943,318 1,972,752 1,972,866
OPERATING EXPENSES 1,642,801 1,340,514 1,115,254
---------- ---------- ----------
Operating Income 300,517 632,238 857,612
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest income 1,312 1,883 1,459
Interest expense (120,781) (129,821) (143,066)
Other income - - 1,106
---------- ---------- ----------
Net Other Expense (119,469) (127,938) (140,501)
---------- ---------- ----------
Income Before Income Taxes 181,048 504,300 717,111
PROVISION FOR INCOME TAXES 26,313 10,185 9,251
---------- ---------- ----------
NET INCOME $ 154,735 $ 494,115 $ 707,860
========== ========== ==========
ABIDON, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 2000, 1999, and 1998
-----------------------------------------------------------------------------
Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------- ---------- ---------- ----------
BALANCES, December 31, 1997 $ 1,705 $ 1,868,295 $ 577,680 $ 2,447,680
1998 net income - - 707,860 707,860
Distributions - - (595,500) (595,500)
------- ---------- ---------- ----------
BALANCES, December 31, 1998 1,705 1,868,295 690,040 2,560,040
1999 net income - - 494,115 494,115
Contribution of related
party payable to equity - 48,000 - 48,000
Distributions - - (601,000) (601,000)
------- ---------- ---------- ----------
BALANCES, December 31, 1999 1,705 1,916,295 583,155 2,501,155
2000 net income - - 154,735 154,735
Distributions - - (150,500) (150,500)
------- ---------- ---------- ----------
BALANCES, December 31, 2000 $ 1,705 $ 1,916,295 $ 587,390 $ 2,505,390
======= ========== ========== ==========
ABIDON, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999, and 1998
------------------------------------------------------------------------------
2000 1999 1998
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Incomes $ 154,735 $ 494,115 $ 707,860
Adjustments to reconcile net income
to net cash flows from operating
activities
Depreciation 215,227 186,060 188,782
Amortization 960 71 71
Change in assets and liabilities
Rent receivable 1,698 10,455 (10,164)
Accounts payable (6,398) 3,131 8,666
Wages payable 5,683 (103) 1,475
Payroll taxes and
withholdings payable 8,574 2,513 641
Sales tax payable (1,694) (2,745) (86)
Deferred revenues 6,589 (1,837) 3,433
Income taxes payable 18,003 (941) 50
Real estate taxes payable (15,595) (2,035) 2,695
---------- ---------- ----------
Net Cash Flows from
Operating Activities 387,782 688,684 903,423
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (89,662) (13,475) (33,399)
Purchases of other assets (1,114) - -
---------- ---------- ----------
Net Cash Flows from
Investing Activities (90,776) (13,475) (33,399)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (173,839) (161,080) (146,575)
Stockholder distributions (150,500) (601,000) (595,500)
---------- ---------- ----------
Net Cash Flows from
Financing Activities (324,339) (762,080) (742,075)
---------- ---------- ----------
Net Change in Cash and Cash Equivalents (27,333) (86,871) 127,949
CASH AND CASH EQUIVALENTS -
Beginning of Year 112,872 199,743 71,794
---------- ---------- ----------
CASH AND CASH EQUIVALENTS -
END OF YEAR $ 85,539 $ 112,872 $ 199,743
========== ========== ==========
Supplemental cash flow disclosures
Cash paid for interest $ 120,781 $ 129,821 $ 143,066
Cash paid for income taxes 8,310 9,251 9,201
Noncash investing and financing activities
Contribution of related party
payable to equity - 48,000 -
ABIDON, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2000, 1999, and 1998
NOTE 1 - Summary of Significant Accounting Policies
----------------------------------------------------------------------------
Nature of Business
Abidon, Inc. (the company), located in Rockford, Illinois, operates in three
lines of business. See note 6 for information on segment reporting.
Business Combinations
On February 1, 2000, the company entered into a plan of merger with State
Street Investors of Rockford, Inc., Rockford Investors, Inc., and East State
Street Antiques Mall, Inc. Pursuant to the plan of merger, the stockholders
of the three companies received 85,250 shares of common stock of the
company. The stockholders of State Street Investors of Rockford, Inc.,
Rockford Investors, Inc., and East State Street Antiques Mall, Inc. and the
percentage of stock they owned were identical to the ownership they owned in
the company. Based on the common control of State Street Investors of
Rockford, Inc., Rockford Investors, Inc., and East State Street Antiques
Mall, Inc., and the company, the combinations were accounted for similar to
a pooling of interest.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Financial Instruments
The carrying amounts for all financial instruments approximates fair value.
