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UNITED STATES
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 March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-26917
BUYERS UNITED, INC.
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(Exact name of registrant as specified in its charter)
Delaware 87-0528557
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
14870 Pony Express Road, Bluffdale, Utah 84065
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(Address of principal executive offices)
(801) 320-3300
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(Registrant's telephone number, including area code)
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(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 13,452,079 shares of common
stock as of May 7, 2004.
FORM 10-Q
BUYERS UNITED, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2004,
and December 31, 2003 (unaudited) 3
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2004 and 2003 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2004 and 2003 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 4. Controls and Procedures 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
BUYERS UNITED, INC.
CONDENSED CONSOLIDATED BALANCE SHEET - (Unaudited)
March 31, December 31,
2004 2003
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 7,325,130 $ 3,055,384
Restricted cash 1,568,566 1,569,336
Accounts receivable, net 8,336,602 8,162,483
Other current assets 248,676 243,844
------------- -------------
Total current assets 17,478,974 13,031,047
Property and equipment, net 2,783,195 2,424,642
Intangible assets, net 8,074,756 8,018,682
Other assets 441,530 496,787
------------- -------------
Total assets $ 28,778,455 $ 23,971,158
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit $ 3,461,104 $ 4,093,782
Current portion of long-term debt and capital lease obligations 6,234,257 7,781,484
Accounts payable 9,495,964 11,248,152
Accrued liabilities 1,816,954 1,828,864
------------- -------------
Total current liabilities 21,008,279 24,952,282
Long-term debt and capital lease obligations 245,980 646,126
------------- -------------
Total liabilities 21,254,259 25,598,408
Stockholders' equity (deficit):
Preferred stock
Series A 183 187
Series B 42 72
Common stock 1,308 760
Additional paid-in capital 29,250,294 20,193,148
Warrants and options outstanding 4,012,394 3,928,110
Accumulated deficit (25,740,025) (25,749,527)
------------- -------------
Total stockholders' equity (deficit) 7,524,196 (1,627,250)
------------- -------------
Total liabilities and stockholders' equity (deficit) $ 28,778,455 $ 23,971,158
============= =============
See accompanying notes
3
BUYERS UNITED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Unaudited)
Three Months Ended March 31,
---------------------------------
2004 2003
---- ----
Revenues from telecommunications services $ 16,743,707 $ 15,481,120
Operating expenses:
Costs of revenues 9,176,193 8,664,767
General and administrative 4,017,284 3,626,700
Selling and promotion 3,103,991 2,331,069
-------------- --------------
Total operating expenses 16,297,468 14,622,536
-------------- --------------
Income from operations 446,239 858,584
Other income (expense):
Interest income 13,850 2,601
Interest expense (357,424) (485,929)
Gain on early extinguishment of debt 109,150 -
-------------- --------------
Total other expense, net (234,424) (483,328)
-------------- --------------
Net income $ 211,815 $ 375,256
8% Preferred dividends on Series A and B preferred stock (202,313) (181,895)
-------------- --------------
Net income applicable to common stockholders $ 9,502 $ 193,361
============== ==============
Net income per common share:
Basic $ - $ 0.03
Diluted - 0.03
Weighted average common shares outstanding:
Basic 8,786,182 6,107,466
Diluted 10,589,677 6,150,660
See accompanying notes
4
BUYERS UNITED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
Three Months Ended March 31,
-------------------------------
2004 2003
---- ----
Cash flows from operating activities:
Net income $ 211,815 $ 375,256
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 970,094 590,363
Amortization included in interest expense resulting from
issuing stock with notes - 5,312
Amortization of discount on notes payable 57,276 114,064
Amortization of note financing costs 25,000 39,241
Amortization of deferred consulting fees - 5,209
Changes in operating assets and liabilities:
Accounts receivable (174,119) (2,723,196)
Other assets (29,832) (460,358)
Checks in excess of available cash balances - 372,612
Accounts payable (1,757,254) 2,832,159
Accrued liabilities 355,724 396,677
-------------- --------------
Net cash provided by (used in) operating activities (341,296) 1,547,339
-------------- --------------
Cash flows from investing activities:
Increase (decrease) in other assets 16,176 (26,526)
Acquisition of customer base (757,856) -
