SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended:
December 31, 2001
Commission File Number
0-28547
800America.com, Inc.
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(Name of small business issuer in its charter)
Nevada 87-0567884
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
420 Lexington Avenue, New York, New York 10170
(Address of Principal Executive Offices)
(800) 999-5048
(Telephone number of Issuer)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE PER SHARE
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(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
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Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
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State issuer's revenues for the most recent fiscal year. $21,401,169.
The aggregate market value of the voting common stock held by
non-affiliates of the registrant as of March 29, 2002 was $32,606,695. Our
commons stock is traded on the OTC Electronic Bulletin Board under the symbol
"ACCO".
There were 19,976,289 shares of common stock $.001 par value per share
outstanding as of March 29, 2002.
ITEM 1. DESCRIPTION OF BUSINESS
CORPORATE HISTORY
We were incorporated in Nevada on December 5, 1996, under the name Sport
Fair Television Inc. Our plan at that time was to create and promote sports
goods shows for home shopping networks transmitted via satellite or cable
television. These plans did not come to fruition. On December 31, 1997, we
acquired from Elizabeth Peters all the issued and outstanding common stock of
Songs of the Planet Inc. in exchange for 200,000 shares of common stock. Songs
of the Planet was organized in August 1997 and changed its name to World House
Entertainment. At the time of the acquisition, it had limited operations. These
operations primarily consisted of providing copyright administrative services to
affiliates of Mrs. Peters. World House Entertainment conducted no business
operations. After the acquisition Elizabeth Peters became the company's sole
employee.
In July 1999, World House Entertainment issued 10,000,000 shares of
restricted common stock to acquire all of the issued and outstanding common
stock of 800America, Inc. a Delaware corporation based in Nashville, Tennessee.
800America, Inc. was incorporated on March 26, 1999 for the purpose of operating
an Internet shopping mall and an online magazine. 800America, Inc. was merged
into the company and the company as part of the merger, changed its name to
800America.com Inc. At the same time, the company sold its wholly owned
subsidiaries, World House Entertainment and Songs of the Planet, to its former
owner, Elizabeth Ann Peters.
OUR BUSINESS
We are a growing company that owns and operates international e-commerce
and technology websites. 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 websites,
OneTwoClick.com and RothmanCloseouts.com (commissions), InternetWebGuide.com,
and FileShooter.com (sales). All of our websites share their underlying
technologies and the management team responsible for our profits.
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THE 800AMERICA NETWORK: THE 800AMERICA NETWORK CONSISTS OF A GROUP OF
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WEBSITES THAT PROVIDE BUSINESS TO BUSINESS, E-COMMERCE SERVICES AND
TECHNOLOGY.
The 800America Network (www.800america.com), is our homepage for all of our
eleven websites 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 website, 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 THE WORLD'S LEADING WEB-BASED
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GLOBAL TRADING COMMUNITY FOR SURPLUS AND CLOSEOUT MERCHANDISE.
Rothman Closeouts, a member of the 800America Network
(www.rothmancloseouts.com), the world's leading web-based global trading
community for surplus and closeout merchandise, is a leading 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.
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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.
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.
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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, sSupport and
eSurveys, brings cs-live's customers' web sites to the next level with live and
interactive customer management solutions.
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:
* continue to maximize opportunities with our existing businesses;
* seek strategic acquisitions of synergistic companies with technologies
that support our strategy and improve shareholder value;
* acquire additional e-commerce companies and layer in our managerial
expertise to expand our existing customer base and maximize
profits; and
* build upon our current infrastructure to provide technology and services
that enhance the Internet shopping experience.
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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 new 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. Our marketing strategy, which we implement through advertising and
promotions as well as partnerships and alliances, includes the following
elements:
* promote our 800America Network and our various brands;
* develop niche marketing programs to attract buyers and sellers to our
web-based trading community; and
* develop technology companies to grow their business.
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
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to intensify in the future as peer-to-peer computing becomes increasingly
popular in both the corporate and personal markets.
EMPLOYEES
As of March 29, 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. In addition, our Beijing office where we have over 150
independent sales persons performing various sales and marketing functions. We
opened this office after acquiring Ebiz4biz.com in February 2001.
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.
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended December 31, 1999, either through the
solicitation of proxies or otherwise.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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 March 29, 2002 there
were 334 shareholders of record. The source of the quotes is Yahoo Financial.
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Common Stock Bid Price
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Calendar Year 2000 High Low
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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
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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 2002 High Low
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First Quarter $ 3.10 $ 2.05
Second Quarter through
April 10, 2002 $ 3.03 $ 2.77
As of March 29, 2002, there were 19,976,289 shares of Common Stock issued
and outstanding.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
We operate various Internet web sites for 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
Certain of our financial information has been revised. Please see Note 12
of the Selected Notes to Financial Statements for a summary of the revisions.
RESULTS OF OPERATIONS
We had revenues of $15,980,529 which were reduced by rebates of $8,913,351
for the year ended December 31, 2000 compared to revenues of $3,283,575 which
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were reduced by rebates of $2,135,668 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 2000, 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. We do not
believe that the sales of these parts of our business adversely affected our
overall financial performance in 2001. The Company realized revenue of
$14,640,954 in B2C, $1,296,575 in B2B and $43,000 in Technology. Costs and
expenses for the year ended December 31, 2000 were $3,953,278, resulting in
operating income for the year of $3,113,900. This compares with costs and
expenses of $872,737 that resulted in operating income of $275,170 for the year
ended December 31, 1999. 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 $2,178,041 in the year ended
December 31, 2000 compared to net cash provided by operations of $119,339 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.
