SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended:
December 31, 2001
Commission File Number
0-28547
800America.com, Inc.
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(Name of small business issuer in its charter)
Nevada 87-0567884
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
420 Lexington Avenue, New York, New York 10170
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(Address of Principal Executive Offices)
(800) 999-5048
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(Telephone number of Issuer)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock $.001 Par Value Per Share
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(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes No X
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Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
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State issuer's revenues for the most recent fiscal year. $21,401,169.
The aggregate market value of the voting common stock held by
non-affiliates of the registrant as of March 29, 2002 was $32,606,695. Our
commons stock is traded on the OTC Electronic Bulletin Board under the symbol
"ACCO".
There were 19,976,289 shares of common stock $.001 par value per share
outstanding as of March 29, 2002.
Item 1. Description of Business
Corporate History
We were incorporated in Nevada on December 5, 1996, under the name
Sport Fair Television Inc. Our plan at that time was to create and promote
sports goods shows for home shopping networks transmitted via satellite or cable
television. These plans did not come to fruition. On December 31, 1997, we
acquired from Elizabeth Peters all the issued and outstanding common stock of
Songs of the Planet Inc. in exchange for 200,000 shares of common stock. Songs
of the Planet was organized in August 1997 and changed its name to World House
Entertainment. At the time of the acquisition, it had limited operations. These
operations primarily consisted of providing copyright administrative services to
affiliates of Mrs. Peters. World House Entertainment conducted no business
operations. After the acquisition Elizabeth Peters became the company's sole
employee.
In July 1999, World House Entertainment issued 10,000,000 shares of
restricted common stock to acquire all of the issued and outstanding common
stock of 800America, Inc. a Delaware corporation based in Nashville, Tennessee.
800America, Inc. was incorporated on March 26, 1999 for the purpose of operating
an Internet shopping mall and an online magazine. 800America, Inc. was merged
into the company and the company as part of the merger, changed its name to
800America.com Inc. At the same time, the company sold its wholly owned
subsidiaries, World House Entertainment and Songs of the Planet, to its former
owner, Elizabeth Ann Peters.
Our Business
We are a growing company that owns and operates international
e-commerce and technology businesses. Our primary business is to bring buyers
and sellers together in an efficient and easy to use format and generate fees
based on transactions. We believe that we are an innovator in developing
proprietary technologies and processes needed for easy navigation and
convenience in business-to-business and business-to-consumer environments. Our
technologies have provided the foundation needed for us to scale and grow our
e-commerce businesses profitably across geographic regions and multiple product
lines.
The majority of our revenues are derived from commissions and sales
generated on transactions made through our four primary businesses,
OneTwoClick.com and RothmanCloseouts.com (commissions), InternetWebGuide.com,
and FileShooter.com (sales). All divisions share their underlying technologies
and the management team responsible for our profits.
The 800America Network: The 800America Network consists of a group of
divisions and subsidiary companies that provide business to business,
e-commerce services and technology.
The 800America Network (www.800america.com), is our homepage for all of
our eleven divisions and subsidiary companies that comprise the 800America
Network.
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OneTwoClick offers consumers a convenient way of easily navigating
among many stores. We are paid a commission on a per transaction basis by the
retail stores included in the OneTwoClick site of 5 to 20% on items sold on this
portal. We are actively involved in determining the stores that are listed on
the portal based on shopper preference. Our filtering mechanism for bringing
stores into the portal is based upon the preferences of our users.
We offer incentives to keep new and repeat visitors coming to the
800America Network through promotions and advertising. We run television
advertising to increase the number of visitors to the 800America Network. As of
March 29, 2002, our OneTwoClick portal had over 700,000 registered customers
making over 300,000 transactions per month.
The 800America Network offers other services to both users and vendors.
Through an 800America Network subsidiary, inShop (www.inshop.com), we provide a
customized mass direct mail service that alerts our inShop customers about
merchandise on sale at particular stores off-line. The stores pay us a per alert
fee to include their sales in the alerts. We receive payments from the stores to
send these alerts to our visitors. inShop has a database of well to do,
primarily female consumers, and extensive relationships with stores and
shoppers. The inShop model helps shoppers make informed shopping decisions by
allowing its members to receive both fashion and designer sales alerts via
e-mail.
We developed and grew our customer base of Internet shoppers through
our online magazine, Internet Web Guide (www.internetwebguide.com). Our Internet
Web Guide provides write-ups, best of best site reviews and articles relating to
Internet shopping and some twenty different other categories. The online
magazine is independently written and is available in six languages and in
several countries around the world.
Rothman Closeouts: Rothman Closeouts operates 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. The minimum order that can be placed is $500.00.
Our goal is to be the "virtual closing room" for closeout merchandise
around the world. Our proprietary technology automates the customer buying
process and has proven instrumental in our ability to reach our goal. This
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technology finds and then matches buyers and sellers, and builds a fast and
accurate customer buying system. This provides Rothman Closeouts with the
ability to gather information on customer buying behaviors on a realtime
continuous basis. The information allows Rothman Closeouts to provide valuable
assistance to its customers in order to close the sale during the actual
negotiation. We operate Rothman internationally and have expanded our services
to the Far East, Europe and South America.
Other Products and Services:
Fileshooter (www.fileshooter.com), has led to the development of a
revolutionary new peer-to-peer communications tool for secure, private instant
Internet messaging that sends and receives any kind or size file including text,
music, pictures and graphics. We acquired a 51% ownership in Fileshooter in
November 2000 and completed the acquisition for the remaining 49% in July 2001
and worked with the company's existing technology to further develop the
Fileshooter product.
