SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
1929 S. 21st Avenue, Nashville, TN, 37212
(800) 999-5042
Address and Telephone Number of Principal Executive Offices
David E. Rabi
1929 S. 21st Avenue
Nashville, TN 37212
(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
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Common Shares, par
value $.001 961,500 $3.73 $3,586,395 861.00
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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. See
"Selling Security Holders."
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, January 16, 2002
800America.com, Inc.
961,500 Share of common stock
o The 961,500 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 a portion 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 January 11, 2002, the closing bid price of our Common Stock on
the OTC Bulletin Board was $3.73.
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 3 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.
Table of Contents
Page No.
SUMMARY..................................................................... 1
RISK FACTORS................................................................ 3
USE OF PROCEEDS............................................................. 14
DIVIDENDS................................................................... 14
CAPITALIZATION.............................................................. 15
PRICE RANGE OF COMMON STOCK................................................. 16
OUR DIVIDEND POLICY......................................................... 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION................... 17
BUSINESS.................................................................... 20
MANAGEMENT.................................................................. 25
EXECUTIVE COMPENSATION...................................................... 27
PRINCIPAL SHAREHOLDERS...................................................... 29
SELLING SECURITY HOLDERS.................................................... 31
PLAN OF DISTRIBUTION........................................................ 32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 34
SHARES ELIGIBLE FOR FUTURE SALE............................................. 34
DESCRIPTION OF CAPITAL STOCK................................................ 36
EXPERTS..................................................................... 37
LEGAL MATTERS............................................................... 38
OTHER AVAILABLE INFORMATION................................................. 38
FINANCIAL STATEMENTS........................................................ 38
i
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. We have developed a profitable business
model where we bring buyers and sellers together in an efficient and easy to use
format and generate fees based on transactions. 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
approach to customer acquisition and retention has provided us a strong
following of loyal Internet users. 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 generated on
transactions made through our two primary businesses, the 800America Network and
Rothman Closeouts.
The 800America Network
Rothman Closeouts
The 800America Network is home to many Internet shoppers and merchants.
Over the past several years, the 800America Network has aggregated a critical
mass of buyers and sellers, with over 700,000 users throughout the world. We
deploy our own filtering mechanism for bringing stores into our network based on
our users' preferences. One feature of the 800America Network is an online
business to consumer shopping portal. To date, we have developed relationships
with over approximately 250 online retail vendors. The 800America Network
conveniently categorizes stores by the type of products the store sells and
provides a direct link to the vendor's website. 800America receives a
pre-negotiated commission from the vendor if a sale is consummated. The
800America Network "buyer and seller introductions" have led to an average of
over 350,000 transactions per month over the last year. The commission paid to
800America on these sales is between 5 and 20% of the total sale.
Rothman Closeouts, a member of the 800America Network, is one of the
world's leading web-based trading communities for surplus and closeout
merchandise. It is a leading business to business exchange for manufacturers,
wholesalers and retailers to sell and buy surplus inventories around the world.
Rothman Closeouts acts as a means to connect buyers and sellers and assist in
trading negotiations, and holds absolutely no inventory. Through management's
years of experience in the trading of closeout merchandise, Rothman Closeouts
has developed a unique trading platform aimed at the needs of buyers and sellers
of surplus and closeout merchandise. Rothman Closeouts has attracted a combined
registered buyer and seller customer base of approximately 26,000 companies,
ranging from small "mom and pop" type stores to large corporations. To further
its position in this highly fragmented market, Rothman Closeouts has developed,
and continues to pursue, exclusive relationships with large brick and mortar
companies in need of alternative distribution channels for the sale of surplus
and closeout merchandise. Rothman Closeouts receives a standard commission of
10% on all sales made through its trading platform.
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. In recent months, we have
further strengthened and diversified our revenue potential through the
acquisition of Fileshooter, a peer-to-peer 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 1929 S. 21st Avenue,
Nashville, Tennessee 37212, and we have offices in New York, 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.
The Offering
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Securities Offered
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Selling Security Holder Shares 961,500 Shares
Common Stock Outstanding: 17,736,627 Shares as of January, 2002*
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Offering Price The Selling Security Holders can sell
the shares at any price.
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Use of Proceeds We will receive a portion of the
proceeds from certain Selling Security
Holders. We will use the proceeds for
general corporate purposes.
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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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*This amount does not include approximately 1,866,400 shares to be issued.
2
Summary of Financial Information
The summary historical financial data should be read in conjunction
with the financial statements (and notes thereto) of our Company and the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
Year ended December 31
2000 1999
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Net sales $15,980,529 $ 3,283,575
Cost of revenues 8,913,351 2,135,668
General and administrative 3,466,798 784,718
Sales and marketing
Research and development
Depreciation
Other (income) expense, net 486,480 88,019
1,041,406 89,723
Net Gain 2,072,494 185,447
Weighted average Common Shares outstanding 12,721,359 6,243,132
Basic Gain per share $ 0.16 $ 0.03
Current Assets 3,144,389 1,093,406
Total Assets 4,421,609 1,402,832
Current Liabilities 411,818 457,519
Total Liabilities 411,818 457,519
Shareholders' equity 4,009,791 945,313
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.
3
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;
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.
4
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
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
President, 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.
5
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 our ability to acquire merchandise, manage our inventory and fulfill
orders,
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,
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.
6
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.
Limitations 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.
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.
7
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.
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.
8
Government regulations may impede our success.
Government regulations and legal uncertainties may place financial
burdens on our business. As of January 11, 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.
Risk of 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
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.
Forward looking statements and associated risks.
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. In addition to other risks described elsewhere in
this "Risk Factors" discussion, 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, many
of which are described in greater detail elsewhere in this "Risk Factors"
discussion, the events predicted in forward-looking statements contained in this
Prospectus may not, in fact, transpire.
9
Risks Related to e-commerce and the Internet
Our business 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
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:
11
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.
Ownership of our shares is concentrated.
As of January 11, 2002, Mr. David E. Rabi, our President, beneficially
owned approximately 55% 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 January 11, 2002, we had 17,736,627 shares of Common Stock
outstanding and as of January 11, 2002, we had approximately 2,491,775 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
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.
