As filed with the Securities and Exchange Commission on June 21, 2002
Registration No. 333-76792
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Pre-Effective Amendment No. 1
Form SB-2
Registration Statement
Under
The Securities Act of 1933
800America.com, Inc.
(Name of small business issuer in its charter)
Nevada 7373 87-0567884
------ ---- ----------
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
420 Lexington Avenue, New York, NY 10170
(800) 999-5042
Address and Telephone Number of Principal Executive Offices
David E. Rabi
420 Lexington Avenue
New York, NY 10170
(800) 999-5048
(Name, address and telephone number of Agent for Service)
Copies of communication to:
John L. Thomas, Esquire
18 Beth Drive
Moorestown, NJ 08057
(856) 234-0960
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the registration statement become effective:
If any of the securities being registered on this Form are to be
offered on a delay or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
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Title of each class of Amount to Proposed Proposed Amount of
securities to be be maximum maximum registration fee
registered registered offering price aggregate
per share offering price
------------------------ ------------ ---------------- --------------- -------------------
Common Stock,
par value $.001 per 961,500 $3.73 $3,586,395 *$861.00
share
------------------------ ------------ ---------------- --------------- -------------------
Common Stock,
par value $.001 per 80,000 $2.19 $175,000 *$16.10
share
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(1) Estimated solely or the purpose of calculating the registration fee
pursuant to the Rule 457(c) and (g) of the Securities Act of 1933, as
amended (the "Securities Act"); using the average of the high and low
prices reported for the company's Common Stock as of January 11, 2002 and
June 14, 2002. See "Selling Security Holders."
* previously paid
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effectiveness date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said section 8(a), may determine.
This prospectus is not an offer to sell these securities and is not an
offer to buy these securities in any state where such an offer or sale is not
permitted.
Subject to completion, June 21, 2002
800America.com, Inc.
1,041,500 Shares of Common Stock
o The 1,041,500 shares of Common Stock offered by this
Prospectus are being offered for resale by the shareholders
listed in the section of this Prospectus called "Selling
Security Holders". We will receive approximately $435,000 of
the proceeds from the sale of these shares by certain of the
Selling Security Holders, which proceeds would be used for
general corporate purposes.
o Our Common Stock is traded on the OTC Bulletin Board under the
symbol "ACCO".
o On June 10, 2002, the closing bid price of our Common Stock on
the OTC Bulletin Board was $2.25.
The securities offered in this Prospectus involve a high degree of
risk. You should carefully consider the factors described under the heading
"Risk Factors" beginning on page 4 of this Prospectus.
----------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is ____________, 2002.
i
454437-1
Table of Contents
Page No.
SUMMARY........................................................................1
RISK FACTORS...................................................................4
USE OF PROCEEDS...............................................................14
DIVIDENDS.....................................................................14
PRICE RANGE OF COMMON STOCK...................................................15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.....................16
BUSINESS......................................................................19
MANAGEMENT....................................................................25
EXECUTIVE COMPENSATION........................................................26
PRINCIPAL SHAREHOLDERS........................................................28
SELLING SECURITY HOLDERS......................................................29
PLAN OF DISTRIBUTION..........................................................31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................32
SHARES ELIGIBLE FOR FUTURE SALE...............................................33
DESCRIPTION OF CAPITAL STOCK..................................................34
EXPERTS.......................................................................36
LEGAL MATTERS.................................................................37
OTHER AVAILABLE INFORMATION...................................................37
FINANCIAL STATEMENTS..........................................................37
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SUMMARY
Unless otherwise indicated or the context otherwise requires,
references herein to "800America," "we," "our" and "us" refer to 800America.com,
Inc., a Nevada corporation, and its direct and indirect subsidiaries.
800America.com, Inc.
Overview of Our Business
We are a growing company that owns and operates international
e-commerce and technology businesses. Our primary business is to bring buyers
and sellers together in an efficient and easy to use format and generate fees
based on transactions. We believe that we are an innovator in developing
proprietary technologies and processes needed for easy navigation and
convenience in business-to-business and business-to-consumer environments. Our
technologies have provided the foundation needed for us to scale and grow our
e-commerce businesses profitably across geographic regions and multiple product
lines.
The majority of our revenues are derived from commissions and sales
generated on transactions made through our four primary businesses,
OneTwoClick.com and RothmanCloseouts.com (commissions), InternetWebGuide.com,
and FileShooter.com (sales). All divisions share their underlying technologies
and the management team responsible for our profits.
In the period of just over two years that we have been operating the
800America Network, 800America has created a profitable enterprise using
Internet transactions which serves as our primary source of revenue. Unlike most
Internet businesses, we have generated profits from the beginning and have
expanded with earnings from existing operations. We have further strengthened
and diversified our revenue potential through the acquisition of Fileshooter, a
peer-to-peer (computer to computer) file sharing software product for secure,
private instant Internet messaging which we launched in the third quarter of
2001. During the latter part of 2001, we purchase the assets of cs-live, inc., a
technology focused software development company which now operates as a division
of the 800America Network. We also acquired iGain, Inc. a marketing service
company, WizwardWorld, Inc., a online marketplace for collectibles, Universal
Payment Systems, Inc., a technology based electronic payment system and in early
2002, Youtopia, Inc., a teen website.
Our strategy is to continue to acquire synergistic, cutting-edge
technology and e-commerce companies at attractive valuations, and then layer in
our operational expertise to maximize the technology and make them profitable.
Through these strategic acquisitions and our innovative products and services,
we feel we are well positioned to expand upon our scalable foundation and grow
our e-commerce businesses.
Corporate Information
Our stock currently trades on the Over-the-Counter Bulletin Board under
the symbol "ACCO."
Our principal executive offices are located at 420 Lexington Avenue,
New York, New York 10170, and we have offices in Nashville, San Francisco,
Ottawa, Canada and Beijing China. Our telephone number at our executive office
is (800) 999-5048, and our website address is www.800america.com. Information on
our website is not a part of this prospectus.
Forward looking statements
This Prospectus contains certain forward-looking statements, including
among others (i) anticipated trends in our financial condition and results of
operations and (ii) our business strategy. These forward-looking statements are
based largely on our current expectations and are subject to a number of risks
and uncertainties. Actual results could differ materially from these
forward-looking statements. Important factors to consider in evaluating such
forward-looking statements include (i) changes in external competitive market
factors or in our internal budgeting process which might effect trends in our
results of operations; (ii) unanticipated working capital or other cash
requirements; (iii) changes in our business strategy or an inability to execute
our strategy due to unanticipated changes in the industries in which we operate;
and (iv) various competitive factors that may prevent us from competing
successfully in the marketplace. In light of these risks and uncertainties, the
events predicted in forward-looking statements contained in this Prospectus may
not, in fact, transpire.
The Offering
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Securities Offered
-------------------------------------------------------------- ------------------------------------------------------------------
Selling Security Holder Shares 1,041,500 Shares
Common Stock Outstanding: 20,346,321 Shares as of June 10, 2002
-------------------------------------------------------------- ------------------------------------------------------------------
Offering Price The Selling Security Holders can sell the shares at any price.
-------------------------------------------------------------- ------------------------------------------------------------------
Use of Proceeds We will receive approximately $435,000 of the proceeds from
certain Selling Security Holders RXS, Inc. and Intelligent Web
Technologies, Inc. We advanced monies to these Selling Security
Holders when we acquired assets from them so we could obtain
clear title to the assets. We will use the proceeds for general
corporate purposes.
-------------------------------------------------------------- ------------------------------------------------------------------
Market for our Common Stock Our Common Stock trades on the Over-the-Counter Bulletin Board,
also called OTCBB, under the trading symbol "ACCO".
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Summary of Financial Information
The summary historical financial data should be read in conjunction
with the financial statements (and notes thereto) of 800America and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
Year ended December 31
2001 2000
-------------------------------
Net sales $21,401,169 $15,980,529
Cost of revenues 0 8,913,351
General and administrative 8,299,061 3,466,798
Sales and marketing
Research and development
Depreciation 1,147,113 486,480
Other (income) expense, net 3,639,357 1,041,406
Net Gain 8,315,638 2,072,494
Weighted average Common Shares outstanding 16,146,516 12,721,359
Basic Gain per share $0.52 $0.16
Current Assets 13,573,598 3,144,389
Total Assets 22,971,595 4,421,609
Current Liabilities 2,028,316 411,818
Total Liabilities 2,038,316 411,818
Shareholders' equity 20,943,279 4,009,791
Three months ended March 31
2002 2001
-------------------------------
Net sales $7,768,164 $4,300,777
Cost of revenues
General and administrative 1,642,783 869,776
Sales and marketing 2,300,000 427,360
Research and development
Depreciation 620,824 136,955
Other (income) expense, net 1,132,953 1,011,286
Net Gain 2,071,604 1,855,400
Weighted average Common Shares outstanding 19,981,320 15,429,943
Basic Gain per share $0.10 $0.12
Current Assets 17,238,220 5,268,489
Total Assets 28,212,597 7,047,156
Current Liabilities 2,457,176 1,179,947
Total Liabilities 3,153,964 1,179,947
Shareholders' equity 25,058,633 5,867,209
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RISK FACTORS
The Common Stock offered hereby is speculative and involve a high
degree of risk. Prospective investors should carefully review and consider the
following Risk Factors, as well as the other information set forth in this
Prospectus hereto, before purchasing the Common Stock offered hereby.
Risks Related to Our Business
We have only a limited operating history for investors to use to assess our
future prospects.
Our corporate predecessor was formed on December 5, 1996. We have had
limited operations to date. As a result, we have a limited operating history
upon which to evaluate the merits of investing in the proposed offering.
The planned expansion of our business will strain our management systems and
other resources.
We have rapidly and significantly expanded our operations and will
expand further to address growth of our product and service offerings and
customer base. This growth will continue to place a significant strain on our
management, operational and financial resources. We will need to improve our
financial and management controls, reporting systems and procedures. We will
also continue to expand, train and manage our work force for marketing, sales
and technical support, product development and infrastructure management, and
manage multiple relationships with customers and other third parties. We also
plan to expand the geographic scope of our customer base and operations. We will
need to continually expand and upgrade our technology infrastructure and systems
and ensure continued high levels of service, speedy operation and reliability.
To achieve our objectives, we may acquire technologies or products or enter into
strategic alliances or acquisitions, although we have no plans or agreements to
do so at the present time. In addition, our senior management team has had only
limited experience working together to manage these challenges and our
management may not be able to work together to meet these challenges.
Our strategy of expanding our business through acquisitions of other businesses
and technologies presents special risks.
We intend to continue to expand through the acquisition of businesses,
technologies, products and services from other businesses as well as through the
development of the products and services of our existing businesses. Many of our
acquisitions to date have been, and we anticipate that we will continue to seek
to acquire, early-stage or distressed companies and technologies with limited
operating histories and limited or no revenues. We may not identify and
successfully compete for attractive acquisition candidates or complete
acquisitions at reasonable purchase prices, in a timely manner or at all. If
these acquisitions are completed, we may not be able to successfully develop
these companies and their technologies. Acquisitions involve a number of special
problems, including:
o difficulty integrating acquired technologies, operations and
personnel with the existing business;
o diversion of management attention in connection with both
negotiating the acquisitions and integrating the assets;
o strain on managerial and operational resources as management
tries to oversee larger operations;
o exposure to unforeseen liabilities of acquired companies;
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o potential issuances of securities in connection with the
acquisition which lessen the rights of holders of our
securities outstanding prior to such issuances;
o the need to incur additional debt;
o the requirement to record additional future operating costs
for the amortization of goodwill and other intangible assets,
which amounts could be significant; and
o integration of new technologies, products or services into our
existing suite of products and business strategy or into the
then current market for such solutions.
We may not be able to successfully address these problems. Moreover,
our future operating results will depend to a significant degree on our ability
to successfully manage growth and integrate acquisitions. If such acquisitions
are completed, we may not be able to successfully develop these young companies.
If we are unable to keep up with the rapid changes in technology and
distribution channels related to the Internet, we may not be able to succeed.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality, accessibility and features of our software
products, network distribution systems, support infrastructure and technologies.
The industries in which we compete are characterized by rapid technological
change, changes in use and client requirements and preferences, frequent product
and service introductions embodying new technologies and the emergence of new
industry standards and practices that could render our existing proprietary
technology and systems obsolete. Furthermore, the adoption of new Internet or
telecommunications technologies may require us to devote substantial resources
to modify and adopt such technologies. Our success will depend, in part, upon
our ability to adapt to this rapidly evolving marketplace. We may not be able to
adequately adapt our products and services or to acquire new products and
services that can compete successfully. In addition, we may not be able to
establish and maintain effective distribution channels.
Due to intense competition in the industries that we serve and intend to serve,
our market share and financial performance could suffer.
The markets in which we do business are highly competitive and many
competitors and potential competitors are more established and have greater
financial resources than us. We face competition primarily from wholesalers and
retail exchanges as well as from companies in the information technology,
Internet and software industries. This particular niche of the on-line shopping
industry that we operate in is highly fragmented and there are virtually no
barriers to entry into this market. We expect on-line shopping sites to
proliferate. We expect that competition will intensify in the future. Many
competitors and potential competitors also have greater market presence, brand
name recognition, financial resources, engineering and marketing capabilities
and technological and personnel resources than us. As a result, competitors may:
o develop and expand their Internet infrastructure and service
offerings more efficiently or more quickly;
o adapt more swiftly to new or emerging technologies and changes
in client requirements;
o take advantage of acquisitions and other opportunities more
effectively;
o devote greater resources to the marketing and sale of their
products and services; and
5
o more effectively leverage existing relationships with clients
and strategic partners or exploit more recognized brand names
to market and sell their services.
These and other competitive pressures may also force prices for
information technology, Internet and software goods and services down and this
price reduction may reduce our revenues and adversely affect our results of
operations and financial condition.
The loss of our senior management or other key personnel or our failure to
attract additional personnel could negatively affect our business and decrease
the value of your investment.
Our success depends largely on the skills of David E. Rabi, our Chief
Executive Officer, and certain other key management and technical personnel as
well as key management and technical personnel of companies acquired by us. Our
performance is also substantially dependent on the services and performance of
our management team at the parent and subsidiary levels. The loss of Mr. Rabi or
one or more of our other board members, key management and technical personnel
may materially and adversely affect our business, results of operations and
financial condition. We may not be able to replace any of these persons in the
event their services become unavailable. We do not have employment or
non-compete agreements with any of our key management personnel.
We also believe continued hiring of new personnel will be required to
support our business and planned growth. Our success also depends in large part
on our ability to identify, hire, train and retain Internet, software and other
technology professionals who can provide the technical, strategic, creative,
marketing and audience development skills required by clients and well as key
management and financial personnel. There is a shortage of qualified personnel
and we compete with other companies for this limited pool. We may not be able to
attract, train, or retain qualified personnel.
Our quarterly results may fluctuate widely and this may adversely effect our
business operations as well as our value.
Due to our limited operating history and the unpredictability of our
industry, we may not be able to accurately forecast our net sales and net
profits. We base our current and future expense levels and our investment plans
on estimates of future net sales. Our expenses and investments are to a large
extent fixed. We may not be able to adjust our spending quickly if our net sales
and net profits fall short of our expectations.