The carrying amounts for cash and cash equivalents, rent receivable,
accounts payable, and accrued liabilities approximate fair value because of
the short maturity of these instruments. The fair value of long-term debt
approximates the carrying amounts based upon the company's expected
borrowing rate for debt with similar remaining maturities and comparable
risk.
Depreciation
Property and equipment are recorded at cost. Improvements are capitalized
while repair and maintenance costs are charged to operations when incurred.
Furniture, fixtures, equipment, and antiques are depreciated or amortized
using the 200% declining balance method, while buildings and improvements
are depreciated using the straight-line method. Depreciation expense
amounted to $215,227, $186,060, and $188,782 for the years ended December
31, 2000, 1999, and 1998, respectively. Expenses computed using the 200%
declining balance method did not differ materially from that which would
have been computed using the straight-line method.
Recoverability of Property, Equipment Improvements
The company evaluated long-lived assets to be held and used in the business
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment is
determined by comparing estimated undiscounted future operating cash flows
to the carrying amounts of assets. if an impairment exists, the amount of
impairment is measured as the excess of the assets carrying amount less the
sum of the estimated discounted future operating cash flows of such asset
and the expected proceeds upon sale of the asset. Assets held for sale are
reported at the lower carrying amount or fair value less estimated costs to
sell. There was no impairment of long-lived assets as of December 31, 2000
and 1999.
Revenue Recognition
The company records lease revenues at the time rent becomes receivable from
the tenant according to individual lease contracts. The company records
sales revenue at the time merchandise is shipped. The company ensures that
the transaction complies with the seven conditions and the six
considerations contained in Accounting and Auditing Enforcement Release No.
108 of the Securities and Exchange Commission (SEC).
In November 1999, the SEC issued Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition." SAB No. 101, as amended, sets forth the SEC staff's
position regarding the point at which it is appropriate for a registrant to
recognize revenue. The staff believes that revenue is realizable and earned
when all of the following criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred or service has been rendered, the
seller's price to the buyer is fixed or determinable and collectibility is
reasonably assured. The company uses the above criteria to determine
whether revenue can be recognized, and therefore, believes that the issuance
of this bulletin does not have a material impact on these financial
statements. The company adopted SAB No. 101 during the quarter ended March
31, 2001 and the effect of adoption was not material to the consolidated
financial statements.
Effective January 1, 2001, the company began recording amounts being charged
to customers for shipping and handling as revenue in accordance with
recently released Emerging Issues Task Force (EITF) Issue 00-10, "Accounting
for Shipping and Handling Fees and Costs."
Income Taxes
For financial statement purposes, the company records income and expenses on
the accrual basis, whereas for income tax purposes, income and expenses are
recorded on the cash basis. The company utilizes the liability method of
accounting for income taxes. Deferred tax assets and liabilities are
recognized for the expected future tax consequences attributable to
temporary differences between the financial statement and income tax
reporting bases of assets and liabilities.
Advertising
Advertising costs are charged to operations when incurred. Advertising
expense amounted to $79,470, $51,115, and $45,357 for the years ended
December 31, 2000, 1999, and 1998, respectively.
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Recently Issued Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended, is effective for
years beginning after June 15, 2000. SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument,
including certain derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at
its fair value. SFAS No. 133 requires that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge criteria are
met. Special accounting for qualifying hedges allows a derivative's gains
or losses to offset related results on the hedged item in the statement of
operations and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.
The adoption of SFAS No. 133 will not materially impact the company's
financial position or results of operations.
Effective January 1, 2002, the company will adopt SFAS No. 141 and 142,
"Business Combinations" and "Goodwill and Other Intangible Assets."
Management believes the adoption of these standards will not have an impact
on the company's financial position or results of operations.
