SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended June 30, 2003
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission file number 000-13337
Buy It Cheap.com, Inc.
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(Name of Small Business Issuer in Its Charter)
Delaware 22-2497491
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1800 Bloomsbury Ave., Ocean, N.J. 07712
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(Address of Principal Executive Offices) (Zip Code)
732-922-3609
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title Of Each Class Name Of Each Exchange On Which Registered
------------------- -----------------------------------------
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock; $.001 par value per share
----------------------------------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $0
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity,
as of a specified date within the past 60 days. (See definition of affiliate
in Rule 12b-2 of the Exchange Act).
As of August 28, 2003, the aggregate market value of the Registrant's
Common Stock (based on the closing bid price for the Common Stock as reported
by the National Quotation Bureau on such date held by non-affiliates of the
Registrant) was approximately $57,000. For the purposes of this report, it
has been assumed that all directors and officers of the Registrant are
affiliates of the Registrant. However, the statements made herein shall not
be construed as an admission for the purpose of determining the affiliate
status of any person. As of August 28, 2003, the Registrant had 9,040,582
shares of Common Stock issued and outstanding.
Note. If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate
market value of the common equity held by non-affiliates on the basis of
reasonable assumptions, if the assumptions are stated.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 9,040,582 shares of Common
Stock, par value $.001 per share, at August 28, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
None
Notice on Forward-Looking Statements
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 and is making this cautionary
statement in connection with such safe harbor legislation. This Form 10-KSB,
and the Annual Report to Shareholders, Form 10- QSB or Form 8-K of the
Company or any other written or oral statements made by or on behalf of the
Company may include forward-looking statements which reflect the Company's
current views with respect to future events and financial performance. The
words "believe," "expect," "anticipate," "intends," "estimate," "forecast,"
"project," "should" and similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Report Act of 1995. All forecasts and projections in this Form
10-KSB are "forward-looking statements," and are based on management's
current expectations of the Company's near-term results, based on current
information available pertaining to the Company, including the risk factors
noted below.
The Company wishes to caution investors that any forward looking statements
made by or on behalf of the Company are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other risk factors include, but are not
limited to: changing economic and political conditions in the United States
and in other countries, changes in governmental spending and budgetary
policies, governmental laws and regulations surrounding various matters such
as environmental remediation, contract pricing and international trading
restrictions, customer product acceptance and continued access to capital
markets and foreign currency risks. The Company wishes to caution investors
that other factors may, in the future, prove to be important in affecting
the Company's results of operations. New factors emerge from time to time
and it is not possible for management to predict all such factors, nor can
it assess the impact of each such factor on the business or the extent to
which any factor, or a combination of factors, may cause actual results to
differ materially from those contained in any forward-looking statements.
Investors are further cautioned not to place undue reliance on such forward-
looking statements as they speak only to the Company's views as of the date
the statement is made. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
PART I
Item 1. Description of Business
General
Buy It Cheap.com, Inc. (the "Company") was incorporated in Delaware on
January 16, 1984 as Cellufone Corporation. From 1984 to 1991 the Company
and/or its subsidiaries, were involved in several different businesses,
including the reselling of cellular telephone service, radio paging (beeper)
service, private pay telephone manufacture and private network switching.
The Company subsequently changed its name to Celcor, Inc. Because growth and
profitability of these operations fell short of expectations, the Company
had either ceased operating or had sold off all its businesses by February,
1991.
Unable to obtain financing to repay debt or fund operations of any kind,
the Company, in April 1991, filed for protection under Chapter 11 of the
United States Bankruptcy Code. The Company was able to secure limited equity
capital from an investor and the Company emerged from bankruptcy in 1992
with virtually no assets or liabilities.
The Company (then known as Celcor, Inc.) had virtually no operations
from 1991 to early 1995 when it executed an Agreement and Plan of Merger with
Northeast (USA) Corp., a New York corporation, ("Northeast NY"). Through this
merger, which became effective August 1, 1996, the Company changed its name
from Celcor, Inc. to Northeast (USA) Corp. and was the surviving entity in
the merger. The Company consummated the merger in order to bring the business
of Northeast NY into the Company. Northeast NY had a joint venture with the
Chinese government to manufacture and distribute vitamins and beauty products.
While limited production and sales were achieved, lack of funding caused
cessation of activities in early 1997. Because the necessary funding for
this operation could not be raised and because certain commitments by each
party had not been met, the Company, in June of 1999, notified the Chinese
that it was no longer interested in pursuing the joint venture. The Chinese
have responded that they were not against dissolving the joint venture,
although no formal liquidation has yet taken place. During the fiscal years
ending June 30, 1996 through 1998 the Company, domestically, generated limited
revenues from retail sales of a beauty supply line. Lack of funding for
promotional activities, and subsequently for fixed overhead costs, caused
cessation of this activity during the latter part of fiscal 1998.
In April of 1999, Robert Edwards, the Company's initial founder and
former president approached the Company on the possibility of starting an
Internet retailing business. Pursuing this proposal, the Company's Board of
Directors approved the acquisition of Buy It Cheap.com, Inc., ("BUYC") a
development stage company organized under Delaware law by two directors of
the Company. BUYC had raised approximately $100,000 in start-up investment
capital. The Company issued 1,400,000 shares of its common stock to
shareholders of BUYC upon consummation of the transaction (October 1999).
Once the acquisition was consummated, the Company operated a website
"Buyitcheap.com" and changed its corporate name to Buy It Cheap.com, Inc.
For accounting purposes, the acquisition has been treated as an acquisition
of the Company by Buy It Cheap.com, Inc. and as a recapitalization of Buy It
Cheap.com, Inc.