Fileshooter instantly sends and receives any type or size of file,
including, but not limited to, text, music, pictures and graphics or any
combination thereof. What makes Fileshooter different from other products is
that it does not reside on any intermediary's server used in sending or
receiving e-mail. Fileshooter takes a file and wraps it in an encrypted format.
The file is then sent via the Internet with nothing more than an Internet
Protocol (IP) address tag to the designated recipient. This innovative process
allows the sender and receiver to communicate privately regardless of each
others browser, e-mail product or Internet service provider. The Fileshooter
file tunnels through the Internet and its myriad of routers instantly to reach
the recipient.
Fileshooter serves the need for individuals, groups and corporations to
communicate with a variety of other individuals or organizations which may have
different service providers and server technologies. Fileshooter offers
additional flexibility to users in providing the ability to open a private chat
line of communication which does not reside on any intermediary's server. The
chat line is private, quick and deleted once the transmission is complete. We
began marketing the software product to consumers and businesses in the third
quarter of 2001.
EBiz4Biz.com is a business to business site that offers Chinese
manufacturers English and Chinese language web pages pointed to North America
where they may display their merchandise for sale.
IPSpayment.com is an online payment system that allows users to pay
bills and transfer funds.
WizardWorld is an online marketplace where people can buy, sell or
trade collectibles.
cs-live provides real-time communications using the Internet as the
delivery medium. cs-live technology enables companies with a web presence to
maximize the effectiveness of the Internet with applications that provide
enhanced real-time communications over the web, including live chat and rich
media. cs-live provides solutions for eLearning, eMarketing, 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.
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Youtopia.com is one of the most popular teenage sites in North America
with approximately 1-2 million members between the ages of fourteen and
twenty-six. The site features contests, games, promotions and some of the most
popular music artists.
Business Strategy
Our strategic objective is to continue to grow our business by
acquiring companies with technologies that support our core business and provide
tools for Internet navigation, shopping and trading convenience. The key
elements of our strategy are to:
o continue to maximize opportunities with our existing businesses;
o seek strategic acquisitions of synergistic companies with
technologies that support our strategy and improve shareholder
value;
o acquire additional e-commerce companies and layer in our
managerial expertise to expand our existing customer base and
maximize profits; and
o build upon our current infrastructure to provide technology and
services that enhance the Internet shopping experience.
Sales and Marketing
We have approximately 150 independent commission-based sale persons
across China who report to our Beijing office who perform various sales and
marketing functions for our new marketing efforts in Asia. We do not employ any
sales personnel in China. All of our employees (6) in our Beijing office are
technical staff. The independent sales force contacts Chinese manufacturers for
the purpose of selling webpages that are pointed to the North American
marketplace. Our marketing strategy, which we implement through advertising and
promotions as well as partnerships and alliances, includes the following
elements:
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.
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
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are virtually no barriers to entry into this market. We expect on-line shopping
sites to proliferate. In order to compete successfully companies will have to
offer more services and promotions to their customers. 800America has limited
resources. As a result, it will be difficult for us to compete with these large
national organizations whose financial strength is significantly greater than
ours. We may not be able to compete effectively with these larger organizations.
We may not be able to continue to operate profitably in the on-line shopping
mall business.
The online surplus trading community is a new, rapidly evolving market.
We expect competition to intensify in the future as the barriers to entry are
relatively low, and current and new competitors can launch new sites at a
minimal cost using commercially available software. Depending on the product
category, we compete with a number of companies serving particular categories of
goods as well as those serving broader ranges of goods.
Our Fileshooter software product competes directly with all
peer-to-peer (computer-to-computer) software products. We believe our product
has certain competitive advantages over our current competition such as being
able to download any size file with no limitation, self-installation and no need
to use an internet service provider, 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 March 29, 2002, we had 52 employees, including 50 full time
employees and 2 additional part-time employees. We may hire additional employees
in 2002, both full time and part time, if our level of operations requires an
increase in our work force. In addition, our Beijing office where we have over
150 independent sales persons performing various sales and marketing functions.
We opened this office after acquiring Ebiz4biz.com in February 2001.
Item 2. Description of Property
We do not own any real property. We maintain our corporate and a sales
office in New York, New York where we lease approximately 1,300 square feet of
space. The lease provides for a monthly rental of approximately $3,460 per month
and continues until June 2005. Our administrative offices are located in
Nashville, Tennessee where we lease an aggregate of approximately 3,600 square
feet of space at two different sites. One site has a lease that provides for a
monthly rental of $891 per month and increases 7 1/2% per year over the
remaining term of the lease, which expires in December 2002. In January 2002, we
rented a second larger space of approximately 2,500 square feet. We rent the
second site, without a written lease, for a monthly rental of $1,951.
Part of our technical operations, Ebiz4biz.com and the cs-live
operations have offices in Ottawa, Canada where the rent, is CDN $26,481 per
year for a period of three years ending 2005 and Ebiz4biz has an office in
Beijing, China where the rent, without a written lease, is $1,000 per month. The
iGain subsidiary leases approximately 1,261 square feet in Fairfield, CT for
approximately $1,576 per month for a one-year term ending December 2002.
Item 3. Legal Proceedings
In the normal course of our business, we are involved in various legal
matters. We do not believe that any legal matter that we are currently involved
with would have a material adverse effect on our business or financial condition
should the matter not be decided in our favor.
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Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ended December 31, 1999, either
through the solicitation of proxies or otherwise.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Our Common Stock has been quoted on the OTC:BB since November 8, 1999
under the symbol "ACCO". The following table set forth, the high and low bid
prices for the Common Stock for the quarters indicated. As of March 29, 2002
there were 334 shareholders of record. The source of the quotes is Yahoo
Financial.
