UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________________ to ____________________
Commission file number 000-28547
800America.com, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0567884
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(State or other jurisdiction of (IRS Employer
incorporation or jurisdiction) Identification No.)
420 Lexington Avenue
New York, New York 10170
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(Address of principal executive offices)
(800) 999-5048
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(Issuers telephone number)
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 (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ____
There were 20,607,986 shares of common stock $0.001 par value per share, issued
and outstanding as of August 12, 2002.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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PART I -- FINANCIAL INFORMATION
Item 1.
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FINANCIAL STATEMENTS
800AMERICA.COM, INC.
New York, New York
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June 30, 2002
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CONTENTS
Page
Accountants' Review Report 1
Balance Sheets. . . . . . . . . . . . . . . . 2
Statements of Income and Retained Earnings. . 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows. . . . . . . . . . . 5
Selected Notes to Financial Statements. . . . 6-7
Independent Accountants' Review Report
Board of Directors
800America.com, Inc.
New York, New York
We have reviewed the accompanying consolidated balance sheets of 800America.com,
Inc. as of June 30, 2002, June 30, 2001 and December 31, 2001, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
three months and six months ended June 30, 2002 and June 30, 2001. These
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles for interim financial
statements.
As discussed in Note number 9 of Selected Notes to Financial Statements, certain
errors resulting in understatement of previously reported net income as of
December 31, 2001 and June 30, 2001 were discovered by management of the Company
during the current year. Accordingly, an adjustment has been made to the
financial statements to correct the error.
Piltz, Williams, LaRosa & Co.
August 12, 2002
Biloxi, Mississippi
1
800America.com, Inc.
Balance Sheets
(Unaudited)
June 30, December 31, June 30,
2002 2001 2001
------------- ------------- -------------
ASSETS
Current assets
Cash $ 19,447,574 $ 13,201,125 $ 5,370,913
Accounts receivable 53,752 1,022,310
Allowance for bad debts (154,000)
Interest receivable 27,849 17,151
Notes receivable
Investment, short-term 301,570 301,570
Total current assets 1,300,000
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21,076,993 13,573,598 6,239,233
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PROPERTY AND EQUIPMENT
Equipment 1,087,201 1,087,201 863,300
Software 3,895,650 3,695,650 2,350,150
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Totals 4,982,851 4,782,851 3,213,450
LESS accumulated depreciation (2,278,157) (1,477,183) (988,133)
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Total property and equipment 2,704,694 3,305,668 2,225,317
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OTHER ASSETS
Stock escrow 115,015
Other intangible assets (net) 4,517,289 3,378,165 1,873,278
Goodwill (net) 5,421,091 5,187,862 2,210,567
Bond deposit 500,000
Other assets 27,533
Total other assets 9,938,380 9,208,575 4,083,845
Totals $ 33,720,067 $ 26,087,841 12,548,385
LIABILITIES & STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $ 239,488 $ 230,077 $ 180,696
Membership dues payable 770,892 770,892
Taxes payable income tax 1,478,242 1,328,378 1,238,147
Deferred Income 787,295
Other current liabilities 27,471
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Total current liabilities 3,275,917 2,329,347 1,446,314
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OTHER LIABILITIES
Deferred income tax 2,249,402 2,256,960 940,025
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STOCKHOLDERS EQUITY
Preferred stock, $0.001 par
value, 5,000,000 shares authorized,
0 shares issued
Common stock, $0.001 par value,
50,000,000 shares authorized
20,136,000 shares issued and outstanding 20,136 18,725 15,430
Additional paid-in capital 12,814,552 10,605,671 3,892,143
LESS Treasury Stock purchased (164,813) (50,000)
Retained earnings 15,524,873 10,927,138 6,254,473
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Total stockholders Equity 28,194,748 21,501,534 10,162,046
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Totals $ 33,720,067 $ 26,087,841 $ 12,548,385
============= ============= ==============
See Accompanying Selected Notes to Financial Statements.