The Company believes that there is a market for lower priced specialty
merchandise on the Internet as strong competition for items new to the market
has left a void in the market for lower cost items. With lower cost and
specialty merchandise, the Company won't compete with the vast majority of
Internet retailers and will benefit from the greater profit margins that are
achievable with this type of merchandise.
Current operating plan
Internet Retailing - Buyitcheap.com
The Company intends to operate a virtual store under the web address of
"Buyitcheap.com" and will offer for sale various types of branded merchandise
over the Internet. While the website has been partially functional, the
Company has not yet promoted it and sales thus far have been negligible.
Initial merchandise lines will consist of specially priced items in consumer
electronics, luggage and giftware. The Company does not intend to inventory
any merchandise, however it may do so in the future. The Company will post
merchandise from various vendors on its website, takes orders and collect
the funds. The order is routed to the applicable vendor for shipment to the
customer. Upon shipment, the Company remits its cost of the item to the
vendor. In keeping with the Company's website name, the theme of its
merchandise offerings will be to offer merchandise at the lowest possible
price. The Company plans to keep overhead low and will seek additional
funding to expand the business. The Company has not officially launched its
website as raising equity capital for dot com businesses has been less than
favorable. The rate at which the Company can secure financing will be a
determing factor in how fast the Company will grow. The Company believes
that the overall economy is improving allowing for a more favorable business
environment in which to launch its website store. At this time, the Company
belives the store could open in the Spring of 2004.
Competition
The Internet retailing business is a highly competitive industry. The
Company, being a start-up in this business, faces competition from numerous
sources, including established Internet retailers with greater financial
resources and a longer operating history. However, the Company expects, in
time, to establish a niche as a retailer of quality branded merchandise
obtained from closeouts, surplus goods, odd lots, etc. offered at cheap
prices, by which to distinguish itself from other Internet retailers and
thus, to effectively compete in this industry. The Company's ability to
successfully compete will be dependent upon its future ability to raise
substantial additional capital.
Supply of merchandise and Internet Infrastructure
The Company, through existing relationships developed by the Company's
management, will display merchandise from various vendors. There is no charge
for displaying the merchandise on the Company's website. The Company marks up
the price charged to it by the vendor. There being no real risk to the
vendor/supplier, the Company believes it will not experience any difficulty
in obtaining merchandise for sale on its website.
While the Company owns its own hardware and software to generate its
website, it currently relies on an outside organization to maintain this
website infrastructure. In the near term future, the Company anticipates
that it will perform these functions itself.
Employees
The Company currently has no paid employees. Certain officers and
directors of the Company have agreed to temporarily work without pay but have
been reimbursed for some out-of-pocket expenditures.
Item 2. Description of Property
The Company leases office space in Clifton, N.J.and maintains its
principal office at 1800 Bloomsbury Ave., Ocean, N.J. 07712 at no cost to the
Company. As the business expands, the Company will need to procure additional
space.
Item 3. Legal Proceedings
From its prior operations in selling beauty products (1995-1997) the
Company (then called Northeast (USA) Corp.) is indebted to two suppliers who
have filed suit against the Company. These filed claims total approximately
$89,000, of which $11,000 is disputed by the Company. One of these creditors
has obtained a judgement (with interest) against the Company for approximately
$60,000. The Company has attempted to settle these claims with issuance of
its common stock and convertible notes. Depending on its financial status,
the Company will attempt to settle these claims in the coming months.
Details of these suits are as follows: Supreme Court of the State of
New York, County of Queens, filed July 15, 1997, plaintiff Laffon Design-
Kree Plast S.P.A., defendant Northeast (USA) Corp. (judgement entered);
Supreme Court of the State of New York, County of Queens, filed March 5,
1997, plaintiff R. P. Scherer Corporation, defendant Northeast (USA) Corp.
(pending).
If the Company is unable to resolve these claims, it may be unable to
proceed with its business plans.
Item 4. Submission of Matters to a Vote of Security Holders
None during the Company's fiscal year ended June 30, 2003.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the OTC Bulletin Board, symbol
BYCC.
The following table shows the range of high and low bid or last trade
quotations for the Company's Common Stock as reported to the Company by Pink
Sheets LLC's "OTC Market Report." No review of the daily quotations as
provided by the OTC Bulletin Board has been undertaken by the Company. The
quotations reflect prices between dealers, without retail mark-ups, mark-
downs or commissions and may not necessarily represent actual transactions
or be indicative of prices at which the Company's Common Stock was traded.
Fiscal year Fiscal quarter ended Low bid High bid
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2002 September 30, 2001 $ .10 $ .10
December 31, 2001 .10 .11
March 31, 2002 .06 .11
June 30, 2002 .06 .06
2003 September 30, 2002 .05 .06
December 31, 2002 .01 .05
March 31, 2003 .01 .01
June 30, 2003 .01 .03
The number of record holders of the Company's Common Stock as of August
31, 2003 was approximately 300, however, the Company believes that there are
substantially more beneficial owners of the Common Stock.
Dividend policy
The Company has never paid any dividends on its common stock. The
Company anticipates that in the foreseeable future, earnings, if any, will
be retained for use in the business or for other corporate purposes, and it
is not anticipated that cash dividends will ever be paid on its common stock.
Item 6. Management's Discussion and Analysis or Plan of Operation
The Company entered the Internet retailing business through the formation
an entity separate from the Company by two of its directors. The new entity
was able to raise limited start-up capital for an Internet retailing business.
The new entity then merged with the Company. For accounting purposes, the
combination of the two companies was treated as an acquistion of the Company
by this new entity. Subsequent to the completion of this acquisition the
Company changed its name to Buy It Cheap.com, Inc. and commenced an Internet
retailing operation under the website "Buyitcheap.com." The Company must
still arrange settlement of its liabilities and raise substantial new
investment capital in order to develop this business.