Common Stock Bid Price
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Calendar Year 2000 High Low
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First Quarter $5.625 $3.125
Second Quarter $5.00 $1.25
Third Quarter $2.50 $1.25
Fourth Quarter $2.50 $1.25
Calendar Year 2001 High Low
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First Quarter $2.18 $1.34
Second Quarter $3.25 $ .37
Third Quarter $4.65 $1.53
Fourth Quarter $4.00 $1.55
Calendar Year 2002 High Low
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First Quarter $3.10 $2.05
Second Quarter through
April 10, 2002 $3.03 $2.77
As of March 29, 2002, there were 19,976,289 shares of Common Stock
issued and outstanding.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
We operate various Internet web sites in three areas: Business to
Business; Business to Consumers and Technology. Our goal is to bring buyers and
sellers together in an efficient and easy format and generate income based on
the transactions. Our technologies coupled with our customer approach continue
to strengthen relationships with our customers. These technologies are providing
the foundation needed to scale and grow the e-commerce businesses profitably
across geographic regions and multiple product lines.
Sites operated under the 800America Network are OneTwoClick.com,
RothmanCloseouts.com, InternetWebGuide.com, FileShooter.com, InShop.com,
eBiz4biz.com, cs-live.com, iGain.com, IPS payment.com, WizardWorld.com and
Youtopia.com.
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Years Ended December 31, 2000 and 1999
Results of Operations
We had revenues of $15,980,529 for the year ended December 31, 2000
compared to revenues of $3,283,575 for the year ended December 31, 1999. Net
income for the year ended December 31, 2000 was $2,072,494 compared to $185,447
for the year ended December 31, 1999. The annual results of operations are not
comparable because of the new divisions in which the Company was engaged in the
most recent year. In 2000, we acquired Rothman Closeouts, 21st Ave. Productions
and Who's Who in Pets. We sold 21st Ave. Productions and Who's Who in Pets in
2001. In 2000, Rothman Closeouts, 21st Ave. Productions and Who's Who in Pets
contributed approximately 20-25% of our total revenue. 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 our limited
operating history and the changing competition in the on-line shopping business,
management cannot predict, based upon past performance, whether the above listed
cost and expense categories are relatively stable or subject to a substantial
degree of volatility.
Liquidity and Capital Resources
Net cash provided by operating activities was $2,153,221 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.
Cash and cash equivalents as of December 31, 2000 were $2,117,746
compared with $392,564 as of December 31, 1999. We had working capital (current
assets less current liabilities) of $2,732,571 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.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000.
Results of Operations
We had revenues of $21,401,169 for the year ended December 31, 2001
compared to revenues of $15,980,529 for the year ended December 31, 2000. Net
income for the year ended December 31, 2001 was $8,315,637 compared to net
income of $2,072,494 for the year ended December 31, 2000. We estimate that
approximately eighty percent of our revenues were derived from continuing
operational and twenty percent from new acquisitions acquired during 2001. Total
operating expenses for the year ended December 31, 2001 were $9,446,174
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resulting in operating income for the year of $11,954,995. This compares to
total operating expenses of $12,866,629 for the year ended December 31, 2000,
resulting in operating income of $3,113,900. We instituted a policy of not
paying rebates as of January 1, 2001 and hence rebates represented none of the
total operating expenses. This compared to customer rebates of $8,913,351 for
the year ended December 31, 2000 that represented approximately 69% of total
operating expenses. We had been paying rebates of between forty and sixty
percent of the amounts collected. Because of our limited operating history with
the various web sites, management cannot predict, based upon past performance,
whether the above listed cost and expense categories are relatively stable or
subject to a substantial degree of volatility. Management continues to expect
that advertising and promotion costs will be a significant part of our operating
structure. For the year ended December 31, 2001, advertising and promotion costs
were $4,443,249 representing approximately 47% of total operating expenses
compared to $1,878,318 in such costs in 2000 representing approximately 14% of
total operating expenses. The increase in advertising costs were a result of our
expanded operations with our various sites and the consequences of events which
occurred after September 11, 2001. One of our sites OneTwoClick showed a
drop-off in revenues after September 11th and another, FileShooter, showed an
increase. We increased our advertising to address both trends. Payroll costs for
the year ended December 31, 2001 were $884,546 compared with $298,254 for the
year ended December 31, 2000. The increase in payroll costs was a result of
hiring more people and having to pay higher salaries for more qualified
technical personnel because of our more complex internet network. Legal and
accounting costs were $226,677 for the year ended December 31, 2001 compared to
$78,039 for the year ended December 31, 2000. The increase is primarily a result
of the acquisitions we completed during the year. The overall increase in our
various costs was a result of our increasing our business primarily through
internal growth. Also during the year ended December 31, 2001, we spent $984,356
on our new acquisitions, most of which was devoted to our inShop operation.
Depreciation and amortization costs were $1,147,113 for the year ended December
31, 2001, compared to $486,480 for the year ended December 31, 2000. The
increase is on account of the write downs resulting from our acquisitions during
the year and obsolete equipment. Management expects that revenues from Business
to Consumers divisions will continue to increase in 2002. Management expects
that all other divisions will have increased revenues and profits as well.
We believe that our revenues and expenses will continue to increase
substantially in the year ending December 31, 2002 both because of the
continuing expansion of our business and because of the changing competition in
the on-line shopping business. Additional expenses are also likely to be
incurred as we expand our bandwidth capacity in order to accommodate new stores
at our web sites as well as new websites. We also plan on integrating more of
the 800America Network customers into the IPSpayment system site.