13
Resale restrictions on transferring "penny stocks".
Various state securities laws impose restrictions on transferring
"penny stock" and as a result, investor in the Common Stock may have their
ability to sell their shares of the Common Stock impaired. For example, the Utah
Securities Commission prohibits brokers from soliciting buyers for "penny
stocks", which makes selling them more difficult.
We are not current in our SEC reports.
Certain information, principally financial information, relating to
several of the acquisitions we have made has not been completed and filed in a
current report with the SEC. This inability to complete the information has
caused us to not be current in our reporting obligations. We cannot predict what
the result of this might be to our Company. As long as we are deficient in our
reporting obligation, we are prevented from using certain SEC forms and our
shareholders who hold "restricted shares" cannot sell them under Rule 144. We
are working to complete the information and file it with the SEC.
USE OF PROCEEDS
We advanced monies to certain of the Selling Security Holders in
connection with our acquisitions of their assets. The advances have been secured
by some of the common stock we issued that is now being offered for sale. If
those Selling Security Holders sell their shares we are entitled to collect the
proceeds from some of the sales. The total amount of the advances was
approximately $35,000. To the extent we receive any proceeds we will use the
amounts for general corporate purposes.
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
CAPITALIZATION
The following table sets forth our capitalization at September 30, 2001
on an actual and as adjusted basis to give effect to this offering, but does not
include warrants that we may issue to the placement agent.
September 30, 2001
(in thousands)
Actual As Adjusted
(Unaudited) (Unaudited)
----------- -----------
Shareholders' equity
Preferred Stock, $0.01 par value; 5,000,000 shares -- --
authorized; no shares issued and outstanding at
September 30, 2001
Common Stock, $0.001 par value; 50,000,000 shares 16,162,000 16,162,000
authorized; 16,161,943 issued and outstanding at
September 30, 2001
Additional paid in capital 2,757,663 2,757,663
Retained earnings (deficit) 8,161,972 8,161,972
Total Capitalization 10,935,797 10,935,797
15
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 January 11, 2002
there were 292 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
As of January 11, 2002, there were 17,736,627 shares of Common Stock
issued and outstanding and an additional approximately 1,866,450 shares to be
issued.
OUR DIVIDEND POLICY
It is anticipated, that for the foreseeable future, earnings will be
retained for the development of our business. Accordingly, we do not anticipate
paying dividends on the Common Stock in the foreseeable future. The payment of
future dividends will be at the sole discretion of our Board of Directors and
will depend on the Company's general business condition.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The Company operates several Internet web sites in three segments:
Business to Business; Business to Consumers and Technology. The Companys goal is
to bring buyers and sellers together in an efficient and easy format and
generate income based on the transactions. This approach to customer acquisition
and retention has provided the Company with a strong following of users. The
Company is an innovator in developing proprietary technologies needed for easy
navigation for business-to-business-and business-to-consumer environments. The
Company's technologies coupled with its unique customer approach continue to
strengthen relationships with its customers. These technologies are providing
the foundation needed to scale and grow the e-commerce businesses profitably
across geographic regions and multiple product lines.
The Company is the home of many Internet shoppers. It offers shoppers a
convenient way to navigate easily among hundreds of stores. The portal offers
incentives to visit continuously the site through promotions and giveaways. The
Company funds TV advertising in over 50 cities around the world.
Sites operated by the Company include a shopping portal 1 2 click,
RothmanCloseouts.com, InternetWebGuide.com, FileShooter.com, InShop.com,
eBiz4biz.com, cs-live.com, iGain.com and UPS payment.com, WizardWorld.com and
Youtopia.com.
Results of Operations
Years Ended December 31, 2000 and 1999
The Company 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 divisions in which the Company was engaged
in the most recent year. 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 $1,004,481 (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 the Company's 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.
The Company believes that its revenues and expenses will continue to
increase substantially in the year ending December 31, 2001, both because of the
continuing expansion of the Company's business and because of the changing
competition in the on-line shopping business. Additional expenses are also
likely to be incurred as the Company expands its bandwidth capacity in order to
accommodate new stores at its web sites as well as new websites.
17
Liquidity and Capital Resources
Net cash provided by operating activities was $2,153,221 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.
The Company's cash and cash equivalents as of December 31, 2000 were
$2,117,746 compared with $392,564 as of December 31,1999. The Company had
working capital (current assets less current liabilities) of $2,732,571 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.
The Company believes that its current capital resources and liquidity
are adequate for its present level of activity for at least the next twelve
months. Other than advertising, marketing and promotional expenses and
development of additional on-line sites, the Company does not have any plans for
significant capital or operating expenditures above its current level. However,
if the Company determines that significant additional advertising and marketing
expenses are warranted over the next twelve months, the Company may seek
additional funds, including the sale of its common stock in either public or
private transactions.
Quarter Ended September 30, 2001 Compared to Quarter Ended September 30, 2000.
The Company had revenues of $5,941,924 for the quarter ended September
30, 2001 compared to revenues of $3,922,359 for the quarter ended September 30,
2000. Net income for the quarter ended September 30, 2001 was $2,623,463
compared to net income of $1,258,524 for the quarter ended September 30, 2000.
Total operating expenses for the quarter ended September 30, 2001 were
$3,318,461 resulting in operating income for the quarter of $2,623,463. This
compares to total operating expenses of $2,663,835 for the quarter ended
September 30, 2000, resulting in operating income of $1,258,524. The Company has
instituted a policy of not paying rebates as of January 1, 2001 and hence
represented none of the total operating expenses. This compared to customer
rebates of $1,362,744 for the quarter ended September 30, 2000 that represented
approximately 51% of total operating expenses. Because of the Companys limited
operating history with its 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 revenues from Business to Consumers
divisions will continue to increase in the fourth quarter. Management expects
that all other divisions will have increased revenues and profits.
Liquidity And Capital Resources
The Companys cash and cash equivalents as of September 30, 2001 were
$9,107,264. At September 30, 2001, the Company had current assets of $9,213,431
and current liabilities of $1,000,945 resulting in working capital at September
30, 2001 (current assets less current liabilities) of $8,212,486.