Financial and operating plan for the next 12 months
The Company plans to continue building and improving its website over the
next several months with a planned "opening" of the store in the Spring of
2004. The Company operates with little overhead. The Company plans to consume
operating cash only to the extent that it has available cash on hand, or that
it has investor comittments for. This may limit the rate at which the Company
will grow. Until there is positive cash flow from its Internet business, or
the Company is able to raise a substantial amount of new capital, there will
be no paid employees or any significant fixed overhead. The sales transactions,
for the most part, will be handled automatically over the Internet requiring
little labor or office space requirements. The Company has experienced several
delays in getting its web site functional, including economic conditions
relating to dot com companies. The objective of the Company will be to
establish the viability of its operations in order to attract substantial
new investment capital to expand its business in the future.
Item 7. Financial Statements
The financial statements of the Company, the notes thereto, and the
Report of the Independent Auditors thereon required by this Item 7 appear in
this report on the pages indicated in the following index.
Page
Independent Auditors' Report................................ F-1
Balance Sheet at June 30, 2003 and 2002..................... F-2
Statement of Income for the fiscal year ended June 30, 2003
and 2002 and the period July 19, 1999 to June 30, 2003..... F-3
Statement of Stockholders' Equity for period July 19, 1999
to June 30, 2003........................................... F-4
Statement of Cash Flows for the fiscal years ended June 30,
2003 and 2002 and for the period July 19, 1999 to June
30, 2003................................................... F-5
Notes to Financial Statements............................... F-6 - F-11
Item 8. Changes in and Disagreements With Accountants or Accounting and
Financial Disclosure
None
Item 8A. Controls and Procedures
Anthony J. Consi, the Company's Chief Executive Officer and Stephen E.
Roman, Jr. the Company's Chief Financial Officer, performed an evaluation of
the Company's disclosure controls and procedures as of June 30, 2003. Based
on their evaluation, they concluded that the controls and procedures in place
are sufficient to assure that material information concerning the Company
which could affect the disclosures in the Company's quarterly and annual
reports is made known to them by other officers and employees of the Company,
and that the communications occur with promptness sufficient to assure the
inclusion of the information in the ten-current report.
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect those controls subsequent
to the date on which Messrs. Consi and Roman performed their evaluation.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Directors are elected by the shareholders and serve until their successors
are elected and have qualified or until a director's earlier death,
resignation or removal. Directors were most recently elected on January 25,
1996 at the special meeting of shareholders held at such time. Robert Edwards
became a director in May, 1999 and Anthony Consi became a director on
September 26, 2000. Mr. Edwards and Mr. Consi were elected to fill seats left
vacant by previous directors' resignations.
On August 16, 2001, Mr. Edwards was elected Chairman of the Board and
Mr. Consi was elected President and CEO. The former President, Stephen Roman
was elected Vice President, Secretary and CFO. Set forth below are the names
and ages of the directors and executive officers of the Company, their
positions with the Company, and their business experience, including their
principal occupations at present and during the past five years.
Director of
Present the Company
Name Age Position since
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Robert Edwards (1) 83 Chairman of 1999
the Board
Anthony J. Consi (2) 81 President, CEO 2000
and Director
Stephen E. Roman, Jr. (3) 55 Director and 1994
Vice President
Jennifer Lo (4) 50 Director and 1996
Vice President
Michael Hsu (5) 63 Director 1996
David Chow (6) 43 Director 1993
Chin-Sung (Joe) Chen (7) 53 Director 1996
(1) Robert Edwards is the original founder of the Company in 1984. He had
not been associated with the Company from 1992 to 1999. Mr. Edwards has
been involved in retailing for the past five years with the Rumson China
and Glass Shop, Inc., a family owned private corporation.
(2) Mr. Consi has served as President and General Partner of Sunrise Realty
Associates and Brinkley Associates, major shopping center operators. He
is also Vice President and Director of risk management for Arc Properties,
Inc. a retail developer and President of Ol' Americ Associates, Inc., a
risk management consulting firm.
(3) Stephen E. Roman, Jr. served as Vice President and Chief Financial Officer
of the Company for the period from April, 1984 to June, 1994 and from
August 2001 to present. He has also served as Secretary since 1994. From
June, 1994 to January, 1996, and from May, 1999 to August 2001, Mr. Roman
has served as President of the Company. In January, 1996, Ms. Lo
succeeded Mr. Roman as President and Mr. Roman became Vice President and
Chief Financial Officer. In May, 1999, Ms. Lo resigned as President and
was succeeded by Mr. Roman. Mr. Consi succeeded Mr. Roman as President in
August 2001. For the last five years, he has served on a part-time basis.
Mr. Roman is a certified public accountant and performs similar services
for other business entities.
(4) Jennifer Lo is a trained pharmacist and from February, 1993 until May
1999 served as chairman and president of the Company. Ms. Lo is the sole
stockholder of Lyncroft Corp., which owns 100,000 shares of the Company.
(5) Michael W. Hsu served as Vice President-Finance from June, 1994 to January,
1996 on a part-time basis. He served as Treasurer (part-time) from January,
1996 to May, 1999. He has been a self-employed certified public accountant
for the past ten years.
(6) David Chow is Managing Director of Center Laboratories, Taiwan, and has
held this position since 1980. He is also Managing Director of Center
Pharmaceutical Co., Ltd., People's Republic of China and has served in
this capacity since 1992. Additionally, in 1993 Mr. Chow became Chairman
of the Taiwan Pharmaceutical Development Association and in 1995, Director
of the GMP Committee of the China Pharmaceutical Industrial Association.
(7) Chin-Sung (Joe) Chen is presently General Manager of Hyscios Pharmacy
International, Co., Ltd., a distributor of pharmaceutical and skin care
products based in Taipei, Taiwan, and has served in this capacity since
1994. Prior to his association with Hyscios, Mr. Chen was employed for
approximately 16 years by Lederle, where he served in a variety of
increasingly responsible positions. From April, 1991 to November, 1993,
Mr. Chen was national marketing manager of Lederle, Taiwan.