Liquidity And Capital Resources
Cash and cash equivalents as of December 31, 2001 were $13,201,125. At
December 31, 2001, the Company had current assets of $13,573,598 and current
liabilities of $2,028,316 resulting in working capital at December 31, 2001
(current assets less current liabilities) of $11,545,282.
In September 2001, we acquired substantially all of the assets,
including the name, of cs-live.com inc. The purchase price was $50,000 and
450,000 shares of common stock. We also assumed certain operating liabilities.
cs-live inc. changed its name to Intelligent Web Technologies, Inc. We have made
advances to Intelligent Web Technologies, Inc. of approximately $300,000. The
advances are secured by the shares of common stock paid as part of the purchase
price. These shares are being registered for resale. When they are sold a
portion of the proceeds will be used to repay the advances.
During the period we acquired all the capital stock of Universal
Payment Systems, Inc. (UPSI). The purchase price was $1.00. UPSI was purchased
from our Chief Executive Officer.
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Also, during the period we raised a total of approximately $7,179,773
from the sale of common stock in two private placements. Subsequently, we
rescinded $5,500,000 to an investor.
Net cash provided by operating activities was $11,794,520 for the year
ended December 31, 2001 compared with net cash of $2,105,472 for the year ended
December 31, 2000. The increase in net cash was primarily attributable to an
increase in revenues, sale of operating assets, the proceeds from the sale of
common stock and a decrease in operating costs as a result of ending the rebate
program. During the period ended December 31, 2001, the Company sold assets for
$500,000 and purchased assets or capital stock of five companies for
approximately $1,632,500 in cash and 4,177,493 shares common stock. During the
year ended December 31, 2000, we obtained $1,679,773 through the sale of equity
securities in private placements.
In October, 2001, we acquired all of the capital stock of iGain, Inc.
The purchase price was 1,050,000 shares of common stock. We agreed to
repurchase, at the option of the holders, 1,000,000 shares of the common stock
issued in the merger for a price at $2.60 per share (the Put Shares). The
conditions for which we will repurchase the Put Shares is (i) if the current
Chief Executive Officer is no longer serving in that capacity, (ii) we conduct a
public offering of our securities and receives at least $7,000,000 in proceeds,
or (iii) one year from the closing date of the merger. In connection with the
merger, we agreed to repurchase a total of 51,028 of the Put Shares for $2.25
per share. This was completed in January 2002. We are the beneficiary of a term
life insurance policy that covers the demise of our current Chief Executive
Officer. The amount of the policy is $10,000,000.
In December, 2001, we acquired the capital stock of WizardWorld, Inc.
in a stock for stock merger. The purchase price was 660,000 shares of our common
stock. We agreed to repurchase the common stock given in the merger in one year
at a purchase price of $2.60 per share. Certain of the holders of WizardWorld
preferred stock who received our common stock in the merger purchased a total of
350,000 shares of our common stock in a private placement for a total of
$850,000. Such purchasers also have the right to have us reacquire the shares at
$2.60 per share after one year.
We believe that our current capital resources and liquidity are
adequate for at least the next twelve months. Other than costs in connection
with the further development of our web sites, we do not have any plans for
significant capital or operating expenditures above our current level unless we
determine to develop additional web sites that could result in additional
development costs. We may also make additional acquisitions which might be
financed at least in part with our funds.
Events Subsequent to December 31, 2001
In January, 2002, we acquired the assets and assumed certain operating
liabilities of Youtopia.com, Inc. The purchase price was 500,000 shares of our
common stock. We also paid approximately $110,000 to remove a lien on the
assets. We have registered some of the stock issued in the transaction for
resale. This money is to be repaid out of the proceeds of such a sale. In
connection with the transaction we hired Youtopia's Chief Executive Officer as a
consultant for six months. The compensation paid to the consultant was 150,000
shares of our common stock upon signing a consulting agreement and 6,667 shares
per month.
Forward Looking Statements
This report on Form 10-KSB contains certain forward-looking statements
that are based on what we believe are reasonable beliefs and assumptions of
management. Often, these statements can be recognized because of the use of
words such as believe, anticipate, intend, estimate and expect in the
statements. Such forward-looking statements obviously involve known and unknown
risks, uncertainties, and other factors that may cause the actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
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Item 7. Financial Statements
Our financial statements begin on page F-1.
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
N/A
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Name Age Position
---- --- ---------
David E. Rabi 62 Chief Executive Officer, Treasurer and Director
Jacques Pate, Jr. 47 President
Bobby Walley 62 Secretary and Director
Darvin D. Pierce 60 Director
Richard Sullivan 74 Director
Significant Employees
Jerry Kavoun 47 Senior Vice-President - Chief Marketing Officer
Vincent Ren 43 Chief Technology Officer
Our directors are elected each year at the annual meeting of
shareholders for a term of one year. Each director serves until the expiration
of his term and thereafter until his successor is duly elected and qualified.
Our by-laws provide that the number of directors constituting the board of
directors may be increased by action of the board of directors, which may also
fill vacancies on the board of directors. The current board of directors will
continue to serve as directors until the next annual meeting of our
shareholders. At this time, there are no committees of the board of directors.
Our executive officers are appointed by the Board of Directors on an
annual basis.
Management
David E. Rabi has been a director since February 1997, and he has
served as our Chief Executive Officer and President since July 9, 1999, except
for an approximate 3 week period in September 2001. As President, Mr. Rabi was
instrumental in leading the company to profitability. He had general management
responsibility for all 800America businesses including marketing of the on-line
11
shopping site, and publishing of the on-line Internet Web Guide Magazine. Mr.
