SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______.
Commission File Number 333-75627
ABIDON INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-4340367
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5301 E. STATE STREET, SUITE 215
ROCKFORD, ILLINOIS 61108
(address of principal executive offices and zip code)
(815) 226-8700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject tot
eh filing requirement for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class: Outstanding at June 30, 2002 Common stock, par value $.01 17,050,000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Abidon, Inc.
BALANCE SHEET
As of June 30, 2002
ASSETS
CURRENT ASSETS
Cash $ 3,137
A/R SEC 13,230
Rents receivable 14,049
----------
Total Current Assets 30,416
PROPERTY AND EQUIPMENT 4,080,959
----------
Net Property and Equipment 4,080,959
OTHER ASSETS
Loan Fees 4,243
Other 59,289
Accumulated Amortization (30,032)
----------
Total Other Assets 33,500
----------
TOTAL ASSETS $ 4,144,875
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 18,491
Payroll taxes 13,106
Sales tax payable 5,814
Deferred revenues 31,544
Federal income tax payable 40,386
Real estate taxes payable 193,407
Current portion of long term debt 190,679
----------
Total Current Liabilities 493,426
LONG-TERM LIABILITIES
Long term debt less current portion 1,043,963
----------
Total Long-Term Liabilities 1,043,963
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 689,486
----------
Total Stockholders' Equity 2,607,486
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,144,875
==========
Unaudited
Abidon, Inc.
INCOME STATEMENT
3 Months Ended June 30,
2002 2001
---------- ----------
REVENUES
Sales - Antiques $ 401,199 $ 407,957
Lease income 461,588 432,469
Sales - Internet auction service revenue 30,774 11,855
---------- ----------
Total Revenues 893,561 852,281
---------- ----------
COST OF GOODS SOLD
Purchases 363,195 345,218
Internet auction service expense 8,404 5,349
---------- ----------
Total Cost of Goods Sold 371,599 350,567
---------- ----------
Gross Profit 521,962 501,714
---------- ----------
OPERATING EXPENSES 415,050 357,842
Operating Income (Loss) 106,912 143,872
---------- ----------
OTHER INCOME (EXPENSE)
Interest Expense (30,735) (30,223)
---------- ----------
Total Other Expense (30,735) (30,223)
---------- ----------
Income before Taxes 76,177 113,649
PROVISION FOR INCOME TAXES 35,986 7,200
---------- ----------
NET INCOME $ 40,191 $ 106,449
========== ==========
EARNINGS PER SHARE $ 0.0024 $ 0.0062
========== ==========
Unaudited
Abidon, Inc.
INCOME STATEMENT
6 Months Ended June 30,
2002 2001
---------- ----------
REVENUES
Sales - Antiques $ 914,916 $ 861,107
Lease income 867,181 759,207
Sales - Internet auction service revenue 54,294 81,828
---------- ----------
Total Revenues 1,836,391 1,702,142
---------- ----------
COST OF GOODS SOLD
Purchases 776,344 703,693
Internet auction service expense 17,441 15,614
---------- ----------
Total Cost of Goods Sold 793,785 719,307
---------- ----------
Gross Profit 1,042,606 982,835
---------- ----------
OPERATING EXPENSES 803,127 792,852
Operating Income (Loss) 239,479 189,983
---------- ----------
OTHER INCOME (EXPENSE)
Interest Income 0 262
Interest Expense (59,601) (52,560)
---------- ----------
Total Other Expense (59,601) (52,298)
---------- ----------
Income before Taxes 179,878 137,685
PROVISION FOR INCOME TAXES 51,648 17,507
---------- ----------
NET INCOME $ 128,230 $ 120,178
========== ==========
EARNINGS PER SHARE $ 0.0075 $ 0.0070
========== ==========
Statement of Retained Earnings
Amount at beginning of year $ 561,255 $ 587,390
---------- ----------
Add net income 128,230 120,178
---------- ----------
Distributions 0 (85,250)
---------- ----------
Amount at end of year $ 689,485 $ 622,318
========== ==========
Unaudited
Abidon, Inc.