Our operating results will fluctuate for many reasons, including:
o changes in general economic conditions, including consumer
spending,
o our ability to retain and increase sales to existing
customers, attract new customers and satisfy our customers'
demands,
o the introduction by our competitors of web sites, products or
services and business exchanges,
o changes in usage of the Internet and online services and
consumer acceptance of the Internet and e-commerce,
o timing of upgrades and developments in our systems and
infrastructure,
o the effects of acquisitions and other business combinations,
and our ability to successfully integrate those acquisitions
and business combinations,
6
o technical difficulties, system downtime or Internet brownouts,
o variations in the mix of products and services we sell,
o variations in our level of merchandise and vendor returns, and
o disruptions in service by shipping carriers.
Both seasonal fluctuations in Internet usage and traditional retail
seasonality are likely to affect our business. Internet usage generally slows
during the summer months. Sales in almost all of our product groups,
particularly toys and electronics, usually increase significantly in the fourth
calendar quarter of each year.
The emerging nature of the commercial uses of the Internet makes
predictions concerning our future revenues difficult. We believe that
period-to-period comparisons of our results of operations will not necessarily
be meaningful and should not be relied upon as indicative of our future
performance. It is also possible that in some fiscal quarters our operating
results will be below the expectations of securities analysts and investors. In
these circumstances, the price of our Common Stock may decline
disproportionately to actual results.
We base our current and future expense levels on our anticipated
investment plans and estimates of future revenues. Currently our expenses are to
a large extent fixed, but this could change as a result of future investments, a
change of business strategy or infrastructure needs. We may not be able to
adjust our spending quickly if our revenues fall short of our expectations.
Further, we may make pricing, purchasing, service, marketing, acquisition or
financing decisions that could adversely affect our business results.
Shareholders may not be able to recover damages from our directors or officers
because of a limitation on liability of directors and officers.
Our Articles of Incorporation and By-laws include provisions to the
effect that (subject to certain exceptions) we shall indemnify, and upon request
shall advance expenses to, any director or officer to the extent that such
indemnification and advancement of expenses is permitted under the Nevada
General Corporation law. Indemnification is available if such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interest of 800America and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
As a result of such provisions in the Articles of Incorporation and the By-laws,
shareholders may be unable to recover damages against our directors and officers
for actions taken by them which constitute negligence, gross negligence or a
violation of their fiduciary duties, which may discourage or deter shareholders
from suing our directors, officers, employees and agents for breaches of their
duty of care, even though such action, if successful, might otherwise benefit us
and our shareholders.
If adverse economic and political conditions occur, substantial declines in the
markets may result which, in turn, could adversely affect our revenues,
potential profitability, and ability to make acquisitions and achieve necessary
liquidity.
In the past several years, the U.S. financial markets have achieved
historic highs. We do not believe that these strong markets will continue
indefinitely and, in fact, the financial markets have experienced significant
declines. Our revenues, potential profitability, and ability to make
acquisitions and achieve necessary liquidity are likely to decline significantly
during periods of stagnant economic conditions or low trading volume or adverse
conditions in the U.S. and global securities and commodities markets.
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In addition, the terrorist attacks that took place in the United States
on September 11, 2001, are an unprecedented event that have created many
economic and political uncertainties, some of which may harm our business and
prospects. The national and global responses to these terrorist attacks, many of
which are still being formulated, may materially adversely affect our business
in ways we cannot predict at the present time.
If we are unable to license and lease certain technology and communications
facilities from third parties in the future, our business will suffer.
We lease communications facilities integral to our business. In the
future, we expect to license and lease certain technology and communications
facilities from third parties, including value-added commerce related products
and services which may be integrated with internally developed management tools
and services, as well as broadband communications services. Third party
technology licenses and leases may not be available to us on commercially
reasonable terms or at all. Our failure for any reason to obtain or maintain
such licenses and leases on commercially reasonable terms, in timely fashion or
at all, could harm our business, operating results and financial condition. Our
inability to obtain upgrades to our leased communications facilities could
result in delays in our network and new business and technology developments
until equivalent facilities could be obtained and integrated. Any of those
delays could materially adversely affect us.
We may be unable to protect our intellectual property and may incur claims that
we are misusing intellectual property of others.
Although we take various steps to seek to protect our proprietary
rights, those actions may be inadequate to prevent misappropriation of core
technology or trademarks, copyrights and other proprietary rights. In addition,
agreements intended to provide that protection may be unenforceable or limited
in certain countries. Notwithstanding any precautions taken, it might be
possible for a third party to copy or otherwise obtain and use software or other
proprietary information of 800America or any business in which we have an
interest without authorization or to develop similar property independently.
Policing unauthorized use of this intellectual property is difficult and
expensive, particularly because the global nature of the Internet makes it
impossible for some of our businesses to control the dissemination of their work
and use of their services.
We publish or distribute content over the Internet and, therefore, may
be subject to legal liability. We may be subject to legal claims relating to the
content on our web sites, or the downloading and distribution of this content.
Claims could involve matters such as defamation, invasion of privacy and
copyright infringement. Providers of Internet products and services have been
sued in the past, sometimes successfully, based on the content of material. We
also may not be able to acquire or maintain appropriate domain names in all
countries in which we do business. Furthermore, regulations governing domain
names may not protect our trademarks and similar proprietary rights. We may be
unable to prevent third parties from acquiring domain names that are similar to,
infringe upon or diminish the value of our trademarks and other proprietary
rights.
We may in the future receive notices from third parties regarding these
claims. While we are not currently subject to any claim involving intellectual
property or similar rights, any future claim, with or without merit, could
result in significant litigation costs and diversion of resources, including the
attention of management, and require us to enter into royalty and licensing
agreements or other agreements, which could have a material adverse effect on
our business, results of operations and financial condition. These royalty and
licensing or other agreements, if required, may not be available on terms
acceptable to us or at all. In the future, we may also need to file lawsuits to
enforce our intellectual property rights, to protect our trade secrets and to
determine the validity and scope of the proprietary rights of others. This
litigation, whether successful or unsuccessful, could result in substantial
costs and diversion of resources, which could have a material adverse effect on
our business, results of operations and financial condition.
8
If we face liability, particularly liability that is not covered by
insurance or is in excess of future insurance coverage, then our reputation and
business may suffer. In the past, plaintiffs have brought these types of claims
and sometimes successfully litigated them against online services. Although we
intend to carry general liability insurance, our future insurance may not cover
claims of these types or may be inadequate to indemnify us for all liability
that may be imposed on us.
If our businesses experience failures of, or capacity constraints in,
our technology, transaction processing systems and network infrastructure or
those of third parties on which those companies rely, our financial performance
may suffer and our or any one our businesses' reputation could be damaged.
Our products, technology, transaction processing systems and network
infrastructure use both internally developed and third-party systems to operate
the Internet aspects of our business. If the number of users of our businesses
increases substantially, we will need to significantly expand and upgrade our
products, technology, transaction processing systems and network infrastructure.
We do not know whether we will be able to accurately project the rate or timing
of any increases, or expand and upgrade our systems and infrastructure to
accommodate any increases in a timely manner. Our ability to facilitate
transactions successfully and provide high quality customer service also depends
on the efficient and uninterrupted operation of our computer and communications
hardware systems. Our products, technology, transaction processing systems and
network infrastructure may experience periodic system interruptions from time to
time. We may not carry sufficient business interruption insurance to compensate
for losses that could occur. Any system failure that causes an interruption or
decrease in responsiveness of our service could impair our financial
performance, and could damage our reputation.
Government regulations may impede our success.
Government regulations and legal uncertainties may place financial
burdens on our business. As of June 10, 2002, there were relatively few laws or
regulations directed specifically at e-commerce. However, because of the
Internet's popularity and increasing use, new laws and regulations may be
adopted. These laws and regulations may cover issues such as the collection and
use of data from web site visitors and related privacy issues, pricing, content,
copyrights, distribution and quality of goods and services. The enactment of any
additional laws or regulations may impede the growth of the Internet and
business-to-business e-commerce, which could decrease the revenue of our
businesses and place additional financial burdens on our businesses. Laws and
regulations directly applicable to e-commerce or Internet communications are
becoming more prevalent. For example, Congress recently enacted laws regarding
online copyright infringement and the protection of information collected online
from children. Although these laws may not have a direct adverse effect on our
business or those of our partner companies, they add to the legal and regulatory
burden faced by Internet companies.
Our business may be adversely effected on account of a system failure.
Customer access to our web sites directly affects the volume of goods
we sell and thus affects our net sales. We experience occasional system
interruptions that make our web sites unavailable or prevent us from efficiently
processing transactions, which may reduce our net sales and the attractiveness
of our products and services. To prevent system interruptions, we continually
need to: add additional software and hardware; upgrade our systems and network
infrastructure to accommodate both increased traffic on our web sites and
increased sales volume; and integrate our systems. However, our computer and
communications systems and operations could be damaged or interrupted by fire,
flood, power loss, telecommunications failure, break-ins, terrorist acts,
earthquake and similar events. In addition, computer viruses, physical or
electronic break-ins and similar disruptions could cause system interruptions,
delays and loss of critical data and could prevent us from providing cervices
and accepting and fulfilling customer orders. If this were to occur, it could
9
damage our reputation. We do not have dedicated backup facilities for conducting
operations in the event of such a disaster or service interruption, although we
backup and store information offsite on a daily basis and we would expect that,
except in the event of widespread disasters, we would use our daily backup to
resume operations at another site with appropriate hardware and communications
systems. We may have inadequate insurance coverage or insurance limits to
compensate us for losses from a major interruption.
The occurrence of any of these risks could have a material adverse
effect on our business, results of operations and financial condition. In
addition, our Internet customers will depend on their Internet service providers
for access to our web sites. These providers have experienced significant
outages in the past and could experience outages, delays and other difficulties
in the future.
Risks Related to e-commerce and the Internet
Our business growth depends on the increased acceptance and use of the Internet
as a medium of commerce.
Our success depends on the increased acceptance and use of the Internet
as a medium of commerce, including advertising, marketing, providing services,
business to business and business to consumer exchanges and portals, payment
systems in single and multiple currencies, purchasing and otherwise conducting
business. The future of the Internet for commercial purposes is not clear. Rapid
growth in the use of the Internet and electronic commerce is a relatively recent
phenomenon. As a result, acceptance and use may not continue to develop at
recent rates and a sufficiently broad base of customers may not adopt or
continue to use the Internet as a medium of commerce. In addition, it is not
clear how effective advertising on the Internet is in generating business as
compared to more traditional types of advertising such as print, television and
radio. Demand for and market acceptance of services and products recently
introduced over the Internet are subject to a high level of uncertainty, and few
proven services and products yet exist.
Electronic commerce may not prove to be a viable medium for purchasing
or exchanging products or a viable medium for payment systems for the following
reasons, any of which could seriously harm our business:
o the necessary infrastructure for Internet communications may
not develop adequately;
o consumers and businesses may have security and confidentiality
concerns;
o complementary products, such as high-speed modems and
high-speed communication lines, may not be developed as
quickly as the technology develops and need arises;
o alternative purchasing and payment solutions may be
implemented;
o buyers may dislike a reduction in the human contact that
traditional purchasing methods provide;
o use of the Internet and other online services may not continue
to increase or may increase more slowly than expected;
o the development or adoption of new standards and protocols may
be delayed;
o new and burdensome governmental regulations may be imposed;
and
o bank and other financial institutions may resist or prohibit
certain Internet payment systems.
10
Clients may be hesitant to use electronic systems due to concerns over potential
security risks, including unauthorized use of confidential information, exposure
to viruses, and disruptions of service.
The secure transmission of confidential information over public
networks is a critical element of e-commerce generally and our business. If
users are not confident in the security of e-commerce, they may not effect
transactions over the Internet or decide continued commerce on the Internet,
including using our products, is not a viable alternative. If our businesses
that depend on such transactions do not add sufficient security features to
their future product releases, their products may not gain market acceptance or
there may be additional legal exposure to them. We cannot be certain that
advances in computer capabilities, new discoveries in the field of cryptography,
or other developments will not result in the compromise or breach of the
algorithms we use to protect content and transactions on our e-marketplaces or
proprietary information in our databases. Our networks and those of third party
service providers and of clients may be vulnerable to unauthorized access,
computer viruses and other security problems. Persons who circumvent security
measures could wrongfully use our information or information of our users, or
cause interruptions or malfunctions in our operations. We may be required to
expend significant resources to protect our networks against the threat of
security breaches, including resources that may be required to be used to
participate in litigation to alleviate problems caused by any breaches. This
litigation, regardless of the outcome, could result in substantial costs and
diversion of management and technical resources, either of which could
materially harm our business. Security breaches could damage our reputation and,
consequently, our ability to conduct business successfully.
Growing concerns about the use of "cookies" may limit our ability to develop
user profiles.
Web sites typically place small files of information commonly knows as
"cookies" on a user's hard drive, generally without the user's knowledge or
consent. Cookie information is passed to the web site through the Internet
user's browser software. Our technology currently uses cookies to collect
information about an Internet user's movement through the Internet. Most
currently available Internet browsers allow users to modify their browser
settings to prevent cookies from being stored on their hard drive, and a small
minority of users are currently choosing to do so. Users can also delete cookies
from their hard drive at any time. Some Internet commentators, privacy advocates
and governmental bodies have suggested limiting or eliminating the use of
cookies. The effectiveness of our technology could be limited by any reduction
or limitation in the use of cookies. If the use or effectiveness of cookies is
limited, we would likely have to switch to other technology that allows us to
gather demographic and behavioral information. This could require significant
reengineering time and resources might not be completed in time to avoid
negative consequences to our business, financial condition or results of
operations, and might not be possible at all.
Risks Related to an Investment in the Shares
The public trading market for our Common Stock is limited and may not be
developed or sustained.
There is a limited trading market for the Common Stock. Since November
8, 1999, the Common Stock has been traded sporadically under the symbol "ACCO"
on the OTC bulletin board, a Nasdaq sponsored and operated inter-dealer
automated quotation system for equity securities. There can be no assurance that
an active and liquid trading market will continue or that it will be sustained.
The price of our Common Stock has been volatile.
The market price of our Common Stock has been, and is likely to
continue to be, volatile, experiencing wide fluctuations. For example, during
the 52-week period ended December 31, 2001, the market price of our Common Stock
11
ranged from $0.37 to $4.66. In recent years, the stock market has experienced
significant price and volume fluctuations which have particularly effected the
market prices of equity securities of many companies providing Internet-related
products and services. Some of these fluctuations appear to be unrelated or
disproportionate to the operating performance of such companies. Future market
movements may adversely affect the market price of our Common Stock. In
addition, the market price of our Common Stock is subject to significant
fluctuation due to the following factors:
o variations in stock market conditions;
o changes in financial estimates by securities analysts or by
our failure to meet estimates;
o variations in quarterly operating results;
o general conditions effecting all participants in our industry;
o announcements by us or our competition;
o regulatory developments; and
o economic or other external factors.
Potential business opportunities may be effected because ownership of our shares
is concentrated.
As of June 10, 2002, Mr. David E. Rabi, our Chief Executive Officer,
beneficially owned approximately 50% of our outstanding Common Stock. As a
result, Mr. Rabi possesses significant influence over us on business and
corporate matters, including the election of directors. The concentration of our
share ownership may: delay or prevent a change in control of 800America, impede
a merger, consolidation, takeover, or other business involving us, or discourage
a potential acquirer from making a tender offer or otherwise attempting to
obtain control of us.
Anti-takeover provisions could make a third-party acquisition of us difficult.
We are a Nevada corporation. Certain anti-takeover provisions of the
Nevada General Corporation Law and our right to issue preferred stock could have
the effect of making it more difficult for a third party to acquire control of
us. In addition, our Articles of Incorporation provide that our Board of
Directors may issue preferred stock without shareholder approval. The issuance
of preferred stock could make it more difficult for a third party to acquire us
without the approval of our board.