The Board of Directors does not presently have an audit, compensation or
nominating committee. There were no meetings of the Board of Directors during
the fiscal year ended June 30, 2003.
No officer or director of the Company is currently involved in any legal
proceeding, nor is any officer or director also an officer or director of any
other publicly held company.
Section 16 (a) Beneficial Ownership Reporting
Based solely upon a review of Forms 3 and 4 and amendments thereto, as
well as Form 5 and amendments thereto, furnished to the Company during the
period from July 1, 2001 to the present, the Company believes the following
to be accurate and correct:
Person or entity Form Reason filing Date on which Status of
required to file required required filing was required filing
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None for the 2 year period ended June 30, 2003
Item 10. Executive Compensation
There was no compensation paid or accrued to any officer or director of
the Company for the fiscal years ended June 30, 2002 and 2003.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the number of shares of the Company's
$.001 par value common stock owned by each person who, as of August 28, 2001,
owns of record, or is known by the Company to own beneficially, more than 5%
of the Company's common stock, as well as the ownership of such shares by
each director and executive officer of the Company and the shares beneficially
owned by all officers and directors as a group.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
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Majestic International Inc. 633,400 6.89
No 3 14th Floor
No 535
Cheng-Kuo
Third Road
Kaohszung, Taiwan ROC
Verchi Holdings Limited 550,000 5.98
Room 312, Entrance 3, Bldg. 14
Compound 3, Jingouhe Road
Wukesong-Haidian District
Beijing, People's Republic
of China
Anthony J. Consi 350,000 3.81
52 Buttel Drive
Clifton, NJ 07013
Stephen E. Roman, Jr. 308,153 3.35
(officer and director)
25 Hillside Road
Shark River Hills, NJ 07753
David Chow (director) 15,000 -
4F No. 20, Lane 34
Sec 2, Pa Te Road, Taipei, Taiwan
Jennifer Lo (officer and director) 421,405 (1) 4.59
258-01 Pembroke Ave.
Great Neck, NY 11021
Michael Hsu (director) 0 0
136-21 Roosevelt Ave
Flushing, NY 11354
Chin-Sung (Joe) Chen (director) 420,000 4.57
7th Floor
No 571
Ming Shui Road
Taipei, Taiwan
Robert Edwards (director) 400,000 (2) 4.35 (2)
256 Clearbrook Court
Little Silver, N.J. 07739
Current Executive Officers and
Directors as a Group (6 persons) 1,914,558 20.83
(1) Includes 100,000 shares owned by Lyncroft Corp., a corporation of which
Ms. Lo is the sole shareholder and 321,405 owned by Ms. Lo's son, J. Wu
who lives with her.
(2) Excludes 200,000 shares held by Mr. Edwards' wife to which he disclaims
beneficial ownership.
The Company is not aware of any arrangements which may result in a change
of control of the Company.
Item 12. Certain Relationships and Related Transactions
Mr. Roman, formerly the Company's President, Secretary and Director and
currently Vice President, CFO, Secretary and Director and Mr. Edwards,
Chairman of the Board and Director, are the founders of Buy It Cheap.com,
Inc., a corporation which merged into the Company in October 1999. Mr. Roman
and Mr. Edwards received 100,000 and 150,000 shares, respectively, of the
Company's stock in the merger for which they have paid a nominal price (see
Item 1 - Description of Business).
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger among Celcor, Inc., Northeast (USA)
Corp., and the Stockholders of Northeast (USA) Corp.(5)
3.1 Certificate of Incorporation, as amended, of the Company (1) (2) (4)
3.1 Amendments to the Certificate of Incorporation dated April, 1987
and October, 1996.
3.2 By-laws of the Company (1) (3)
4.1 Certificate of Designations, Preferences and Rights of Series C 8%
Convertible Preferred Stock of Celcor, Inc.
10.1 Promissory Notes between the Company and Buy It Cheap.com, Inc.
10.2 Joint Venture Contract between China Northeast Pharmaceutical
Company and U.S. Lyncroft Company (translated from the Chinese)
creating United Vitatech.
10.3 Contract of Shenyang United Vitatech Pharmaceutical Ltd. (translated
from the Chinese)
10.4 Regulations of Shenyang United Vitatech Pharmaceutical Ltd.
(translated from the Chinese)
10.5 Agreement dated December 26, 1993 between Mannion Consultants Ltd
and Northeast (USA) Corp.
31. Rule 13a-14(a) Certification
32. Rule 13a-14(b) Certification
Footnotes
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1, No. 294663.
(2) Incorporated by reference to the Company's Form 10-K for the year ended
June 30, 1986. ( File No. 000-13337).
(3) Incorporated by reference to the Company's 1986 Proxy Statement dated
November 7, 1986. (File No. 000-13337).
(4) Incorporated by reference to the Company's Registration Statement on
Form S-1, No. 3312084.
(5) Incorporated by reference to the Company's Form 10-K for the year ended
June 30, 1995. (File No. 000-13337)
(b) There were no reports on Form 8-K filed during the fiscal year ended
June 30, 2003.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Buy It Cheap.com, Inc.
----------------------
(Registrant)
By _________________________________________________________
Stephen E. Roman, Jr. - Principal financial officer
Title: Vice President, CFO and Director Date: September 24, 2003
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
By__________________________________________________________
Robert Edwards
Title: Director Date:September 24, 2003
By __________________________________________________________
Jennifer Lo
Title: Director Date:September 24, 2003
By __________________________________________________________
Michael Hsu
Title: Director Date:September 24, 2003
By __________________________________________________________
Anthony J. Consi, President and Director, Principal Executive Officer
Title: Director Date:September 24, 2003
EXHIBIT 31: Rule 13a-14(a) CERTIFICATION
I, Anthony J. Consi, certify that:
1. I have reviewed this Annual Report on Form 10-KSB of Buy It Cheap.
com, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the small business issuer as of, and for, the periods presented in
this report;
4. The small business issuer's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the small business
issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the small business issuer's
internal controls over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal controls over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal controls over financial reporting.