Purchases of property and equipment (587,784) (402,918)
-------------- --------------
Net cash used in investing activities (1,329,464) (429,444)
-------------- --------------
Cash flows from financing activities:
Restricted cash 770 (480,485)
Net borrowings and payments under line of credit (632,678) (989,118)
Borrowings under notes payable, net of debt issuance costs - 496,810
Exercise of options and warrants 917,000 -
Private placement of common stock, net of offering costs 8,160,063 -
Repurchase of common stock (500,000) -
Principal payments on long-term debt (2,004,649) (1,077,185)
-------------- --------------
Net cash provided by (used in) financing activities 5,940,506 (2,049,978)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 4,269,746 (932,083)
Cash and cash equivalents at the beginning of the period 3,055,384 994,360
-------------- --------------
Cash and cash equivalents at the end of the period $ 7,325,130 $ 62,277
============== ==============
See accompanying notes
5
BUYERS UNITED, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
Three Months Ended March 31,
-------------------------------
2004 2003
---- ----
Supplemental cash flow information:
Cash paid for interest $ 386,609 $ 280,597
Supplemental schedule of noncash investing and financing activities:
Issuance of common shares in payment of preferred stock dividend $ 476,256 $ 377,688
Accrual of dividend payable on preferred stock 202,313 181,895
Issuance of common shares for officer's personal guranty - 36,300
Issuance of warrants with private placement of common stock 189,336 -
Retire and replace note payable - 800,000
Close Touch America transaction and record obligation - 3,750,000
See accompanying notes
6
BUYERS UNITED, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Unaudited)
March 31, 2004
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Buyers United, Inc. ("the Company" or "Buyers United") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q of Regulation
S-X. Accordingly, they do not include all the information and footnotes
necessary for a comprehensive presentation of financial position and results
of operations.
It is management's opinion, however, that all material adjustments
(consisting of normal recurring accruals) have been made which are necessary
for a fair financial statement presentation. The results for the interim
period are not necessarily indicative of the results to be expected for the
year.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-KSB for the year
ended December 31, 2003.
2. Summary of Significant Accounting Policies
Stock-Based Compensation: Employee compensation expense under stock options
is reported using the intrinsic method. No stock-based compensation cost is
reflected in net income applicable to common stockholders, since all options
had an exercise price equal to or greater than the market price of the
underlying common stock at the date of grant. The following table illustrates
the effects on net income (loss) applicable to common stockholders and
earnings (loss) per share if expense was measured using the fair value
recognition provision of SFAS No. 123, "Accounting for Stock-Based
Compensation:"
Three months ended March 31,
----------------------------------
2004 2003
---- ----
Net income applicable to common stockholders:
As reported $ 9,502 $ 193,361
Pro forma stock-option based compensation (113,092) (69,132)
---------- ----------
Pro forma net income (loss) applicable to
common stockholders $ (103,590) $ 124,229
========== ==========
Basic and diluted net income (loss) per common share:
As reported: $ - $ 0.03
Pro forma basic and diluted net income (loss)
per common share $ (0.01) $ 0.02
3. Acquisitions
Buyers United entered into an agreement to purchase 37 dedicated long
distance customers from Source Communications, LLC for $750,000 in February
2004. The transaction was closed in March 2004.
4. Gain on early extinguishment of debt
In the summer of 2003 the Company entered into a Purchase Agreement to
acquire approximately 12,000 long distance customers from Glyphics
Communications, Inc. Subsequently, the two parties agreed that Buyers United
would accelerate payments under the agreement in exchange for a discount on
the purchase price. The final payment under the agreement was made in
February 2004, and the Company recorded a $109,150 gain on the early
extinguishment of the debt.
7
5. Accrued liabilities
Accrued liabilities consisted of the following:
March 31, December 31,
2004 2003
---- ----
Accrued commissions $ 839,153 $ 669,523
Accrued dividends 202,313 478,599
Other 775,488 680,742
------------ ------------
$ 1,816,954 $ 1,828,864
============ ============
6. Capital Transactions
During the three months ended March 31, 2004, investors exercised warrants to
purchase a total of 157,000 shares of common stock. Total proceeds received
in these transactions was $362,000.
