BID.COM
International Inc.
(formerly Internet Liquidators International Inc.)
WWW.BID.COM
TSE SYMBOL: BII
1998
THIRD QUARTER REPORT
6725 Airport Road, Suite #201, Mississauga, ON L4V 1V2
Tel: 905-672-SHOP (7467), Fax: 905-672-5705,Toll Free: 1-888-287-7467
Dear Shareholder
1998 Third Quarter revenue for Bid.Com International Inc., one of North America's leading
online auctions, increased 12.5% to $6.3 million from $5.6 million in the second quarter of the
year. Revenue for the nine months was $13.7 million, up from $1.2 million in the same period in
1997, an increase of more than 1000%. Gross profit for the quarter increased more than 250% by
$0.2 million to 3.2% of sales in the third quarter, up from $51,000, or 0.9% of sales in the second
quarter. Gross profit for the nine months was $0.3 million, an increase of more than 200%
compared with the 1997 period.
The improvement in gross profit resulted from increased site traffic to Top-Bid auctions, the
successful launch of Dutch Auctions, as well as the introduction of new products and suppliers,
particularly in non-computer related categories. The company fully believes that the trend in
margin improvement is sustainable now that it has achieved critical mass and is able to manage
balanced growth in revenues and margins.
We're beginning to see evidence of our forecasted economic-of-scale, achieving our growth in
revenues and gross profits with a reduction in marketing and operating costs. We have been able
to reduce our primary operating expense of advertising and promotion, both in gross dollar terms
and as a percent of sales, from 61% to 53% of sales. Other operating expenses held constant at
26% of sales. Significant reductions in expenses will occur going forward as we start driving the
business to positive cashflow rather than building revenues at the expense of profits.
Net losses for the quarter declined marginally from $4.83 million to $4.79 million and were
reduced as a percentage of sales from 86.4% to 76.2%. The company's balance sheet reflects the
closing of three equity financings in the third quarter, with investors from Canada, the U.S. and
Europe. These financings, from new distribution partner, Rogers Media Inc., from Bid.Com's
supply chain, and from financial institutions, provided more than $13 million in gross proceeds to
Bid.Com. The net effect is an increase in current assets from $2.6 million to $11.4 million, and an
improvement in the company's working capital position by $7.7 million from the previous quarter.
Our fourth quarter is proceeding according to plan. Now that we are gaining critical mass in site
traffic, we anticipate further increases in revenues and margins, while reducing marketing expenses
and maintaining operating costs at a relatively constant rate. The economies-of-scale which form
the cornerstone of our business model will become increasingly more evident going forward.
There is still substantial capacity in our current configuration and it is not expensive to scale at this
point. The company recently announced that it has secured the URL www.dutchauction.com, in
the belief that the declining price auction format should capture a meaningful share of the forecast
$50+ billion online auction industry by 2002. The Dutch Auction is proving to be more effective
in a number of product categories than Top Bid Auctions. Specifically, Bid.Com believes that the
Dutch Auction will prove to be a superior form for liquidation opportunities and
business-to-business commodity transactions.
The Company also recently launched Bid Buddy and Bid Search. These leading-edge technology
tools automate key functions of the online bidding process.
In its first day of operation, more than 50% of our bid activity was generated by Bid Buddy,
confirming our belief that it is an effective tool that eliminates the need for customers to be
physically present at auctions. The ability to place absentee bids through an intelligent agent,
requiring only a single mouse click to implement, greatly increases the accessibility of our online
auctions to the marketplace. Bid Buddy is technologically superior to existing agents offered
within the online sector, and we believe it to be the most user-friendly agent currently available on
the Net.
During the quarter, Bid.Com closed the largest e-commerce content deal in Canadian history,
valued at over $6 million during the initial term, with Rogers Media Inc. As part of the agreement,
site traffic will be stimulated by a media campaign across a number of Rogers' properties, which
include print, radio, television and the Internet, as well as a committed advertising spend on
non-Rogers properties. With the launch expected in the fourth quarter, the company expects that
Bid.Com will become a household name in Canada by year-end, and be on target to assume the
dominant online auction position in Canada. The alliance has significant strategic importance for
the company. It was negotiated as a content license at nominal incremental cost to Bid.Com and
includes a substantial up-front payment from the licensee that is responsible for driving site traffic.
As well, it provides for an ongoing profit-sharing partnership.
Bid.Com continues to make excellent progress in all aspects of its operations and financial
performance. The company is committed to being the technological leader in online auctions and
now offers its unique auction platform for license. It has created an easily integrated, fully year
2000 compliant system, which is capable of running many concurrent rising price auctions, falling
price auctions and static priced e-commerce transactions, imbedded with state-of-the-art bidding
and search agents. The technology has proven its scacability to many thousands of simultaneous
users, its adaptability to multiple countries and currencies, its assembly line operational efficiency,
and its plug and play user interface. Bid.Com will provide licensees with stand-alone turnkey
installations on client servers as well as custom-branded applications from Bid.Com's servers.