Rabi has extensive experience forming and running large complex international
organizations and served as a financial and marketing consultant to various
international companies in Africa and South America. From 1977 to 1990, he
served as President and CEO of the Carmel Group, a multinational, privately-held
corporation based in South America, with 14 international offices, sales of
approximately $1.5 billion and over 6,800 employees. Mr. Rabi was instrumental
in the sale of the company. His accomplishments are far reaching and are
reflected throughout 800America's structure and culture. Mr. Rabi has a
Bachelors Degree in Business Administration and a Masters Degree in Economics
and Finance from the Sorbonne University in France.
Jacque Pate, Jr. has been employed by us since February 1997. He was
appointed President in January, 2002. From 1979 to February 1997, he served as
President of Jupate, Inc., a construction company. He devotes approximately 80%
of his business time to the affairs of the Company. Mr. Pate holds a B.S. in
Business Administration from Birmingham Southern College and a B.S. in Building
Construction from Auburn University.
Bobby Walley has been a director since February 1997, and he has served
as our Secretary since August 2000 and as our President for an approximate 3
week period in September 2001. Mr. Walley owned a forestry consulting firm,
Walley Consulting Co., in Hattiesburg, Mississippi for approximately 10 years
prior to its sale in 1998. Since then he has been an independent consultant. Mr.
Walley holds a Bachelors Degree in Business Administration, a Masters Degree in
Forestry and an AAA Degree (similar to a Ph.D.) in Forestry from Mississippi
State University.
Darvin D. Pierce has been a director since February 1997. Mr. Pierce
has more than 20 years experience working in the investment community.
Currently, he is the co-manager of several mutual bank loan funds and since 1990
has held a senior executive position for Van Kampen Funds of Oakbrook Terrace,
Illinois. In this capacity, Mr. Pierce is the Chief Analyst for $13.2 billion
bank originated secured corporate loans, and is responsible for all analytic
work, "due diligence" and monitoring of the portfolio; he manages 10
professional and eight clerical and accounting personnel and is responsible for
the day-to-day administration, as well as the establishment and maintenance of
working relationships with a number of the Syndication Desks/Personnel at major
lending institutions in the United States. From 1986 to 1990 he was Senior Vice
President, Chief Lending Officer, Australia and New Zealand Bank, New York, New
York. From 1980 to 1986, he was the Vice President, Senior Lending Officer of
the National Bank of Canada, Chicago, Illinois. Mr. Pierce has a Bachelor of
Science in Finance and Economics and a Masters in Business Administration from
Northwestern University.
Richard Sullivan has been a director since January 2002. Mr. Sullivan
has been a financial consultant for over thirty years. He holds a. B.A. degree
from Georgetown University and a M.B.A. from Cornell University.
Significant Employees
Jerry Kavoun has held his position since January 2001. Mr. Kavoun
joined us after we purchased substantially all of cs-live's assets in October
2001. He was a Vice President, General Manager and a founder of cs-live, inc.
where he worked from June 2000. From September 1999 until June 2000, he worked
at Atmos Corp., a business development company, as Senior Vice-President, in
which he was a founder. From September 1996 to September 1999, he worked at
ChipWorld, Inc. (patent litigation support for semiconductor licensing) where he
was Director, Business Development. He holds an EEE (electrical electronics
engineering), Semiconductor Physics from Riga Polytechnical University.
12
Vincent Ren has held his position since February 2001. Prior to that
time he was the President, Chief Technology Officer and a Director of
ebiz4Biz.com, Inc. since July 1999. We purchased ebiz4Biz in January 2001. From
November 1997 until July 1999, he was a software designer for Nortel Networks.
From August 1994 to November 1997, he was a software developer for Milkyways
Networks Corporation. Mr. Ren holds a B.E. in Electrical Engineering from the
Institute of Light Industrial Engineering, Beijing, China and an M.B.A. from the
University of International Business & Economics, Beijing, China.
Compliance with Section 16(a)
Mr. Jacque Pate was appointed President on January 17, 2002. Mr. Pate
inadvertently filed his Form 3 late.
Item 10. Executive Compensation
The following Summary Compensation Table sets forth, for the three
years ended December 31, 2001, the compensation for services in all capacities
earned by our Chief Executive Officer. There were no other officers or employees
whose total annual salary, bonus and other annual compensation exceeded $100,000
in fiscal year 2001.
SUMMARY COMPENSATION TABLE
Securities
Name and Underlying
Principal Position Year Salary Bonus Options
------------------ ---- ------ ----- ----------
David E. Rabi 2001 $200,000 -- -0-
President 2000 $120,000 -- 1,000,000
1999 120,000 -- 250,000
Bobby Walley 2001 -0- -- -0-
President for
approximately 3 weeks
The following table sets forth information concerning grants of stock
options to purchase shares of our Common Stock during the year ended December
31, 2001 to our Chief Executive Officer.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation for
Option Term ($)
Individual Grants
----------------------------------------------------------------------------------------
Number of Percentage of
Securities Total Options
Underlying Granted to
Options Employees In Exercise Price
Name Granted Fiscal 2000 (%) Per Share ($) Expiration Date
---- ------- --------------- ------------- ---------------
David E. Rabi -0- -0- -0- --
Bobby Walley -0- -0- -0- --
13
The following table sets forth information with respect to stock
options exercised by our Chief Executive Officer during the fiscal year ended
December 31, 2001 and stock options he held as of December 31, 2001.