On March 15, 2004 the Company closed a private placement to institutional and
accredited investors. The Company sold 3,782,000 shares of common stock at
$2.30 per share, or a total of approximately $8.7 million. Net proceeds of
the offering after placement fees and expenses were approximately $8.1
million.
In connection with the placement, Acceris Communications Inc., formerly
I-link Incorporated and the holder of 300,000 shares of Series B Convertible
Preferred Stock, converted all of its preferred stock to 1.5 million common
shares. Acceris subsequently sold 750,000 of those common shares to the
investors in the private placement at $2.30 per share.
In January and February 2004, three Directors exercised options to purchase a
total of 255,000 shares of Common Stock. Total proceeds received by the
Company in connection with these exercises was $555,000.
In December 2003, a holder of 100,000 shares of Series B Convertible
Preferred Stock converted all of those shares to 500,000 shares of common
stock. In January 2004, the holder sold those common shares plus 14,560
additional shares, or a total of 514,560 shares, to Buyers United for
$500,000 in a privately negotiated transaction.
7. Major suppliers
For the three-month periods ended March 31, 2004 and 2003, approximately 53
and 66 percent, respectively, of the Company's cost of revenue was generated
from two telecommunication providers. As of March 31, 2004 and December 31,
2003, respectively, the Company owed $3.6 million and $3.0 million to these
providers. The Company has entered into contractual agreements with these
vendors. During 2002 one of these providers filed for bankruptcy protection
under Chapter 11, and the other provider is currently being scrutinized by
the Securities and Exchange Commission over certain accounting practices.
8. Subsequent events
During the first week of April 2004, investors exercised warrants to purchase
an additional 74,500 shares of common stock. Total proceeds received in these
transactions was $186,250.
On April 12, 2004, the Company repaid $2.3 million in promissory notes to one
of its directors. The director subsequently exercised warrants to purchase
297,500 shares of common stock, and the Company received proceeds of
$595,000.
On April 26, 2004, the Company repaid a $50,000 note payable to another of
its directors.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
Buyers United is a domestic telecommunications company that offers and sells a
wide range of long distance and related communication services to business and
residential customers. Historically we functioned as an aggregator and reseller
of telecommunications services provided by others. We intend to continue to
pursue and develop this type of business. However, in December 2002 Buyers
United entered into agreements to purchase and manage assets of Acceris
Communications Inc. (formerly I-Link, Inc.) and its subsidiary, I-Link
Communications, Inc., and license in perpetuity software developed by I-Link for
the operation of a Voice over Internet Protocol communications network (VoIP
Network). We closed the transactions in May 2003. With these newly acquired
assets we have been developing and offering, as a provider, enhanced services
such as fax to email, and transmit data and other communication services for a
portion of the journey over our VoIP Network rather than entirely through third
party providers. In October 2003, Buyers United acquired the exclusive right to
sell and manage the enhanced telecommunications functions of MyACD, Inc. with a
one-year option to purchase it at a price of approximately $6.8 million. With
the MyACD technology we are now offering a new product approach that combines
our national VoIP Network with on-demand proprietary telephony software for
contact handling/management applications. We are changing the way mission
critical applications are delivered and priced for the contact center
marketplace, or for any business or department seeking to improve how it manages
the productivity and quality of its customer contact opportunities.
Buyers United entered into an agreement to purchase 37 dedicated long distance
customers from Source Communications, LLC for $750,000 in February 2004. The
transaction was completed in March 2004.
We generate internal growth by pursuing multiple marketing avenues, including
using independent agents, marketing through the Internet, and selling through
our direct sales force. We intend to expand and develop our direct sales force
and value-added reseller programs during 2004. We believe continuing financial
difficulties and uncertainty in the telecommunications industry may result in
opportunities to acquire customers from unrelated companies, and we intend to
remain open to these opportunities. However, at present we are not evaluating
any new acquisitions.
Results of Operations
Revenues
- --------
Total revenues increased 8.2 percent to $16.7 million for the three-months ended
March 31, 2004 as compared to $15.5 million for the same period in 2003. The
increase in revenue is primarily due to the revenues generated from customers
purchased throughout 2003 and the acquisition of customers from Source
Communication, LLC, which closed in March 2004. We also generated growth
internally from ongoing promotional efforts, primarily involving independent
agents.