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000.
RESULTS OF OPERATIONS
We had revenues of $20,641,007 for the year ended December 31, 2001
compared to revenues of $7,067,178 for the year ended December 31, 2000. Net
income for the year ended December 31, 2001 was $8,305,462 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
operations and twenty percent from new acquisitions acquired during 2001. Total
operating expenses for the year ended December 31, 2001 were $8,741,397
resulting in operating income for the year of $11,899,610. This compares to
total operating expenses of $3,953,278 for the year ended December 31, 2000,
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resulting in operating income of $3,113,900. We instituted a policy of not
paying rebates as of January 1, 2001. For the year ended December 31, 2000 we
paid a total of $8,913,351 in rebates. 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 51%
of total operating expenses compared to $1,878,318 in such costs in 2000
representing approximately 47% 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
$890,106 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 $1,681,131 on our new acquisitions, most of
which was devoted to our inShop operation. Depreciation and amortization costs
were $1,299,475 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 will continue to
increase in 2002, and there will also be increases in technology and business to
business revenue.
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.
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 $2,625,517 resulting in working capital at December 31, 2001
(current assets less current liabilities) of $10,948,081.
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 leases. 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
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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. For financial statement purposes it has been valued at
$782,000, the same carrying amount as in the hands of the transferor. 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 $11,678,998 for the year
ended December 31, 2001 compared with net cash of $2,178,041 for the year ended
December 31, 2000. The increase in net operating cash was primarily attributable
to an increase in revenues, and a decrease in rebates as a result of ending the
rebate program. During the period ended December 31, 2001, the Company sold
assets for $500,000, received back a bond deposit of $500,000 and purchase
equipment for $1,681,131. During the year ended December 31, 2000, we obtained
$1,679,773 through the sale of equity securities in private placements,
repurchased our Common Stock for $50,000 and repaid debts assumed in merger
transactions of $918,785.
At December 31, 2001, accounts receivables were $53,752 compared to
$995,634 at December 31, 2000. The difference is in the manner we now collect
accounts receivables. In the prior year, accounts receivables were tracked and
collected by an unrelated third party and remitted to us monthly. During 2001,
the accounts receivables were tracked and collected directly by us with
remittance to us either directly by credit card or primarily weekly or biweekly
by stores on the website.
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 at an earlier date 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
340,000 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.
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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.
EVENTS SUBSEQUENT TO DECEMBER 31, 2001
In January, 2002, we acquired the assets and assumed certain operating
liabilities of Youtopia.com, Inc. The purchase price was 650,000 shares of our
common stock. We also paid approximately $110,000 to remove a lien on the
assets. We have agreed to register some of the stock issued in the transaction
for resale. This money is to be repaid out of the proceeds of such a sale. In
connection with the transaction we hired Youtopia's Chief Executive Officer as a
consultant for six months. The compensation paid to the consultant was 150,000
shares of our common stock which was part of the 650,000 shares paid as the
purchase price.
FORWARD LOOKING STATEMENTS
This report on Form 10-KSB/A contains certain forward-looking statements
that are based on what we believe are reasonable beliefs and assumptions of
management. Often, these statements can be recognized because of the use of
words such as believe, anticipate, intend, estimate and expect in the
statements. Such forward-looking statements obviously involve known and unknown
risks, uncertainties, and other factors that may cause the actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
ITEM 7. FINANCIAL STATEMENTS
Our financial statements begin on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
N/A
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
NAME AGE POSITION
David E. Rabi 62 Chief Executive Officer, Treasurer and Director
Jacques Pate, Jr. 47 President
Bobby Walley 62 Secretary and Director
12
Richard 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. Mr. Pate holds a B.S. from
Auburn University School of Architecture.
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
13
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.
RICHARD 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.
COMPLIANCE WITH SECTION 16(A)
Mr. Jacque Pate was appointed President on January 17, 2002. Mr. Pate
inadvertently filed his Form 3 late. Mr. David E. Rabi filed a Form 3 and Form 5
late.
ITEM 10. 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.
SUMMARY COMPENSATION TABLE
Securities
Name and Underlying
Principal Position Year Salary Bonus Options
------------------ ---- ------ ----- ----------
2001 $200,000 -- -0-
David E. Rabi 2000 $120,000 -- 1,000,000
President 1999 120,000 -- 250,000
14
Bobby Walley 2001 -0- -- -0-
President for
approximately 3 weeks
The following table sets forth information concerning grants of stock
options to purchase shares of our Common Stock during the year ended December
31, 2001 to our Chief Executive Officer.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation for
Option Term ($)
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
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of March 29, 2002:
* each person known by us to own beneficially more than 5% of our Common
Stock;
15
* each of our directors;
* each of our five most highly compensated officers who earned more than
$ 100,000 in our last fiscal year; and
* all directors and executive officers as a group.
The percentage of beneficial ownership for the table is based on 19,976,289
shares of Common Stock outstanding on March 29, 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) 49.0%
Jacques Pate 80,000(3) *
Lazard Fr res & Co.