AGGREGATED OPTION/SAR EXERCISES IN LAST YEAR AND YEAR-END
OPTION/SAR VALUES
Number of Value of Unexercised
Securities In-the-Money
Underlying Number of Securities Options/SARs
Options/SARs Underlying Options/SARs at Fiscal Y/E
Acquired on Value at Fiscal Y/E (#) Exercisable/
Name Exercise (#) Realized Exercisable/Unexercisable Unexercisable
---- ------------ -------- ------------------------- ---------------------
David E. Rabi -- -- 1,000,000/0 $2,500,000/0
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial
ownership of our Common Stock as of March 29, 2002:
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
19,976,289 shares of Common Stock outstanding on March 29, 2002.
Unless otherwise indicated below, to our knowledge, all persons and
entities listed below have sole voting and investment power over their shares of
Common Stock, except to the extent that individuals share authority with spouses
under applicable law. Unless otherwise indicated, each entity or person listed
below maintains a mailing address of c/o 800America.com, Inc. 420 Lexington
Avenue, New York, New York 10170.
The number of shares of Common Stock beneficially owned by each
shareholder is determined in accordance with the rules of the Securities and
Exchange Commission and does not necessarily indicate beneficial ownership for
any other purpose. Under these rules, beneficial ownership includes those shares
of Common Stock over which the shareholder exercises sole or shared voting or
investment power.
14
Percentage
Amount of Ownership
Name of Beneficial Before
Beneficial Owner Ownership Offering(1)
---------------- --------- -----------
David E. Rabi 10,308,000(2) 49.0%
Jacques Pate 80,000(3) *
Lazard Freres & Co. 1,933,550 9.1%
30 Rockerfeller Plaza
61st Floor
New York, NY 10020
Darvin Pierce 60,000(4) *
Bobby Walley 65,000(5) *
Richard Sullivan - 0 - --
---------- ----
All Executive Officers and Directors
as a group (5 persons) 10,513,000(6) 49.6%
-----------
* Less than one percent.
(1) Based on a total of 19,976,289 shares of Common Stock outstanding as of
March 29, 2002. This amount excludes the conversion of any other
convertible securities. Excludes all of our Common Stock equivalents,
including stock options, warrants and restricted stock.
(2) Includes 9,308,000 shares of Common Stock held by American Deductible,
Inc., as trustee of a trust established for the benefit of the children of
Mr. Rabi. Mr. Rabi does not act as trustee of the trust but has a power of
attorney to act on behalf of said trust and may be deemed to have direct
voting control of the Common Stock held in the trust. Also includes options
to purchase 1,000,000 shares of Common Stock.
(3) represents options to purchase 80,000 shares of Common Stock.
(4) Includes options to purchase 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.
Item 12. Certain Relationships and Related Transactions
On July 9, 1999, 800America, Inc., a Delaware corporation, was merged
into 800America.com, Inc. As part of the Agreement and Plan of Merger, we issued
10,000,000 shares of our Common Stock to the three shareholders of 800America,
Inc. We also changed the name of the company to 800America.com, Inc. Of the
restricted shares of Common Stock issued pursuant to the merger, 9,358,000
shares of Common Stock were issued to American Deductible, Inc. American
Deductible, Inc. is a trust established for the benefit of the children of Mr.
Rabi, our Chief Executive Officer and a director of 800America and the former
President and controlling shareholder of 800America, Inc. Mr. Rabi does not act
as trustee of the trust but holds a power of attorney on behalf of the trust and
may be deemed to hold direct voting control of such shares.
15
In February 2000, we issued to David E. Rabi a total of 1,000,000 stock
options under our Stock Option Plan.
In August 2001, we purchased all of the capital stock of IPS Payment
Systems, Inc., formerly UPS Payment Systems, Inc., from our Chief Executive
Officer, Mr. David E. Rabi. The purchase price was $1.00.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
3.01 Articles of Incorporation (1)
3.02 Bylaws (2)
10.0 Lease dated November 3, 1999, as amended (3)
(1) Incorporated by reference to Exhibit 3.01 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on July 17, 1998 (file no. 333-51683).
(2) Incorporated by reference to Exhibit 10.0 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on January 11, 2002 (file no. 333-76792).
(3) Incorporated by reference to Exhibit 3.02 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on July 17, 1998 (file no. 333-51683).
(b) The following reports on Form 8-K are hereby incorporated by
reference:
1. On December 5, 2001, a report on Form 8-K was filed in connection
with the Registrant's acquisitions of all of the capital stock of
WizardWorld, Inc.
2. On October 29, 2001, a report on Form 8-K was filed in connection
with the Registrant's acquisitions of all the capital stock of
iGain, Inc.
16
800America.com Inc.
Table of Contents
Independent Auditor's Letter F-2
Consolidated Balance Sheet F-3
Consolidated Income Statement F-4
Consolidated Changes in Stockholders' Equity F-5
Consolidated Changes in Stockholders' Equity (Continued) F-6
Consolidated Statement of Cash Flows F-7
Consolidated Notes to Financial Statement F-8 - F-13
F-1
Jack F. Burke, Jr.
Certified Public Accountant
P. O. Box 15728
Hattiesburg, Mississippi 39404
Independent Auditor's Letter
To the Board of Directors and Stockholders'
of 800America.com Inc.
I have audited the accompanying consolidated balance sheet of 800America.com
Inc. (a Nevada Corporation) as of December 31, 2001 and 2000 and the related
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 2001. These financial statements are the
responsibility of 800America.com Inc. management. My responsibility is to
express and opinion on these financial statements based on my audit.
I conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
our opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 800America.com Inc. as of December
31, 2001 and 2000 and the results of its operations and its cash flows for the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
Jack F. Burke, Jr.