NOTE 2 - Property and Equipment
----------------------------------------------------------------------------
Major categories of property and equipment at December 31 are summarized as
follows:
Depreciable
Lives 2000 1999 1998
------------ ---------- ---------- ----------
Land N/A $ 535,070 $ 535,070 $ 535,070
Buildings and improvements 31.5-39 yrs. 5,722,338 5,710,950 5,698,375
Equipment 5-7 yrs. 95,216 145,346 144,446
---------- ---------- ----------
Total Property and Equipment 6,352,624 6,391,366 6,377,891
Less: Accumulated depreciation (2,000,483) (1,913,660) (1,727,600)
---------- ---------- ----------
Net Property and Equipment $ 4,352,141 $ 4,477,706 $ 4,650,291
========== ========== ==========
NOTE 3 - Long-Term Debt
----------------------------------------------------------------------------
Long-term debt at December 31, 2000 and 1999 consisted of the following:
2000 1999
--------- ---------
Note payable to bank with monthly payments of
principal and interest of $5,300 bearing
interest at 7.80%. This note is secured by a
first mortgage on real estate and the
personal guarantee of one of the company's
stockholders. The note is due November 2003. $ 160,116 $ 208,962
Note payable to bank with monthly payments of
principal and interest of $19,252 bearing
interest at 7.50%. This note is secured by a
first mortgage on real estate and the
personal guarantee of two of the company's
stockholders. The note is due September
2008. 1,345,222 1,470,215
--------- ---------
Total 1,505,338 1,679,177
Less: Current portion of long-term debt (171,505) (159,016)
--------- ---------
Long-Term Debt $1,333,833 $1,520,161
========= =========
Annual maturities of long-term debt for the years ending after December 31,
2000 are as follows:
2001 $ 171,505
2002 201,394
2003 210,004
2004 167,519
2005 180,524
Thereafter 574,392
-----------
Total $ 1,505,338
===========
NOTE 4 - Related Party Transactions
----------------------------------------------------------------------------
During 2000, 1999, and 1998, the company paid management fees to one of its
stockholders of $70,000, $70,000 and $78,000, respectively.
During 2000, 1999, and 1998, the company paid distributions to its
stockholders of $150,500, $601,000 and $595,500, respectively.
NOTE 5 - Income Taxes
----------------------------------------------------------------------------
For 2000, Abidon, Inc. was taxed as a corporation for its short period of
February through December, as were State Street Investors of Rockford, Inc.,
Rockford Investors, Inc., and East State Street Antiques Mall, Inc. for
their short periods commencing January 1, 2000 through January 31, 2000.
No deferred income taxes have been recorded as of December 31, 2000 because
no significant temporary differences exist between the reporting of amounts
for financial statement purposes and income tax purposes.
During 1999 and 1998, State Street Investors of Rockford, Inc. was taxed
under the provisions of Subchapter S of the Internal Revenue Code, Rockford
Investors, Inc. was taxed as a partnership, and East State Street Antiques
Mall, Inc. was taxed as a sole proprietorship. For these types of tax
entities, in lieu of federal and state corporation income taxes, the owners
are taxed on their proportionate share of the taxable income which is
combined with their other personal income and deductions to determine
taxable income on their individual tax returns. Therefore, for 1999 and
1998 there is no provision for corporate income taxes. Income tax expense
for these years consists of state of Illinois Replacement Tax.
The provision for income taxes differs from the amount of income tax
determined by applying the U.S. statutory federal income tax rate of 34% to
income before income taxes as a result of the following:
Year ended December 31,
2000 1999 1998
% % %
---- ---- ----
Federal income taxes at statutory rate 34.0 34.0 34.0
Benefit of federal graduated rates (18.4) - -
State income taxes, net of federal benefit 4.8 2.5 2.5
Income taxed at a partner/shareholder level - (34.0) (34.0)
Nondeductible items and other (5.9) (0.5) (1.2)
---- ---- ----
14.5 2.0 1.3
==== ==== ====
NOTE 6 - Segment Information
----------------------------------------------------------------------------
The company operates in three business segments. The company operates an
on-line auction service (internet auction), owns and leases two commercial
office buildings on East State Street in Rockford (commercial real estate),
and also operates an antique mall in the lower level of each office building
(antique mall). Information on the company's business segments was as
follows:
2000 1999 1998
---------- ---------- ----------
For the years ended December 31
Revenues
Internet auction $ 74,400 $ - $ -
Commercial real estate 1,783,510 1,782,746 1,807,410
Antique mall 1,968,555 2,095,795 2,420,209
---------- ---------- ----------
Total Revenues $3,826,465 $ 3,878,541 $ 4,227,619
========== ========== ==========
Operating income (loss)
Internet auction $ (490,078) $ (86,026) $ -
Commercial real estate 738,460 670,861 809,955
Antique mall 52,135 47,403 47,657
---------- ---------- ----------
Total Operating Income $ 300,517 $ 632,238 $ 857,612
========== ========== ==========
2000 1999 1998
---------- ---------- ----------
Capital expenditures
Internet auction $ 76,624 $ - $ -
Commercial real estate 13,038 13,475 33,399
Antique mall - - -
---------- ---------- ----------
Total Capital Expenditures $ 89,662 $ 13,475 $ 33,399
========== ========== ==========
Depreciation and amortization
Internet auction $ 31,969 $ - $ -
Commercial real estate 184,218 183,173 183,280
Antique mall - 2,958 5,573
---------- ---------- ----------
Total Depreciation and Amortization $ 216,187 $ 186,131 $ 188,853
========== ========== ==========
At December 31
Identifiable assets
Internet auction $ 48,436 $ - $ -
Commercial real estate 4,368,986 4,594,383 4,811,603
Antique mall 26,774 4,255 57,017
---------- ---------- ----------
Total Identifiable Assets $ 4,444,196 $ 4,598,638 $ 4,868,620
========== ========== ==========
F-2
Riggins & Shillady Accounting
1111 S. Alpine Rd., Ste. 702
Rockford, IL 61108
815-227-1220
To the Board of Directors
Abidon, Inc.