30 Rockerfeller Plaza
61st Floor
New York, NY 10020 1,933,550 9.1%
Bobby Walley 65,000(4) *
Richard Sullivan - 0 -
------------- -----------
All Executive Officers and Directors
as a group (4 persons) 10,453,000(5) 49.6%
*Less than one percent.
(1) Based on a total of 19,976,289 shares of Common Stock outstanding as of
March 29, 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.
16
(2) Includes 9,308,000 shares of Common Stock held by American Deductible,
Inc., as trustee of a trust established for the benefit of the children of Mr.
Rabi. Mr. Rabi does not act as trustee of the trust but has a power of attorney
to act on behalf of said trust and may be deemed to have direct voting control
of the Common Stock held in the trust. 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 40,000 shares of Common Stock.
(5) Includes options to purchase 1,155,000 shares of Common Stock.
ITEM 12. 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 a trust established for the benefit of the children of Mr.
Rabi, our Chief Executive Officer and a director of 800America and the former
President and controlling shareholder of 800America, Inc. Mr. Rabi does not act
as trustee of the trust but holds a power of attorney on behalf of the trust and
may be deemed to hold direct voting control of such shares.
In February 2000, we issued to David E. Rabi a total of 1,000,000 stock
options under our Stock Option Plan.
In August 2001, we purchased all of the capital stock of IPS Payment Systems,
Inc., formerly UPS Payment Systems, Inc., from our Chief Executive Officer, Mr.
David E. Rabi. The purchase price was $1.00.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.01 Articles of Incorporation (1)
3.02 Bylaws (2)
10.0 Lease dated November 3, 1999, as amended (3)
23.1 Consent of Jack Burke, Jr. , CPA
99.1 CEO and CFO Certifications required by Section 906 of Sarbanes - Oxley
Act 2002
17
(1) Incorporated by reference to Exhibit 3.01 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on July 17, 1998 (file no. 333-51683).
(2) Incorporated by reference to Exhibit 10.0 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on January 11, 2002 (file no. 333-76792).
(3) Incorporated by reference to Exhibit 3.02 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on July 17, 1998 (file no. 333-51683).
(b) The following reports on Form 8-K are hereby incorporated by
reference:
1. On December 5, 2001, a report on Form 8-K was filed in connection
with the Registrant's acquisitions of all of the capital stock
of WizardWorld, Inc.
2. On October 29, 2001, a report on Form 8-K was filed in connection
with the Registrant's acquisitions of all the capital stock of
iGain, Inc.
18
FINANCIAL STATEMENTS
800AMERICA.COM, INC.
New York, New York
December 31, 2001
CONTENTS
Page
----
Accountants' Audit Report F-1
Balance Sheets F-2
Statements of Income and Retained Earnings F-3
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-18
19
Jack F. Burke, Jr.
Certified Public Accountant
P. 0. 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 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 my 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.
As discussed in Note 12 to the financial statements, certain changes have been
made to amounts reported in previously issued financial statements. These
changes are the result of errors arising from the misapplication of accounting
principles related to the amount, classification, presentation or disclosure of
purchase transactions previously reported.
Jack F. Burke, Jr.
Hattiesburg, Mississippi
March 22, 2002, except for the changes shown
in Note 12, which is October 25, 2002
F-1
800AMERICA.COM, INC.
BALANCE SHEETS
December 31,
2001 2000
------------ ----------
ASSETS
CURRENTS ASSETS
Cash $13,201,125 $2,117,746
Accounts receivable 53,752 995,634
Allowance for doubtful accounts (139,000)
Prepaid advertising 75,000
Deferred tax asset 47,260
Interest receivable 17,151
Notes receivable 301,570
------------ ----------
Total current assets 13,573,598 3,096,640
------------ ----------
PROPERTY AND EQUIPMENT
Equipment 1,087,201 764,569
Software 4,477,650 887,150
------------ ----------
Totals 5,564,851 1,651,719
LESS accumulated depreciation 1,585,794 567,832
------------ ----------
Total property and equipment 3,979,057 1,083,887
------------ ----------
OTHER ASSETS
Other intangible assets (net) 2,912,165
Goodwill (net) 4,350,976 193,333
Bond deposit 500,000
Other assets 27,533 47,750
------------ ----------
Total other assets 7,790,674 241,083
------------ ----------
Totals $25,343,329 $4,421,610
============ ==========
LIABILITIES & STOCKHOLDERSEQUITY
CURRENT LIABILITIES
Accounts payable $ 230,077 $ 24,947
Membership dues payable 770,892
Taxes payable income tax 975,272 386,872
Deferred income 649,276
------------ ----------
Total current liabilities 2,625,517 411,819
------------ ----------
OTHER LIABILITIES
Deferred income tax 1,282,135
------------ ----------
PREFERRED STOCK, REDEMPTION OUTSIDE CONTROL OF COMPANY
Common stock, $0.001 par value, 2,000,000 shares subject to
put options, put price of $2.25 to $2.60 per share 5,182,140
LESS stock escrow 115,015
------------ ----------
Total preferred stock, redemption outside control of Company 5,067,125
------------ ----------
STOCKHOLDERSEQUITY
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 and 13,412,000 shares issued and
outstanding, 2001 and 2000 respectively, 2,000,000 shares
common shown as preferred stock for 2001. 16,725 13,412
Additional paid-in capital 6,457,791 1,943,134
Treasury Stock purchased (50,000)
Retained earnings 9,944,036 2,053,245
------------ ----------
Total stockholders' equity 16,368,552 4,009,791
------------ ----------
Totals $25,343,329 $4,421,610
============ ==========
See Accompanying Notes to Financial Statements.