Hattiesburg, Mississippi
March 22, 2002
F-2
800America.com, Inc.
Consolidated Balance Sheet
December 31
2001 2000
Assets
Current Assets
Cash $13,201,125 $2,117,746
Accounts Receivable 53,752 995,634
Allowance for Doubtful Accounts 0 (139,000)
Prepaid Advertising 0 75,000
Deferred Tax Asset 0 47,260
Interest Receivables 17,151 0
Notes Receivable 301,570 0
----------- ----------
Total Current Assets 13,573,598 3,096,640
----------- ----------
Property and Equipment
Equipment 1,066,463 743,831
Software 3,695,650 887,150
Auto 20,738 20,738
Networking Development 2,633,493 0
----------- ----------
7,416,344 1,651,719
Less Accumulated Depreciation 1,607,545 567,832
----------- ----------
Net Property and Equipment 5,808,799 1,083,887
----------- ----------
Other Assets
Bond Deposit 500,000 0
Stock Escrow 115,015 0
Goodwill (Net) 2,774,266 193,333
Other Assets 199,917 47,750
----------- ----------
Total Other Assets 3,589,198 241,083
----------- ----------
Total Assets 22,971,595 4,421,610
=========== ==========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable Trade 131,085 24,947
Subscribers Refund Due 770,892 0
Income Tax Payable 1,027,518 386,872
Accrued Expenses 98,821 0
----------- ----------
Total Current Liabilities 2,028,316 411,819
----------- ----------
Stockholders' Equity
Preferred Stock $0.001 Par Value, 5,000,000
Shares Authorized 0 Shares Issued
Common Stock $0.001 Par Value 50,000,000
Shares Authorized 18,724,493 Shares Issued at
December 31, 2001 and 13,412,000
Shares Issued December 31, 2000 18,725 13,412
Additional Paid in Capital 10,605,671 1,943,134
Less Treasury Stock Purchased (50,000)
Retained Earnings 10,368,883 2,053,245
----------- ----------
Total Stockholders' Equity 20,943,279 4,009,791
----------- ----------
Total Liabilities and Stockholders' Equity $22,971,595 $4,421,610
=========== ==========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-3
800America.com, Inc.
Consolidated Income Statement
For Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
Revenues $21,401,169 $15,980,529 $3,283,575
----------- ----------- ----------
Cost and Expense
Advertising and Promotion 4,443,249 1,878,318 397,738
Rebates 8,913,351 2,135,668
Bad Debts 270,795 66,000
Depreciation and Amortization 1,147,113 486,480 88,019
Contract Services 296,972
Payroll 884,546 299,254 86,961
Consulting 216,250 313,204 85,000
Legal and Accounting 226,677 78,039 40,915
Rent 157,959 25,466 17,800
Travel 284,310 104,904 8,532
General and Administrative 804,742 496,818 81,772
Cost - Integrating Acquisition Operations 984,356
----------- ----------- ----------
Total Cost and Expense 9,446,174 12,866,629 3,008,405
----------- ----------- ----------
Operating Income 11,954,995 3,113,900 275,170
----------- ----------- ----------
Other Income
Interest Income 184,423 26,243 5,810
Sale of Assets 500,000
----------- ----------- ----------
Total Other Income 684,446 26,243 5,810
----------- ----------- ----------
Income Before Income Tax 12,639,441 3,140,143 280,980
Income Tax Expense 4,323,803 1,067,649 95,533
Net Income $8,315,638 $2,072,494 $185,447
Basic Earnings Per Share Common Stock $0.52 $0.16 $0.03
Weighted Average Common Stock Outstanding 16,146,516 12,721,359 6,243,132
Diluted Earnings Per Share $0.46 $0.14 $0.03
Diluted Weighted Shares 18,276,516 14,371,359 6,432,989
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-4
800America.com, Inc.
Consolidated Changes in Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
Additional
Common Stock Paid In Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
Balance December 31, 1998 700,000 $700 $6,069 ($204,696) ($197,927)
Sale of Common Stock at $2.50
Per Share Pursuant to Initial
Public Offering Net of Offering
Cost March 31, 1999 80,000 80 198,713 198,793
Services and Rental Space
Contributed by Officer 9,000 9,000
Common Stock Insured Pursuant
to Merger July 9, 1999 11,170,000 11,170 (11,170)
Common Shares Sold July 9, 1999 300,000 300 499,700 500,000
Additional Paid in Capital
November 2, 1999 250,000 250,000
Net Income 185,447 185,447
--------------------------------------------------------------------------------------
Balance December 31, 1999 12,250,000 12,250 952,312 (19,249) 945,313
Sale of Common Stock January 14, 2000 250,000 250 249,750 250,000
Common Stock Sold June 30, 2000
Acquisition June 30, 2000 200,000 200 199,800 200,000
Common Stock Issued for Services
at Fair Market Value 12,000 12 11,988 12,000
Common Stock Sold October 26, 2000 700,000 700 529,284 529,984
Net Income 2,072,494 2,072,494
--------------------------------------------------------------------------------------
Balance December 31, 2000 13,412,000 13,412 1,943,134 2,053,245 4,009,791
Continued
F-5
800America.com, Inc.