2
800America.com, Inc.
Statements of Income
Three and Six Month Periods Ended June 30, 2002 and 2001
(Unaudited)
2002 2002 2001 2001
Three Six Three Six
Months Months Months Months
---------- ----------- ---------- ----------
REVENUES $7,641,048 $15,409,212 $5,001,972 $9,302,346
---------- ----------- ---------- ----------
COST AND EXPENSES
Payroll cost 709,088 1,352,973 192,956 379,870
Advertising 2,226,000 4,526,000 719,759 1,147,119
Depreciation amortization 508,213 1,161,849 290,013 426,968
Bad debts 53,752 15,000 15,000
General and administration 495,604 1,533,250 778,516 1,461,452
---------- ---------- --------- ----------
Total cost and expenses 3,938,905 8,627,824 1,996,244 3,430,409
---------- ----------- ---------- ----------
Income from operations 3,702,143 6,781,388 3,005,728 5,871,937
---------- ---------- ---------- ----------
OTHER INCOME
Interest 82,324 163,949 24,698 43,506
Sale of assets 500,000 500,000
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Total other income 82,324 163,949 524,698 543,506
---------- ---------- ---------- ----------
Income before provision for income taxes 3,784,467 6,945,337 3,530,426 6,415,443
Provision for income taxes 1,293,044 2,347,602 1,184,121 2,214,215
---------- ---------- ---------- ----------
Net income $2,491,423 $4,597,735 $2,346,305 $4,201,228
========== ========== ========== ==========
Net earnings per share, common
basic stock $ 0.13 $ 0.23 $ 0.15 $ 0.27
Net earnings per share, common stock $ 0.11 $ 0.20 $ 0.14 $ 0.25
Fully diluted
See Accompanying Selected Notes to Financial Statements.
3
800 America.com, Inc.
Statements of Changes in Stockholders' Equity
(Unaudited)
Additional
Common Stock Paid In Retained Treasury Stockholders
Shares Amount Capital Earnings Stock Equity
---------- ------- --------- --------- -------- ------------
Balances December 31, 2000 13,412,000 $ 13,412 $ 1,943,134 $ 2,053,245 $ $ 4,009,791
Stock issued pursuant to the
acquisition of inshop.com,
February 2, 2001 1,817,943 1,818 1,815,676 1,817,494
Stock issued pursuant
to the acquisition of Ebiz.com,
30-May-01 200,000 200 133,333 133,533
Net income for the six months
ended June 30, 2001 4,201,228 4,201,228
---------- -------- ------------ ----------- ----------- -----------
Balances June 30, 2001 15,429,943 $ 15,430 $ 3,892,143 $ 6,254,473 $ 0 $ 10,162,046
========== ======== ============ =========== =========== ============
Additional
Common Stock Paid In Retained Treasury Stockholders
Shares Amount Capital Earnings Stock Equity
---------- ------- --------- --------- -------- ------------
Balances December 31, 2001 18,724,493 $ 18,725 $ 10,605,671 $ 10,927,140 $ (50,000) $ 21,501,536
Stock issued pursuant to the
acquisition of Youtopia.com
January 8, 2002 680,000 680 1,699,320 1,700,000
Stock options exercised 731,000 731 509,561 510,292
Buy back of shares issued as part
of an acquisition (114,813)
Net income for the six months 4,597,735 4,597,735
ended June 30, 2002
---------- -------- ------------ ----------- ----------- ------------
Balances June 30, 2002 20,135,493 $ 20,136 $ 12,814,552 $ 15,524,875 $ (164,813) $ 28,309,563
========== ======== ============ =========== =========== ============
See Accompanying Selected Notes to Financial Statements.
4
800America.com, Inc.