F-2
800 AMERICA.COM. INC.
STATEMENTS OF INCOME
For the Year Ended December 31,
2001 2000 1999
----------- ----------- ----------
SALES $ 2,545,786 $ $
Cost of sales:
Amortization 120,833
----------- ----------- ----------
Sales margin 2,424,953
----------- ----------- ----------
Commissions 17,471,580 15,980,529 3,283,575
Rebates 8,913,351 2,135,668
----------- ----------- ----------
Net commissions 17,471,580 7,067,178 1,147,907
----------- ----------- ----------
Subscription fees and membership dues 744,474
----------- ----------- ----------
Total revenue 20,641,007 7,067,178 1,147,907
----------- ----------- ----------
COST AND EXPENSES
Payroll cost 890,106 299,254 86,961
Advertising and promotion 4,443,249 1,878,318 397,738
Depreciation amortization 1,178,642 486,480 88,019
Bad debts 270,795 66,000
General and administration 2,229,400 1,018,431 234,019
----------- ----------- ----------
Total cost and expenses 8,741,397 3,953,278 872,737
----------- ----------- ----------
Income from operations 11,899,610 3,113,900 275,170
----------- ----------- ----------
OTHER INCOME
Interest 184,423 26,243 5,810
Sale of assets 500,000
----------- ----------- ----------
Total other income 684,423 26,243 5,810
----------- ----------- ----------
Income before provision for income taxes 12,584,033 3,140,143 280,980
Provision for income taxes 4,278,571 1,067,649 95,533
----------- ----------- ----------
Net income $ 8,305,462 $ 2,072,494 $ 185,447
=========== =========== ==========
Net earnings per share, common basic stock $ 0.53 $ 0.16 $ 0.03
Weighted average common stock outstanding 15,690,137 12,721,359 6,243,132
Diluted earnings per share 0.47 0.14 0.03
Diluted average common stock outstanding 17,820,138 14,371,359 6,432,989
See Accompanying Notes to Financial Statements.
F-3
800 AMERICA.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Stock Paid In Retained Treasury Stockholders'
Shares Amount Capital Earnings Stock Equity
----------- ----------- ------------ ----------- ------------ -----------
Balances 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
----------- ----------- ------------ ----------- ------------ -----------
Balances 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
Stock issued pursuant to the
acquisition of Rothman
Closeout.com, June 6, 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
----------- ----------- ------------ ----------- ------------ -----------
Balances December 31, 2000 13,412,000 13,412 1,943,134 2,053,245 4,009,791
Stock issued pursuant to the
acquisition of inshop.com,
February 2, 2001 1,817,493 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 2,272,419 2,273,469
Stock issued pursuant to the
acquisition of cs-live.com,
September 24, 2001 450,000 450 899,550 900,000
Transfer of Universal Payment
System, Inc. August 2001 516,120 516,120
Stock issued pursuant to the
acquisition of Wizard World.com,
December 31, 2001 660,000 660 1,748,340 1,749,000
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)
Above stock subject to put options (2,000,000) (2,000) (4,765,469) (414,671) (5,182,140)
Net income 8,305,462 8,305,462
----------- ----------- ------------ ----------- ------------ -----------
Balance December 31,2001 16,724,493 $ 16,725 $ 6,457,791 $9,944,036 (50,000) $16,368,552
=========== =========== ============ =========== ============ ===========
See Accompanying Notes to Financial Statements.
F-4
800AMERICA.COM, INC.
STATEMENTS OF CASH FLOWS
December 31,
2001 2000 1999
------------ ------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,305,462 $ 2,072,494 $ 185,447
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,299,475 486,480 88,019
Bad debts (139,000) 73,000 66,000
Non-cash compensation and expenses 216,250 12,000
Sale of assets (500,000)
Changes in operating assets and liabilities:
Prepaid assets - (increase) decrease 75,000 46,600 (121,600)
Interest receivable (17,151)
Accounts receivable - (increase) decrease 941,882 (466,832) (528,802)
Accounts payable - (increase) decrease 205,130 15,951 (18,249)
Rebates payable (330,551) 330,551
Deferred revenue 781,864
Deferred income taxes (78,314)
Taxes payable - increase 588,400 268,899 117,973
------------ ------------ ----------
Net cash provided by operating activities 11,678,998 2,178,041 119,339
------------ ------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 500,000
Stock escrow - decrease (115,015)
Bond - China received (500,000)
Purchase of equipment and software (1,681,131) (1,254,274) (380,146)
Deposit on equipment (94,000)
Refund of deposit 94,000
Notes receivable (301,570)
Other assets (increase) decrease 20,217 (72,569) (22,440)
------------ ------------ ----------
Net cash used in investing activities (2,077,499) (1,232,843) (496,586)
------------ ------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debts assumed in merger transaction (918,785)
Repayment of notes payable (157,500)
Other liabilities (31,059)
Member dues payable assumed in merger transaction 770,892
Acquisition of treasury stock (50,000)
Sale of common stock 1,679,773 779,984 957,793
------------ ------------ ----------
Net cash provided by financing activities 1,481,880 779,984 769,234
------------ ------------ ----------
Net increase in 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
============ ============ ==========
See Accompanying Notes to Financial Statements.