STATEMENT OF CASH FLOWS
June 30,
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 128,231 $ 120,178
Adjustments to reconcile Net Income
(Loss) to net Cash provided by
(used in) operating activities:
Depreciation and Amortization 97,453 94,116
Losses (Gains) on sales of Decrease
(Increase) in Operating Assets:
Accounts Receivable (16,585) (385)
Increase (Decrease in Operating Liabilities:
Accounts Payable (94,614) (86,658)
Accrued Liabilities (80,783) (38,100)
---------- ----------
Total Adjustments (94,529) (31,027)
---------- ----------
Net Cash Provided By (Used In)
Operating Activities 33,701 89,151
CASH FLOW FROM INVESTING ACTIVITIES
Capital Expenditures (22,245) (15,211)
---------- ----------
Net Cash Provided By (Used In)
Investing Activities (22,245) (15,211)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable Repayments (87,710) (76,755)
Dividends Paid 0 (85,250)
---------- ----------
Net Cash Provided By (Used In)
Financing Activities (87,710) (162,005)
---------- ----------
NET INCREASE (DECREASE) IN CASH (76,254) (88,065)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 79,390 88,065
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,137 $ 0
========== ==========
Unaudited
Abidon, Inc.
Notes to financial statments
Note 1 - Summary of Significant Accounting Policies
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 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 fro all financial instruments approximates fair value.
The carrying amounts for cash an 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 $97,452.84 for the 6 Months ending June 30, 2002. 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, wheras 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.
Advertising
Advertising costs are charged to operations when incurred. Advertising
expense amounted to $68,244.13 for the 6 Months ended June 30, 2002.
Note 2 - Long-Term Debt
Long-term debt at March 31, 2002 consisted of the following:
Note payable to bank with monthly payments
of principal and interest of $5,300 bearing
interest at 7.80%, this note is securd by a
first mortgage on real estate and the personal
guarantee of one of the company's stockholders.
The note is due November 2003. $ 83,282
Note payable to bank with monthly payments
of principal and interest of $19,252 bearing
interest at 7.50%, this note is securd by a
first mortgage on real estate and the personal
guarantee of one of the company's stockholders.
The note is due September 2008. 1,151,360
----------
Total 1,234,642
Less: Current portion of Long-Term debt (190,679)
----------
Long-Term Debt $ 1,043,963
==========
Note 3 - Segment information
The company operates 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). Invormation on the company's business segments was as
follows:
3 months ending June 30,
2002 2001
---------- ----------
Revenues
Internet Auction $ 30,774 $ 11,855
Commercial Real Estate 461,588 432,469
Antique Mall 401,199 407,957
---------- ----------
Total Revenues $ 893,561 $ 852,281
---------- ----------
Operating Income (Loss)
Internet Auction $ (106,594) $ (94,947)
Commercial Real Estate 255,208 240,903
Antique Mall (41,705) (2,083)
---------- ----------
Total Operating Income $ 106,909 $ 143,873
---------- ----------
Capital Expenditures
Internet Auction $ 3,929 $ 2,818
Commercial Real Estate 0 0
Antique Mall 0 0
---------- ----------
Total Capital Expenditures $ 3,929 $ 2,818
---------- ----------
Depreciation and amortization
Internet Auction $ 2,846 $ 8,726
Commercial Real Estate 45,818 38,126
Antique Mall 62 72
---------- ----------
Total depreciation and amortization $ 48,726 $ 46,924
---------- ----------
6 months ending June 30,
2002 2001
---------- ----------
Revenues
Internet Auction $ 54,294 $ 81,828
Commercial Real Estate 867,181 759,207
Antique Mall 914,917 861,104
---------- ----------
Total Revenues $ 1,836,392 $ 1,702,139
---------- ----------
Operating Income
Internet Auction $ (227,259) $ (127,471)
Commercial Real Estate 488,003 287,216
Antique Mall (21,264) 30,240
---------- ----------
Total Operating Income $ 239,480 $ 189,985
---------- ----------
Capital Expenditures
Internet Auction $ 3,929 $ 15,210
Commercial Real Estate 18,316 0
Antique Mall 0 0
---------- ----------
Total Capital Expenditures $ 22,245 $ 15,210
---------- ----------
Depreciation and amortization
Internet Auction $ 5,692 $ 17,452
Commercial Real Estate 91,636 76,520
Antique Mall 125 144
---------- ----------
Total depreciation and amortization $ 97,453 $ 94,116
---------- ----------
Identifiable Assets
Internet Auction $ 22,768 $ 45,192
Commercial Real Estate 4,057,597 4,227,449
Antique Mall 594 862
---------- ----------
Total identifiable assets $ 4,080,959 $ 4,273,503
---------- ----------
Note 4 - Property and Equipment
Major categories of property and equipment at June 30, are summarized as
follows:
2002 2001
---------- ----------
Land $ 535,070 $ 535,070
Buildings 5,747,884 5,722,338
Furn Fixt & Equip 114,217 110,427
---------- ----------
Total $ 6,397,171 6,367,835
Accumulated Depr (2,316,211) (2,094,331)
---------- ----------
Net Property and Equipment $ 4,080,960 $ 4,273,504
========== ==========
Depreciable Lives:
Buildings are depreceated at 39 years. Equipment is depreciated
at 5 - 7 years.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Some of the statements contained in this report on Form 10-Q that are not
purely historical are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933 and Section 1E of the Securities Exchange Act of
1934, including, without limitations, statements regarding the Company's
expectations, hopes, beliefs, anticipations, commitments, intentions and
strategies regarding the future. Forward-looking statements include, but are
not limited to, statements contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Actual results
could differ from those projected in any forward-looking statements for the
reasons, among others detailed under "factors That May Affect Future
Results" in this Report. We believe that many of the risks detailed in this
Report are part of doing business in the industries in which we compete and
will likely be present in all periods reported. The fact that certain risks
are characteristic of an industry does not lessen the significance of the
risk. The forward-looking statements are made as of the date of this Form
10-Q. We assume no obligation to update the forward-looking statements or
to update the reasons why actual results could differ from those projected
in the forward-looking statements.