Statements of Cash Flows
Six Month Periods Ended June 30, 2002 and 2001
(Unaudited)
June 30,
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,597,735 $ 4,201,228
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,161,849 426,968
Changes in operating assets and liabilities:
Bad debts 53,752 15,000
Non-cash compensation and expenses 310,150
Sale of assets (500,000)
Prepaid assets increase 75,000
Interest receivable (10,698)
Accounts receivable increase (26,676)
Deferred income received 787,295
Accounts payable increase 9,411 155,750
Deferred income taxes (255,481) (5,100)
Taxes payable increase 164,559 851,275
Other current liabilities increase 27,471
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Net cash provided by operating activities 6,818,572 5,220,916
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 500,000
Stock escrow decrease 115,015
Bond China received 500,000
Purchase of equipment and software (1,598,732)
Investment, short-term (4,000,000)
Short-term investment returned 2,700,000
Other assets 27,533 47,749
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Net cash used in investing activities (657,452) (1,050,983)
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debts assumed in merger transaction (918,785)
Acquisition of treasury stock (114,813)
Additional paid-in capital 199,567
Sale of common stock 575 2,017
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Net cash provided by financing activities 85,329 (916,768)
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Net increase in cash 6,246,449 3,253,165
Beginning cash balance 13,201,125 2,117,746
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Ending cash balance $ 19,447,574 $ 5,370,911
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See Accompanying Selected Notes to Financial Statements.
5
800America.com, Inc.
Selected Notes to Financial Statements
Unaudited
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1. The accompanying unaudited financial statements have been prepared with the
accounting policies in effect as of December 31, 2001 as set forth in the
Notes to Financial Statements of 800America.com, Inc. In the opinion of
Management, all adjustments necessary for a fair presentation of the
condensed consolidated financial statements have been included and are of a
normal recurring nature.
The accompanying unaudited consolidated financial statements have been
prepared also in accordance with the instructions to Form 10-Q and Rule
10-01 of Regulations S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The statements include
information required for interim financial statements.
2. The results of operations for the six months ended June 30, 2002 and 2001,
are not necessarily indicative of the results to be expected for the full
year.
3. Per share data is based on the weighted average shares of common stock
outstanding of 19,992,750 and 15,356,925 for the six months ended June 30,
2002 and 2001, respectively. Per share data for diluted shares is based on
the weighted average diluted shares of common stock outstanding of
22,929,750 and 17,106,925 for the six months ended June 30, 2002 and 2001,
respectively.
4. The Company acquired the assets of Youtopia.com in a purchase transaction
for six hundred eighty thousand shares of its previously unissued common
stock. The stock had a value of $2.50 per share at the time of the
transaction. The fair market value of the assets acquired in the
transaction were as follows:
Software $ 200,000
Subscriber list 1,500,000
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Total $ 1,700,000
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5. Deferred income taxes result from book/tax basis difference in assets
acquired in tax free merger transactions.
6. The Company entered into a fifty percent joint venture with another company
for direct sales of certain closeout items in South America. The Company
invested $4,000,000 in the first quarter in this joint venture. The
arrangement is short term and should be completed in the third quarter of
2002. $2,700,000 of the Company's investment has been returned as of June
30, 2002.
7. The Company paid $2,438,528 and $1,476,966 in income tax for the six months
ended June 30, 2002 and 2001, respectively. No interest was paid during
those periods.
800America.com, Inc.
Selected Notes to Financial Statements
Unaudited
-----------
(Continued)
8. Non cash transactions included the issuance of 680,000 shares of common
stock for Youtopia.com with a value of $1,700,000, as described in note 4
above. The Company also issued 156,000 shares of common stock for
consulting services with a value of $218,400 during the six months ended
June 30, 2002. Non cash compensation of $91,750 was recognized in the
exercise of options in the Company stock option plan on 170,000 shares.