F-5
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 websites used in international e-commerce, technology, business to
business and business to consumer formats. The Company has acquired several
development stage Internet based companies (see Note 2, Acquisitions) and has
merged their operations into the Company's operations. The various revenue
sources of 800America.com, Inc. from these acquisitions are not maintained as
operating segments and therefore do not constitute components for segment
accounting as required by SFAS 131 Disclosures about Segments of an Enterprise
and Related Information. Revenue sources are identified but discrete financial
information relative to expenses is not maintained. The operating results are
not viewed by management as components, but viewed by management based upon the
entity as a whole.
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 - In the prior year, account receivables were tracked and
collected by an unrelated third party and remitted to the Company monthly.
During the current year the accounts receivable were tracked and collected by
the Company with remittance to the Company either directly by credit card or
primarily weekly or biweekly by the stores on the website.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - Management reviews the accounts for bad debts
and determines the estimated allowance for doubtful accounts on at least a
quarterly basis. As of December 31, 2001, management considered all remaining
accounts 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. Purchased subscriber lists are being amortized over seven
years.
CAPITALIZED SOFTWARE COSTS - The Company has acquired and capitalized various
types of software that it uses in its operations. The majority of this software
is considered to be for internal use as defined in SOP 98-1. Some of this
software cost represents the cost of acquiring websites and the associated
website operating software. In addition, the Company also has other software
that it has purchased and sells through one or more of its websites. The
capitalized cost of software is being amortized over its estimated economic
life. At a minimum, all software is evaluated at least annually to determine
whether the asset value of the capitalized software has been impaired.
Management is of the opinion that due to the three year amortization period
utilized to write off capitalized software cost, that the remaining net asset
value approximates net realizable value and no additional write down is
required.
WEBSITE DEVELOPMENT ACTIVITY - The Company has a number of websites whereby they
sell services or products. These sites were developed by other entities and
purchased by the Company; therefore, these sites have been through the website
application and infrastructure development stage and at the present time are in
the operating stage.
F-6
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
PURCHASED SUBSCRIBER LISTS - The Company has acquired subscriber or user lists
during the course of its acquisitions. These costs are accounted for separately
from "Goodwill" as required by SFAS 141, paragraph 39.
NON-GOODWILL INTANGIBLES - Intangible assets other than goodwill consist of
subscriber list acquired in purchase transactions. They are being amortized
over their expected lives of 7 years and are reviewed for potential impairment
whenever events or circumstances indicate that carrying amounts may not be
recoverable. No impairment loss was recognized during the reporting period. On
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 142, Goodwill and Intangible Assets. This provides that a recognized
intangible asset shall be amortized over its useful life to the reporting entity
unless that life is determined to be indefinite. The amount of an intangible
asset to be amortized shall be the amount initially assigned to that asset less
any residual value.
GOODWILL - Goodwill arising from purchase transactions before June 30, 2001, is
being amortized over 15 years. Goodwill acquired after June 30, 2001 is not
being amortized. Goodwill is reviewed for possible impairment at least annually
or more frequently upon the occurrence of an event or when circumstances
indicate that the carrying amount is greater than its fair value. No impairment
loss was recognized during the reporting period. On January 1, 2002, the
Company adopted Statement of 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 that the
Company have a bond of five hundred thousand ($500,000) US dollars on deposit
with a bank in China. Subsequent to year end, this bond was refunded to the
Company.
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 relate to the acquisition of certain of the
property and assets of cs-live.com, Inc. (now Intelligent Web Technologies,
Inc.). As part of the transaction, the Company has provided loans to
Intelligent Web Technologies, Inc. which bear interest at a rate of 4% annually.
There have been no principal or interest payments on these loans. Eighty
(80,000) thousand shares of the Company's stock, which is held in escrow, secure
this loan. The escrow agreement provides that upon registration of the
Company's stock, the shares held in escrow are to be sold and the loan repaid.
In addition to the above 80,000 shares, a share pledge agreement has been
entered into that addresses another 370,000 shares that are held in escrow to
secure payments required by debentures issued by cs-live.com, Inc. and amounts
due for legal services provided to cs-live.com, Inc. These shares are referred
to as the "Top Up Shares".
F-7
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
The share pledge agreement provides that in the event the net proceeds from the
sale of the 80,000 shares are not sufficient to repay the loan, then the Company
shall be entitled to require cs-live.com, Inc. to register and sell such number
of the "Top Up Shares" as needed to satisfy the outstanding portion of the loan
balance, provided that the selling price per "Top Up Share" shall not be less
than $2.30.
REVENUE RECOGNITION - Revenues are generated for the Company in four ways
depending upon the website.
COMMISSIONS OR FEES - Commissions or fees for utilizing some of the services
provided by the Company's websites are realized through credit card transactions
at the time a transaction is initiated on a website. For transactions occurring
on the shopping portal, the stores residing on that portal send a commission
check to the Company on a weekly, biweekly or monthly basis depending upon the
contractual agreement between the Company and the respective store. On a
monthly basis, this income is summarized and recognized as revenue in the
financial statements.
SOFTWARE SALES - Sales of software are done by credit card transaction and
realized at the time a transaction is initiated on the website. This income is
also summarized monthly and recognized as revenue in the financial statements.
SUBSCRIPTION FEE - Subscription fees for the on-line magazine are also collected
by credit card transactions. While the receipt of cash is recognized monthly
and is non-refundable, the collection of an up-front fee does not constitute an
earnings event. Therefore the subscription fees are recognized as revenue
ratably over the period the services are provided and the fees are earned.