5301 E. State Street, Suite 215
Rockford, IL 61108-2389
The accompanying balance sheet of Abidon, Inc. as of September 30, 2001, and
the related statements of income and retained earnings and cash flows for
the year then ended, have been compiled by us.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited
or reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
Riggins & Shillady Accounting
December 7, 2001
Marvin Riggins, Partner
Abidon, Inc.
BALANCE SHEET
As of September 30, 2001
Assets
CURRENT ASSETS
Rent receivable 9,504
Total Current Assets 9,504
PROPERTY AND EQUIPMENT
Buildings 5,727,668
Furniture, Fixt. & Equip. 111,146
Land 535,070
Accumulated Depreciation (2,114,862)
Net Property and Equipment 4,259,022
OTHER ASSETS
Loan fees 4,243
Other 1,114
Less: Accumulated amortization (1,367)
Total Other Assets 3,990
TOTAL ASSETS 4,272,516
Liabilities
CURRENT LIABILITIES
Accounts Payable 5,265
Accrued Payroll Taxes 12,166
Accrued Sales Tax 7,055
Deferred revenues 39,950
Accrued Income Tax 79,422
Real estate taxes payable 185,710
Current portion L/T Debt 171,505
Total Current Liabilities 501,073
LONG-TERM LIABILITIES
Long-Term Debt less current portion 1,210,170
Total Long-Term Liabilities 1,210,170
STOCKHOLDERS' EQUITY
Common Stock, $.0001 par value per share
40,000,000 shares authorized
17,050,000 shares issued and outstanding 1,705
Additional paid-in capital 1,916,295
Retained Earnings 643,273
Total Stockholder's Equity 2,561,273
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 4,272,516
See Accountants' Compilation Report
Abidon, Inc.
INCOME STATEMENT
For the 9 Months Ended September 30, 2001
9 Months Ended
September 30, 2001
REVENUES
Lease Revenues $ 1,263,969
Antique Mall sales 1,568,478
Internet auction service revenues 36,792
-----------
Total Revenues 2,869,239
-----------
COST OF GOODS SOLD
Paid to Antique Mall dealers 1,213,892
Internet auction service consignment 22,989
-----------
Total Cost of Goods Sold 1,236,881
-----------
Gross Profit 1,632,358
-----------
Depreciation 114,379
OPERATING EXPENSES 1,190,732
-----------
Operating Income (Loss) 327,247
-----------
OTHER INCOME (EXPENSE)
Interest Income 262
Interest expense (97,303)
-----------
Total Other Expense (97,041)
-----------
Income before Taxes 230,206
-----------
PROVISION FOR INCOME TAXES 89,073
-----------
NET INCOME $ 141,133
===========
Statement of Retained Earnings
Amount at beginning of year 587,390
-----------
Add net income 141,133
-----------
Distributions (85,250)
-----------
Amount at end of year 643,273
===========
See Accountants' Compilation Report
Abidon, Inc.