Bid.Com International Inc. (formerly known as Internet Liquidators International Inc.) was
founded in 1995 and listed on the Toronto Stock Exchange in February 1998. With offices in
Toronto, Ontario and Tampa, Florida, it is one of the Internet's leading online auction sales
organizations. The company offers a compelling, entertaining, and cost-effective method of selling
a wide array of goods and services over electronic distribution channels. In addition to its strategic
alliances with America Online, The Toronto Star Newspapers Limited, and Rogers Media Inc., the
company enjoys distribution agreements with Yahoo!, Netscape, Metacrawler, and more recently
with ComputerShopper.com, a Ziff-Davis property. Bid.Com is strategically positioned to
leverage its technological leadership by offering the pre-eminent online auction platform for license
to business-to-business markets and for distribution through broadband/cable media.
Paul Godin
Chief Executive Officer
BID.COM INTERNATIONAL INC.
Consolidated Balance Sheet
September 30, 1998
(unaudited - prepared by Management)
1998
1997
ASSETS
CURRENT
Cash and short term Investments
$
9,090,245
$
396,154
Accounts receivable
283,893
179,918
Inventory for resale
216,100
34,800
Deposits and prepaid expenses
1,822,552
424,122
11,412,790
1,034,994
CAPITAL ASSETS
625,765
343,114
TRADEMARKS AND INTELLECTUAL ASSETS
56,846
-
$
12,095,401
$
1,378,108
LIABILITIES
CURRENT
Accounts Payable
$
4,763,728
$
1,155,271
Loan Payable
118,930
4,763,728
1,274,201
SHAREHOLDERS EQUITY
Share capital
29,178,460
6,022,528
Deficit
(21,846,787)
(5,918,621)
7,331,673
103,907
$
12,095,401
1,378,108
BID.COM INTERNATIONAL INC.
Consolidated Statement of Loss and Deficit
For the nine month period ended September 30, 1998
(unaudited - prepared by Management)
1998
1997
REVENUE
$
13,712,527
$
1,175,817
COST OF GOODS SOLD
13,422,462
1,455,038
290,065
(279,221)
EXPENSES
Advertising and promotion
8,901,837
1,233,858
Computing and communication fees
150,620
169,864
Depreciation and Amortization
135,702
83,416
Filing fees and investor relations
261,134
71,714
Interest expense
5,316
7,778
Office and general
984,142
247,286
Professional fees
332,081
206,966
Salaries and consulting
1,651,368
1,122,407
Software development and expense
493,882
162,546
Travel and entertainment
249,691
87,908
13,165,773
3,393,741
NET LOSS FOR THE PERIOD
$
(12,875,708)
$
(3,672,962)
DEFICIT, BEGINNING OF PERIOD
(8,971,079)
(2,245,659)
DEFICIT, END OF PERIOD
$
(21,846,787)
$
(5,918,621)
LOSS PER SHARE
$
(0.62)
$
(0.31)
BID.COM INTERNATIONAL INC.
Consolidated Statement of Changes in Financial Position
For the nine month periods ended September 30, 1998
(unaudited - prepared by Management)
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING
ACTIVITIES
1998
1,997
OPERATING
Net loss for the period
$
(12,875,708)
$
(3,672,962)
Item not affecting cash
Depreciation
135,702
83,416
(12,740,007)
3,589,546
Change in non-cash operating working capital items
3,162,642
153,561
(9,577,365)
(3,435,985)
INVESTING
Purchase of capital assets
(272,699)
(76,612)
Purchase of trademark
(70,654)
-
(343,353)
(76,612)
FINANCING
Loans payable
0
(138,570)
Special warrants receivable
2,189,231
Issuance of common shares (net of expenses)
14,644,377
3,985,624
16,833,608
3,847,054
NET CASH INFLOW DURING THE PERIOD
6,912,890
334,457
CASH, BEGINNING OF PERIOD
2,177,355
61,697
CASH, END OF PERIOD
$
9,090,245
$
396,154
Bid.Com International Inc.
Corporate Directory
DIRECTORS AND OFFICERS
Paul Godin, Chief Executive Officer, Chairman and Director
Christopher Bulger*, Executive Vice President Business Development, Assistant Secretary and
Director
Jeffrey Lymbumer, President, Secretary/Treasurer and Director
Frank Clegg*, Director
David Pamenter, Assistant Secretary and Director
* Member of the Audit Committee
Mike Abramsky, Director
Dr. Duncan Copeland*, Director
Fred Singer, Director
Paul Hart, Chief Financial Officer
Brent Bowes, Vice President, Corporate Controller and Assistant Secretary
Rob Joynt, Vice President, General Merchandising Manager
Jim Moskos, Vice President Technology
OFFICES
Toronto Bid.Com International Inc. |