In September 2001, the Company 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. The Company also assumed certain operating
liabilities. cs-live inc. changed its name to Intelligent Web Technologies, Inc.
The Company has made advances to Intelligent Web Technologies, Inc. of
approximately $325,000. The advances are secured by the shares of common stock
paid as part of the purchase price.
18
During the period the Company acquired all the capital stock of
Universal Payment Systems, Inc. (UPSI). The purchase price was $1.00. UPSI was
purchased from Management of the Company.
Also, during the period the Company raised a total of approximately
$6,700,000 from the sale of its common stock in two private placements.
Subsequently, the Company rescinded $5,500,000 to an investor.
The Company believes that its 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, the Company does not have any
plans for significant capital or operating expenditures above its current level
unless it determines to develop additional web sites that could result in
additional development costs. The Company may also make additional acquisitions
which might be financed at least in part with Company funds.
Nine Months Ended September 30, 2001 Compared With September 30, 2000
Results of Operations
The Company had revenues of $15,244,673 for the nine months ended
September 30, 2001 compared with revenues of $9,501,802 for the nine months
ended September 30, 2000. This represents a 60% increase. The increase was
primarily the result of increased sales. Net income from operations was
$8,644,800 for the nine months ended September 30, 2001 compared with net income
of $2,016,962 for the nine months ended September 30, 2000. Total operating
expenses were $6,600,000 for the nine months ended September 30,2001 compared
with $7,485,000 for the nine months ended September 30,2000. This is a decrease
of 12% and is primarily a result of the discontinuance of the rebate program.
Liquidity And Capital Resources
Net cash provided for operating activities was $8,157,000 for the nine
months ended September 30, 2001 compared with net cash of $1,575,661 for the
nine months ended September 30, 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 in a private placement and a decrease in operating
costs as a result of ending the rebate program. During the nine month period
ended September 30, 2001, the Company sold assets for $500,000 and purchased two
companies for approximately $1,550,000 in cash and common stock. During the nine
months ended September 30, 2000, the Company obtained $250,000 through the sale
of equity securities in a private placement.
Events Subsequent to September 30, 2001
In October, 2001, the Company acquired all of the capital stock of
iGain, Inc. The purchase price was 1,050,000 shares of common stock. The Company
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 the Company will repurchase the Put Shares is
(i) if the current Chief Executive Officer is no longer serving in that
capacity, (ii) the Company conducts a public offering of its 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, the Company agreed to
repurchase a total of 51,028 of the Put Shares within 30 days of the closing for
$2.25 per share. The Company is the beneficiary of a term life insurance policy
that covers the demise of the 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.
19
In January, 2002, we acquired the assets and assumed certain operating
liabilities of Youtopia.com, Inc. The purchase price was 500,000 shares of our
common stock. We also paid approximately $110,000 to remove a lien on the
assets. This money is to be repaid out of the proceeds of a sale of some of the
Common Stock we issued in the transaction. 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 upon signing a consulting
agreement and 6,667 shares per month
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 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 approach to
customer acquisition and retention has provided us a strong following of loyal
Internet users. 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 generated on
transactions made through our two primary businesses, the 800America Network and
Rothman Closeouts. The divisions share their underlying technologies and the
management team responsible for company profits.
The 800America Network: The 800America Network consists of a group of
companies that provide e-commerce services.
The 800Arnerica Network (www.800america.com), our shopping portal, is
the home to many Internet shoppers. The 800America Network offers consumers a
convenient way of easily navigating among hundreds of stores. We are paid a
monthly commission by the retail stores included in the 800America Network of 5
to 20% on items sold on the 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 network is based upon the preferences of
our users. As of January 11, 2002, there were approximately over 250 retailers
and other merchants included in the Network.
We offer incentives to keep new and repeat visitors coming to the
800America Network site through promotions, give-aways, prizes and contests. We
run television advertising to increase the number of visitors to the 800America
Network. As of January 11, 2002, our portal had over 700,000 registered
customers making over 300,000 transactions per month.
The 800America Network offers other services to both its users and its
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. 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 rich database of consumers, and
extensive relationships with stores and shoppers. The inShop model helps
shoppers make smart shopping decisions by allowing its members to receive both
fashion and designer sales alerts via e-mail.
20
We developed and grew our customer base of Internet shoppers through
our online magazine, Internet Web Guide (www.intemetwebguide.com). Our Internet
Web Guide provides site reviews and articles relating to Internet shopping. The
online magazine is a leading magazine on the web and is available in six
languages and in several countries around the world.
Rothman Closeouts: Rothman Closeouts operates the world's leading
web-based 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.
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.
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
2001and 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.
21
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.
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.
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.
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.
22
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.
Sales and Marketing
We have approximately 150 independent sale persons across China who
report to our Beijing office who perform various sales and marketing functions
for our new marketing efforts in Asia. See "Employees." Our marketing strategy
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.
23
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 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 January 11, 2002, we had 49 employees, including 47 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.
Property
We do not own any real property. Our corporate offices are located in
Nashville, Tennessee where we lease an aggregate of approximately 2,000 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. We rent the second
site, without a written lease, for a monthly rental of $650.
We maintain a sales office located in New York, New York where we lease
an aggregate of 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.
24
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 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.
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.
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.
MANAGEMENT
Board of Directors, Executive Officers and Significant Employees
Name Age Position
David E. Rabi 62 President, Treasurer and Director
Jacques Pate, Jr. 47 Chief Operating Officer
Bobby Walley 61 Secretary and Director
Darvin D. Pierce 59 Director
Significant Employees
Jerry Kavoun 47 Vice President-Chief Marketing Officer
Vincent Ren 43 Chief Technology Officer
25
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 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. 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.
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.
26
Significant Employees
Jerry Kavoun has held his position since November 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 SVP business development company, 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, 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 2001. As of January 16, 2002, yearly bonuses for 2001 had not
been determined.