9. Correction of prior year amounts for purchase transactions and the effect
on the periods presented is as follows:
6
June 30, December 31, June 30,
2002 2001 2001
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Balance sheet items:
Assets:
Other intangible assets $ 918,785 $ 918,785 $ 1,836,276
Accumulated depreciation 130,363
Accumulated amortization (43,751) (174,113)
Goodwill 1,717,775 2,413,595 2,023,901
Advances to subsidiary (172,374) (172,373) (1,068,076)
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Totals 2,420,435 3,116,257 2,796,103
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Liabilities and equity:
Income tax payable 253,780 253,780 (50,759)
Deferred income tax 1,608,399 2,304,220 992,385
Retained earnings 558,256
Additional paid-in capital 1,949,009
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Totals 2,420,435 2,558,000 2,890,635
========== =========== ==========
Net to income statement $ $ 558,257 $ (98,532)
========== =========== ==========
June 30, December 31, June 30,
2002 2001 2001
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Income statements
Depreciation and amortization $ $ (43,751) $
General and administration 746,412 149,291
Provision for income taxes (144,404) (50,759)
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Net to income statement $ $ 558,257 $ 98,532
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7
Item 2. Management's Discussion and Results or Plan of Operation.
General
We operate various Internet web sites in three areas: Business to Business;
Business to Consumers, which includes our publishing operations, and Technology.
Our goal is to bring buyers and sellers together in an efficient and easy format
and generate income based on the transactions. Our technologies coupled with our
customer approach continue to strengthen relationships with our customers. These
technologies are providing the foundation need to scale and grow the e-commerce
businesses profitably across geographic regions and multiple product lines.
Sites operated under the 800America Network are OneTwoClick.com,
RothmanCloseouts.com, InternetWEbGuide.com, FileShooter.com, InShop.com,
eBiz4biz.com, cs-live.com, iGain.com, IPS payment.com, WizardWorld.com and
Youtopia.com.
Results of Operations
Quarter Ended June 30, 2002 Compared to Quarter Ended June 30, 2001.
We had revenues of $7,641,048 for the quarter ended June 30, 2002 compared to
revenues of $5,001,972 for the quarter ended June 30, 2001. Approximately,
$800,000 of our revenues during the period were derived from an off-line venture
whereby we joint ventured with a company to sell closeout merchandise into the
South American market. Each of the parties invested $4,000,000. All costs and
expenses, profits and losses were shared equally by the parties. We did not
participate in the management and operation of this venture. Our total
investment was $4,000,000. As of July 2002, we had received our total
investment back. We do not regularly engage in these types of ventures but, as
the opportunity arises we may engage in them in the future.
Approximately 23% of our total revenues were derived from foreign sources for
the period. Approximately 65% of our foreign revenue came from our
Business-to-Business operations, approximately 16% from our Technology
operations and the balance from our Business-to-Consumer operations.
Approximately 65% of the foreign revenue came from South America and the balance
from the Far East and Europe.
Net income for the quarter ended June 30, 2002 was $2,491,423 compared to net
income of $2,346,305, for the quarter ended June 30, 2001. Total operating
expenses for the quarter ended June 30, 2002 were $3,938,905 resulting in net
operating income for the quarter of $3,702,143. This compares to total operating
expenses of $1,996,244 for the quarter ended June 30, 2001, resulting in net
operating income of $3,005,728. This increase in operating expenses is a result
of our continuing to grow our business in order to increase revenues. Because of
our limited operating history with our various web sites, management cannot
predict, based upon past performance, whether the above listed cost and expense
categories are relatively stable or subject to a substantial degree of
volatility. Management continues to expect that advertising costs will be a
significant part of our operating structure. Advertising expenses for the
period ending June 30, 2002 were $2,226,000 compared with $719,759 for the three
months ended June 30, 2001.
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Liquidity And Capital Resources
Cash and cash equivalents as of June 30, 2002 were $19,447,570. At June 30,
2002, we had current assets of $21,076,993 and current liabilities of $3,275,917
resulting in working capital at June 30, 2002 (current assets less current
liabilities) of $17,801,076.