MEMBERSHIP DUES - Membership dues are for a term of one year and are considered
an up-front fee and are not revenue until earned. As part of an acquisition, the
Company assumed the liability for dues that are refundable upon demand until the
expiration of the membership term. Those dues will be recognized as revenues at
the end of the membership term. Any dues collected subsequent to that
acquisition are non-cancelable and are recognized as revenue ratably over the
membership term.
BARTERING TRANSACTIONS - The Company does not engage in any bartering
transactions.
ADVERTISING EXPENSE - PREPAID ADVERTISING - Advertising cost is expensed in the
period in which the costs are incurred.
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.
F-8
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
REBATES - In prior years, the various stores that resided on the internet
shopping portal offered customers a rebate of from three to ten percent based on
each store's policy. Upon proof of purchase from the customer, the Company
would pay a rebate to the customer in accordance with the store's policy. In
turn, the selling store would pay a commission to the Company in the range of
five to twenty percent depending on the store.
At the end of the calendar year 2000, the Company ceased the practice of issuing
rebates.
PRIVATE OFFERING - STOCK SALE - The Company sold previously unissued stock in
two private offerings for approximately $7,179,773 net of offering cost. In
order to accommodate one investor who desired to retract their investment in
both private offerings, the Company repurchased $5,500,000 of the stock
previously sold. The remaining shares are not subject to mandatory redemption.
INCOME TAXES - Deferred tax assets and liabilities are determined based on
temporary differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in rates is recognized
as income or expense in the period that includes the enactment date.
STOCK BASED COMPENSATION - The accompanying financial statements of the Company
have been prepared in accordance with APB Opinion No. 25, Accounting for Stock
Issued to Employees: ("APB No. 25"). Under APB 25, generally, no compensation
expense is recognized in the financial statements in connection with the
awarding of stock option grants to employees provided that, as of the grant
date, all terms associated with the award are fixed and the fair value of the
Company's stock is equal to or less than the amount an employee must pay to
acquire the stock. The Company will recognize compensation expense in
situations where the terms of an option grant are not fixed or where the fair
value of the Company's common stock on the grant date is greater than the amount
an employee must pay to acquire the stock.
Disclosures require by Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("SFAS No. 123"), including pro forma
operating results had the Company prepared its financial statements in
accordance with the fair-value-based method of accounting for stock-based
compensation, have been included in Note 6.
STOCK OPTIONS GRANTED TO NON-EMPLOYEES - The fair value of options granted to
non-employees for services rendered is recognized as an expense in accordance
with EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services.
F-9
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130,
Reporting Comprehensive Income ("SFAS 130"). This statement requires companies
to classify items of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. SFAS 130 is effective for financial statement issues for
fiscal years beginning after December 15, 1997. The Company adopted SFAS 130 in
fiscal year 1999. There was no difference between net income and comprehensive
income for the three years ended December 31, 2001.
Certain reclassifications have been made to prior year financial statements to
conform to current year presentation. The change had no effect on net income.
F-10
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2 - ACQUISITIONS - PURCHASE TRANSACTIONS
The Company acquired the following companies or businesses during 2001:
ebiz4biz.com, Wizard
Fileshooter inshop.com Inc. iGain, Inc. cs-live World, Inc. Total
----------- ---------- ---- ----------- ------- ----------- -----
Operations included from 6/30/2001 2/2/2001 5/30/01 10/9/2001 9/24/2001 12/3/2001
Fair value of assets acquired:
Cash $ $ $ $770,892 $ $ $ 770,892
Other assets 236,235 236,235
Equipment 10,000 214,000 224,000
Software / web development 500,000 1,072,500 786,000 450,000 2,808,500
Other intangibles 1,836,278 1,250,000 3,086,278
Goodwill 1,393,843 133,333 1,515,698 450,000 772,169 4,265,043
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 500,000 3,230,121 1,215,833 3,286,590 900,000 2,258,404 11,390,948
---------- ---------- ---------- ---------- ---------- ---------- ----------
Liabilities assumed:
Deferred revenue 770,892 770,892
Payables 918,785 236,235 1,155,020
Deferred tax 493,843 242 273,169 1,009,241
--------- ---------- --------- ---------- ---------- ---------- ---------
Total liabilities 1,412,628 1,013,121 509,404 2,935,153
--------- ---------- --------- ---------- ---------- ---------- ---------
Net investment 500,000 1,817,493 1,215,833 2,273,469 900,000 1,749,000 8;455;795
--------- ---------- ---------- ---------- ---------- ---------- ----------
Cash 500,000 1,082,500 50,000 1,632,500
Stock issued 1,817,493 133,333 2,273,469 850,000 1,749,000 6,823,295
---------- ---------- ---------- ---------- ---------- ---------- ----------
Totals $ 500,000 $1,817,493$1,215,833 $2,273,469 $ 900,000 $1,749,000 $8,455,795
========== ========== ========== ========== ========== ========== ==========
Number of shares issued 0 1,817,493 200,000 1,050,000 450,000 660,000 4,177,493
========== ========== ========== ========== ========== ========== ==========
Goodwill arising from purchase transactions before June 30, 2001, is being
amortized over 15 years. Goodwill acquired after June 30, 2001 is not being
amortized. Goodwill is reviewed for possible impairment at least annually or
more frequently upon the occurrence of an event or when circumstances indicate
that the carrying amount is greater than its fair value.