27
SUMMARY COMPENSATION TABLE
Securities
Name and Underlying
Principal Position Year Salary Bonus Options
------------------ ---- ------ ----- -------
David E. Rabi 2001 $200,000 -- -0-
President 2000 $120,000 -- 1,000,000
1999 120,000 -- 250,000
Bobby Walley 2001 -0- -- -0-
President for
approximately 3 weeks
The following table sets forth information concerning grants of stock
options to purchase shares of our Common Stock during the year ended December
31, 2001 to our President.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term ($)
--------------------------------------------------------------------------------------------
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 President during the fiscal year ended December 31,
2001 and stock options he held as of December 31, 2001.
28
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR-END
OPTION/SAR VALUES
Number of
Securities Value of Unexercised In-
Underlying Number of Securities the-Money 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
Employment Agreements and Change in Control Arrangements
Rothman Employment Agreement
We are party to an Employment Agreement with Jane Rothman effective as
of March 15, 2000, providing for the employment of Ms. Rothman as manager of the
prior business of Rothman Closeouts.com, Inc. as a separate division of
800America. This agreement provides for a term of employment until March 15,
2003, subject to removal with or without cause under certain circumstances. If
terminated without cause, Ms. Rothman shall be entitled to the salary due and
owing up until March 15, 2003. The agreement provides for an initial salary of
S40,000 per year, subject to a good faith review every six months during the
term of the agreement, the reimbursement of reasonable pocket expenses, and the
entitlement to receive the fringe benefits on terms provided to the executive
staff. Under the agreement, Ms. Rothman received a bonus of $50,000 as an
inducement to enter into the employment agreement. Ms. Rothman's current annual
salary is $60,000. The agreement contains conflicts of interest provisions
effective during the term of her employment. The agreement also contains a
covenant not to compete that survives until March 2003.
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of December 31, 2001:
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
17,736,627 shares of Common Stock outstanding on January 11, 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. 1929 S. 21st
Avenue, Nashville, Tennessee 37212.
29
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) 55.0%
Jacques Pate 180,000(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) *
All Executive Officers and Directors 10,613,000(6) 56%
as a group (4 persons)
* Less than one percent.
(1) Based on a total of 17,736,627 shares of Common Stock outstanding as of
January 11, 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 and excludes approximately 1,866,450
shares to be issued.
(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) Includes 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.
30
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 to remove the lien 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.
Shares Beneficially Shares Shares Beneficially
Owned Offered Owned After Offering
Selling Prior to the For If All Offered
Security Holder(1) Offering Sale (2) Shares Are Sold (2)
----------------------------------- --------------------- ---------------- -----------------------
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 37,500 41,250 -0-
Rochelle Gold Genack 27,500 27,500 -0-
Tanya Gold 41,250 41,250 -0-
Marin 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 Wielschner 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 80,000 370,000
RXS, Inc. 500,000 150,000 350,000
(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
Schinler is a consultant for us and she is the Chief Executive Officer and a
shareholder of RXS, Inc.
(2) 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.
31
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.
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.
32
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.
33
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 President 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 April 2000, we issued to Jane Rothman a
total of 200,000 shares of Common Stock in connection with the acquisition of
Rothmancloseouts.com. She may sell 60,000 shares at June 2001, 60,000 shares at
June 2002 and 80,000 shares at June 2003. In September 2000, we issued to Ms.
Rothman a total of 50,000 stock options under our Stock Option Plan.
In August 2001, we purchased all of the capital stock of Universal
Payment Systems, Inc. from our President, Mr. David E. Rabi. The purchase price
was $1.00.
SHARES ELIGIBLE FOR FUTURE SALE
General
We have outstanding 17,736,627 shares of our Common Stock, at January
11, 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 14,733,821 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.
34
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
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 January 11, 2002, we have granted a total of 2,420,000 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.
35
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.
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 January 11, 2002, there were 17,736,627
shares of Common Stock and no shares of Preferred Stock issued and outstanding.
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.
36
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
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.
37
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.
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 50,000 shares of
the Company's Common Stock.
OTHER AVAILABLE INFORMATION
We have filed a registration statement on Form SB-2 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.
38
INDEX TO FINANCIAL STATEMENTS
800America.com, Inc.
Consolidated Financial Statements
December 31, 2000
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-6
Notes to Reviewed Financial Statements............................ F-7 thru F-11
800America.com, Inc.
Condensed Consolidated Financial Statements
For Nine Months Ended September 30, 2001
Page
----
Balance Sheet.................................................... F-12 thru F-13
Income Statement........................................................... F-14
Cash Flow Statement........................................................ F-15
Notes to Condensed Consolidated Financial Statements............. F-16 thru F-17
F-1
Jack F. Burke, Jr.
Certified Public Accountant
P. O. Box 15728
Hattiesburg, Mississippi 39404
Independent Auditors' Report
Board of Directors and Stockholders
I have audited the accompanying balance sheet of 800America. Com, Inc. as of
December 31, 2000 and 1999, and the related consolidated statements of earnings,
comprehensive earnings, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2000. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an 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
statements presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, such financial statements present fairly, in all material
respects, the financial position of 800America. Com, Inc. as of December 31,
2000 and 1999 and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2000, in conformity with
generally accepted accounting principles.
Sincerely,
Jack F. Burke, Jr. February 21, 2001
F-2
800America. Com, Inc.