We may require additional funding to expand our operations and the interests of
holders of Common Stock could be adversely affected by any such financing.
Capital, if available to us at all, could be in the form of debt or
equity. Any increase in our debt:
o might require the creation of a class of securities that would
be senior in right of payment to the Common Stock in voting
rights, in payment of dividends, in the event of our
liquidation or in other respects;
o might restrict our ability to pay dividends;
12
o could require significant interest payments that would affect
our earnings and cash flow, which, in turn, could affect our
ability to pay dividends;
o would increase the vulnerability of our business to downturns
in the economy;
o would limit our ability to withstand competitive pressures
from less leveraged competitors; and
o would hinder our ability to grow, and raise additional
financing for working capital.
The increase of significant amounts of equity:
o could affect our earnings per share of Common Stock;
o could result in a series or class of preferred stock having
superior or pari-passu rights, preferences and powers,
including as to dividends, voting and liquidation preferences;
and
o would result in dilution of the interests of holders of our
Common Stock in our earnings, as well as the voting power of
all of our securities holders.
We may issue preferred stock, which could dilute the interest of holders of the
Common Stock or deter a change of control of 800America, even if the change of
control is favored by its shareholders.
Our Articles of Incorporation permit our Board of Directors to issue
shares of preferred stock in one or more series having the rights, privileges
and limitations, including voting rights, conversion privileges and redemption
rights, as may, from time to time, be determined by our Board of Directors. The
issuance of preferred stock senior to the Common Stock could dilute the
interests of holders of the Common Stock. Furthermore, shares of preferred stock
that may be issued could be utilized as a method of making it more difficult for
any party to gain control of us unless approved by our Board of Directors.
Certain events could result in a dilution of your ownership of our Common Stock.
As of June 10, 2002, we had 20,346,321 shares of Common Stock
outstanding and as of June 10, 2002, we had approximately 3,439,000 Common Stock
equivalents including warrants and stock options. The exercise prices of the
Common Stock equivalents range from $1.00 to $4.25 per share. These securities
also provide for antidilution protection upon the occurrence of sales of our
Common Stock below certain prices, stock splits, redemptions, mergers and other
similar transactions. If one or more of these events occurs the number of shares
of our Common Stock that may be acquired upon conversion or exercise would
increase. If converted or exercised, these securities will result in a dilution
to your percentage ownership of our Common Stock.
You may have difficulties trading and obtaining quotations on "penny stock"
issues.
The shares of common stock offered are for "penny stocks" as defined in
the Exchange Act. These shares are traded in the over-the-counter market on the
OTC Bulletin Board. As a result, an investor may find it more difficult to
dispose of or obtain accurate quotations as to the price of the shares of the
common stock being registered. In addition, the "penny stock" rules adopted by
the SEC under the Exchange Act make the sale of the shares of the common stock
subject to certain regulations, which impose sales practice requirements on
broker-dealers. For example, broker-dealers selling such securities must, prior
to effecting the transaction, provide their customers with a document that
discloses the risks of investing in such securities. Furthermore, if the person
purchasing the securities is someone other than an accredited investor or an
established customer of the broker-dealer, the broker-dealer must approve the
potential customer's account by obtaining information concerning the customer's
13
financial situation, investment experience and investment objectives. The
broker-dealer must also make a determination whether the transaction is suitable
for the customer and whether the customer has sufficient knowledge and
experience in financial matters to be reasonably expected to be capable of
evaluating the risk of transactions in such securities. Accordingly, the SEC's
rules may limit the number of potential purchasers of the shares of the common
stock.
Resale restrictions on transferring "penny stocks".
Various state securities laws impose restrictions on transferring
"penny stock" and as a result, investors in the Common Stock may have their
ability to sell their shares of the Common Stock impaired.
USE OF PROCEEDS
When we acquired certain assets of Intelligent Web Technologies, Inc.,
formerly cs-live.com, we advanced approximately $325,000 in order that certain
lien holders could be paid and we could acquire the assets free of any lien. The
advances are evidenced by promissory notes and are intended to be repaid through
the sale of a portion of the shares of our Common Stock paid to Intelligent Web
Technologies, Inc. The shares, 450,000 in total, are being held in escrow and
upon effectiveness of this prospectus, 180,000 shares will be available for sale
to satisfy the repayment of the advances. When we purchased certain of the
assets of RXS, Inc., formerly Youtopia.com, we paid a bank approximately
$110,000 for certain assets that had been foreclosed on by the bank. RXS, Inc.
agreed to repay us the amounts we paid to the bank to acquire the assets. RXS,
Inc. will sell certain of the shares of our Common Stock received as
consideration in the purchase and use a portion of the proceeds received by them
to repay us. The shares to be sold are also held in escrow.
DIVIDENDS
To date, we have paid no dividends on any shares of our Common Stock,
and our board of directors has no present intention of paying any dividends on
the Common Stock in the foreseeable future. The payment by us of dividends on
the Common Stock in the future, if any, rests solely within the discretion of
our board of directors and will depend upon, among other things, our earnings,
capital requirements and financial condition, as well as other factors deemed
relevant by our board of directors. Although dividends are not limited currently
by any agreements, it is anticipated that future agreements, if any, with
institutional lenders or others may limit our ability to pay dividends on the
Common Stock.
14
PRICE RANGE OF COMMON STOCK
Our Common Stock has been quoted on the OTC:BB since November 8, 1999
under the symbol "ACCO". The following table set forth, the high and low bid
prices for the Common Stock for the quarters indicated. As of June 10, 2002
there were 322 shareholders of record. The source of the quotes is Yahoo
Financial.
Common Stock
Bid Price
-------------------------------------------------- --------------------------------------------------
Calendar Year 2000 High Low
-------------------------------------------------- -------------------- --------------------
First Quarter $5.625 $3.125
Second Quarter $5.00 $1.25
Third Quarter $2.50 $1.25
Fourth Quarter $2.50 $1.25
Calendar Year 2001 High Low
-------------------------------------------------- -------------------- --------------------
First Quarter $2.18 $1.34
Second Quarter $3.25 $.37
Third Quarter $4.65 $1.53
Fourth Quarter $4.00 $1.55
Calendar Year 2001 High Low
-------------------------------------------------- -------------------- --------------------
First Quarter $3.10 $2.05
Second Quarter through June 10, 2002 $2.94 $2.24
--------------------------------------------------------------------------------------------------------
As of June 10, 2002, there were 20,346,321 shares of Common Stock
issued and outstanding.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
We operate various Internet web sites in three areas: Business to
Business; Business to Consumers 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 needed 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.
Years Ended December 31, 2000 and 1999
Results of Operations
We had revenues of $15,980,529 for the year ended December 31, 2000
compared to revenues of $3,283,575 for the year ended December 31, 1999. Net
income for the year ended December 31, 2000 was $2,072,494 compared to $185,447
for the year ended December 31, 1999. The annual results of operations are not
comparable because of the new selling lines in which the Company was engaged in
the most recent year. In 2002, we acquired Rothman Closeouts, 21st Ave.
Productions and Who's Who in Pets. We sold 21st Ave. Productions and Who's Who
in Pets in 2001. In 2000, Rothman Closeouts, 21st Ave. Productions and Who's Who
in Pets contributed approximately 20-25% of our total revenue. The Company
realized revenue of $14,640,954 in its B2C division, $1,296,575 in its B2B
division and $43,000 in its Technology division. Costs and expenses for the year
ended December 31, 2000 were $12,866,629, resulting in operating income for the
year of $3,113,900. This compares with costs and expenses of $3,008,405 that
resulted in operating income of $275,170 for the year ended December 31, 1999.
Customer rebates totaled $8,913,351 for the year ended December 31, 2000 and
represented approximately 69% of total costs and expenses. Other than customer
rebates, the largest categories of costs and expenses were for general, selling
and administrative expenses in the amount of $1,317,685 (including salaries and
other personnel expenses), bad debt expenses in the amount of $270,795,
advertising costs and expenses in the amount of $1,878,318 and depreciation and
amortization expenses of $486,480. In 1999 the largest categories of costs and
expenses were for general, selling and administrative expenses in the amount of
$320,980 (including salaries and other personnel expenses), bad debt expenses in
the amount of $66,000, advertising costs and expenses in the amount of $397,738
and depreciation and amortization expenses of $88,019. Because of our limited
operating history and the changing competition in the on-line shopping business,
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.
Liquidity and Capital Resources
Net cash provided by operating activities was $2,105,472 in the year
ended December 31, 2000 compared to net cash provided by operations of $96,899
for the year ended December 31, 1999. The Company's net cash increase for the
year ended December 31, 2000 was $1,725,182 compared to a net cash increase for
the year ended December 31, 1999 of $391,987. The Company's ending cash balance
at December 31, 2000 was $2,117,746 compared to an ending cash balance at
December 31, 1999 of $392,564. Net cash inflows from operations are expected to
continue during the fiscal year ending December 31, 2001.
16
Cash and cash equivalents as of December 31, 2000 were $2,117,746
compared with $392,564 as of December 31, 1999. We had working capital (current
assets less current liabilities) of $2,684,821 at December 31, 2000 compared
with $635,887 at December 31, 1999 and no material long-term commitments or
material commitments for capital or operational expenditures.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000.
Results of Operations
We had revenues of $21,401,169 for the year ended December 31, 2001
compared to revenues of $15,980,529 for the year ended December 31, 2000. Net
income for the year ended December 31, 2001 was $8,315,637 compared to net
income of $2,072,494 for the year ended December 31, 2000. We estimate that
approximately eighty percent of our revenues were derived from continuing
operational and twenty percent from new acquisitions acquired during 2001. Total
operating expenses for the year ended December 31, 2001 were $9,446,174
resulting in operating income for the year of $11,954,995. This compares to
total operating expenses of $12,866,629 for the year ended December 31, 2000,
resulting in operating income of $3,113,900. We instituted a policy of not
paying rebates as of January 1, 2001 and hence rebates represented none of the
total operating expenses. This compared to customer rebates of $8,913,351 for
the year ended December 31, 2000 that represented approximately 69% of total
operating expenses. We had been paying rebates of between forty and sixty
percent of the amounts collected. Because of our limited operating history with
the 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 and promotion costs will be a significant part of our operating
structure. For the year ended December 31, 2001, advertising and promotion costs
were $4,443,249 representing approximately 47% of total operating expenses
compared to $1,878,318 in such costs in 2000 representing approximately 14% of
total operating expenses. The increase in advertising costs were a result of our
expanded operations with our various sites and the consequences of events which
occurred after September 11, 2001. One of our sites OneTwoClick showed a
drop-off in revenues after September 11th and another, FileShooter, showed an
increase. We increased our advertising to address both trends. Payroll costs for
the year ended December 31, 2001 were $884,546 compared with $299,254 for the
year ended December 31, 2000. The increase in payroll costs was a result of
hiring more people and having to pay higher salaries for more qualified
technical personnel because of our more complex internet network. Legal and
accounting costs were $226,677 for the year ended December 31, 2001 compared to
$78,039 for the year ended December 31, 2000. The increase is primarily a result
of the acquisitions we completed during the year. The overall increase in our
various costs was a result of our increasing our business primarily through
internal growth. Also during the year ended December 31, 2001, we spent $984,356
on our new acquisitions, most of which was devoted to our inShop operation.
Depreciation and amortization costs were $1,147,113 for the year ended December
31, 2001, compared to $486,480 for the year ended December 31, 2000. The
increase is a result of the increase in depreciable property and equipment cost
allocations resulting from acquisitions. Management expects that revenues from
Business to Consumers divisions will continue to increase in 2002. Management
expects that all other divisions will have increased revenues and profits as
well.
We believe that our revenues and expenses will continue to increase
substantially in the year ending December 31, 2002 both because of the
continuing expansion of our business and because of the changing competition in
the on-line shopping business. Additional expenses are also likely to be
incurred as we expand our bandwidth capacity in order to accommodate new stores
at our web sites as well as new websites. We also plan on integrating more of
the 800America Network customers into the IPSpayment system site.
17
Liquidity And Capital Resources
Cash and cash equivalents as of December 31, 2001 were $13,201,125. At
December 31, 2001, the Company had current assets of $13,573,598 and current
liabilities of $2,028,316 resulting in working capital at December 31, 2001
(current assets less current liabilities) of $11,545,282.
In September 2001, we acquired substantially all of the assets,
including the name, of cs-live.com inc. The purchase price was $50,000 and
450,000 shares of common stock. We also assumed certain operating liabilities.
cs-live inc. changed its name to Intelligent Web Technologies, Inc. We have made
advances to Intelligent Web Technologies, Inc. of approximately $300,000. The
advances are secured by the shares of common stock paid as part of the purchase
price. These shares are being registered for resale. When they are sold a
portion of the proceeds will be used to repay the advances.
During the period we acquired all the capital stock of Universal
Payment Systems, Inc. (UPSI). The purchase price was $1.00. UPSI was purchased
from our Chief Executive Officer.
Also, during the period we raised a total of approximately $7,179,773
from the sale of common stock in two private placements. Subsequently, we
rescinded $5,500,000 to an investor.
Net cash provided by operating activities was $11,794,520 for the year
ended December 31, 2001 compared with net cash of $2,105,472 for the year ended
December 31, 2000. The increase in net cash was primarily attributable to an
increase in revenues, sale of operating assets, the proceeds from the sale of
common stock and a decrease in operating costs as a result of ending the rebate
program. During the period ended December 31, 2001, the Company sold assets for
$500,000 and purchased assets or capital stock of five companies for
approximately $1,632,500 in cash and 4,177,493 shares common stock. During the
year ended December 31, 2000, we obtained $1,679,775 through the sale of equity
securities in private placements.
In October, 2001, we acquired all of the capital stock of iGain, Inc.
The purchase price was 1,050,000 shares of common stock. We agreed to
repurchase, at the option of the holders, 1,000,000 shares of the common stock
issued in the merger for a price at $2.60 per share (the Put Shares). The
conditions for which we will repurchase the Put Shares is (i) if the current
Chief Executive Officer is no longer serving in that capacity, (ii) we conduct a
public offering of our securities and receives at least $7,000,000 in proceeds,
or (iii) one year from the closing date of the merger. In connection with the
merger, we agreed to repurchase a total of 51,028 of the Put Shares for $2.25
per share. This was completed in January 2002. We are the beneficiary of a term
life insurance policy that covers the demise of our current Chief Executive
Officer. The amount of the policy is $10,000,000.
In December, 2001, we acquired the capital stock of WizardWorld, Inc.
in a stock for stock merger. The purchase price was 660,000 shares of our common
stock. We agreed to repurchase the common stock given in the merger in one year
at a purchase price of $2.60 per share. Certain of the holders of WizardWorld
preferred stock who received our common stock in the merger purchased a total of
350,000 shares of our common stock in a private placement for a total of
$850,000. Such purchasers also have the right to have us reacquire the shares at
$2.60 per share after one year.
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
determine 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 funds.
18
Quarter Ended March 31, 2002 Compared to Quarter Ended March 31, 2001
Results of Operations
We had revenues of $7,768,164 for the quarter ended March 31, 2002
compared to revenues of $4,300,777 for the quarter ended March 31, 2001.