STATEMENT OF CASH FLOWS
For the 9 Months Ended September 30, 2001
2001
-----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 141,134
Adjustments to reconcile Net Income
(Loss) to net Cash provided by
(used in) operating activities:
Depreciation and Amortization 114,379
Losses (Gains) on sales of
Decrease (Increase) in
Operating Assets:
Accounts Receivable (6,979)
Increase (Decrease) in
Operating Liabilities:
Accrued Liabilities (103,900)
-----------
Total Adjustments 3,500
-----------
Net Cash Provided By (Used in)
Operating Activities 144,634
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (26,230)
Proceeds From Sale of Fixed Assets 4,971
-----------
Net Cash Provided By (Used In)
Investing Activities (21,259)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable Repayments (123,663)
Dividends Paid (85,250)
-----------
Net Cash Provided By (Used In)
Financing Activities (208,913)
-----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (85,539)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 85,539
-----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ (0)
===========
See Accountants' Compilation Report
Riggins & Shillady Accounting
1111 S. Alpine Rd., Ste. 702
Rockford, IL 61108
815-227-1220
Notes to financial statements - Summary of Significant Accounting Policies
Nature of Business
Abidon, Inc. (the company), located in Rockford, Illinois, operates in three
lines of business. The company operates an on-line auction service
(internet auction), owns and leases two commercial office buildings on East
State Street in Rockford (commercial real estate), and also operates an
antique mall in the lower level of each office building (antique mall).
Business Combinations
On February 1, 2000, the company entered into a plan of merger with East
State Street Investors of Rockford, Inc., Rockford Investors, Inc., and East
State Street Antiques mall, Inc. Pursuant to the plan of merger, the
stockholders of the three companies received 85,250 shares of common stock
of the company. The stockholders of East State Street Investors of
Rockford, Inc., Rockford Investors, Inc., and East State Street Antiques
mall, Inc. and the percentage of stock they owned were identical to the
ownership they owned in the company. Based on the common control of East
State Street Investors of Rockford, Inc., Rockford Investors, Inc., and East
State Street Antiques mall, Inc., and the company, the combinations were
accounted for similar to a pooling of interest.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Financial Instruments
The carrying amounts for all financial instruments approximate fair value.
The carrying amounts for cash and cash equivalents, rent receivable,
accounts payable, and accrued liabilities approximate fair value because of
the short maturity of these instruments. The fair value of long-term debt
approximates the carrying amounts based upon the company's expected
borrowing rate for debt with similar remaining maturities and comparable
risk.
Depreciation
Property and equipment are recorded at cost. Improvements are capitalized
while repair and maintenance costs are charged to operations when incurred.
Furniture, fixtures, equipment, and antiques are depreciated or amortized
using the 200% declining balance method, while buildings are improvements
are depreciated using the straight-line method. Depreciation expense
amounted to $114,379 for the nine months ending September 30, 2001.
Expenses computed using the 200% declining balance method did not differ
materially from that which would have been computed using the straight-line
method.
Revenue Recognition
The company records lease revenues at the time rent becomes receivable from
the tenant according to individual lease contracts. The company records
sales revenue at the time merchandise is shipped.
Income Taxes
For financial statement purposes, the company records income and expenses on
the accrual basis, whereas for income tax purposes, income and expenses are
recorded on the cash basis. The company utilized the liability method of
accounting for income taxes. Deferred tax assets and liabilities are
recognized for the expected future tax consequences attributable to
temporary differences between the financial statement and income tax
reporting bases of assets and liabilities.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions
described above and elsewhere herein:
EXHIBIT DOCUMENT NUMBER
Form of Underwriting Agreement*............................... 1.01
Registrant's Amended and Restated Certificate of Incorporation 3.01
Registrant's Bylaws........................................... 3.03
Investor Rights............................................... 4.02
* To be supplied by amendment.
U-1
UNDERWRITING AGREEMENT
There is no Underwriting Agreement. The Company is seeking an Underwriter.
The Registrant intends to sell the stock themselves if no Underwriter is
obtained.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses to be paid by the
Company in connection with the sale of the shares of Common Stock being
registered hereby. All amounts are estimates except for the Securities and
Exchange Commission registration fee.
Securities and Exchange Commission registration fee $ 21,510
NASD filing fee.................................... 55,000*
Nasdaq National Market filing fee.................. 5,000*
Accounting fees and expenses....................... 30,000*
Legal fees and expenses............................ 10,000*
Road show expenses................................. 90,000*
Printing and engraving expenses.................... 25,000*
Blue sky fees and expenses......................... 30,000*
Transfer agent and registrar fees and expenses..... 20,000*
Miscellaneous...................................... 213,490*
Total.............................................. $500,000
* Estimates
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court
to award, or a corporation's board of directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of
1933, as amended (the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth information regarding all securities
sold by the Registrant since its inception on January 18, 2000.