Balance Sheet
December 31
Assets 2000 1999
---- ----
Current Assets
Cash $ 2,117,746 $ 392,564
Accounts Receivable 995,634 528,802
Allowance for Doubtful Accounts (139,000) (66,000)
Prepaid Advertising 75,000 121,600
Deposit on Equipment 0 94,000
Advances 47,749 22,440
Deferred Tax Asset 47,260 --
----------- -----------
Total Currents 3,144,389 1,093,406
=========== ===========
Property and Equipment
Equipment 743,831 219,308
Software 887,150 157,399
Auto 20,738 20,738
----------- -----------
Accumulated Depreciation (567,832) (88,019)
Net Property and Equipment 1,083,887 309,426
----------- -----------
Other Assets
Intangible Assets, 193,333 --
----------- -----------
Total Other Assets 193,333 --
----------- -----------
Total Assets 4,421,609 1,402,832
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable - Trade 24,946 8,995
Rebates Payable 0 330,551
Income Tax Payable 386,872 117,973
----------- -----------
Total Current Liabilities 411,818 457,519
=========== ===========
Stockholder's Equity
Preferred Stock $0.001 Par Value
5,000,000 Shares Authorized 0 Issued 0 0
Common Stock $0.001 Par Value
50,000,000 shares Authorized At $0.001 Par Value
13,412,000 Shares December 31, 2000,
12,250,000 Shares December 31, 1999,
Issued and Outstanding
Additional Paid in Capital 13,412 12,250
Retained Earnings (Deficit) 1,943,134 952,312
2,053,245 (19,249)
----------- -----------
Total Stockholders' Equity
4,009,791 945,313
----------- -----------
Total Liabilities and Stockholders Equity $ 4,421,609 $ 1,402,832
=========== ===========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-3
Income Statement
For Years Ended December 31
2000 1999 1998
---- ---- ----
Revenues $15,980,529 $ 3,283,575 $ 27,398
----------- ----------- -----------
Cost and Expenses
Advertising 1,878,318 397,738 --
Rebates 8,913,351 2,135,668 --
Bad Debts 270,795 66,000 9,199
Depreciation and Amortization 486,480 88,019 --
Consulting 313,204 -- --
Other Operating Expense 1,004,481 320,980 82,594
----------- ----------- -----------
Total 12,866,629 3,008,405 91,793
=========== =========== ===========
Operating Income (Loss) 3,113,900 275,170 (64,395)
----------- ----------- -----------
Other Income (Expense)
Interest Income 26,243 5,810 10,699
Interest Expense -- -- (17,160)
----------- ----------- -----------
Total Other Income (Expense) 26,243 5,810 (6,461)
----------- ----------- -----------
Income (Loss) Before Income Tax 3,140,143 280,980 (70,856)
Net Income (Loss) 1,067,649 95,533 --
----------- ----------- -----------
Basic Earnings Per Share Common Stock $ 0.16 $ 0.03 $ (0.10)
Basic Weighted Average Common Shares
Outstanding 12,721,359 6,243,132 700,000
Diluted Earnings Per Share Common
Common Stock $ 0.14 $ 0.03 --
Basic Weighted Average
Common Shares 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.
Changes in Stockholders' Equity
Years Ended December 31, 2000, 1999 and 1998
Common Common Additional Total
Stock Stock Paid In Retained Stockholders'
Shares Amount Capital Earnings Equity
Balance December 31, 1997 700,000 $ 700 $ 9,464 $ (133,840) $ (123,676)
Services Contributed by Stockholder
At Fair Value -- -- 12,000 -- 12,000
Office Space Contributed by Stockholder
At Fair Value -- -- 6,000 -- 6,000
Deferred Offering Cost -- -- (21,395) -- (21,395)
Net Loss From Year Ended
December 31, 1998 -- -- -- (70,856) (70,856)
----------- ----------- ----------- ----------- -----------
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 Office -- -- 9,000 -- 9,000
Common Shares Issued 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 Profit Year Ended
December 31, 1999 -- -- -- 185,447 185,477
----------- ----------- ----------- ----------- -----------
Balance December 31, 1999 12,250,000 12,250 952,312 (19,249) 945,313
Common Stock Sold
January 14, 2000 250,000 250 249,750 -- 250,000
Common Stock Issued Pursuant
To Purchase June 30, 2000 200,000 200 199,800 -- 200,000
Common Stock Issued
For Services 12,000 12 11,988 -- 12,000
Common Stock Sold
October 26, 2000 700,000 700 529,284 -- 529,984
Net Profit for Year Ended
December 31, 2000 -- -- -- 2,072,494 2,072,494
----------- ----------- ----------- ----------- -----------
Balance December 31, 2000 13,412,000 $ 13,412 $ 1,943,134 $ 2,053,245 $ 4,009,794
=========== =========== =========== ===========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-5
800America.Com, Inc.
Statement of Cash Flows
Years Ended December 31,
2000 1999 1998
---- ---- ----
Cash Flows From Operating Activities
Net Income (Loss) $ 2,072,494 $ 185,447 $ (70,856)
Adjustments to Reconcile Net Income
To cash Provided (Used) by Operation
Depreciation and Amortization 486,480 88,019 8,534
Stock Issued for Public Relations Expense 12,000
Increase in Provision for Doubtful Accounts 73,000 66,000 --
Accounts Receivable (Increase) (466,832) (528,802) --
Prepared Advertising (Increase) Decrease 46,000 (121,600) --
Deferred Tax Asset (Increase) (24,820) (22,440) --
Accounts Payable Increase (Decrease) 15,951 (18,248) 35,492
Rebates Payable Increase (Decrease) (330,551) 330,551 --
Income Tax Payable Increase (Decrease) 268,899 117,973 --
Other Liabilities Increase (Decrease) -- -- 18,000
----------- ----------- -----------
Net Cash Provided (Used) by Operations 2,153,221 96,899 (8,830)
----------- ----------- -----------
Cash Flows From Investment Activities
Deposit on Equipment Increase (Decrease) 94,000 (94,000) --
Advances Increase (Decrease) (47,749) -- --
Equipment Purchase (524,523) (222,747) (1,321)
Software Purchases (729,751) (157,399) --
----------- ----------- -----------
Net Cash (Used) By Investment Activity 2,153,221 96,899 (8,830)
----------- ----------- -----------
Cash Flows From Financing Activities
Notes Payable Increase (Decrease) -- (157,500) --
Other Liability Increase (Decrease) -- (31,059) --
Sale of Previously Unissued Common Stock 779,984 957,793 --
Net Process from Notes Payable -- -- 3,019
----------- ----------- -----------
Net Cash Provided by Financing Activity 779,984 769,234 3,019
----------- ----------- -----------
Net Cash Increase (Decrease) 1,725,182 391,987 (7,132)
Beginning Cash Balance 392,564 577 7,709
----------- ----------- -----------
Ending Cash Balance 2,117,746 392,564 577
=========== =========== ===========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-6
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 located in Nashville, TN. The Company owns and
operates ten web sites in different fields. Among them is a shopping portal for
over 305 nationally known stores, Rothmancloseouts.com a global site where
buyers and sellers match their surplus merchandise, recently affiliated with
Chinese markets, Steeplehouse.com an auction house of fine art, Inde4U.com for
the independent artist, Fileshooter.com is one of the best software for
transferring data and messages on the Internet bypassing providers, 21st Ave.