Approximately, $504,000 of our revenues were derived from an off-line venture
whereby we partnered with another company to sell closeout merchandise into the
South American market. Our total investment was approximately $4,000,000. To
date we have received $900,000 of our investment back and the remaining
investment of $3,100,000, which has been used to purchase close out merchandise,
should be received during the second quarter along with additional revenue. We
do not regularly engage in these types of ventures but, as the opportunity
arises we may engage in them in the future. Approximately 21% of our total
revenues were derived from foreign sources. 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 March 31, 2002 was $2,071,604 compared to net
income of $1,855,400 for the quarter ended March 31, 2001 . Total operating
expenses for the quarter ended March 31, 2002 were $4,563,607 resulting in net
operating income for the quarter of $3,204,557. This compares to total operating
expenses of $1,434,091 for the quarter ended March 31, 2001, resulting in net
operating income of $2,866,686. 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 its operating structure. Management expects that all
divisions will have increased revenues and profits in the Second Quarter.
Liquidity And Capital Resources
Cash and cash equivalents as of March 31, 2002 were $13,809,345. At
March 31, 2002, we had current assets of $17,228,220 and current liabilities of
$2,457,176 resulting in working capital at March 31, 2002 (current assets less
current liabilities) of $14,771,044.
In January 2002, we acquired substantially all of the assets, including
the name, of Yutopia.com. and assumed certain operating leases. The purchase
price was 680,000 shares of common stock.
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 its 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.
BUSINESS
Our Business
We are a growing company that owns and operates international
e-commerce and technology businesses. Our primary business is to bring buyers
and sellers together in an efficient and easy to use format and generate fees
based on transactions. We believe that we are an innovator in developing
proprietary technologies and processes needed for easy navigation and
convenience in business-to-business and business-to-consumer environments. Our
technologies have provided the foundation needed for us to scale and grow our
e-commerce businesses profitably across geographic regions and multiple product
lines.
19
The majority of our revenues are derived from commissions and sales
generated on transactions made through our four primary businesses,
OneTwoClick.com and RothmanCloseouts.com (commissions), InternetWebGuide.com,
and FileShooter.com (sales). All divisions share their underlying technologies
and the management team responsible for our profits.
The 800America Network: The 800America Network consists of a group of
divisions and subsidiary companies that provide business to business,
e-commerce services and technology.
The 800America Network (www.800america.com), is our homepage for all of
our eleven divisions and subsidiary companies that comprise the 800America
Network.
OneTwoClick offers consumers a convenient way of easily navigating
among many stores. We are paid a commission on a per transaction basis by the
retail stores included in the OneTwoClick site of 5 to 20% on items sold on this
portal. We are actively involved in determining the stores that are listed on
the portal based on shopper preference. Our filtering mechanism for bringing
stores into the portal is based upon the preferences of our users.
We offer incentives to keep new and repeat visitors coming to the
800America Network through promotions and advertising. We run television
advertising to increase the number of visitors to the 800America Network. As of
March 29, 2002, our OneTwoClick portal had over 700,000 registered customers
making over 300,000 transactions per month.
The 800America Network offers other services to both users and vendors.
Through an 800America Network subsidiary, inShop (www.inshop.com), we provide a
customized mass direct mail service that alerts our inShop customers about
merchandise on sale at particular stores off-line. The stores pay us a per alert
fee to include their sales in the alerts. We receive payments from the stores to
send these alerts to our visitors. inShop has a database of well to do,
primarily female consumers, and extensive relationships with stores and
shoppers. The inShop model helps shoppers make informed shopping decisions by
allowing its members to receive both fashion and designer sales alerts via
e-mail.
We developed and grew our customer base of Internet shoppers through
our online magazine, Internet Web Guide (www.internetwebguide.com). Our Internet
Web Guide provides write-ups, best of best site reviews and articles relating to
Internet shopping and some twenty different other categories. The online
magazine is independently written and is available in six languages and in
several countries around the world.
Rothman Closeouts: Rothman Closeouts operates a web-based global
trading community for surplus and closeout merchandise.
Rothman Closeouts, a member of the 800America Network
(www.rothmancloseouts.com), is one of the busiest and most popular web-based
global trading community for surplus and closeout merchandise. It is a business
to business closeout portal for manufacturers, wholesalers and retailers to sell
and buy surplus inventories around the world. Through management's years of
experience in closeout merchandise, Rothman has built an on-line global trading
community in which buyers and sellers are brought together in an efficient and
cost-effective manner to buy and sell surplus merchandise. The Rothman online
platform has been used by many brick and mortar companies seeking an online
distribution channel for their surplus and closeout merchandise. We believe
these relationships will continue to increase as brick and mortar companies seek
new ways to bring their businesses to the Internet without incurring significant
start-up and operating costs.
20
Rothman's business model was developed based on our management team's
in-depth knowledge of the industry. Our management team has many years of
industry experience and understands how buyers and sellers trade in surplus
merchandise. Our understanding of the marketplace provides us a competitive edge
and is reflected in the services we provide. We continue to tailor our Rothman
services to reach web-based trading communities in other countries. We have
expanded the Rothman services to thousands of small business owners across
America. Most surplus merchandise is sold in larger lots at higher prices
leaving the small business owner unable to compete with the large retailers
offering closeouts. Our services allow these small business owners to aggregate
their surplus merchandise so that they may share in the benefits of selling
larger lots. The minimum order that can be placed is $500.00. Commissions are
determined as a percentage of the total transaction excluding transportation
charges and are paid by the Seller.
Our goal is to be the "virtual closing room" for closeout merchandise
around the world. Our proprietary technology automates the customer buying
process and has proven instrumental in our ability to reach our goal. This
technology finds and then matches buyers and sellers, and builds a fast and
accurate customer buying system. This provides Rothman Closeouts with the
ability to gather information on customer buying behaviors on a realtime
continuous basis. The information allows Rothman Closeouts to provide valuable
assistance to its customers in order to close the sale during the actual
negotiation. We operate Rothman internationally and have expanded our services
to the Far East, Europe and South America.
Other Products and Services:
Fileshooter (www.fileshooter.com), has led to the development of a
revolutionary new peer-to-peer communications tool for secure, private instant
Internet messaging that sends and receives any kind or size file including text,
music, pictures and graphics. We acquired a 51% ownership in Fileshooter in
November 2000 and completed the acquisition for the remaining 49% in July 2001
and worked with the company's existing technology to further develop the
Fileshooter product.
Fileshooter instantly sends and receives any type or size of file,
including, but not limited to, text, music, pictures and graphics or any
combination thereof. What makes Fileshooter different from other products is
that it does not reside on any intermediary's server used in sending or
receiving e-mail. Fileshooter takes a file and wraps it in an encrypted format.
The file is then sent via the Internet with nothing more than an Internet
Protocol (IP) address tag to the designated recipient. This innovative process
allows the sender and receiver to communicate privately regardless of each
others browser, e-mail product or Internet service provider. The Fileshooter
file tunnels through the Internet and its myriad of routers instantly to reach
the recipient.
Fileshooter serves the need for individuals, groups and corporations to
communicate with a variety of other individuals or organizations which may have
different service providers and server technologies. Fileshooter offers
additional flexibility to users in providing the ability to open a private chat
line of communication which does not reside on any intermediary's server. The
chat line is private, quick and deleted once the transmission is complete. We
began marketing the software product to consumers and businesses in the third
quarter of 2001.
EBiz4Biz.com is a business to business site that offers Chinese
manufacturers English and Chinese language web pages pointed to North America
where they may display their merchandise for sale.
IPSpayment.com is an online payment system that allows users to pay
bills and transfer funds.
WizardWorld is an online marketplace where people can buy, sell or
trade collectibles.
cs-live provides real-time communications using the Internet as the
delivery medium. cs-live technology enables companies with a web presence to
maximize the effectiveness of the Internet with applications that provide
enhanced real-time communications over the web, including live chat and rich
media. cs-live provides solutions for eLearning, eMarketing, eSupport and
eSurveys, brings cs-live's customers' web sites to the next level with live and
interactive customer management solutions.
21
The iGain platform employs an Application Service Provider (ASP) model
to deliver cash rewards-based loyalty programs to its clients via both Cash
Rewards and Merchant Partner application services. Clients may use the services
independently or together to reward loyal customers. By modeling the
relationships between clients, members, and incentive programs, iGain fully
manages the distribution, tracking, and fulfillment of cash incentives. As an
ASP, iGain leverages the power of the Internet to quickly and efficiently put
clients' rewards programs to work. iGain loyalty programs are agile and can be
launched in less than two weeks. B2B and B2C services are provided utilizing
standard protocols over the Internet.
Youtopia.com is one of the most popular teenage sites in North America
with approximately 1-2 million members between the ages of fourteen and
twenty-six. The site features contests, games, promotions and some of the most
popular music artists.
Business Strategy
Our strategic objective is to continue to grow our business by
acquiring companies with technologies that support our core business and provide
tools for Internet navigation, shopping and trading convenience. The key
elements of our strategy are to:
o continue to maximize opportunities with our existing
businesses;
o seek strategic acquisitions of synergistic companies with
technologies that support our strategy and improve shareholder
value;
o acquire additional e-commerce companies and layer in our
managerial expertise to expand our existing customer base and
maximize profits; and
o build upon our current infrastructure to provide technology
and services that enhance the Internet shopping experience.
Sales and Marketing
We have approximately 150 independent commission-based sale persons
across China who report to our Beijing office who perform various sales and
marketing functions for our marketing efforts in Asia. We do not employ any
sales personnel in China. All of our employees (6) in our Beijing office are
technical staff. The independent sales force contacts Chinese manufacturers for
the purpose of selling webpages that are pointed to the North American
marketplace. We employ one internal salesperson and one marketing person. Our
marketing strategy, which we implement through advertising and promotions as
well as partnerships and alliances, includes the following elements:
o promote our 800America Network and our various brands;
o develop niche marketing programs to attract buyers and sellers
to our web-based trading community; and
o develop technology companies to grow their business.
22
Competition
Competition in the on-line shopping industry is intense, with numerous
companies competing in what is currently a highly fragmented industry. Almost
all of the major national retailers have established their own web sites and are
experiencing mixed results in this segment of their business. Several companies
have emerged with on-line shopping portals similar to ours. Many of these
companies have spent millions of dollars in advertising and marketing in an
attempt to carve out a niche and establish their brand names in this highly
competitive market. Few of these competitors are currently operating profitably
since they expend large amounts of money for advertising in order to establish
their market identities. As a result, the advertising market is becoming
saturated with numerous on-line merchants, creating confusion among consumers.
It is becoming more difficult for each company to differentiate its products and
services from those of its rivals. We are aware that several new companies have
begun to offer on-line shopping portals with a customer rebate feature. This
particular niche of the on-line shopping industry is highly fragmented and there
are virtually no barriers to entry into this market. We expect on-line shopping
sites to proliferate. In order to compete successfully companies will have to
offer more services and promotions to their customers. 800America has limited
resources. As a result, it will be difficult for us to compete with these large
national organizations whose financial strength is significantly greater than
ours. We may not be able to compete effectively with these larger organizations.
We may not be able to continue to operate profitably in the on-line shopping
mall business.
The online surplus trading community is a new, rapidly evolving market.
We expect competition to intensify in the future as the barriers to entry are
relatively low, and current and new competitors can launch new sites at a
minimal cost using commercially available software. Depending on the product
category, we compete with a number of companies serving particular categories of
goods as well as those serving broader ranges of goods.
Our Fileshooter software product competes directly with all
peer-to-peer (computer-to-computer) software products. We believe our product
has certain competitive advantages over our current competition, but we expect
competition to intensify in the future as peer-to-peer computing becomes
increasingly popular in both the corporate and personal markets.
Employees
As of June 10, 2002, we had 52 employees, including 50 full time
employees and 2 additional part-time employees. We may hire additional employees
in 2002, both full time and part time, if our level of operations requires an
increase in our work force.
Item 2. Description of Property
We do not own any real property. We maintain our corporate and a sales
office in New York, New York where we lease approximately 1,300 square feet of
space. The lease provides for a monthly rental of approximately $3,460 per month
and continues until June 2005. Our administrative offices are located in
Nashville, Tennessee where we lease an aggregate of approximately 3,600 square
feet of space at two different sites. One site has a lease that provides for a
monthly rental of $891 per month and increases 7 1/2% per year over the
remaining term of the lease, which expires in December 2002. In January 2002, we
rented a second larger space of approximately 2,500 square feet. We rent the
second site, without a written lease, for a monthly rental of $1,951.
Part of our technical operations, Ebiz4biz.com and the cs-live
operations have offices in Ottawa, Canada where the rent, is CDN $26,481 per
year for a period of three years ending 2005 and Ebiz4biz has an office in
Beijing, China where the rent, without a written lease, is $1,000 per month. The
iGain subsidiary leases approximately 1,261 square feet in Fairfield, CT for
approximately $1,576 per month for a one-year term ending December 2002.
23
Item 3. Legal Proceedings
In the normal course of our business, we are involved in various legal
matters. We do not believe that any legal matter that we are currently involved
with would have a material adverse effect on our business or financial condition
should the matter not be decided in our favor.
Intellectual Property Rights
Our success depends upon our ability to protect our proprietary
technology and operate without infringing on the proprietary rights of others.
We expect to rely on a combination of patent, trademark, trade secret and
copyright law and contractual restrictions to protect the proprietary aspects of
our technology. However, we do not currently hold any patents or copyrights. We
hold a trademark on our Fileshooter logo and have applied for, but have not yet
received, trademarks on several other tradenames we use in our business. We also
own the trademark names for cs-live, iGain, WizardWorld (online use only) and
Youtopia. We have patents and several pending applications. We will seek to
protect the source code for our software, documentation and other written
materials through trade secret and copyright laws. These legal protections
provide us limited protection. Policing unauthorized use of our technology is
difficult, and we may be unable to determine whether piracy of our software
technology has occurred. A substantial amount of uncertainty exists concerning
the application of copyright laws to the Internet, and there can be no assurance
that existing laws will provide adequate protection for our original content. In
addition, because copyright laws do not prohibit independent development of
similar content, there can be no assurance that copyright laws will provide any
competitive advantage to us. The laws of some foreign countries do not protect
proprietary rights as fully as the laws of the United States. The steps we have
taken to protect our proprietary rights, however, may not be adequate to deter
misappropriation of all proprietary information.
Despite our efforts to protect our proprietary rights and other
intellectual property, unauthorized parties may attempt to copy aspects of our
technology, obtain and use information that we regard as proprietary or
misappropriate our copyrights, trademarks, trade dress or similar proprietary
rights. We cannot be sure that our means of protecting our proprietary rights
will be adequate or that our competitors will not independently develop similar
technology or duplicate our products or design around our intellectual property
rights. In addition, the validity, enforceability and scope of protection of
intellectual property in Internet-related industries is uncertain and still
evolving.
We also license certain third party technology that we incorporate into
our products. To our knowledge, we are not infringing any proprietary rights of
third parties. However, we cannot be sure that third parties will not claim that
we are. We expect that software developers will increasingly be subject to
infringement claims as the number of products and competitors in our markets
grows. Any claims, with or without merit, could be time-consuming for us to
defend, result in costly litigation, divert our management's attention and
resources, cause product development delays or require us to enter into royalty
or licensing agreements. These royalty or licensing agreements, if required, may
not be available on terms acceptable to us, if at all. If a successful claim of
product infringement were brought against us and we were unable to either
license the infringed or similar technology or develop alternative technology on
a timely basis, our business prospects are likely to be materially adversely
affected.
24
MANAGEMENT
Board of Directors, Executive Officers and Significant Employees
Name Age Position
David E. Rabi 62 Chief Executive Officer, Treasurer and Director
Jacques Pate, Jr. 47 President
Bobby Walley 62 Secretary and Director
Darvin D. Pierce 60 Director
Richard K. Sullivan 74 Director
Significant Employees
Jerry Kavoun 47 Senior Vice-President - Chief Marketing Officer
Vincent Ren 43 Chief Technology Officer
Our directors are elected each year at the annual meeting of
shareholders for a term of one year. Each director serves until the expiration
of his term and thereafter until his successor is duly elected and qualified.