Cost of revenues
- ----------------
Cost of revenues for the three-month period ended March 31, 2004 were $9.2
million, a 5.9 percent increase, compared to $8.7 million for the comparable
period in 2003. Cost of revenues as a percentage of revenue for the three-month
period ended March 31, 2004 was 54.8 percent, as compared to 56.0 percent during
2003.
The increase in gross margin in the first quarter of 2004 compared to the first
quarter of 2003 is the result of a decrease in carrier costs for long-distance
minutes.
9
General and administrative expenses
- -----------------------------------
General and administrative expenses in the first quarter of 2004 increased 10.8
percent to $4.0 million compared to $3.6 million in the first quarter of 2003.
The increase is the result of costs associated with the increase in revenue.
Selling and promotion expenses
- ------------------------------
Selling and promotion expenses increased 33.2 percent to $3.1 million during the
three-month period ended March 31, 2004 from $2.3 million for the same period in
2003. Selling and promotion expenses as a percentage of revenue increased to
18.5 percent for the three-months ended March 31, 2004 compared with 15.1
percent for the same period in 2003. The increase resulted from higher
commissions paid on increased revenue and an increase in amortization expense on
customer accounts that were acquired throughout 2003.
Other income (expense)
- ----------------------
Interest expense for the three-month period ended March 31, 2004 was $357,424,
compared to $485,929 in 2003, a decrease of 26.5 percent. The decrease in
interest expense was the result of a reduction in the outstanding debt held
throughout the period.
In the summer of 2003 the Company entered into a Purchase Agreement to acquire
approximately 12,000 long distance customers from Glyphics Communications, Inc.
Subsequently, the two parties agreed that Buyers United would accelerate
payments under the agreement in exchange for a discount on the purchase price.
The final payment under the agreement was made in February 2004, and the Company
recorded a $109,150 gain on the early extinguishment of the debt.
Liquidity and Capital Resources
- -------------------------------
Buyers United's current ratio as of March 31, 2004 increased to 0.83:1 from
0.52:1 at December 31, 2003. The components of current assets and current
liabilities that changed significantly since the end of 2003 were cash and
accounts payable.
The increase in cash resulted from a private placement of common stock. On March
15, 2004, Buyers United sold 3,782,000 shares of common stock at $2.30 per
share, or a total of approximately $8.7 million. Net proceeds of the offering
after placement fees and expenses were approximately $8.1 million. The net
proceeds of the private placement will be used for various corporate purposes,
including sales and marketing related programs, funding further development of
our VoIP Network, reducing debt, and for working capital and other general
corporate purposes.
During the three months ended March 31, 2004 long-term debt and the related
current portion of long-term debt decreased by $1.9 million. On April 12, 2004
the Company repaid $2.3 million in promissory notes to one of its directors. The
director subsequently exercised warrants to purchase 297,500 shares of common
stock. The proceeds received by the Company totaled $595,000. On April 26, 2004,
the Company repaid a $50,000 note payable to another of its directors.
Buyers United has a line of credit agreement with RFC Capital Corporation that
expires in January 2006. The available borrowing limit is $5 million. Interest
accrues at prime plus three percent, or seven percent as of March 31, 2004. The
facility allows Buyers United to obtain financing on its eligible accounts
receivable, including unbilled receivables and regular monthly billings. The
facility is collateralized by the underlying receivables. On March 31, 2004,
Buyers United financed the maximum amount available based on eligible accounts
receivable at that time. This amount, less draws by RFC applied against the
10
outstanding amount, aggregated $3.5 million. The facility requires Buyers United
to maintain a restricted cash account for the collection of the receivables. As
of March 31, 2004, Buyers United had $1.4 million of restricted cash associated
with the RFC arrangement.