Productions, which designs and builds web sites and BtoB sites and Internet Web
Guide Magazine, a widely read magazine online with readership around the world.
All sites are automated with all transactions handled by computers.
Cash and Cash Equivalents - The Company's cash consist of unrestricted
checking and saving accounts. The Company does not have any cash equivalents.
Accounts Receivable - Allowance for Doubtful Account - The Company has
established an allowance for doubtful accounts that its management indicates is
reasonable.
Property, Plant and Equipment - Property, plant and equipment is
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.
Intangibles - Goodwill, trademarks and other intangibles arising from
acquisition are being amortized over fifteen years.
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.
Advertising Expense - 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.
Income Taxes - Deferred income taxes result from temporary differences
between financial and tax reporting. A net operation loss from a pre-merger year
was not allowed against taxable income.
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.
Other Comprehensive Income - There are no attributes of other
comprehensive income. Net income and other comprehensive income are the same.
Restatement of Prior Year - The statements ending December 31, 1999
were restated to reflect a deferred tax asset of $22,400 due to a temporary
timing difference in the balance sheet with a reduction of the same amount in
the statement of income. The adjustment did not change earnings per share as
originally presented.
F-7
Note 2 - Acquisitions
Merger With 800 America Inc. - The Company's merger consummated at July 7, 1999
qualified as a tax free reorganization and was accounted for as a pooling of
interest. World House Entertainment, Inc. was not a significant component of the
merger. 800 America Inc. was merged into the Company and its name was changed to
800America. Com, Inc.. Ten million (10,000,000) shares of common stock were
issued to 800 America Inc. stockholders and one million nine hundred fifty
thousand (1,950,000) shares were issued to World House Entertainment, Inc.
shareholders. Pursuant to the agreement the former shareholders of World House
Entertainment, Inc. then purchased 300,000 shares of stock for $500,000.
Purchase of Rothman Closeouts - The Company acquired Rothman Closeouts, an
Internet sales site and accounted for the transaction as a purchase. The Company
issued 200,000 shares at a value of $200,000 in the transaction. Income from
Rothman has been included in income from June 26, 2000. Assets acquired were
intangible assets including a web site and customer base, which will be
amortized over fifteen years.
Note 3 - Financial Instruments
Fair Value - The carrying value of cash accounts receivable, accounts
payable, and customer rebates approximates fair value.
Concentrations of Credit Risk - Financial instruments that potentially
subject the Company to credit risk include cash on deposit at a financial
institution in the amount of $2,117,746 and $392,564 at December 31, 2000 and
1999 respectively, which is Federally Insured up to $100,000. The Company has
extended unsecured credit to regular customers of $995,634 December 31, 2000 and
$528,802 at December 31, 1999. The Company has additionally established an
allowance for doubtful accounts of $139,000 against its receivables. The Company
does not require collateral to support financial instruments subject to credit
risk. The Company directly wrote off $197,795 of accounts during the year.
Note 4 - Related Party Transactions
The Company, 800 America Inc., acquired its beginning operations from a
related company Internet Web Guide, Inc. Internet Web Guide, Inc. developed the
web site and collected income from subscribers and from stores. 800 America,
Inc. and Internet Web Guide, Inc. agreed that Internet Web Guide, Inc. cost for
developing the business was equal to income collected of $127,000. The purchase
price was allocated as follows:
Equipment $ 70,000
Fixtures 10,000
Web Site 10,000
Subscriber Base 37,000
--------
Total $127,000
Compensation paid majority Stockholder and Chief Operating Officer was
$75,000 and $85,000 for the years ended December 31, 2000 and 1999 respectively.
Additional services contributed by stockholders' were $6,000 and $18,000 for the
year ended December 31, 1999 and 1998 respectively.
Note 5 - Supplemental Cash Flow Information
For years ended 12/31/2000 12/31/1999 12/31/1998
---------- ---------- ----------
Interest Paid 0 0 $17,160
Income Tax Paid $856,305 0 0
F-8
Note 6 - Non Cash Transaction
Services Contributed by Stockholder -- -- $12,000
Office Space contributed (Fair Value) 0 $6,000 $ 6,000
200,000 shares Common Stock
was issued for the purchase of
Rothman Closeouts $200,000 -- --
12,000 shares Common "Stock was
issued for Public Relations
Services $ 12,000 -- --
Note 7 - Stock Option Plan
The Company started 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 date. The average price of the shares under options is $1.75
per share. The following summarize the options granted exercised and
outstanding:
December 31 2000 1999 1998
----------- ---- ---- ----
Options outstanding
Beginning of year 1,650,000 0 0
Granted 0 1,650,000 0
Exercised 0 0 0
Options outstanding End of year 1,650,000 1,650,000 0
No compensation results from the grant.
Note 8 - Income Tax
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS109) 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, SFAS 109 generally considers all expected future events
other than enactments of changes in the tax law or rates .
F-9
The deferred tax asset account resulted from temporary differences
between the amount of assets and liabilities recognized for financial reporting
and tax. The components of the net deferred income tax asset are as follows:
2000 1999
---- ----
Provisions for Doubtful Accounts $24,820 $22,440
Income Taxes are:
2000 1999 1998
---- ---- ----
Current Tax Expenses $ 1,092,469 $ 117,973 $ 0
Deferred Tax Benefit (24,820) (22,400) 0
----------- ----------- -----
Provision for Income Tax $ 1,067,649 95,573 $ 0
The provision for income taxes and the reconciliation between federal
income taxes at the statutory effective rates are as follows:
2000 1999 1998
Amount % Amount % Amount %
Federal Income Tax at Statutory Rate $1,067,649 34.0 $95,533 34.0 ($24,091) (34.0)
Non Deductible Net Operating Loss From Merger 24,091 34.0
---------- ---- ------- ---- ------- ----
Provisions for Income Taxes $1,067,649 34.0 $95,533 34.0 $ 0 0
Operating Leases - Lease expense for the year ended December 31, 2000
was $25,465 and for the year ended December 31, 1999 was $17,500. The Company
leased facilities at 1301 Mt. Juliet Road for $698 per month and increasing 7
1/2% in each of the next two years. The Company has leased additional facilities
at 1929 21st Street, Nashville on a month to month lease at $650 per month. The
Mt. Juliet lease expires at December 2002.