Our by-laws provide that the number of directors constituting the board of
directors may be increased by action of the board of directors, which may also
fill vacancies on the board of directors. The current board of directors will
continue to serve as directors until the next annual meeting of our
shareholders. At this time, there are no committees of the board of directors.
Our executive officers are appointed by the Board of Directors on an
annual basis.
Management
David E. Rabi has been a director since February 1997, and he has
served as our Chief Executive Officer and President since July 9, 1999, except
for an approximate 3 week period in September 2001. As President, Mr. Rabi was
instrumental in leading the company to profitability. He had general management
responsibility for all 800America businesses including marketing of the on-line
shopping site, and publishing of the on-line Internet Web Guide Magazine. Mr.
Rabi has extensive experience forming and running large complex international
organizations and served as a financial and marketing consultant to various
international companies in Africa and South America. From 1977 to 1990, he
served as President and CEO of the Carmel Group, a multinational, privately-held
corporation based in South America, with 14 international offices, sales of
approximately $1.5 billion and over 6,800 employees. Mr. Rabi was instrumental
in the sale of the company. His accomplishments are far reaching and are
reflected throughout 800America's structure and culture. Mr. Rabi has a
Bachelors Degree in Business Administration and a Masters Degree in Economics
and Finance from the Sorbonne University in France.
Jacque Pate, Jr. has been employed by us since February 1997. He was
appointed President in January, 2002. From 1979 to February 1997, he served as
President of Jupate, Inc., a construction company. He devotes approximately 80%
of his business time to the affairs of the Company. Mr. Pate holds a B.S. in
Business Administration from Birmingham Southern College and a B.S. in Building
Construction from Auburn University.
25
Bobby Walley has been a director since February 1997, and he has served
as our Secretary since August 2000 and as our President for an approximate 3
week period in September 2001. Mr. Walley owned a forestry consulting firm,
Walley Consulting Co., in Hattiesburg, Mississippi for approximately 10 years
prior to its sale in 1998. Since then he has been an independent consultant. Mr.
Walley holds a Bachelors Degree in Business Administration, a Masters Degree in
Forestry and an AAA Degree (similar to a Ph.D.) in Forestry from Mississippi
State University.
Darvin D. Pierce has been a director since February 1997. Mr. Pierce
has more than 20 years experience working in the investment community.
Currently, he is the co-manager of several mutual bank loan funds and since 1990
has held a senior executive position for Van Kampen Funds of Oakbrook Terrace,
Illinois. In this capacity, Mr. Pierce is the Chief Analyst for $13.2 billion
bank originated secured corporate loans, and is responsible for all analytic
work, "due diligence" and monitoring of the portfolio; he manages 10
professional and eight clerical and accounting personnel and is responsible for
the day-to-day administration, as well as the establishment and maintenance of
working relationships with a number of the Syndication Desks/Personnel at major
lending institutions in the United States. From 1986 to 1990 he was Senior Vice
President, Chief Lending Officer, Australia and New Zealand Bank, New York, New
York. From 1980 to 1986, he was the Vice President, Senior Lending Officer of
the National Bank of Canada, Chicago, Illinois. Mr. Pierce has a Bachelor of
Science in Finance and Economics and a Masters in Business Administration from
Northwestern University.
Richard K. Sullivan has been a director since January 2002. Mr.
Sullivan has been a financial consultant for over thirty years. He holds a. B.A.
degree from Georgetown University and a M.B.A. from Cornell University.
Significant Employees
Jerry Kavoun has held his position since January 2001. Mr. Kavoun
joined us after we purchased substantially all of cs-live's assets in October
2001. He was a Vice President, General Manager and a founder of cs-live, inc.
where he worked from June 2000. From September 1999 until June 2000, he worked
at Atmos Corp., a business development company, as Senior Vice-President, in
which he was a founder. From September 1996 to September 1999, he worked at
ChipWorld, Inc. (patent litigation support for semiconductor licensing) where he
was Director, Business Development. He holds an EEE (electrical electronics
engineering), Semiconductor Physics from Riga Polytechnical University.
Vincent Ren has held his position since February 2001. Prior to that
time he was the President, Chief Technology Officer and a Director of
ebiz4Biz.com, Inc. since July 1999. We purchased ebiz4Biz in January 2001. From
November 1997 until July 1999, he was a software designer for Nortel Networks.
From August 1994 to November 1997, he was a software developer for Milkyways
Networks Corporation. Mr. Ren holds a B.E. in Electrical Engineering from the
Institute of Light Industrial Engineering, Beijing, China and an M.B.A. from the
University of International Business & Economics, Beijing, China.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, for the three
years ended December 31, 2001, the compensation for services in all capacities
earned by our Chief Executive Officer. There were no other officers or employees
whose total annual salary, bonus and other annual compensation exceeded $
100,000 in fiscal year 2001.
26
SUMMARY COMPENSATION TABLE
Securities
Name and Underlying
Principal Position Year Salary Bonus Options
------------------ ---- ------ ----- -------
David E. Rabi 2001 $200,000 -- -0-
Chief Executive Officer 2000 $120,000 -- 1,000,000
1999 120,000 -- 250,000
Bobby Walley 2001 -0- -- -0-
President for approximately 3 weeks
The following table sets forth information concerning grants of stock
options to purchase shares of our Common Stock during the year ended December
31, 2001 to our Chief Executive Officer.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation for
Option Term ($)
Individual Grants
----------------------------------------------------------------------------------------------
Number of Percentage of
Securities Total Options
Underlying Granted to
Options Employees In Exercise Price
Name Granted Fiscal 2000 (%) Per Share ($) Expiration Date
---- ------- --------------- ------------- ---------------
David E. Rabi -0- -0- -0- --
Bobby Walley -0- -0- -0- --
The following table sets forth information with respect to stock
options exercised by our Chief Executive Officer during the fiscal year ended
December 31, 2001 and stock options he held as of December 31, 2001.
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR-END
OPTION/SAR VALUES
Number of Value of Unexercised
Securities In-the-Money
Underlying Number of Securities Options/SARs
Options/SARs Underlying Options/SARs at Fiscal Y/E
Acquired on Value at Fiscal Y/E (#) Exercisable/
Name Exercise (#) Realized Exercisable/Unexercisable Unexercisable
---- ------------ -------- ------------------------- -------------
David E. Rabi -- -- 1,000,000/0 $2,500,000/0
27
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of June 10, 2002:
o each person known by us to own beneficially more than 5% of
our Common Stock;
o each of our directors;
o each of our five most highly compensated officers who earned
more than $ 100,000 in our last fiscal year; and
o all directors and executive officers as a group.
The percentage of beneficial ownership for the table is based on
20,346,321 shares of Common Stock outstanding on June 10, 2002.
Unless otherwise indicated below, to our knowledge, all persons and
entities listed below have sole voting and investment power over their shares of
Common Stock, except to the extent that individuals share authority with spouses
under applicable law. Unless otherwise indicated, each entity or person listed
below maintains a mailing address of c/o 800America.com, Inc. 420 Lexington
Avenue, New York, New York 10170.
The number of shares of Common Stock beneficially owned by each
shareholder is determined in accordance with the rules of the Securities and
Exchange Commission and does not necessarily indicate beneficial ownership for
any other purpose. Under these rules, beneficial ownership includes those shares
of Common Stock over which the shareholder exercises sole or shared voting or
investment power.
Percentage
Amount of Ownership
Name of Beneficial Before
Beneficial Owner Ownership Offering(1)
---------------- --------- -----------
David E. Rabi 10,308,000(2) 50.6%
Jacques Pate 80,000(3) *
Lazard Freres & Co. 1,933,550 9.1%
30 Rockerfeller Plaza
61st Floor
New York, NY 10020
Darvin Pierce 60,000(4) *
Bobby Walley 65,000(5) *
Richard K. Sullivan - 0 - --
------------- -----
All Executive Officers and Directors 12,446,550(6) 51.0%
as a group (5 persons)
* Less than one percent.
28
(1) Based on a total of 20,346,321 shares of Common Stock outstanding as of
June 10, 2002. This amount excludes the conversion of any other
convertible securities. Excludes all of our Common Stock equivalents,
including stock options, warrants and restricted stock.
(2) Includes 9,308,000 shares of Common Stock held by American Deductible,
Inc., an entity established for the benefit of the children of Mr.
Rabi. Mr. Rabi has a power of attorney to act on behalf of American
Deductible, Inc. and may be deemed to have direct voting control of the
Common Stock held by it. Also includes options to purchase 1,000,000
shares of Common Stock.
(3) represents options to purchase 80,000 shares of Common Stock.
(4) Includes options to purchase 35,000 shares of Common Stock.
(5) Includes options to purchase 40,000 shares of Common Stock.
(6) Includes options to purchase 1,155,000 shares of Common Stock.
SELLING SECURITY HOLDERS
The table below sets forth information concerning the sale of shares of
Common Stock by the Selling Security Holders. We will receive a portion of the
proceeds from the resale of the common stock by Intelligent Web Technologies and
RXS, Inc.
When we purchased the assets of Intelligent Web Technologies, Inc., we
advanced funds to certain of their creditors in order to be able to take the
assets free and clear of any liens or encumbrances. The total amount of the
advances is approximately $325,000. Likewise, when we purchased assets from RXS,
Inc., we had to pay a lienholder (a bank) to take the assets free and clear. The
amount we paid was approximately $110,000. RXS, Inc. agreed to reimburse us for
this amount.
The following table also sets forth the name of each person who is
offering shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered. Beneficial ownership is determined in accordance with SEC rules and
generally includes voting or investment power with respect to securities. Common
shares that are issuable upon the exercise of outstanding options, warrants,
convertible Preferred Stock or other purchase rights, to the extent exercisable
within 60 days of the date of this Prospectus, are treated as outstanding for
purposes of computing each Selling Security Holder's percentage ownership of
outstanding common shares.
29
Shares Beneficially Shares Shares Beneficially
Owned Offered Owned After Offering
Selling Prior to the For If All Offered
Security Holder(1) Offering (2) Sale (3) Shares Are Sold (3)
------------------------------------ --------------------------- -------------------- --------------------------
Name Number of Shares Percentage Number of Shares
---- ---------------- ---------- ----------------
Aliza Gold 27,500 27,500 -0-
Joel Gold 247,500 137,500 110,000
Leah Gold 41,250 41,250 -0-
Rochelle Gold Genack 27,500 27,500 -0-
Tanya Gold 41,250 41,250 -0-
Maria Molinsky 55,000 55,000 -0-
Linda Neuman 27,500 27,500 -0-
Victor Molinsky 16,500 16,500 -0-
Carole and Robert Juranek 27,500 27,500 -0-
EH&P Investments 27,500 27,500 -0-
Bryan Simmons, Jr. 27,500 27,500 -0-
The Equity Group Profit Sharing 110,000 110,000 -0-
Plan & Trust
Sam and Tova Wietschner 8,250 8,250 -0-
Alice C. Tate Roth IRA 27,500 27,500 -0-
Isacc J. Buchen and Gail B. Buchen 13,750 13,750 -0-
Allen Conkling 5,500 5,500 -0-
Evan Genack 82,500 82,500 -0-
Schneur Genack and Rachella Genack 27,500 27,500 -0-
Intelligent Web Technologies, Inc. 450,000 160,000 290,000
RXS, Inc. 500,000 150,000 350,000
30
(1) Except as described below, no Security Holders have held any position
or office, or has had any material relationship with us or any of our
affiliates within the past three years. Mr. Jerry Kavoun, our Vice
President-Chief Marketing Officer, was a founder of Intelligent Web
Technologies, Inc. Ms. Randi Schinder is a consultant for us and she is
the Chief Executive Officer and a shareholder of RXS, Inc. Mr. Joel
Gold is an officer in a company that served as a "placement agent" in a
private placement of our common stock and common stock purchase
warrants
(2) Excludes approximately 650,000 warrants to purchase common stock.
(3) Assumes no sales are affected by the Security Holders during the
offering period other than pursuant to this offering and that all
shares offered will be issued and sold.
PLAN OF DISTRIBUTION
The Selling Security Holders and any of their pledges, assignees, and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market, or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. There is no assurance that the Selling Security Holders will
sell any or all of the Common Stock in this offering. The Selling Security
Holders may use any one or more of the following methods when selling shares:
o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers.
o Block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction.
o Purchases by a broker-dealer as principal and resale by the
broker-dealer for its own account.
o An exchange distribution following the rules of the applicable
exchange.
o Privately negotiated transactions.
o Short sales or sales of shares not previously owned by the
seller
o Broker-dealers may agree with the Selling Security Holders to
sell a specified number of such shares at a stipulated price
per share.
o A combination of any such methods of sale or any other lawful
method.
o The Selling Security Holders may also engage in:
o Short selling against the box, which is making a short sale
when the seller already owns the shares.
o Buying puts, which is a contract whereby the person buying the
contract may sell shares at a specified price by a specified
date.
31
o Selling under Rule 144 under the Securities Act, if available
which it is currently not, rather than under this Prospectus.
o Other transactions in our securities or in derivatives of our
securities and the subsequent sale or delivery of shares by
the shareholder.
o Pledging shares to their brokers under the margin provisions
of customer agreements. If a selling Security Holder defaults
on a margin loan, the broker may, from time to time, offer to
sell the pledged shares.
Broker-dealers engaged by the Selling Security Holders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from Selling Security Holders in amounts to be
negotiated. If any broker-dealer acts as agent for the purchaser of shares, the
broker-dealer may receive commission from the purchaser in amounts to be
negotiated. The Selling Security Holders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Security Holders and any broker-dealers or agents that are
involved in selling the shares may be considered to be "underwriters" within the
meaning of the Securities Act for such sales. An underwriter is a person who has
purchased shares from an issuer with a view towards distributing the shares to
the public. in such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
considered to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the
registration of the shares in this offering. However, we will not pay any
commissions or any other fees in connection with the resale of the common stock
in this offering. We have agreed to indemnify the Selling Security Holders and
their officers, directors, employees and agents, and each person who controls
any Selling Security Holder, in certain circumstances against certain
liabilities, including liabilities arising under the Securities Act. Each
Selling Security Holder has agreed to indemnify the Company and its directors
and officers in certain circumstances against certain liabilities, including
liabilities arising under the Securities Act.
If we are notified by the Selling Security Holder that they have a
material arrangement with a broker-dealer for the resale of the common stock,
then we would be required to amend the registration statement of which this
prospectus is a part, and file a prospectus supplement to describe the
agreements between the Selling Security Holder and the broker-dealer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 9, 1999, 800America, Inc., a Delaware corporation, was merged
into 800America.com, Inc. As part of the Agreement and Plan of Merger, we issued
10,000,000 shares of our Common Stock to the three shareholders of 800America,
Inc. We also changed the name of the company to 800America.com, Inc. Of the
restricted shares of Common Stock issued pursuant to the merger, 9,358,000
shares of Common Stock were issued to American Deductible, Inc. American
Deductible, Inc. is an entity established for the benefit of the children of Mr.
Rabi, our Chief Executive Officer and a director of 800America and a controlling
shareholder of 800America, Inc. Mr. Rabi does hold a power of attorney on behalf
of American Deductible, Inc. and may be deemed to hold direct voting control of
such shares.