Date Of Title Of Number Aggregate
Class Of Purchasers Sale Securities Securities And Form
------------------- -------- ---------- ---------- ---------
State Street Investors Jan. 24, Common 55,000 Complete
of Rockford, Inc. 2000 corporation
East State Antique Mall Jan. 24, Common 10,000 Complete
Inc. 2000 corporation
Rockford Investors Inc. Jan. 24, Common 20,250 Complete
2000 corporation
On August 15, 2000 the company stock was split 200 to 1. After completion
of the stock split there are 17,050,000 shares of common stock outstanding.
No other stock has been issued through September 30, 2001.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
EX-1.00 Underwriting Agreement
EX-2.00 Plan of Acquisition, reorganization, arrangement, liquidation, or
succession
EX-2.01 Merger Agreement between UBuy2 Inc. and State Street Investors
Inc., Rockford Investors, Inc. and East State Antiques Mall, Inc.
EX-2.02 Merger between UBuy2 Inc. and Rockford Investors, Inc.
EX-2.03 Minutes Approving Merger between UBuy2 Inc. and Three Corporations
EX-3.00 Certificate of Incorporation, UBuy2 Inc.
EX-3.01 Certificate of Amendment, Abidon, Inc.
EX-3.02 Certificate of Amendment, change in Authorized Shares of Stock
EX-3.03 Bylaws of Corporation
EX-4.01 Copy of Stock Certificate
EX-4.02 Copy of Rights of Investors
EX-5.00 Opinion Regarding Legality *
EX-8.00 Opinion Regarding Tax Matters
EX-10.00 Material Contracts Index - Leases
EX-10.78 Mortgage Associated Commercial Mortgage Inc. and Abidon Inc.
EX-10.79 Bank One, Illinois NA and Abidon, Inc.
EX-11.00 Consolidated Statement of Income Data
EX-13.00 Annual Report to Stockholders
EX-15.00 Letter Regarding Unaudited Interim Financial Information
EX-21.00 Subsidiary of Registrant
EX-23.00 Consent of Experts and Counsel
* To be supplied by amendment.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Rockford, State of
Illinois, on December 20, 2001.
ABIDON INC.
------------------------
(Registrant)
/s/ Howard Miller
------------------------
Howard Miller, President
By (Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Stanley Miller
------------------------
Stanley Miller
(Signature)
Secretary
------------------------
(Title)
December 20, 2001
------------------------
(Date)
/s/ Howard Miller
--------------------------------
Howard Miller, President, Chief
Executive Officer and a Director
/s/ Stanley Miller
--------------------------------
Stanley Miller, Secretary and Director
/s/ Harvey D. Bokath
--------------------------------
Harvey Bokath, Director
/s/ John Frisella
--------------------------------
John Frisella, Director
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
EX-1.00 Underwriting Agreement
EX-2.00 Plan of Acquisition, reorganization, arrangement, liquidation, or
succession
EX-2.01 Merger Agreement between UBuy2 Inc. and State Street Investors
Inc., Rockford Investors, Inc. and East State Antiques Mall, Inc.
EX-2.02 Merger between UBuy2 Inc. and Rockford Investors, Inc.
EX-2.03 Minutes Approving Merger between UBuy2 Inc. and Three Corporations
EX-3.00 Certificate of Incorporation, UBuy2 Inc.
EX-3.01 Certificate of Amendment, Abidon, Inc.
EX-3.02 Certificate of Amendment, change in Authorized Shares of Stock
EX-3.03 Bylaws of Corporation
EX-4.01 Copy of Stock Certificate
EX-4.02 Copy of Rights of Investors
EX-5.00 Opinion Regarding Legality *
EX-8.00 Opinion Regarding Tax Matters
EX-10.00 Material Contracts Index - Leases
EX-10.78 Mortgage Associated Commercial Mortgage Inc. and Abidon Inc.
EX-10.79 Bank One, Illinois NA and Abidon, Inc.
EX-11.00 Consolidated Statement of Income Data
EX-13.00 Annual Report to Stockholders
EX-15.00 Letter Regarding Unaudited Interim Financial Information
EX-21.00 Subsidiary of Registrant
EX-23.00 Consent of Experts and Counsel
* To be supplied by amendment.