1301 Mt Juliet Road
Mt Juliet, TN
1st Year $ 9,576
2nd $10,294
The Company also leases a T3 line from Bell South for $11,275 per month. The
lease expires May 2002.
1st Year 2001 $ 135,300
2nd Year 2002 $ 56,375
Note 9 - Agreement to Acquire Subsidiaries
Legal Matters
The Company agreed on October 27, 2000 to acquire Inshop.com,
Inc.("InShop") (A Delaware Corporation). The Company agreed to issue 1,817,943
shares of its previously unissued stock in the purchase. The transaction to take
place in early 2001.
F-10
The proforma results of the acquisition are as follows:
800America.com, Inc. Inshop.com, Inc. Combined
-------------------- ---------------- --------
Current Assets $3,144,389 $ 0 $3,144,389
Property and Equipment
Net of Accumulation
Depreciation 1,083,887 373,455 1,45,342
Intangible Assets
Net 199,333 1,694,488 1,887,821
---------- ---------- ----------
Total Assets 4,421,609 2,067,943 6,489,552
---------- ---------- ----------
Current Liabilities 411,818 250,000 661,818
---------- ---------- ----------
Common Stock 13,412 1,818 15,230
Additional Paid in Capital 1,943,134 1,816,125 3,759,259
Retained Earnings 2,053,245 0 2,053,245
---------- ---------- ----------
Total Stockholders' Equity 4,009,791 1,817,943 5,582,734
---------- ---------- ----------
Total Liabilities &
Stockholders' Equity $4,421,609 $2,067,943 $6,489,552
---------- ---------- ----------
Because InShop was not operational during the last year no proforma
income statement - data can be provided.
InShop is involved in the following litigation.
A Summons and Complaint in an action titled against 800America.Com,
Inc. and InShop com, Inc. has been served on InShop. The damages asked for are
$219,429. The action is pending in the Supreme Court of the State of New York,
County of New York. There has been no activity in this litigation beyond the
service of the Summons and Complaint on InShop. The Company intends vigorously
to defend this litigation.
A summons and complaint in an action seeking a consulting fee of
$25,000 has been served on InShop. The action is pending in the Civil court of
the City of New York. The Company intends to vigorously to defend the
litigation.
Because of the early stages of the litigation referred to in the
preceding two paragraphs, and due to the contingencies of litigation, the
Company is precluded from providing any estimate at this time as to amounts
which the plaintiffs might recover should the Company and InShop fail
successfully to defend their positions.
On January 30, 2001, the Company commenced an action for breach of
contract. The action is pending in the Supreme Court of the State of New York,
County of New York. The issue was the Company's agreement to purchase another
company. The target company subsequently refused to comply with the agreement.
The Company is asking $2,000,000 in damages.
F-11
800America.com, Inc.
Condensed Consolidated Balance Sheet
Unaudited
September 30, 2001 and December 31, 2000
September 30, 2001 December 31, 2000
ASSETS
Current Assets
Cash in Bank $ 9,107,264 $ 2,117,746
Accounts Receivable 212,907 995,634
Allowances for Doubtful Accounts (154,000) (154,000)
Prepaid Advertising 75,000
Due from Affiliate 47,749
Deferred Tax Asset 47,260 47,260
------------ ------------
Total Current Assets 9,213,431 3,144,389
------------ ------------
Property and Equipment
Equipment 852,562 743,831
Software 2,377,150 887,150
Auto 20,738 20,738
------------ ------------
3,250,450 1,651,719
Accumulated Depreciation (1,145,034) (567,832)
------------ ------------
Total Property and Equipment 2,105,416 1,083,887
------------ ------------
Other Assets
Intangible Assets (Net) 176,666 193,333
Investment iGain, Inc. 50,000
Investment - UPS 1
Note Receivables Stockholders' 82,818
Investment Inshop 174,395
Other Assets 132,500
------------ ------------
Total Other Assets 616,380 193,333
------------ ------------
Total Assets 11,935,227 4,421,609
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable Trade
Accrued Expenses
Income Tax Payable
Due on Purchase
Total Current Liabilities
Stockholders' Equity Preferred Stock No Par Value
5,000,000 Shares Authorized
0 Issued Common Stock - 0.0001 Par Value
50,000,000 Shares Authorized
13,412,999 Shares Outstanding at December 31, 2000
16,162,943 Shares Outstanding at September 30, 2001
Additional Paid in Capital Retained Earnings
Total Liabilities and Stockholders' Equity
See Accompanying Notes to Condensed Consolidated Financial Statements
F-12
800America.com, Inc.