F-11
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
The following table represents unaudited combined pro forma information as if
all acquisitions were combined as of the beginning of the periods presented.
The pro forma data is presented for illustrative purposes only and is not
necessarily indicative of the combined results of operations of future periods
or the results that would have occurred had all companies or businesses been
combined during the specified periods. The following information was taken from
various Form 8-Ks. Inasmuch as the FileShooter and EBIZ4BIZ acquisitions were
only asset acquisitions and no Form 8-Ks were filed, no operating activity is
shown in the following pro forma information.
800America Wizard
.com, Inc. inshop.com iGain, Inc. cs-live.com World, Inc. Total
------------- ------------- ------------- ------------- ------------- -------------
December 31, 2000
Revenues $ 7,067,178 $ $ 170,319 $ 21,698 $ 66,542 $ 7,325,737
============ ============= ============= ============= ============= =============
Net income $ 2,072,494 $ ($40,363) ($1,712,185) ($3,197,075) ($2,877,129)
============ ============= ============= ============= ============= =============
Net income per share common stock (0.23)
Net income per fully diluted shares (0.20)
December 31, 1999
Revenues $ 1,147,907 $ $ $ $ $ 1,147,907
============ ============= ============= ============= ============= =============
Net income $ 185,447 ($3,071,935) $ $ $ ($2,886,488)
============ ============= ============= ============= ============= =============
Net income per share common stock (0.46)
=============
Net income per fully diluted shares (0.45)
=============
The acquisition of inshop.com called for the transfer of all of its outstanding
capital stock to the Company in exchange for 1,817,493 shares of the Company's
common stock. At the time of closing, one shareholder, who was to receive
83,355 shares of the Company's stock refused to tender his shares, as he felt he
was not being adequately compensated for his shares. His shares represented
less than 5% of the shares involved in the transaction. After adding the shares
called for in the acquisition, the Company had 15,229,493 shares outstanding.
The aforementioned shareholder's 83,355 shares represented less than one-half of
one percent (.5%) of the Company's outstanding shares.
The Company was of the opinion that an agreement would be reached with the
shareholder with minimal effect on the number of shares of the Company. Because
the shareholder's interest in the issued shares of the Company was not material,
the Company merged inshop.com's assets into the assets of the Company.
Also during 2001 the Company was the recipient of assets from an entity,
Universal Payment Systems Inc., that was controlled by the Company's Chief
Executive Officer. These assets consisted of software to be used internally by
the Company. This software was in the operational stage. For financial
statement purposes it has been valued at seven hundred eighty-two thousand
dollars ($782,000), the same carrying amount as in the hands of the transferor.
On June 6, 2000, the Company purchased the assets of 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.
F-12
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3 - PREFERRED STOCK, REDEMPTION OUTSIDE CONTROL OF COMPANY
As part of the agreements whereby the Company acquired iGain, Inc. and Wizard
World, Inc., and sold stock to certain shareholders of Wizard World Inc., the
Company issued 2,000,000 shares of its common stock with put options to
shareholders of these companies. These put options provide that the Company
will, at the discretion of the shareholders, repurchase such shares at the put
prices provided for in the agreements. In addition, the Company has placed
$115,015 in escrow which will be used to fund part of the cost of repurchasing
shares. Inasmuch as the redemption of these shares is outside the control of
the Company, these securities are shown as temporary equity.
Preferred stock, redemption Redemption
outside control of Company Shares Value
-------------------------------------- ------ -------------
Shares redeemable - 1st quarter 2002 51,028 $ 114,813
Shares redeemable - 4th quarter 2002 1,948,972 5,067,327
--------- -----------
Totals 2,000,000 $ 5,182,140
========= ===========
As part of the acquisition of iGain, Inc. and Wizard World, Inc., the Company
issued 1,660,000 shares with the above-described put options. The value of
these options has been estimated using a Black-Scholes option-pricing mode.
These estimated values have been added to the cost of the above acquisitions.
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.
NOTE 5 - RELATED PARTY TRANSACTIONS
Compensation paid to the chief executive officer, who is a 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.
F-13
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
December 31,
For years ended 2001 2000 1999
------------- ---------- ----------
Interest Paid $ 0 $ 0 $ 0
Income Tax Paid $ 3,572,439 $ 856,305 $ 0
NOTE 7 - NON CASH TRANSACTION
December 31,
2001 2000 1999
------------- ---------- ----------
200,000 shares common stock was issued
for the purchase of Rothman Closeouts $ 0 $ 200,000 $ 0
Shares issued for services $ 216,250 $ 12,000 $ 6,000
4,177,493 shares of common issued in
acquisitions $ 6,823,295 $ 0 $ 0
Assets transferred to Company from
Universal Payment Systems Inc. $ 782,000 $ 0 $ 0
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 (SFAS
123), 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.