Date: September 24, 2003 /s/Anthony J. Consi
-----------------------------------------
Anthony J. Consi, Chief Executive Officer
I, Stephen E. Roman, Jr. , certify that:
1. I have reviewed this Annual Report on Form 10-KSB of Buy It Cheap.
com, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the small business issuer as of, and for, the periods presented in
this report;
4. The small business issuer's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the small business
issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the small business issuer,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the small business issuer's
internal controls over financial reporting that occurred during the small
business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal controls over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal controls over financial reporting.
Date: September 24, 2003 /s/ Stephen E. Roman, Jr.
----------------------------------------------
Stephen E. Roman, Jr., Chief Financial Officer
* * * * *
EXHIBIT 32: Rule 13a-14(b) CERTIFICATION
The undersigned officers certify that this report fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934, and
that the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of Buy It
Cheap.com, Inc.
A signed original of this written statement required by Section 906 has been
provided to Buy It Cheap.com, Inc. and will be retained by Buy It Cheap.com,
Inc. and furnished to the Securities and Exchange Commission or its staff
upon request.
September 24, 2003 /s/ Anthony J. Consi
-------------------------
Anhony J. Consi
(Chief executive officer)
/s/ Stephen E. Roman, Jr.
--------------------------
Stephen E. Roman, Jr.
(Chief financial officer)
Buy It Cheap.com, Inc.
(A Development Stage Company)
Financial Statements
June 30, 2003 and 2002
Buy It Cheap.com, Inc.
(A Development Stage Company)
Index to the Financial Statements
June 30, 2003 and 2002
Page
Independent Auditors' Report . . . . . . . . . . . . . . . F-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . F-2
Statements of Operations . . . . . . . . . . . . . . . . . F-3
Statement of Stockholders' Equity . . . . . . . . . . . . . F-4
Statements of Cash Flows . . . . . . . . . . . . . . . . . F-5
Notes to the Financial Statements . . . . . . . . . . . . . F-6 - F-12
Independent Auditors' Report
To the Board of Directors of
Buy It Cheap.com, Inc.
We have audited the accompanying balance sheets of Buy It Cheap.com, Inc.
(A Development Stage Company) as of June 30, 2003 and 2002 and the related
statements of operations, stockholders' equity, and cash flows for the years
ended June 30, 2003 and 2002, and the period July 19, 1999 (date of inception)
to June 30, 2003. 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence 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 Buy It Cheap.com, Inc.
(A Development Stage Company) at June 30, 2003 and 2002, and the results of
its operations and its cash flows for the years ended June 30, 2003, 2002,
and the period July 19, 1999 (date of inception) to June 30, 2003 in
conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in the notes to
the financial statements, the Company has incurred losses, has no current
sources of revenue or funds and has a working capital deficit as of June 30,
2003. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans regarding those matters
are also described in the notes to the financial statements. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Rosenberg, Rich, Baker, Berman & Company
--------------------------------------------
Rosenberg, Rich, Baker, Berman & Company
Bridgewater, NJ
August 18, 2003
F-1
Buy It Cheap.com, Inc.
(A Development Stage Company)
Balance Sheets
June 30,
2003 2002
------------------------
Assets
Current Assets
Cash $ 563 $ 6,371
Deposits 1,000 1,000
-------- --------
Total Current Assets 1,563 7,371
-------- --------
Property and equipment, net of
accumulated depreciation of $36,494
and $29,917, respectively 1,781 8,358
Investment in joint venture - 620,535
Reserve against investment in joint venture
- (620,535)
-------- --------
Total assets $ 3,344 $ 15,729
======== ========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses $ 153,944 $ 154,945
Due to officers and directors 5,559 5,559
Advance from shareholder 20,000 -
Convertible note payable 16,198 16,198
-------- --------
Total Current Liabilities 195,701 176,702
Commitments and Contingencies - -
Stockholders' Equity
Preferred stock - $.001 par value, 10 10
Authorized 2,000,000 shares
Issued and Outstanding - 10,000 shares
Common stock - $.001 par 9,190 9,190
Authorized - 20,000,000 shares
Issued 9,190,802 and outstanding
9,040,582
Paid in capital 787,140 787,140
Treasury stock, 150,220 common shares
at cost (751,100) (751,100)
Retained deficit, accumulated during
the development stage (237,597) (206,213)
-------- --------
Total Stockholders' Equity (192,357) (160,973)
-------- --------
Total Liabilities and Stockholders' Equity $ 3,344 $ 15,729
======== ========
See notes to the financial statements.
F-2
Buy It Cheap.com, Inc.
(A Development Stage Company)
Statements of Operations
Period
From July 19,
1999 (Date of
Year Ended Year Ended Inception) to
June 30, 2003 June 30, 2002 June 30, 2003
------------------------------------------------------------------------------
Revenues $ - $ - $ -
Direct Operating Costs (2,831) (2,700) (23,387)
General and Administrative
Expenses (28,553) (55,074) (214,210)
----------------------------------------
Net Loss $ (31,384) $ (57,774) $(237,597)
========================================
Weighted average number of shares
outstanding 9,040,427 8,990,016 8,224,582
=========================================
Loss Per Common Share $ - $ (0.01) $ (0.03)
========================================
Loss Per Common Share -
Assuming dilution $ - $ (0.01) $ (0.03)
========================================
See notes to the financial statements.