In August 2001, we purchased all of the capital stock of Universal
Payment Systems, Inc. from our Chief Executive Officer, Mr. David E. Rabi. The
purchase price was $1.00.
32
SHARES ELIGIBLE FOR FUTURE SALE
General
We have outstanding 20,346,321 shares of our Common Stock, at June 10,
2002. Of these shares, approximately 3,000,000 shares of Common Stock are freely
tradable in the public market without restriction under the Securities Act,
unless these shares are held by our "affiliates," as that term is defined in
Rule 144 under the Securities Act.
The remaining 17,346,321 shares of our Common Stock are "restricted
shares". We issued and sold these restricted shares in private transactions in
reliance on exemptions from registration under the Securities Act. Restricted
shares may be sold in the public market only if they are registered or if they
qualify for an exemption from registration under the Securities Act.
Stock Option Plan
Our Board of Directors adopted, and our shareholders approved, our
Stock Option Plan, on November 15, 1999 and November 24, 1999, respectively. The
purpose of the Stock Option Plan is to attract and retain directors, officers,
other employees and consultants of 800America and its subsidiaries and to
provide such persons with incentives to continue in the long-term service of
800America and its subsidiaries and to create a more direct interest in the
future success of the operations of 800America by relating incentive
compensation to increases in shareholder value. The Stock Option Plan is divided
into three separate programs:
o The Discretionary Stock Option Grant Program under which
eligible persons may, at the discretion of the Committee or
the Board, be granted Stock Options.
o The Restricted Stock Program under which eligible persons may,
at the discretion of the Committee or the Board, be granted
rights to receive shares of Common Stock, subject to certain
restrictions; and
o The Supplemental Bonus Program under which eligible persons
may, at the discretion of the Committee or the Board, be
granted a right to receive payment, in cash, shares of Common
Stock, or a combination thereof, of a specified amount.
Persons eligible to participate in the Stock Option Plan include
employees of 800America or a subsidiary, members of the board, and consultants
and other independent advisors who provide services to 800America or a
subsidiary. The Stock Option Plan is administered by the Board of Directors. The
initial aggregate number of shares of Common Stock that may be issued under the
plan is 2,000,000, which increases annually based on the number of outstanding
shares of Common Stock. Management expects to propose an increase in the number
of shares that may be issued under the plan.
Upon an acquisition, shareholder-approved merger or consolidation, a
change in a majority of the members of the board, or the sale, transfer or other
disposition of all or substantially all of the assets of 800America, all
outstanding stock options, restricted stock and supplemental bonuses shall
become immediately exercisable. Upon a change of control (as defined in the
Stock Option Plan) of 800America, options become fully exercisable, and
restrictions on restricted shares lapse. Our Board of Directors may amend or
modify the plan at any time subject to any required shareholder approval. No
such amendment or modification shall adversely affect the rights and obligations
with regard to awards outstanding under the plan at the time of such amendment
or modification, unless the participant consents to such amendment or
33
modification. The plan will terminate upon the earliest of (i) ten (10) years
after the effective date of the plan or (ii) the termination of all outstanding
awards in connection with a change in control. Upon such plan termination, all
outstanding awards shall thereafter continue to have force and effect in
accordance with the provisions of the documents evidencing such awards.
As of June 10, 2002, we have granted a total of 2,539,000 stock options
under the Stock Option Plan, primarily to the officers and directors and
employees of 800America.
Rule 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares for at least one year would be entitled to
sell in any three-month period up to the greater of:
o 1% of the then-outstanding shares of our Common Stock; and
o the average weekly trading volume of our Common Stock during
the four calendar weeks preceding the filing of a Form 144
with respect to the sale.
Sales under Rule 144 are also subject to certain manner of sale and
notice requirements and to the availability of current public information about
us. As we are not current in our reports to the SEC, the use of Rule 144 is of
limited use to our shareholders.
Rule 144(k)
Under Rule 144(k), a person who has not been one of our affiliates
during the preceding 90 days and who has beneficially owned the restricted
shares for at least two years is entitled to sell them without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144.
Rule 701
In general, Rule 701 permits non-affiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the holding period
provision of Rule 144.
DESCRIPTION OF CAPITAL STOCK
General
The following summary of certain provisions of our Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, our Articles of Incorporation and by-laws, however, the
summary does contain all material terms of the Capital Stock.
We are authorized by our Amended and Restated Articles of Incorporation
to issue an aggregate of 50,000,000 shares of Common Stock, par value $0.001 per
share, and 5,000,000 shares of Preferred Stock, par value $0.001 per share,
which preferred stock may be issued with the rights, designations and
privileges, including redemption and voting rights, as our board of directors
may, from time to time, determine. As of June 10, 2002, there were 20,346,321
shares of Common Stock and no shares of Preferred Stock issued and outstanding.
34
Common Stock
Each holder of Common Stock is entitled to one vote per share and,
subject to the rights of the holders of any Preferred Stock we may issue in the
future, to receive dividends when and as declared by our Board of Directors, and
to share ratably in our assets legally available for distribution in the event
of our liquidation, dissolution or winding up. Holders of our Common Stock do
not have subscription, redemption or conversion rights, nor do they have any
preemptive rights. In the event we were to elect to sell additional shares of
our Common Stock following this offering, investors in this offering would have
no right to purchase these additional shares. As a result, their percentage
equity interest in us would be diluted. Holders of the Common Stock do not have
cumulative voting rights, which means that the holders of more than half of the
outstanding shares of Common Stock can elect all of our directors, if they
choose to do so. In this event, the holders of the remaining shares would not be
able to elect any directors. Our Board of Directors is empowered to fill any
vacancies on the Board of Directors. Except as otherwise required by Nevada law,
all shareholder action is taken by vote of a majority of the outstanding shares
of Common Stock voting as a single class present at a meeting of shareholders at
which a quorum, consisting of a majority of the outstanding shares of our Common
Stock, is present in person or by proxy.
Preferred Stock
We are authorized by our Amended and Restated Articles of Incorporation
to issue a maximum of 5,000,000 shares of Preferred Stock, in one or more series
and containing the rights, privileges and limitations, including voting rights,
conversion privileges and/or redemption rights, as may, from time to time, be
determined by our Board of Directors. Preferred Stock may be issued in the
future in connection with acquisitions, financings or any other matters as the
Board of Directors deems to be appropriate. The effect of the Preferred Stock is
that our Board of Directors alone, within the bounds and subject to the federal
securities laws and the Nevada General Corporation Law, may be able to authorize
the issuance of Preferred Stock, which could have the effect of delaying,
deferring or preventing a change in control of us without further action by the
shareholders and may adversely affect the voting and other rights of holders of
Common Stock. The issuance of Preferred Stock with voting and conversion rights
may also adversely affect the voting power of the holders of Common Stock,
including the loss of voting control to others.
Indemnification
Under the Nevada General Corporation Law, a director, officer, employee
or agent of a Nevada corporation may be entitled to indemnification by the
corporation under certain circumstances against expenses, judgements, fines and
amounts paid in settlement of claims brought against them by a third person or
by or in right of the corporation.
We are obligated under our Amended and Restated Articles of
Incorporation to indemnify any of our present or former directors, officers,
employees and agents of 800America, or anyone who is or was serving at the
request of 800America as a director, officer, trustee, employee or agent of
another corporation, partnership, joint venture, trust, or other enterprise.
This indemnification applies to any of the foregoing persons who was or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding against expenses (including attorneys' fees), judgements,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding. Indemnification is available if
such person acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest of 800America and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Our Amended and Restated Articles of Incorporation do not permit
indemnification for any claim, issue or matter as to which such person has been
adjudged by a court to be liable to 800America or for amounts paid in settlement
35
to 800America, unless and only to the extent that the court or other court of
competent jurisdiction determines upon application that, in view all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for the expenses which the court deems proper. Our Amended and
Restated Articles of Incorporation provide for indemnification against expenses,
including attorneys' fees, actually and reasonably incurred by any covered
person in his defense. 800America may also advance expenses consistent with the
provisions of the applicable Nevada law.
The Nevada General Corporation Law, also permits a corporation to limit
the personal liability of its officers and directors for monetary damages
resulting from a breach of their fiduciary duty to the corporation and its
shareholders. Our Amended and Restated Articles of Incorporation do not provide
such a limitation.
Our Amended and Restated Articles of Incorporation and By-laws provide
that indemnification is not exclusive of any other rights these persons may
otherwise have under contract or by law. The indemnification will apply to the
actions of these persons in their official or action in another capacity while
holding office, except that indemnification, unless order by a court for actions
by or in the right of 800America or for the advancement of expenses of any
director or officer, may not be made to or on behalf of any officer or director
if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action. This indemnification will also continue as to a person
who has ceased to be a director, officer, employee or agent, and the benefit of
the indemnification will pass to that person's heirs, executors and
administrators.
Transfer Agent
The transfer agent and registrar for our Common Stock is Interwest
Transfer Company, Inc.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Jack F. Burke, Jr., the independent auditors who had been engaged by
800America as the principal accountants to audit its consolidated financial
statements for 2001, was dismissed effective June 3, 2002. The decision to
change accountants was recommended by the Audit Committee of 800America's Board
of Directors and unanimously approved by the Board of Directors.
The reports of Jack F. Burke, Jr. on the financial statements of
800America during the two-year period ended December 31, 2001 did not contain an
adverse opinion or a disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope, or accounting principals. During the two-year
period ended December 31, 2001 and the subsequent interim period preceding the
dismissal of Jack F. Burke, Jr., the Company did not have any disagreements with
Jack F. Burke, Jr., on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Jack F. Burke, Jr. would
have caused it to make reference to the subject matter of the disagreement in
connection with its reports.
On June 3, 2002, 800America engaged Piltz, Williams, LaRosa & Company
as its new auditors to audit 800America's consolidated financial statements.
Accordingly, Piltz, Williams, LaRosa & Company will act as 800America's
independent auditors for the fiscal year ending December 31, 2002.
EXPERTS
The consolidated financial statements of 800America.com, Inc. at
December 31, 2000 and 1999 appearing in this Prospectus have been audited by
Jack F. Burke, Jr., CPA, independent auditor as set forth in the report thereon,
appearing elsewhere in this Prospectus and are in reliance upon such report
given upon the authority of such auditors as experts in accounting and auditing.
36
LEGAL MATTERS
Legal matters concerning the issuance of shares of common stock offered
in this Prospectus will be passed upon by John L. Thomas, Esquire, Moorestown,
New Jersey. Mr. Thomas beneficially owns options to purchase 100,000 shares of
the Company's Common Stock.
OTHER AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 (File No.
333-76792) under the Securities Act of 1933 Act with the Commission in
connection with the securities offered by this Prospectus. This Prospectus does
not contain all of the information that is in the registration statement, you
may inspect without charge, and copy our filings, at the public reference room
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of this material may also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
Information about the public reference room is available from the
Commission by calling 1-800-SEC-0330.
The Commission maintains a web site on the Internet that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. The address of the site is
www.sec.gov. Visitors to the site may access such information by searching the
EDGAR archives on this web site.
You should rely only on the information contained in this Prospectus.
We have not authorized anyone to provide you with any information that is
different.
The Selling Security Holders are offering to sell, and seeking offers
to buy, shares of common stock only in jurisdictions where such offers and sales
are permitted.
The information contained in this Prospectus is accurate only as of the
date of this Prospectus.
FINANCIAL STATEMENTS
Our Financial Statements begin on Page F-1.
37
INDEX TO FINANCIAL STATEMENTS
800America.com, Inc.
Consolidated Financial Statements
December 31, 2001
Page
----
Review Report of Independent Auditor.........................................F-2
Balance Sheet................................................................F-3
Income Statement.............................................................F-4
Stockholder's Equity.........................................................F-5
Cash Flow Statement..........................................................F-7
Notes to Reviewed Financial Statements.............................F-8 thru F-14
800America.com, Inc.
Condensed Consolidated Financial Statements
For Three Months Ended March 31, 2002
Page
----
Independent Accountant's Review Report......................................F-15
Balance Sheet...............................................................F-16
Income Statement............................................................F-17
Cash Flow Statement.........................................................F-18
Notes to Condensed Consolidated Financial Statements..............F-19 thru F-20
F-1
Jack F. Burke, Jr.
Certified Public Accountant
P. O. Box 15728
Hattiesburg, Mississippi 39404
Independent Auditor's Letter
To the Board of Directors and Stockholders' of 800America.com Inc.
I have audited the accompanying consolidated balance sheet of 800America.com
Inc. (a Nevada Corporation) as of December 31, 2001 and 2000 and the related
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of 800America.com Inc. management. My responsibility is to
express and opinion on these financial statements based on my audit.
I conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I plan and perform
the audit 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. I believe that my audit provides a reasonable basis for
our opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 800America.com Inc. as of December
31, 2001 and 2000 and the results of its operations and its cash flows for the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
Jack F. Burke, Jr.
Hattiesburg, Mississippi
March 22, 2002
F-2
800America.com, Inc.
Consolidated Balance Sheet
December 31
2001 2000
Assets
Current Assets
Cash $13,201,125 $ 2,117,746
Accounts Receivable 53,752 995,634
Allowance for Doubtful Accounts 0 -139,000
Prepaid Advertising 0 75,000
Deferred Tax Asset 0 47,260
Interest Receivables 17,151 0
Notes Receivable 301,570 0
----------- -----------
Total Current Assets 13,573,598 3,096,640
----------- -----------
Property and Equipment
Equipment 1,066,463 743,831
Software 3,695,650 887,150
Auto 20,738 20,738
Networking Development 2,633,493 0
----------- -----------
7,416,344 1,651,719
Less Accumulated Depreciation 1,607,545 567,832
----------- -----------
Net Property and Equipment 5,808,799 1,083,887
----------- -----------
Other Assets
Bond Deposit 500,000 0
Stock Escrow 115,015 0
Goodwill (Net) 2,774,266 193,333
Other Assets 199,917 47,750
----------- -----------
Total Other Assets 3,589,198 241,083
----------- -----------
Total Assets 22,971,595 4,421,610
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable Trade 131,085 24,947
Subscribers Refund Due 770,892 0
Income Tax Payable 1,027,518 386,872
Accrued Expenses 98,821 0
----------- -----------
Total Current Liabilities 2,028,316 411,819
----------- -----------
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 18,724,493 Shares
Issued at December 31, 2001 and 13,412,000
Shares Issued December 31, 2000 18,725 13,412
Additional Paid in Capital 10,605,671 1,943,134
Less Treasury Stock Purchased -50,000
Retained Earnings 10,368,883 2,053,245
----------- -----------
Total Stockholders' Equity 20,943,279 4,009,791
----------- -----------
Total Liabilities and Stockholders' Equity $22,971,595 $ 4,421,610
=========== ===========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-3
800America.com, Inc.
Consolidated Income Statement
For Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
Revenues $21,401,169 $15,980,529 $3,283,575
----------- ----------- -----------
Cost and Expense
Advertising and Promotion 4,443,249 1,878,318 397,738
Rebates 8,913,351 2,135,668
Bad Debts 270,795 66,000
Depreciation and Amortization 1,147,113 486,480 88,019
Contract Services 296,972
Payroll 884,546 299,254 86,961
Consulting 216,250 313,204 85,000
Legal and Accounting 226,677 78,039 40,915
Rent 157,959 25,466 17,800
Travel 284,310 104,904 8,532
General and Administrative 804,742 496,818 81,772
Cost - Integrating Acquisition Operations 984,356
----------- ----------- -----------
Total Cost and Expense 9,446,174 12,866,629 3,008,405
----------- ----------- -----------
Operating Income 11,954,995 3,113,900 275,170
----------- ----------- -----------
Other Income
Interest Income 184,423 26,243 5,810
Sale of Assets 500,000
----------- ----------- -----------
Total Other Income 684,446 26,243 5,810
----------- ----------- -----------
Income Before Income Tax 12,639,441 3,140,143 280,980
Income Tax Expense 4,323,803 1,067,649 95,533
Net Income $8,315,638 $2,072,494 $185,447
Basic Earnings Per Share Common Stock $0.52 $0.16 $0.03
Weighted Average Common Stock Outstanding 16,146,516 12,721,359 6,243,132
Diluted Earnings Per Share $0.46 $0.14 $0.03
Diluted Weighted Shares 18,276,516 14,371,359 6,432,989
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-4
800America.com, Inc.