OVERVIEW
We are engaged in leasing office space, managing antique malls and operating
an internet web site. In 1998 we have shifted our emphasis from the office
rental and antique malls to the Internet web site.
Our web site revenues have started to improve due to the success we have had
with the half-price gift certificate auctions. The emphasis has expanded in
our marketing from the local Rockford market to the other regions of the
United States.
In response to the success met in the other regions we have expanded our
drive to include major food chains, major hardware outlets as well as
national franchised fast food service companies. We intend to utilize our
experience in these major markets to bring our customers increased interest
in our auctions and increase our future business opportunities in this
arena.
RESULTS OF OPERATIONS
REVENUES
Revenues for the three-month period ended June 30, 2002 were $893,561
reflecting a 4% increase in sales compared with the same period in the
preceding year. The increase is due to the higher rent generated in the
office leasing section of the company .
COST OF SALES
Cost of sales increased by $21,032 to $371,599 for the three month period
ended June 30,2002. These cost increase reflect an increase in cost of 6%
from $350,567 due to the cost of goods reflected in the increase in sales
for the same period in the preceding year. We expect the cost of goods to
continue to increase as the sales volume on the web site continues to
increase.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased $57,208 for the
three-month period ended June 30, 2002, to $415,050 reflecting a 15%
increase from the three-month period ended June 30, 2001. The increase was
primarily due to increases in personnel as a result of additional staff in
the web site development.
OTHER INCOME AND EXPENSES
Other income and expenses were $30,735 for the three-month period ended June
30, 2002. This expense is consistent with the $30,223 expenses of the same
three-month period ended June 30, 2001. The other expenses are interest
expenses on the long term debt.
LIQUIDITY AND CAPITAL RESOURCES
Abidon's cash and cash equivalents consist of bank deposits. Abidon has
available bank lines, equity funding possibilities to meet any future cash
flow requirements. The balance of cash and cash equivalents at June 30, 2002
is $3,137 as compared with $0 for the same period ending June 30, 2001.
This is consistent with the balance at the end of our second quarter 2001.
FACTORS THAT MAY INFLUENCE FUTURE RESULTS
Unless we significantly increase our revenues on the web-site, our
increasing expenses and negative cash flow will significantly harm our
financial position.
We have not been profitable on our website since the start up of this
portion of our business. We are operating at a loss due to the start up in
development cost of equipment and salaries.
Expansion of this web site will be sought by forming strategic alliances
with companies that can supply us with gift certificates at a discount to us
and reduce our cost while we increase our sales.
There can be no guarantee that we will achieve these objectives or goals.
Our inability to significantly increase our sales volume and decrease the
cost of the certificates could seriously harm our business, and cause harm
to our financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our exposure to market risk for changes in interest rates relates primarily
to our long-term debt on the Real Estate. We have one year remaining on the
building at 5411 east State Street , and Seven years remaining on the
building at 5301 east State Street. We have no investments denominated in
foreign country currencies or any other marketable securities.
PART II
ITEMS 1 THROUGH 6 NOT APPLICABLE
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized
We hereby certify that this Report on Form 10-Q fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that the information contained in this report fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
ABIDON INC.
8/14/2002 /S/ Howard P. Miller
--------------- -----------------------------
Date Howard P. Miller
President and
Chief Executive Officer
8/14/2002 /S/ Stanley Miller
---------------- --------------------------
Date Stanley Miller
Vice President