Condensed Consolidated Statements of Income
Unaudited Periods Ended September 30, 2001 and September 30, 2000
2001 2001 2000 2000
Three Nine Three Nine
Months Months Months Months
Revenues 5,941,924 15,244,673 3,922,359 9,501,802
----------- ----------- ----------- -----------
Cost and Expense
Rebates 1,362,744 4,876,154
Advertising 1,536,486 2,683,605 400,820 1,060,112
Depreciation-Amortization 166,901 593,869 74,971 154,273
Bad Debts 0 15,000 9,837 180,837
----------- ----------- ----------- -----------
General and Administrative 1,615,074 3,307,403 815,463 1,213,464
----------- ----------- ----------- -----------
Total 3,318,461 6,599,877 2,663,835 7,484,840
----------- ----------- ----------- -----------
Net Income from Operations 2,623,463 8,644,796 1,258,524 2,016,962
----------- ----------- ----------- -----------
Other Income
Interest 65,094 108,600 5,189 10,406
Sale of Assets 0 500,000 0 0
----------- ----------- ----------- -----------
Income Tax Expense (935,100) (3,200,000) (448,305) (689,305)
----------- ----------- ----------- -----------
Net Income 1,753,457 6,053,396 815,408 1,338,063
----------- ----------- ----------- -----------
Basic Earning Per Share $ 0.11 $ 0.38 $ 0.07 $ 0.11
Diluted Earnings Per Share $ 0.09 $ 0.33 $ 0.06 $ 0.10
See Accompanying Notes To Condensed Consolidated Financial Statements
F-13
800America.com, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited
Nine Months Ended September 30,
2001 2000
---- ----
Cash Flows from Operating Activities
Net Income $ 6,053,396 $ 1,338,063
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities
Depreciation and Amortization $ 578,869 $ 154,273
Bad Debts Allowance - Increase 15,000 73,000
Accounts Receivable (Increase)
Decrease 797,727 (707,292)
Other Assets (Increase) Decrease 122,749 215,600
Accounts Payable Increase (Decrease) 68,845 181,181
Income Tax Payable-Increase (Decrease) 479,695 301,570
Accrued Expenses 40,706 19,266
Due on Purchase 1
----------- -----------
Cash Provided by Operations 8,156,988 1,575,661
----------- -----------
Cash Flows From Investing Activities
Purchase of Equipment (108,731) (437,422)
Purchase of Software (1,490,000)
Advance to Operating Activities (384,506)
Purchase UPS 1
----------- -----------
Cash Used by Investment Activities (1,983,238) (437,422)
----------- -----------
Cash Flows From Financing Activities
Sale of Previously Unissued Stock (Net) 6,315,768
Repurchase Stock From Above Sales (5,500,000)
Additional Paid in Capital 250,000
----------- -----------
Cash Provided by Financing Activities 815,768 250,000
----------- -----------
Net Increase in Cash 6,989,518 1,388,239
Beginning Cash Balance 2,117,746 392,464
----------- -----------
Ending Cash Balance $ 9,107,264 $ 1,780,703
=========== ===========
See Accompanying Notes to Condensed Consolidated Financial Statements
F-15
800AMERICA . COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 full year. For further
information, refer to the December 31, 2000 consolidated financial statements
and notes thereto include in 800America.com, Inc. 10KSB.
Note 2 - Related Party Transactions
Compensation paid Chief Executive Officer $201,666 for nine months
ended September 30, 2001 and $55,000 for the six months ended June 30, 2000.
Note 3 - Supplemental Cash Flow Information
Nine months ended 9/30/01 9/30/00
------- -------
Interest paid 0 0
Income tax paid $2,319,100 $387,735
Note 4 - None Cash Transactions
1,817,493 Shares Common Stock
for operating activity Inshop.Com 1,817
200,000 Shares Common Stock
eBiz4Biz.com 200
450,000 Shares of Common Stock
for assets of cs-live.com 450
Note 5 - Purchase of Subsidiary's
The Company purchased eBiz4Biz. Com which was not operational but had
succeeded in developing some advance computer software. The agreement was dated
January 20, 2001 but the purchase was not completed until May 16, 2000.
The agreement contemplated the purchase method of accounting.
The period for which the results of operations of the acquisition are
included in the income statement for the eight months ending September 30, 2001.
Goodwill was not recognized. The only asset of eBiz4Biz is advanced technology
software.
The Company purchased Fileshooter.com (Fileshooter). Fileshooter was
dormant since its inception until purchased by 800America.com, Inc. on June 30,
2001. Fileshooter, like eBiz4Biz.com was fully integrated into 800America.com
Inc. operations. Method of accounting will be the purchase method. No goodwill
is recognized. The only asset of Fileshooter.com is advanced technology
software. The Company purchased substantially all of the assets of cs-live.com.
F-16
The above purchases were completed for a combination of stock and cash
of approximately $1,550,000.
The Company acquired all of the capital stock of Universal Payments
Systems (UPSI). Company management owned and developed UPSI. The purchase price
was $1.
In September 2001, the Company 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. The company also assumed certain operating
liabilities. cs-live inc. changed it name to Intelligent Web Technologies, Inc.
The Company has made advance to Intelligent Web Technologies, Inc. of
approximately $82,818 at September 30, 2001. The advance is secured by the
shares of common stock paid as a part of the purchase price.
Note 6 - 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 7 - Subsequent Events Contingent Liability
In October 2001, the Company acquired all of the capital stock of
iGain, Inc. The purchase price was 1,050,000 shares of common stock. The Company
agreed to repurchase, at the option of the holders, 1,000,000 shares of common
stock issued in the merger (less $51,028 shares as explained below) for a price
of $2.60 per share. The conditions for which the Company will repurchase the
shares is the earlier of (i) if the current Chief Executive Officer is no longer
serving in that capacity, (ii) the Company conducts a public offering of its
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, the Company
agreed to repurchase a total of 51,028 of the shares within 30 days of the
closing for $2. 25 per share. If all the shares were repurchased within one year
from the closing date of the merger the total redemption price would be
$2,582,140.
F-17
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 Inshape, 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
services to be rendered. The shares will be issued pursuant to an exemption from
registration set out in Section 4(2) of the Act.
We also agreed in December to issue 100,000 shares to a consultant for
services to be rendered. The shares will be issued pursuant to an exemption from
registration set out in Section 4(2) of the Act.
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 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.
II-2
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
* to be filed by amendment
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.
(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.
II-3
(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.
II-4
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 Nashville, Tennessee on January 15,
2002.
800America.com, Inc.
By: /s/ David E. Rabi
-------------------------------
David E. Rabi
Chairman and Chief Executive Officer
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 January 15, 2002
---------------------- Officer (Principal and Chief Executive
David E. Rabi Officer) Director and Chief Financial Officer
(Principal Accounting Officer)
/s/ Bobby Wallay Director January 15, 2002
----------------------
Bobby Wallay
/s/ Darvin D. Pierce Director January 15, 2002
----------------------
Darvin D. Pierce
II-5
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
10.0 Lease dated November 3, 1999, as amended
10.1 Form of Common Stock Purchase Warrant
10.2 Employment Agreement dated March 10, 2000,
Between registrant and Jane Rothman
23.1 Consent of Jack F. Burke, Jr., CPA