Consolidated Changes in Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
Additional
Common Stock Paid In Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
Balance December 31, 1998 700,000 $700 $6,069 -$204,696 -$197,927
Sale of Common Stock at $2.50
Per Share Pursuant to Initial
Public Offering Net of Offering
Cost March 31, 1999 80,000 80 198,713 198,793
Services and Rental Space
Contributed by Officer 9,000 9,000
Common Stock Insured Pursuant
to Merger July 9, 1999 11,170,000 11,170 -11,170
Common Shares Sold July 9, 1999 300,000 300 499,700 500,000
Additional Paid in Capital
November 2, 1999 250,000 250,000
Net Income 185,447 185,447
------------------------------------------------------------------------------------------
Balance December 31, 1999 12,250,000 12,250 952,312 -19,249 945,313
Sale of Common Stock January 14, 2000 250,000 250 249,750 250,000
Common Stock Sold June 30, 2000
Acquisition June 30, 2000 200,000 200 199,800 200,000
Common Stock Issued for Services
at Fair Market Value 12,000 12 11,988 12,000
Common Stock Sold October 26, 2000 700,000 700 529,284 529,984
Net Income 2,072,494 2,072,494
------------------------------------------------------------------------------------------
Balance December 31, 2000 13,412,000 13,412 1,943,134 2,053,245 4,009,791
F-5
800America.com, Inc.
Consolidated Changes in Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
Continued
Additional
Common Stock Paid In Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
Balance Forward 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 1,817,493 1,818 1,815,676 1,817,494
Stock Issued Pursuant to the Acquisition
of EBIZ.com May 30, 2001 200,000 200 133,133 133,333
Stock Issued Pursuant to the Acquisition
of iGain.com October 15, 2001 1,050,000 1,050 2,203,950 2,205,000
Stock Issued Pursuant to the Acquisition
of Assets of cslive.com September 24, 2001 450,000 450 899,550 900,000
Stock Issued Pursuant to the Acquisition of Wizard
World.com December 3, 2001 660,000 660 1,715,340 1,716,000
Stock Issued for Service at Fair Market Value 115,000 115 216,135 216,250
Stock Issued Private Placement Net of Offering Cost 665,000 665 814,172 814,837
Stock Sold December 3, 2001 355,000 355 864,581 864,936
Treasury Stock Purchased -50,000 -50,000
Net Income for Year Ended December 31, 2001 8,315,638 8,315,638
-------------------------------------------------------------------------------
Balance December 31, 2001 18,724,493 $18,725 $10,605,671 $10,368,883 -$50,000 $20,943,279
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-6
800America.com, Inc.
Consolidated Statement of Cash Flows
Years Ended December 31,
2001 2000 1999
Cash Flows From Operating Activities
Net Income (Loss) $8,315,638 $2,072,494 $185,447
Adjustments to Reconcile Net Income
to Cash Provided (Used) by Operations
Depreciation & Amortization 1,039,713 486,480 88,019
Stock Issued for Services 216,250 12,000
Change in Current Assets and Liabilities
Increase in Provision for Doubtful Accounts -139,000 73,000 66,000
Notes Receivable -301,570
Accounts Receivable 941,882 -466,832 -528,802
Prepaid Advertising 46,600 -121,600
Other Assets 105,109 -72,569 -22,440
Accounts Payable 205,133 15,951 -18,249
Rebates Payable -330,551 330,551
Income Tax Payable 640,473 268,899 117,973
Due to Subscribers Increase 770,892
------------------ ---------------- --------------
Net Cash Provided (Used) by Operations 11,794,520 2,105,472 96,899
------------------ ---------------- --------------
Cash Flows From Investment Activities
Bond Deposit -500,000
Stock Escrow -115,015
Deposit on Equipment Increase 94,000 -94,000
Purchase of Computer Related Assets -1,573,734 -1,254,274 -380,140
Advances -152,167
------------------ ---------------- --------------
Net Cash (Used) By Investment Activity -2,340,916 -1,160,274 -474,146
------------------ ---------------- --------------
Cash Flows From Financing Activities
Notes Payable -157,500
Other Liabilities -31,059
Sale of Common Stock 1,679,775 779,984 957,793
Purchase of Treasury Stock -50,000
------------------ ---------------- --------------
Net Cash Provided By Financing Activity 1,629,773 779,984 769,234
------------------ ---------------- --------------
Net Cash 11,083,379 1,725,182 391,987
Beginning Cash Balance 2,117,746 392,564 577
------------------ ---------------- --------------
Ending Cash Balance $13,201,125 $2,117,746 $392,564
================== ================ ==============
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-7
800America.com, Inc.
Consolidated Notes to Financial Statements
Note 1 - Business and Significant Accounting Policies
Nature of Operations - 800America.com Inc. (A Nevada Corporation) is a
diversified internet company. 800America.com Inc. (the Company) owns and
operates international e-commerce and technology business to business and
business to consumer formats. The Company has acquired several Internet based
companies (see Note 2 Acquisitions) and has integrated their operations into the
Company's operations.
Cash and Cash Equivalents - The Company does not have any cash equivalents. Cash
consists of deposits in banks. There are no restrictions on any bank balances.
Account Receivables - Account receivables at December 31, 2001 were minimal and
no allowance for Bad Debts is needed. The full amounts of account receivables at
December 31, 2000 were collected. All remaining accounts are considered fully
collectable.
Property, Plant and Equipment - Property, plant and equipment are recorded at
cost. Maintenance and repairs expenditures are charged to expense when incurred.
The accelerated method of depreciation is used with equipment over a useful life
of five years and straight line depreciation over three years is used for
software purchased. Networking Development consists of the existing computerized
structure that was acquired and integrated into the Company's operations.
Intangibles - Goodwill and other assets arising from acquisitions are being
amortized over their useful life not to exceed 15 years. On January 1, 2002 the
Company adopted Financial Accounting Standards No. 142, Goodwill and Intangible
Assets. Under this pronouncement the Company discontinued its practice of
amortizing goodwill in favor of an annual impairment analysis. Impairment
analysis will be performed more frequently should conditions or circumstances
arise which merit such a review.
Bond Deposit - The government of the Peoples Republic of China required a bond
of five hundred thousand ($500,000) US dollars on deposit with a bank in China.
Pursuant to its agreement with the government, the Company expects to receive a
refund of the money.
Stock Escrow - The Company put in escrow one hundred fifteen thousand and
fifteen dollars ($115,015) to buy back, on request, 51,028 shares of its stock
owned by employees of iGain,Inc. a Company acquired through acquisition.
Notes Receivable - Notes receivable are short term and due from the successor
company (Intelligent Web Technology) to a company (cslive) from which the
Company purchased assets in one of the acquisitions.
F-8
Revenue Recognition - The Company recognizes revenues when a transaction is
completed on one of its web sites and a commission to the Company is generated
and paid directly to the Company. For the year ended December 31, 2001 the
Company's accounts receivable are minimal.
Advertising Expense - Prepaid Advertising - Advertising cost is expensed in the
year the advertising takes place. Prepaid advertising is recognized when such
services have been paid for but not yet used at the end of the period. There was
no prepaid advertising at December 31, 2001, prepaid advertising of $75,000 at
December 31, 2000 was expensed in 2001.
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, the
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 these estimates.
Rebates - In prior years, 2000 and 1999, the Company offered rebates to its
customers who patronized its shopping portals. The Company received an agreed
discount from the stores comprising the shopping portals and from this discount
paid rebates to its customers. The Company ceased the rebate procedure at the
end of year 2000.
Private Offering - Stock Sale - The Company sold previously unissued stock in a
private offering for approximately $6,315,768 net of offering cost. The Company
repurchased, at sale price, $5,500,000 of the stock sold from one investor
Note 2 - Acquisitions
The Company acquired the following companies or businesses during 2001:
Operations Stock Cost
Included Shares Stock Contingent
Method From Cash Issued Value Cost Goodwill (1) Commitment (2)
Fileshooter Purchase 06-30-2001 $500,000 500,000
Inshop.com Purchase 02-02-2001 1,817,493 $1,817,493 $1,817,493 $900,000
ebiz4biz.com, Inc. Purchase 05-30-2001 1,082,500 200,000 133,333 1,215,833 133,333
iGain, Inc. (3) Purchase 10-09-2001 1,050,000 2,205,000 2,205,000 1,205,000
cslive - Assets Purchase 09-24-2001 50,000 450,000 900,000 950,000 450,000 770,892
Wizard World Inc.(4) Purchase 12-03-2001 660,000 1,716,000 1,716,000
Total $1,632,500 4,177,493 $6,771,826 $8,404,326 $2,688,333 $770,892
F-9
(1) Goodwill acquired before July 1, 2001 was initially being amortized
over fifteen (15) years. On January 1, 2002 the Company adopted
Financial Accounting Standards No. 142, Goodwill and Intangible Assets.
Upon the adoption of this pronouncement the Company no longer amortizes
goodwill but performs an impairment evaluation annually, or more
frequently should circumstances or conditions arise which merit such a
review.
(2) Amount due members of cslive if, the members make a claim for funds due
them. Any amounts not claimed by September 24, 2002 will revert to the
Company.
(3) The Company agreed to repurchase, for $2.60 per share at the option of
the holders, under certain conditions, one million (1,000,000) shares
of the common stock issued in the merger.
(4) The Company agreed to repurchase at $2.60 per share, six hundred sixty
thousand (660,000) shares of common stock issued in the merger at the
option of the holder for a period up to one year from the date of the
merger.
The Company's potential exposure on the buy back provisions (3)& (4) is
approximately $2,831,000.
In 2000 the Company purchased RothmanCloseout.com for two hundred thousand
(200,000) shares of stock valued at $1 which was the approximate market value of
the stock. Rothman is a business to business closeout portal for manufacturers,
wholesalers and retailers to sell and buy surplus inventories internationally.
The purchase price of two hundred thousand dollars ($200,000) was allocated to
goodwill.
Note 3 - Contingent Liability
As noted in Note 2 Acquisitions (3) and (4), the Company is potentially liable
within the next year for $2,831,000 on its buy back agreements with the former
stockholders' of iGain, Inc. and Wizard World Inc. two companies acquired during
2001.
The Company has also agreed to buy back 51,028 shares of its stock issued to
iGain, Inc. employees. (See Note 1 Stock Escrow). The agreement specifies the
employees who may sell their stock at $2.25 per share. The total possible
repurchase cost to the Company is $114,813.
Note 4 - Financial Instruments
Fair Value - The carrying value of cash, accounts receivable and accounts
payable approximates fair value due to the short term to maturity.
Concentrations of Credit Risk - Financial instruments that potentially subject
the Company to credit risk include cash on deposit at financial institutions in
the amount $13,201,125 at December 31, 2001, which is Federally Insured up to
$100,000. The Company has extended unsecured credit to regular customers of
$53,752 December 31, 2001 and $995,634 at December 31, 2000. The Company had no
bad debt for year 2001 and wrote off $197,795 in bad debts in 2000.
F-10
Note 5 - Related Party Transactions
Compensation paid majority Stockholder was $191,663 and $75,000 for the years
ended December 31, 2001 and 2000 respectively. Additional services contributed
by stockholders' were $6,000 for the year ended December 31, 1999.
Note 6 - Supplemental Cash Flow Information
For years ended 12/31/2001 12/31/2000 12/31/1999
Interest Paid 0 0 0
Income Tax Paid $3,572,439 $856,305 0
Note 7 - Non Cash Transaction
12/31/2001 12/31/2000 12/31/1999
200,000 shares common stock was
issued for the purchase of
Rothman Closeouts $200,000
Shares issued for services $216,250 $12,000 $6,000
4,177,493 shares of common
issued in acquisitions $6,771,826
Note 8 - Stock Option Plan
The Company has a stock option plan (the Plan) which provides for the granting
of incentive stock options to all full time employees as well as non qualified
options to non employee directors and consultants. The Plan is designed so that
options under the Plan are granted at 100% of Fair Market Value at date of
grant. The exercises price of the options range from $1.00 to $4.25 per share.
The following summarize the options granted and outstanding.
December 31, 2001 2000 1999
Options outstanding beginning of year 1,650,000 1,650,000 0
Granted 770,000 0 1,650,000
Exercised 0 0 0
Options outstanding end of year 2,420,000 1,650,000 1,650,000
As permitted under Statement of Financial Accounting Standards No. 123 (FAS123),
"Accounting for Stock-Based Compensation," the Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations, in accounting for stock-based awards to
employees. Under APB 25, the Company generally recognized no compensation
expense with respect to such awards.
F-11
Pro forma information regarding net income and earnings per share is required by
FAS 123 for awards granted after October 28, 1995 as if the Company had
accounted for its stock-based awards to employees under the fair value method of
FAS 123. The fair value of the Company's stock-based awards to employees was
estimated using a Black-Scholes option pricing mode. The Black-Sholes option
valuation model was developed for use in estimating the fair value of trade
options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Because the
Company's stock-based awards to employees have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock-based awards to employees. The fair value
of the Company's stock-based awards to employees was estimated assuming no
expected dividends and the following weighted average assumptions:
2001 2000 1999
---- ---- ----
Risk Free Rate 4.5 5.45 6.32
Volatility 5.50 55.0 65.0
Expected Life 3yrs 4yrs 5yrs
The following table summarizes information about options outstanding at December
31,2001:
Range of Exercise Number Outstanding Weighted Average Average Exercisable Average
Price at 12/31/02 Remaining Life Exercise Price Options Exercise Price
1.00 - 4.00 2,420,000 7.4 2.31 2,420,000 2.31
Had the fair value method been applied, net income would have been reduced by
$193,600 or $0.01 per share for 2001, $115,000 or $0.01 per share for 2000 and
$132,000 or $0.02 per share for 1999. The average fair value of options granted
were $0.08 in 2001, and $0.08 in 1999.
Note 9 - Income Tax
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting from Income Taxes (FAS No. 109) is an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In estimating
future consequences, FAS No.109 generally considers all expected future events
other than enactments of changes in the tax law or rates.
F-12
The deferred tax asset account resulted from temporary differences between the
amounts of assets and liabilities recognized for financial reporting and tax.
The components of the net deferred income tax asset are as follows:
2001 2000 1999
Provisions for Doubtful Accounts 0 $24,820 $22,440
Income Taxes are:
2001 2000 1999
Current Tax Expense $4,323,804 $1,092,469 $117,973
Deferred Tax Benefit 0 (24,820) (22,440)
------------------------------------------
Provision for Income Tax $4,323,804 $1,067,649 $95,533
The Provision for income taxes and the reconciliation between federal income
taxes at the statutory effective rates are as follows:
2001 2000 1999
Amount % Amount % Amount %
Federal Income Tax at Statutory Rate Amount $4,323,804 34.0 $1,067,649 34.0 $95,533 34.0
---------- ---- ---------- ---- -------
Provision for Income Tax $4,323,804 34.0 $1,067,649 34.0 $95,533 34.0
Note 10 - Operating Leases
Lease expense for the year ended December 31, 2001 was $157,959 and for the year
ended December 31, 2000 was $25,465. The Company leased facilities at Mt.