F-3
Buy It Cheap.com, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
June 30, 2003
Retained Deficit,
Accumulated
Preferred Stock Common Stock Treasury Stock During the
--------------- ------------ Paid in ------------------ Development
Shares Amount Shares Amount Capital Shares Amount Stage Total
--------------------------------------------------------------------------------------------------------------
Balance at
July 19, 1999
(date of inception) - $ - - $ - $ - - $ - $ - $ -
Issuance of stock in
exchange for
software - - 210,000 210 14,790 - - - 15,000
Issuance of stock
for cash - - 1,190,000 1,190 83,810 - - - 85,000
Acquisition of
Northeast (USA)
Corp. 10,000 10 7,158,407 7,158 552,975 (150,220) (751,100) - (190,957)
Issuance of stock
for release of
accounts payable
obligation - - 32,395 32 16,165 - - - 16,197
Issuance of stock
pursuant to private
placement offering - - 150,000 150 74,850 - - - 75,000
Net loss for the
period July 19,
1999 (date of
inception) to June
30, 2000 - - - - - - - (69,097) (69,097)
-----------------------------------------------------------------------------------------
Balance at June
30, 2000 10,000 $ 10 8,740,802 $8,740 $742,590 (150,220) $(751,100) $ (69,097) $ (68,857)
Issuance of Stock
for Cash - - 50,000 50 24,950 - - - 25,000
Net loss for the
year ended June
30, 2001 - - - - - - - (79,342) (79,342)
-----------------------------------------------------------------------------------------
Balance at June
30, 2001 10,000 $ 10 8,790,802 $8,790 $767,540 (150,220) $(751,100) $(148,439) $ (123,199)
Issuance of stock
for release of
accounts payable
obligation - - 400,000 400 19,600 - - - 20,000
Net loss for the
year ended June
30, 2002 (57,774) (57,774)
-----------------------------------------------------------------------------------------
Balance at June
30, 2002 10,000 $ 10 9,190,802 $9,190 $787,140 (150,220) $(751,100) $(206,213) $ (160,973)
Net loss for the
year ended June
30, 2003 - - - - - - - (31,384) (31,384)
----------------------------------------------------------------------------------------
Balance at June
30, 2003 10,000 $ 10 9,190,802 $9,190 $787,140 (150,220) $(751,100) $(237,597) $ (192,357)
========================================================================================
See notes to the financial statements.
F-4
Buy It Cheap.com, Inc.
(A Development Stage Company)
Statements of Cash Flows
Period
From July 19,
1999 (Date of
Year Ended Year Ended Inception) to
June 30, 2003 June 30, 2002 June 30, 2003
------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net Loss $ (31,384) $ (57,774) $ (237,597)
Adjustments to Reconcile Net Loss
to Net Cash Used by Operating
Activities
Depreciation and amortization 6,577 11,967 36,494
Changes in Assets and Liabilities
Decrease (Increase) in other
current assets - - (1,000)
Increase in accounts payable and
accrued expenses (1,001) 10,936 19,014
--------------------------------------
Net Cash Used by Operating Activities (25,808) (34,871) (183,089)
--------------------------------------
Cash Flows From Investing Activities
Purchases of property and equipment - - (23,275)
Decrease in due from officers/directors - 28,790 -
Cash acquired - - 1,927
--------------------------------------
Net Cash Provided (Used) by
Investing Activities - 28,790 (21,348)
--------------------------------------
Cash Flows From Financing Activities
Proceeds from sale of common stock - - 185,000
Proceeds from shareholder advance 20,000 - 20,000
--------------------------------------
Net Cash Provided by Financing
Activities 20,000 - 205,000
--------------------------------------
Net (Decrease) Increase in Cash (5,808) (6,081) 563
Cash at beginning of period 6,371 12,452 -
--------------------------------------
Cash at end of period $ 563 $ 6,371 $ 563
======================================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Liabilities assumed in the acquisition
of Northeast (USA) Corp. for common
stock $ - $ - $ (190,957)
======================================
Accounts payable satisfied by
issuance of common stock and
convertible note payable $ - $ 20,000 $ 32,395
======================================
Software costs financed by issuance
of common stock $ - $ - $ 15,000
======================================
See notes to the financial statements.
F-5
Buy It Cheap.com, Inc.
(A Development Stage Company)
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Buy It Cheap.com, Inc. (the "Company") is a Delaware corporation. On
November 3, 1999, Northeast (USA) Corp. purchased all of the common stock of
Buy It Cheap.com (a developmental stage company). For accounting purposes,
the acquisition has been treated as an acquisition of Northeast (USA) Corp.
by Buy It Cheap.com and as a recapitalization of Buy It Cheap.com. The
Company will operate in the internet retailing industry. Since there have
been no significant revenues generated from internet retailing, the Company
is considered a Developmental Stage Company for financial reporting purposes.
The Company's financial statements have been presented on the basis that
it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has incurred losses, has no current source of revenues or funds and has a
working capital deficit as of June 30, 2003. The Company's continued
existence is dependent upon its ability to secure adequate financing. The
Company plans to raise additional capital in the future; however there are no
assurances that such plan will be successful. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
Joint Venture
Northeast (USA) Corp., in 1992, formed a joint venture agreement with the
Northeast General Pharmaceutical Factory (NEGPF) a government owned
pharmaceutical concern in Shenyang, China, whereby both companies established
a joint venture company in China. Northeast (USA) Corp. and NEGPF were to
have contributed certain assets to the joint venture. Northeast (USA) Corp.
was to have contributed $2.1 million in cash and $1.15 million in technology
for a total capital contribution of $3.25 million. NEGPF was to have
contributed $750,000 in cash and a land-use right valued at $1.75 million
for a total contribution of $2.5 million. Based upon the amount of
contribution, Northeast (USA) Corp. owned 56.52% of the joint venture and
NEGPF owned 43.48%. To date, Northeast (USA) Corp. has contributed $1 million
of cash and has contributed the technology. NEGPF has contributed $750,000
of cash but has not contributed the land-use right. The joint venture had
only limited start-up operations and operations effectively ceased in 1997
due to lack of funding. Northeast (USA) Corp. has communicated with NEGPF
that it no longer has any interest in the joint venture. As such the Company
had reserved $620,535 against the investment the joint venture. During the
year ended June 30, 2003, the Company determined the investment in joint
venture to be permanently impaired and wrote off the asset and the associated
reserve. This transaction did not have a material effect on the financial
statements.