On September 10, 2003, Buyers United filed a registration statement on Form SB-2
with the Securities and Exchange Commission to register for resale up to
approximately 8.8 million shares of common stock underlying outstanding
warrants, options and convertible debt. During 2003, investors exercised
warrants to purchase 522,500 shares of common stock providing cash to Buyers
United of approximately $1.0 million. By the beginning of March 2004, investors
had exercised warrants for 71,000 shares of common stock, providing cash of
$147,000. In mid-March 2004 the registration statement was temporarily suspended
until Buyers United can file an amendment updating the registration statement
with its 2003 audited financial statements and other information. The suspension
meant those investors holding securities convertible into common stock covered
in the registration statement could not sell any of the common shares under the
terms of the prospectus. Notwithstanding this temporary restriction, since the
date the prospectus was suspended through May 7, 2004, investors had exercised
warrants for an additional 461,000 shares of common stock, thus providing cash
to Buyers United of $1,003,750.
Critical accounting policies and estimates
Revenue Recognition - Buyers United's revenue recognition policy with respect to
reseller agreements is to record gross revenues and receivables from customers
when Buyers United acts as principal in the transaction; takes title to the
products or services; and has risks and rewards of ownership, such as risk of
loss for collection, delivery, or returns. Revenues from sales of services are
recognized upon providing the services to the customers.
Accounts Receivable and Allowance for Doubtful Accounts - Accounts receivable is
comprised of amounts billed and billable to customers, net of an allowance for
uncollectible amounts. The allowance for doubtful accounts is estimated by
management and is based on specific information about customer accounts, past
loss experience, and general economic conditions. An account is written off by
management when deemed uncollectible, although collections efforts may continue.
Property and Equipment - Property and equipment are stated at cost. Major
additions and improvements are capitalized, while minor repairs and maintenance
costs are expensed when incurred. In accordance with Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," Buyers United capitalizes certain costs incurred for the
development of internal use software. These costs include the costs associated
with coding, software configuration, upgrades, and enhancements.
Advertising Costs - Buyers United advertises its services through traditional
venues such as print media to the general public. Costs associated with these
advertising efforts are expensed as incurred.
Debt Issuance Costs - As an inducement to various investors, shareholders, and
board members to lend monies to Buyers United, shares of common stock and
warrants to purchase shares of common stock were issued to them. The fair market
value of those shares at the date of issuance has been capitalized as debt
issuance costs and is being amortized over the life of the loans.
Income Taxes - Buyers United recognizes a liability or asset for the deferred
income tax consequences of all temporary differences between the tax bases of
assets and liabilities and their reported amounts in the financial statements
that will result in taxable or deductible amounts in future years when the
reported amounts of the assets and liabilities are recovered or settled. These
deferred income tax assets or liabilities are measured using the enacted tax
rates that will be in effect when the differences are expected to reverse.
Recognition of deferred tax assets is limited to amounts considered by
management to be more likely than not of realization in future periods.
11
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1985 provides a safe harbor for
forward-looking statements made by Buyers United, except where such statements
are made in connection with an initial public offering. All statements, other
than statements of historical fact, which address activities, actions, goals,
prospects, or new developments that we expect or anticipate will or may occur in
the future, including such things as expansion and growth of our operations and
other such matters are forward-looking statements. Any one or a combination of
factors could materially affect our operations and financial condition. These
factors include competitive pressures, success or failure of marketing programs,
changes in pricing and availability of services and products offered to members,
legal and regulatory initiatives affecting member marketing and rebate programs
or long distance service, and conditions in the capital markets. Forward-looking
statements made by us are based on knowledge of our business and the environment
in which we operate as of the date of this report. Because of the factors listed
above, as well as other factors beyond its control, actual results may differ
from those in the forward-looking statements.
Item 4. CONTROLS AND PROCEDURES
With the participation of management, Buyers United's chief executive officer
and chief financial officer evaluated its disclosure controls and procedures on
May 12, 2004. Based on this evaluation, the chief executive officer and the
chief financial officer concluded that the disclosure controls and procedures
are effective in connection with Buyers United's filing of its interim report on
Form 10-Q for the quarterly period ended March 31, 2004.
Subsequent to May 12, 2004, through the date of this filing of Form 10-Q for the
quarterly period ended March 31, 2004, there have been no significant changes in
Buyers United's internal controls or in other factors that could significantly
affect these controls, including any significant deficiencies or material
weaknesses of internal controls that would require corrective action.