Pro forma information regarding net income and earnings per share is required by
SFAS 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
SFAS 123. The fair value of the Company's stock-based awards to employees was
estimated using a Black-Scholes option-pricing mode. The
F-14
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
Black-Scholes 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:
December 31,
2001 2000 1999
---------- ---------- ----------
Risk Free 4.5 5.45 6.32
Rate Volatility 55.0 55.00 65.00
Expected Life 3 years 4 years 5 years
The following table summarizes information about options outstanding at December
31,2001:
Range of Number Average Average
exercise outstanding at Weighted average exercise Exercisable exercise
Price December 31, 2002 remaining life price Options 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
Income taxes payable and deferred taxes (or deferred charges) as of December 31,
2001 and 2000, were as follows:
December 31,
2001 2000
---------- ----------
Deferred tax assets:
Allowance for bad debts $ ($47,260)
---------- ----------
Deferred tax liabilities:
Book/tax basis difference in purchase acquisition:
Software 427,921
Equipment 155,662
Other intangibles 698,552
---------- ----------
Total deferred tax liabilities 1,282,135
---------- ----------
Net deferred tax 1,282,135 (47,260)
Current tax payable 975,272 386,872
---------- ----------
Totals $2,257,407 $ 339,612
========== ==========
F-15
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
Years Ended December 31,
2001 2000 1999
---------- ----------- ----------
Income taxes consist of the following
components:
Current $4,212,082 $1,092,469 $ 117,973
Deferred tax (benefit) 66,489 (24,280) (22,440)
---------- ----------- ----------
Provision for income tax $4,278,571 $1,067,649 $ 95,533
========== =========== ==========
Deferred income taxes (benefits) resulted from the following:
2001 2000 1999
---------- ----------- ----------
Provision for bad debts $ 47,260 ($24,820) ($22,440)
Depreciation and amortization 19,229
---------- ----------- ----------
Totals $ 66,489 ($24,820) ($24,440)
========== =========== ==========
Income taxes amounted to less than the amounts computed by applying the U.S.
federal income tax rate of 34% for 2001, 2000 and 1999 to earnings before income
taxes. The reason for these differences is shown below:
Year Ended December 31,
2001 % 2000 % 1999 %
------------ ------ ---------- ------ ------- ------
Taxes computed at statutory rate $ 4,346,616 34.00% $1,067,649 34.00% $95,533 34.00%
Increase (decrease) resulting from:
Nondeductible amortization (38,784.00) -0.29%
Other nondeductible expenses (29,261.00) -0.22%
------------ ------ ---------- ------ ------- ------
Provision for income taxes $ 4,278,571 33.49% 1,067,649 34.00% 95,333 34.00%
============ ====== ========== ====== ======= ======
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 in December 2002. The
Company also leases office space in New York City, 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.
Fairefield, 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
F-16
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
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.
NOTE 12 - SUMMARY OF CORRECTIONS
The Company's financial statements have been restated to reflect the correction
of errors in recording the costs and liabilities associated with acquisitions
and mergers, to record deferred income relative to subscription fees, to record
the redeemable preferred shares, to recognize the income tax effects of the
corrections, and to record any resultant effect on the income statement. The
effect on this restatement is as follows:
NOTE 12 - SUMMARY OF CORRECTIONS
December 31, 2001
As previouisly As
reported restated
----------- ----------
Balance sheet
Assets
Software $ 3,695,650 $4,477,650
Accumulated depreciation 1,607,545 1,585,794
Other intangible assets (net) 2,633,493 2,912,165
Goodwill (net) 2,774,266 4,350,976
Other assets 199,917 27,533
Liabilities
Taxes payable - income taxes 1,027,518 975,272
Deferred income 0 649,276
Deferred income tax 0 1,282,135
Preferred stock redemption, outside control of Company 0 5,182,140
Stockholder's equity
Common stock 18,725 16,725
Additional paid-in capital 10,605,671 6,457,791
Retained earnings 10,368,883 9,994,036
Statement of income
Sales 0 2,545,786
Cost of sales - Amortization 0 120,833
Subscription fees 1,393,750 744,474
Depreciation and amortization 1,147,113 1,178,642
General and administration 3,425,812 2,229,400
Provision for income taxes 4,323,804 4,315,499
Net income 8,315,456 8,305,462
Net earnings per share:
Basic 0.52 0.53
Diluted 0.46 0.47
F-17
800AMERICA.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 13 - SUBSEQUENT EVENT
The Company purchased in January 2002, the assets of YOUtopia.com, Inc. in
exchange for six hundred fifty thousand (650,000) shares of common stock. Cost
allocation to assets has not yet been established. The Company also repurchased
from iGain, Inc. employees the Company's common stock as detailed in Note 1
Stock Escrow and Note 3 Preferred Stock, Redemption Outside Control of Company.
F-18
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
800America.com, Inc.
By: /s/ David E. Rabi
------------------
David E. Rabi,
Chief Executive Officer
Date: November 11, 2002
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ David E. Rabi Chief Executive Officer Date: November 11, 2002
----------------------
David E. Rabi (Principal Executive Officer)
Director and Chief Financial
Officer (Principal Accounting
Officer)
* Director Date: *
----------------------
Bobby Walley
/s/ Richard Sullivan Director Date: November 11, 2002
----------------------
Richard Sullivan
19
CERTIFICATIONS
I, David E. Rabi., certify that:
1. I have reviewed this annual report on Form 10-KSB/A of 800America.com,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.
Date: November 11, 2002 By: /s/ David E. Rabi
------------------------
David E. Rabi
Chief Executive Officer
Principal Executive Officer
I, David E. Rabi., certify that:
1. I have reviewed this annual report on Form 10-KSB/A of 800America.com,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.
Date: November 11, 2002 By: /s/ David E. Rabi
----------------------
David E. Rabi
Chief Financial Officer
20