Advertising Costs
Advertising costs are charged to operations when incurred. Advertising
costs charged to expense were $0 for the year ended June 30, 2003, $1,360 for
the year ended June 30, 2002, and $6,216 for the period July 19, 1999 (date
of inception) to June 30, 2003.
Depreciation and Amortization
The cost of property and equipment is depreciated for financial reporting
purposes on a straight-line basis over the estimated useful lives of the
assets: 5 years for machinery and equipment and 3 years for software.
Repairs and maintenance expenditures which do not extend the useful lives of
the related assets are expensed as incurred.
F-6
Buy It Cheap.com, Inc.
(A Development Stage Company)
Notes to the Financial Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Income Taxes
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. Deferred tax assets and
liabilities represent the future tax return consequences of those differences,
which will either be taxable or deductible when the assets and liabilities
are recovered or settled. Deferred taxes also are recognized for operating
losses that are available to offset future federal and state income taxes.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
NEW ACCOUNTING PRONOUNCEMENTS
In August 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This statement addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. SFAS 144 supercedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of, and provides guidance on classification and accounting
for such assets when held for sale or abandonment. SFAS 144 is effective
for fiscal years beginning after December 15, 2001. The adoption of SFAS No.
144 did not have a significant impact on the Company's results of operations
or financial position.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
This statement rescinds SFAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, SFAS No. 44,
Accounting for Intangible Assets of Motor Carriers, and SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
statement amends SFAS No. 13, Accounting for Leases, to eliminate
inconsistencies between the required accounting for sales-leaseback
transactions and the require accounting for certain lease modifications that
have economic effects that are similar to sales-leaseback transactions.
Also, this statement amends other existing authoritative pronouncements to
make various technical corrections, clarify meanings, or describe their
applicability under changed conditions. Provisions of SFAS No. 145 related
to the rescissions of SFAS No. 4 were effective for the Company on November
1, 2002 and provisions affecting SFAS No. 13 were effective for transactions
occurring after May 15, 2002. The adoption of SFAS No. 145 did not have a
significant impact on the Company's results of operations or financial
position.
In June 2003, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement covers
restructuring type activities beginning with plans initiated after December
31, 2002. Activities covered by this standard that are entered into after
that date will be recorded in accordance with the provisions of SFAS No. 146.
The adoption of SFAS No. 146 did not have a significant impact on the
Company's results of operations or financial position.
F-7
Buy It Cheap.com, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NEW ACCOUNTING PRONOUNCEMENTS, Continued
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-
Based Compensation-Transition and Disclosure, which provides alternative
methods of transition for a voluntary change to fair value based method of
accounting for stock-based employee compensation as prescribed in SFAS 123,
Accounting for Stock-Based Compensation. Additionally, SFAS No. 148 required
more prominent and more frequent disclosures in financial statements about
the effects of stock-based compensation. The provisions of this Statement
are effective for fiscal years ending after December 15, 2002, with early
application permitted in certain circumstances. The Company has adopted the
disclosure provisions.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
Guarantor's Accounting and Disclosure Requirements for Guarantees, including
Indirect Guarantees of Indebtedness of Others. FIN 45 requires a company,
at the time it issues a guarantee, to recognize an initial liability for the
fair value of obligations assumed under the guarantees and elaborates on
existing disclosure requirements related to guarantees and warranties. The
initial recognition requirements are effective for the Company during the
third quarter ending March 31, 2003. The adoption of FIN 45 did not have a
significant impact on the Company's results of operations or financial
position.
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.
FIN 46 requires certain variable interest entities to be consolidated
by the primary beneficiary of the entity if the equity investors in the
entity do not have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other
parties. FIN 46 is effective for all new variable interest entities created
or acquired after January 31, 2003. For variable interest entities created
or acquired prior to February 1, 2003, the provisions of FIN 46 must be
applied for the first interim or annual period beginning after June 15, 2003.
The adoption of FIN 46 did not have a significant impact on the Company's
results of operations or financial position.
DUE TO/FROM OFFICERS AND DIRECTORS
Amounts due to/from Officers and Directors represent unsecured, non-
interest bearing loans, having no repayment terms.
ADVANCE FROM SHAREHOLDER
Advance from shareholder represents an unsecured, non interest bearing
dvance, having no specific repayment terms.
F-8
Buy It Cheap.com, Inc.
(A Development Stage Company)
Notes to the Financial Statements
PROPERTY AND EQUIPMENT
Property and equipment at cost, less accumulated depreciation and
amortization, consists of the following:
June 30,
2003 2002
----------------------
Equipment $ 5,935 $ 5,935
Software 32,340 32,340
------ ------
Subtotal 38,275 38,275
Less accumulated depreciation and
amortization 36,494 29,917
------ ------
Total $ 1,781 $ 8,358
====== ======
Depreciation expense charged to operations was $6,577 for the year ended
June 30, 2003 and $11,967 for the year ended June 30, 2002, and $36,494 for
the period July 19, 1999 (date of inception) to June 30, 2003.
OPERATING LEASE COMMITMENTS
The Company leases office space on a month to month basis. Rent expense
was $1,500 for the year ended June 30, 2003 and $1,800 for the year ended
June 30, 2002, and $3,750 for the period July 19,1999 (date of inception) to
June 30, 2003.