12
PART II. OTHER INFORMATION
--------------------------
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 15, 2004 the Company closed a private placement to institutional and
accredited investors. The Company sold 3,782,000 shares of common stock at $2.30
per share, or a total of approximately $8.7 million. Net proceeds of the
offering after placement fees and expenses were approximately $8.1 million. The
net proceeds of the private placement are intended to be used for various
corporate purposes, including sales and marketing related programs, to fund
further development of its VoIP Network, reduction of debt, and for working
capital and other general corporate purposes. Roth Capital Partners, LLP acted
as the placement agent for the offering and received cash compensation of
$488,423, plus a warrant to purchase 164,125 shares of common stock at an
exercise price of $2.76 per share.
In connection with the placement, Acceris Communications Inc., formerly I-link
Incorporated and the holder of 300,000 shares of Series B Convertible Preferred
Stock, converted all of its preferred stock to 1.5 million common shares.
Acceris subsequently sold 750,000 of those common shares to the investors in the
private placement at $2.30 per share. As a result of the conversion and sale,
Acceris Communications now holds 808,546 shares of the Company's common stock,
or approximately six percent of the 13 million shares of common stock
outstanding following completion of the private placement.
The private placement was made only to institutional and accredited investors in
a transaction exempt from the registration requirements of the Securities Act of
1933. Buyers United subsequently registered under the Securities Act the resale
of the common stock purchased by the investors in the private placement, the
808,546 shares of common stock held by Acceris, and 164,125 shares of common
stock issuable under the warrant granted to the placement agent.
In October 2003, Buyers United registered under the Securities Act the resale of
up to approximately 8.8 million shares of common stock underlying outstanding
warrants, options and convertible debt. During the three months ended March 31,
2004, investors exercised warrants to purchase 157,000 shares of common stock
providing cash to Buyers United of $362,000.
In December 2003, a holder of 100,000 shares of Series B Convertible Preferred
Stock converted all of those shares to 500,000 shares of common stock. In
January 2004, the holder sold those common shares plus 14,560 additional shares,
or a total of 514,560 shares, to Buyers United for $500,000, or $.0972 per
share, in a privately negotiated transaction. Buyers United did not announce or
pursue and publicly-announced purchase plan during the first quarter of 2004.
During the last half of 2003, preferred stock dividends amounted to $476,406,
consisting of $150,426 on outstanding shares of Series A eight percent
cumulative convertible preferred stock, and $325,980 on outstanding shares of
Series B eight percent cumulative convertible preferred stock. These dividends
were paid through the issuance of 171,055 shares of common stock to the holders
of the preferred stock on February 20, 2004.
13
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: Copies of the following documents are included or furnished as
exhibits to this report pursuant to Item 601 of Regulation S-K.
Exhibit
No. Title of Document
10.1 Reconciliation Agreement dated March 9, 2004 with Acceris
Communications and I-Link Communications (1)
10.2 Form of Securities Purchase Agreement dated March 10, 2004 (1)
10.3 Form of Registration Rights Agreement dated March 10, 2004 (1)
10.5 Warrant issued to Roth Capital Partners, LLC (2)
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of the Chief Executive Officer and Chief
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- --------------------
(1) These documents were filed as exhibits to the current report on Form 8-K
filed by Buyers United with the Securities and Exchange Commission on
March 17, 2004, and are incorporated herein by this reference.
(2) This document was filed as an exhibit to the registration statement on Form
S-2, file no. 333-114302, filed by Buyers United with the Securities and
Exchange Commission on April 8, 2004, and is incorporated herein by this
reference.
Reports on Form 8-K:
- --------------------
Buyers United filed a current report on Form 8-K with the Securities and
Exchange Commission on March 17, 2004, reporting under Item 5 a press release
announcing the completion of a private placement, filing under Item 7 documents
related to the private placement and press releases, and reporting under Item 12
the issuance of a press release regarding earnings.
14
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.
BUYERS UNITED, INC.
Date: May 13, 2004 By: /s/ Theodore Stern, Chief Executive Officer
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Date: May 13, 2004 By: /s/ David R. Grow, Chief Financial Officer
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