Juliet, TN for $891 per month and increasing 7-1/2% for the next year. The
Company has leased additional facilities in Nashville, TN on a month to month
lease at $650 per month. The Mt. Juliet lease expires at December 2002. The
Company also leases office space in New York, at $3,460 per month, Ottawa,
Canada where the rent is $26,481 per year, Beijing, China at $1,000 per month
and Fairfield CT with rent of $1,576 per month.
Fairfield CT Beijing Mt. Juliet, TN Nashville New York Ottawa
1st Year $18,912 $12,000 $9,576 $11,494 $41,520 $26,481
2nd Year $41,520 $26,481
3rd Year $41,520 $26,481
4th Year $41,520 $26,481
The Company also leases a T3 line from Bell South for $11,275 per month. The
lease expires May 2002.
1st Year 2002 $135,300
Note 11 - Treasury Stock
The Company purchased 12,400 shares of its outstanding stock at $4.03 per share
resulting in the Treasury Stock transaction of $50,000.
F-13
Note 12 - Subsequent Event
The Company purchased In January 2002 the assets of YOUtopia.com Inc. in
exchange for five hundred thousand (500,000) shares of common stock. Cost
allocation to assets has not yet been established. The Company also repurchased
from iGain employees the Company's common stock as detailed in Note 1 Stock
Escrow and Note 3 Contingent Liability.
F-14
Jack F. Burke, Jr.
Certified Public Accountant
P. O. Box 15728
Hattiesburg, Mississippi 39402
Independent Accountant's Review Report
I have reviewed the accompanying balance sheets of 800America.com Inc.,
as of March 31, 2002 and December 31, 2001 and the related statements of income,
retained earnings, and cash flows for the three months ended March 31, 2002 and
March 31, 2001 in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of 800America.com Inc.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with auditing standards generally accepted in
the U.S., the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, I do not express such an
opinion.
Based on my review, I am 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.
Sincerely,
Jack F. Burke, Jr.
May 16, 2002
F-15
800America.com Inc.
Balance Sheet
March 31, 2002 and December 31, 2001
March 31, December 31,
2002 2001
Assets
Current Assets
Cash $13,809,345 $13,201,125
Accounts Receivable 0 53,752
Interest Receivable 17,305 17,151
Notes Receivable 301,570 301,570
Investment Short Term 3,100,000 0
--------------------------------
Total Current Assets 17,228,220 13,573,598
--------------------------------
Property and Equipment
Equipment 1,087,201 1,087,201
Software 3,895,650 3,695,650
--------------------------------
4,982,851 4,782,851
Accumulated Depreciation (1,942,411) (1,607,545)
--------------------------------
Total Property and Equipment 3,040,440 3,175,306
--------------------------------
Other Assets
Stock Escrow 173,445 115,015
Other Intangible Assets (Net) 4,133,493 2,633,493
Goodwill (Net) 3,417,358 2,774,266
Bond Deposit 0 500,000
Other Assets 219,633 199,917
--------------------------------
Total Other Assets 7,943,929 6,222,691
--------------------------------
Total Assets 28,212,597 22,971,595
================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 239,494 229,906
Membership Dues Payable 770,892 770,892
Deferred Income Tax 232,262 0
Taxes Payable - Income Tax 1,214,528 1,027,518
--------------------------------
Total Current Liabilities 2,457,176 2,028,316
Long Term Liabilities
Deferred Income Tax 696,788 0
--------------------------------
Total Liabilities 3,153,964 0
--------------------------------
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
Authorized, 19,981,320 Shares Issued and
Outstanding 19,981 18,725
Additional Paid in Capital 12,648,115 10,605,671
Less Treasury Stock Purchased (50,000) (50,000)
Retained Earnings 12,440,537 10,368,883
--------------------------------
Total Stockholders' Equity 25,058,633 20,943,279
--------------------------------
Total Liabilities and Stockholders' Equity $28,212,597 $22,971,595
================================
See Accompanying Notes to Financial Statements
F-16
800America.com Inc.
Income Statement
Three Months and March 31, 2002 and 2001
Three Months Three Months
Ended Ended
March 31, 2002 March 31, 2001
Revenues $7,768,164 $4,300,777
--------------- -----------------
Cost and Expense
Advertising 2,300,000 427,360
Bad Debt 53,752 0
Depreciation and Amortization 620,824 136,955
Payroll 581,385 186,914
General and Administration 1,007,646 682,862
--------------- -----------------
Total Cost and Expense 4,563,607 1,434,091
--------------- -----------------
Net Operating Income 3,204,557 2,866,686
Other Income
Interest Income 81,625 18,808
--------------- -----------------
Net Income Before Income Tax 3,286,182 2,885,494
Income Tax Expense 1,214,578 1,030,094
--------------- -----------------
Net Income 2,071,604 1,855,400
--------------- -----------------
Basic Earnings Per Share Common Stock $0.10 $0.12
19,981,320 Weighted Shares 2002
15,429,943 Weighted Shares 2001
Diluted Earnings Per Share $0.09 $0.11
22,981,320 Shares 2002
18,429,943 Shares 2001
See Accompanying Notes to Financial Statements
F-17
800America.com Inc.
Statement of Cash Flows
Three Months Ended March 31, 2002 and 2001
2002 2001
Cash Flows From Operating Activities
Net Income $2,071,654 $1,855,400
Adjustments to Reconcile Net Income
to Cash Provided in Operations
Depreciation and Amortization 620,824 136,955
Consulting Fees Paid in Common Stock 218,400 0
Accounts Receivable 53,752 (1,135,460)
Notes Receivable (154) 0
Investment - Short Term (3,100,000) 0
Bond - China Received 500,000 0
Other Assets - Increase (78,146) 75,000
Accounts Payable - Increase 9,880 157,991
Taxes Payable Income - Increase 187,010 594,196
Other Current Liabilities - Increase 0 15,942
----------------- ----------------
Total Cash Flows From Operating Activities 483,220 1,700,024
----------------- ----------------
Cash Flows From Investing Activities
Purchase of Equipment 0 (98,626)
Advances to Operating Activities 0 (490,009)
----------------- ----------------
Cash (Used) in Investing 0 (588,635)
----------------- ----------------
Cash Flows From Financing Activities
Additional Paid in Capital 124,875 0
Sale of Common Stock 125 0
----------------- ----------------
Cash Flows Provided From Financing Activities 125,000 0
----------------- ----------------
Net Increase in Cash 608,220 1,111,389
Beginning Cash Balance 13,201,125 2,117,746
----------------- ----------------
Ending Cash Balance $13,809,345 $3,229,135
----------------- ----------------
See Accompanying Notes to Financial Statements
F-18
800America.com Inc.
Selected Notes to Reviewed Financial Statements
March 31, 2002
Note 1 - Financial Statement Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the U.S.
for interim financial information. In the opinion of management, all
adjustments, which are necessary for a fair presentation, have been included.
The results for interim periods are not necessarily indicative of results which
may be expected for any other interim period or for the fully year. For further
information, refer to the December 31, 2001 consolidated financial statements
and notes thereto include in 800Americ.com, Inc. 10KSB.
Note 2 - Business Combinations
The Company purchased the assets of Youtopia.com in exchange for six
hundred eighty thousand shares of its previously unissued common stock. Valued
at $2.50 per share. The cost price of 1,700,00 dollars was allocated as follows:
Software $ 200,000
Subscriber List 1,500,000
----------
Total $1,700,000
----------
Note 3 - Deferred Income Tax
Deferred income tax has been established represented future income tax
expense on the difference between the tax basis and allocated cost of certain
assets obtained in business combinations.
Note 4 - Related Party Transactions
Compensation paid the Chief Executive Officer for the three months
ended March 31, 2001 was $60,000 and for the three months ended March 31, 2000
the amount was $30,000.
F-19
Note 5 - Supplemental Cash Flow Information
Three Months Ended 03/31/02 03/31/01
Interest Paid 0 0
Income Tax Paid $1,224,000 $435,898
Note 6 - Non Cash Transaction
680,000 shares common stock for Youtopia.com 1,700,000
158,334 shares common stock issued for consulting services 218,400
Note 7 - Short Term Investments
The company entered into a joint venture in South America for direct
sale of certain closeout items. The Company invested four million dollars
($4,000,000) on February 12, 2002. On March 28 the Company received its first
pay back of nine hundred thousand dollars ($900,000) leaving a remaining
investment of three million one hundred thousand dollars ($3,100,000).
During the quarter the Company also received a return of its five
hundred thousand dollars ($500,000) deposit from a bank in the Peoples Republic
of China.
F-20
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24. Indemnification of Officers and Directors.
Section 78.7802 of the General Corporation Law of Nevada, as amended
("GCL"), authorizes a Nevada corporation to indemnify its officers, directors,
employees and agents under certain circumstances against expenses and
liabilities incurred in legal proceedings involving such persons because of
their holding or having held such positions with the corporation and to purchase
and maintain insurance of such indemnification. Our By-laws substantively
provide that we will indemnify our officers, directors, employees and agents to
the fullest extent provided by Section 78.7802 of the GCL.
Section 78.751 of the GCL permits a Nevada corporation, by so providing
in its By-laws, to eliminate the personal liability of a director for monetary
damages for any action taken unless the director has breached or failed to
perform the duties of his office and the breach or failure constitutes
self-dealing, willful misconduct or recklessness. In addition, no such
limitation of liability is available with respect to the responsibility or
liability of a director pursuant to any criminal statute or for the payment of
taxes pursuant to federal, state or local law. Our By-laws eliminate the
personal liability of the directors to the fullest extent permitted by Section
78.7802 of the GCL.
Item 25. Other Expenses of Issuance and Distribution.
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
common stock.
SEC Registration Fee........................... * $ 861
Printing and Engraving Expenses................ * $ 4,000
Accounting Fees and Expenses................... * $ 1,500
Legal Fees and Expenses........................ * $ 7,000
Miscellaneous.................................. * $ 2,500
-------
Total................................ * $15,861
* estimated
Item 26. Recent Sales of Unregistered Securities
During the three years immediately preceding the date of the filing of
this registration statement, the following securities were issued by
800America.com, Inc. without registration under the Securities Act of 1933, as
amended ("Act"):
II-1
In March 2000, we issued 200,000 shares of our common stock to one
person in connection with the acquisition of all the capital stock of Rothman's
Closeouts, Inc. We issued the shares pursuant to an exemption from registration
set out in Section 4(2) of the Act.
In October 2000, we issued 1,850,000 shares of our common stock to
twelve accredited investors in connection with the acquisition of all the
outstanding capital stock of Inshope, Inc. We issued the shares pursuant to Rule
506 of Regulation D under the Act.
In January 2001, we issued 200,000 shares to thirty persons in
connection with the acquisition of all of the outstanding capital stock of
ebiz4biz, Inc. All of the persons who received shares of our common stock were
non-US citizens and resided outside of the United States.
In July 2001, we issued twenty-six units. Each unit consisted of 25,000
shares of common stock and 2,500 common stock purchase warrants. Each investor
was an "accredited purchaser" as that term is defined in Rule 506 of Regulation
D set out in the Act.
In September 2001, we issued 450,000 shares in exchange for
substantially all of the assets and assumption of certain operating liabilities
of cs-live, inc. The shares were issued pursuant to an exemption from
registration set out in Section 4(2) of the Act.
In October 2001, we issued 1,050,000 shares of common stock in exchange
for the outstanding capital stock of iGain, Inc. All of the stockholders of
iGain, Inc. who exchanged their shares (17) were "accredited investors" as that
term is defined in Rule 506 of Regulation D set out in the Act.
In December 2001, we issued 660,000 shares of our common stock in
exchange for all the outstanding capital stock of WizardWorld, Inc. All of the
stockholders of WizardWorld, Inc. who exchanged their shares (5) were
"accredited investors" as that term is defined in Rule 506 of Regulation D set
out in the Act.
Also in December 2001, we sold 340,000 shares of our common stock and
received $850,000 in gross proceeds. There were 4 investors all of whom were
"accredited investors" as that term is defined in Rule 506 of Regulation D set
out in the Act.
In December 2001, we agreed to issue 45,000 shares to a consultant for
financial and business services to be rendered. The shares will be issued
pursuant to an exemption from registration set out in Section 4(2) of the Act.
The shares were valued at $78,750.
We also agreed in December to issue 100,000 shares to a consultant for
financial and business services to be rendered. The shares will be issued
pursuant to an exemption from registration set out in Section 4(2) of the Act.
The shares were valued at $137,500.
In January 2002, we issued 500,000 shares of our common stock in
exchange for substantially all of the assets and the assumption of certain
operating liabilities of Youtopia.com, Inc. The shares were issued pursuant to
an exemption from registration set out in Section 4(2) of the Act.
Also in January, we issued 150,000 to a consultant for marketing
services to be rendered. The consultant is an "accredited investor" as that term
is defined in Rule 506 of Regulation D set out in the Act. The shares were
valued at $210,000.
II-2
In February and March of 2002, the registrant issued a total of 75,000
shares of its Common Stock for financial consulting services. The shares were
issued to an "accredited investor" as that term is used in Rule 506 of
Regulation D of the Securities Act of 1933, as amended. The shares were valued
at $105,000.
Also, in February 2002, the registrant issued 50,000 shares of its
Common Stock for financial consulting services to an "accredited investor" as
that term is used in Rule 506 of Regulation D of the Securities Act, as amended.
The shares were valued at $70,000.
In January, February, March, April and May of 2002, the registrant
issued a total of 33,335 shares of its Common Stock to a marketing consultant
who is an "accredited investor" as that term is used in Rule 506 of the
Regulation D of the Securities Act of 1933, as amended. The shares were valued
at $46,669.
Item 27. Exhibits
Exhibit Number Description
-------------- -----------
* 3.1 Amended and Restated Articles of Incorporation
and By-laws (incorporated by reference to
Registration Statement on Form SB-2
(Commission File No. 333-51683)).
5.0 & 23.0 Opinion and Consent of John L. Thomas, Esquire
*10.0 Lease dated November 3, 1999, as amended
*10.1 Form of Common Stock Purchase Warrant
*10.2 Employment Agreement dated March 20, 2000,
between the registrant and Jane Rothman
23.1 Consent of Jack F. Burke, Jr., CPA
* previously filed
Item 28. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
II-3
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change t such information in the registration statement.
Provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15 (d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Form SB-2 and has duly caused this
registration statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York on June 20, 2002.
800America.com, Inc.
By: /s/ David E. Rabi
-------------------------------------
David E. Rabi
Chairman and Chief Executive Officer
II-4
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been duly signed below by the following persons
in the capacities and dates indicated.
Signatures Title Date
---------- ----- ----
/s/ David E. Rabi Chairman of the Board, and Chief Executive June 20, 2002
---------------------- Officer (Principal and Chief Executive Officer)
David E. Rabi Director and Chief Financial Officer
(Principal Accounting Officer)
/s/ Bobby Wallay Director June 20, 2002
----------------------
Bobby Wallay
/s/ Darvin D. Pierce Director June 20, 2002
----------------------
Darvin D. Pierce
/s/ Richard K. Sullivan Director June 20, 2002
----------------------
Richard K. Sullivan
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
5.0823.0 Opinion and Consent of John L. Thomas, Esquire
23.1 Consent of Jack F. Burke, Jr., CPA