INCOME TAXES
The Company's deferred tax asset is comprised of the following temporary
differences:
June 30,
2003 2002
----------------------
Net operating losses $ 658,575 $ 627,191
Differences between basis of reporting
for book and tax - 620,500
------- ---------
Total $ 658,575 $1,247,691
======= =========
The reconciliation of reported income tax expense to the amount of
income tax expense that would result from applying domestic federal statutory
tax rates to pretax income is as follows:
June 30,
2003 2002
----------------------
Tax (benefit) at the U.S. Federal
Statutory rate (34%) (34%)
Valuation allowance - change 34% 34%
State income tax - net of federal tax benefit - -
---- ----
Provision for income taxes - -
==== ====
F-9
Buy It Cheap.com, Inc.
(A Development Stage Company)
Notes to the Financial Statements
INCOME TAXES, Continued
Deferred taxes are recognized for temporary differences between the
bases of assets and liabilities for financial statement and income tax
purposes. The differences relate primarily to the reserve against investment
in Joint Venture (expensed for financial statement purposes but not deductible
for income tax purposes).
The Company's provision for income taxes differs from applying the
statutory U.S. federal income tax rate to income before income taxes. The
primary difference results from providing for state income taxes and from
deducting certain expenses for financial statement purposes but not for
federal income tax purposes.
Those amounts have been presented in the Company's financial statements
as follows:
June 30,
2003 2002
----------------------
Deferred tax asset, noncurrent $ 224,000 $ 214,000
Total valuation allowance recognized for
deferred tax assets (224,000) (214,000)
-------- --------
Net deferred tax assets $ - $ -
======== ========
The Company has available net operating loss carry forwards which may be
used to reduce Federal and State taxable income and tax liabilities in future
years as follows:
FEDERAL STATE
------------------------
Available Through
2004 $ $ 191,664
2005 181,950
2006 50,064
2007 69,097
2008 79,342
2009 57,774
2010 31,384
2017 191,664
2018 181,950
2019 50,064
2020 69,097
2021 79,342
2022 57,774
2023 31,384
--------- ---------
$ 661,275 $ 661,275
========= =========
F-10
Buy It Cheap.com, Inc.
(A Development Stage Company)
Notes to the Financial Statements
LOSS PER SHARE
In accordance with Financial Accounting Standards Board Statement No.
128, "Earnings Per Share", basic earnings per share amounts are computed
based on the weighted average number of shares outstanding. The number of
shares used in the computations were 9,040,427 for the year ended June 30,
2003, 8,990,016 for the year ended June 30, 2002, and 8,224,582 for the
period from July 19, 1999 (date of inception) to June 30, 2003.
The effect of assuming the conversion of the Series C convertible
preferred stock as a common stock equivalent would be antidilutive, and was
therefore not considered in the computation of diluted earnings per share.
The following is a reconciliation of net loss to net loss per share -
basic and diluted.
For the
For the For the Period July
Year Year 19, 1999
Ended Ended (date of
June 30, June 30, inception) to
2003 2002 June 30, 2003
----------------------------------------
Net Loss $ (31,384) $ (57,774) $ (237,597)
Less: Dividends on Preferred
Stock net of tax benefit (2,400) (2,400) (9,600)
----------------------------------
Loss Applicable to common
shareholders - basic (33,784) (60,174) (247,197)
==================================
Loss Applicable to Common
Shareholders -
Assuming dilution $ (33,784) $ (60,174) $ (247,197)
==================================
Weighted Average Shares
Outstanding 9,040,427 8,990,016 8,224,582
===================================
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, due to/from officers, accounts payable and
accrued expenses and the convertible note payable approximates fair value
because of the short maturity of these instruments.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These estimates
are subjective in nature and involve uncertainties and matters of significant
judgement and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
PREFERRED STOCK
In May 1994, Northeast (USA) Corp. issued 275,000 shares of its newly
designated Series C convertible stock, $.001 par value, for an aggregate
amount of $825,000 to a group of private investors. Except for $30,000
(representing 10,000 shares) of the preferred stock, all had been converted
according to their terms prior to July 1, 1998. The Company has the right
to redeem the shares at $4.50 per share. The shares carry a stated dividend
rate of 8% per annum. Dividends are cumulative and are payable quarterly.
No cash dividends have ever been paid. Some former preferred shareholders
(prior to or simultaneous with their conversion) have accepted shares of the
Company's common stock in lieu of cash dividends. Those that did not accept
shares of common stock for dividends and those that did not convert their
preferred shares are owed a total of $111,190 of dividend arrearages at June
30, 2003 and $108,790 of dividend arrearages at June 30, 2002.
F-11
Buy It Cheap.com, Inc.
(A Development Stage Company)
Notes to the Financial Statements
CONVERTIBLE NOTE PAYABLE
During the period ended June 30, 2000 the Company entered into an
agreement with one of its creditors whereby the amount of the creditor's
claim ($32,395) was settled through the issuance of 32,395 of the Company's
common shares and a convertible note for $16,198. The note is non-interest
bearing and was due on December 31, 2002. The note may be converted at the
creditor's option, into 32,395 shares of the Company's common stock prior to
that date. The Company is in default on this note payable.
COMMITMENTS AND CONTINGENCIES
The Company is indebted to two suppliers who have filed suit against the
Company. These filed claims total approximately $89,000, of which $11,000
is disputed by the Company. One of these creditors has obtained a judgement
(with interest) against the Company for approximately $60,000. The Company
has attempted to settle these claims with issuance of its common stock and
convertible notes. Depending on its financial status, the Company will
attempt to settle these claims in the coming months.
If the Company is unable to resolve these claims, it may be unable to
proceed with its business.