During the period we announced a buy-back program whereby we intend to purchase
ten percent of our outstanding Common Stock.
We are obligated to stand ready to repurchase 1,998,972 shares of our Common
Stock from certain stockholders who acquired our shares in exchange for shares
in two acquisitions we concluded last year and from purchasers in a private
placement. The repurchase price is $2.60 per share. In October 948,972 shares
will be subject to repurchase unless certain events occur sooner, with one of
the events being that our current CEO no longer remains at that position, and
the balance will be subject to repurchase in December of 2002. This obligation
is not part of our buy-back program.
We believe that our current capital resources and liquidity are adequate for at
least the next twelve months. Other than costs in connection with the further
development of our web sites, we do not have any plans for significant capital
or operating expenditures above our current level unless we determines to
develop additional web sites that could result in additional development costs.
We may also make additional acquisitions which might be financed, at least in
part, with our own funds.
Six Months Ended June 30, 2002 Compared With June 30, 2001
Results of Operations
We had revenues of $15,409,212 for the six months ended June 30, 2002 compared
with revenues of $9,302,346 for the six months ended June 30, 2001. The increase
was primarily the result of increased sales. Net income was $4,597,735 for the
six months ended June 30, 2002, compared with net income of $4,201,228 for the
six months ended June 30, 2002. Total operating expenses were $8,627,824 for
the six months ended June 30, 2002 compared with $3,430,409 for the six months
ended June 30, 2001. Foreign sales accounted for approximately 22% of our total
revenues for the six month period ending June 30, 2002. Approximately 60% of our
foreign revenue came from our Business-to-Business operations, 17% from our
Technology operations and the balance from our Business-to-Consumer operations.
Liquidity and Capital Resources
Net cash provided for operating activities was $6,818,572 for the six months
ended June 30, 2002 compared with net cash of $5,220,916 for the six months
ended June 30, 2001. The increase in net cash was primarily attributable to an
increase in revenues and a decrease in operating costs. During the six months
ended June 30, 2001, we sold assets for approximately $500,000.
Events Subsequent to June 30, 2002
In July 2002, we repurchased 163,000 shares of our common stock under our
buy-back program.
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Forward Looking Statements
This report on Form 10-QSB contains certain forward-looking statements that are
based on what we believe are reasonable beliefs and assumptions of management.
Often, these statements can be recognized because of the use of words such as
believe, anticipate, intend, estimate and expect in the statements. Such
forward-looking statements obviously involve known and unknown risks,
uncertainties, and other factors that may cause the actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
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PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
We are a party to litigation incurred in connection with the ordinary operation
of our business. We do not believe that any adverse result in the various
litigation matters would have a material effect on our operations or financial
condition.
In March 2001, we were served with a summons and complaint in an action titled
Jeffrey Steiner against inShop.com, Inc. and 800America.com, Inc. The action is
pending in the Supreme Court of the State of New York, County of New York. The
complaint seeks $500,000 for stock redemption proceeds, plus any accrued and
unpaid dividends and other relief in connection with our acquisition of shares
of inShop.com, Inc. The proceedings are currently in the discovery stage.
Item 2. Changes in Securities and Use of Proceeds
In April and May of 2002, the registrant issued a total of 13,334 shares of its
Common Stock to a consultant who is an "accredited investor" as that term is
used in Rule 506 of Regulation D of the Securities Act of 1933, as amended.
Item 3. Exhibits and Reports on Form 8-K
(a) the following exhibits are filed as part of this report.
99.1 CEO and CFO Certifications required under Section 906 of the
Sarbanes - Oxley Act of 2002
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
800America.com, Inc.
Date: August 14, 2002 By: /s/ David E. Rabi
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David E. Rabi
Chief Executive Officer (Principal
Executive Officer)
Chief Financial Officer and Chief
Accounting Officer