Consolidated Changes in Stockholders' Equity
Years Ended December 31, 2001, 2000 and 1999
Continued
Additional
Common Stock Paid In Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
Balance Forward 13,412,000 13,412 1,943,134 2,053,245 4,009,791
Stock Issued Pursuant to the Acquisition
of Inshop.com, February 2, 2001 1,817,493 1,818 1,815,676 1,817,494
Stock Issued Pursuant to the Acquisition
of EBIZ.com May 30, 2001 200,000 200 133,133 133,333
Stock Issued Pursuant to the Acquisition
of iGain.com October 15, 2001 1,050,000 1,050 2,203,950 2,205,000
Stock Issued Pursuant to the Acquisition
of Assets of cslive.com September 24, 2001 450,000 450 899,550 900,000
Stock Issued Pursuant to the Acquisition of
Wizard World.com December 3, 2001 660,000 660 1,715,340 1,716,000
Stock Issued for Service at Fair Market Value 115,000 115 216,135 216,250
Stock Issued Private Placement Net of
Offering Cost 665,000 665 814,172 814,837
Stock Sold December 3, 2001 355,000 355 864,581 864,936
Treasury Stock Purchased (50,000) (50,000)
Net Income for Year Ended December 31, 2001 8,315,638 8,315,638
------------------------------------------------------------------------------------
Balance December 31, 2001 18,724,493 $18,725 $10,605,671 $10,368,883 ($50,000) $20,943,279
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-6
800America.com, Inc.
Consolidated Statement of Cash Flows
Years Ended December 31,
2001 2000 1999
Cash Flows From Operating Activities
Net Income (Loss) $8,315,638 $2,072,494 $185,447
Adjustments to Reconcile Net Income
to Cash Provided (Used) by Operations
Depreciation & Amortization 1,039,713 486,480 88,019
Stock Issued for Services 216,250 12,000
Change in Current Assets and Liabilities
Increase in Provision for Doubtful Accounts (139,000) 73,000 66,000
Notes Receivable (301,570)
Accounts Receivable 941,882 (466,832) (528,802)
Prepaid Advertising 46,600 (121,600)
Other Assets 105,109 (72,569) (22,440)
Accounts Payable 205,133 15,951 (18,249)
Rebates Payable (330,551) 330,551
Income Tax Payable 640,473 268,899 117,973
Due to Subscribers Increase 770,892
----------- ------------ --------
Net Cash Provided (Used) by Operations 11,794,520 2,105,472 96,899
----------- ------------ --------
Cash Flows From Investment Activities
Bond Deposit (500,000)
Stock Escrow (115,015)
Deposit on Equipment Increase 94,000 (94,000)
Purchase of Computer Related Assets (1,573,734) (1,254,274) (380,140)
Advances (152,167)
----------- ------------ --------
Net Cash (Used) By Investment Activity (2,340,916) (1,160,274) (474,146)
----------- ------------ --------
Cash Flows From Financing Activities
Notes Payable (157,500)
Other Liabilities (31,059)
Sale of Common Stock 1,679,775 779,984 957,793
Purchase of Treasury Stock (50,000)
----------- ------------ --------
Net Cash Provided By Financing Activity 1,629,773 779,984 769,234
----------- ------------ --------
Net Cash 11,083,379 1,725,182 391,987
Beginning Cash Balance 2,117,746 392,564 577
----------- ------------ --------
Ending Cash Balance $13,201,125 $ 2,117,746 $392,564
=========== ============ ========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-7
800America.com, Inc.
Consolidated Notes to Financial Statements
Note 1 - Business and Significant Accounting Policies
Nature of Operations - 800America.com Inc. (A Nevada Corporation) is a
diversified internet company. 800America.com Inc. (the Company) owns and
operates international e-commerce and technology business to business and
business to consumer formats. The Company has acquired several Internet based
companies (see Note 2 Acquisitions) and has integrated their operations into the
Company's operations.
Cash and Cash Equivalents - The Company does not have any cash equivalents. Cash
consists of deposits in banks. There are no restrictions on any bank balances.
Account Receivables - Account receivables at December 31, 2001 were minimal and
no allowance for Bad Debts is needed. The full amounts of account receivables at
December 31, 2000 were collected. All remaining accounts are considered fully
collectable.
Property, Plant and Equipment - Property, plant and equipment are recorded at
cost. Maintenance and repairs expenditures are charged to expense when incurred.
The accelerated method of depreciation is used with equipment over a useful life
of five years and straight line depreciation over three years is used for
software purchased. Networking Development consists of the existing computerized
structure that was acquired and integrated into the Company's operations.
Intangibles - Goodwill and other assets arising from acquisitions are being
amortized over their useful life not to exceed 15 years. On January 1, 2002 the
Company adopted Financial Accounting Standards No. 142, Goodwill and Intangible
Assets. Under this pronouncement the Company discontinued its practice of
amortizing goodwill in favor of an annual impairment analysis. Impairment
analysis will be performed more frequently should conditions or circumstances
arise which merit such a review.
Bond Deposit - The government of the Peoples Republic of China required a bond
of five hundred thousand ($500,000) US dollars on deposit with a bank in China.
Pursuant to its agreement with the government, the Company expects to receive a
refund of the money.
Stock Escrow - The Company put in escrow one hundred fifteen thousand and
fifteen dollars ($115,015) to buy back, on request, 51,028 shares of its stock
owned by employees of iGain,Inc. a Company acquired through acquisition.
F-8
Notes Receivable - Notes receivable are short term and due from the successor
company (Intelligent Web Technology) to a company (cslive) from which the
Company purchased assets in one of the acquisitions.
Revenue Recognition - The Company recognizes revenues when a transaction is
completed on one of its web sites and a commission to the Company is generated
and paid directly to the Company. For the year ended December 31, 2001 the
Company's accounts receivable are minimal.
Advertising Expense - Prepaid Advertising - Advertising cost is expensed in the
year the advertising takes place. Prepaid advertising is recognized when such
services have been paid for but not yet used at the end of the period. There was
no prepaid advertising at December 31, 2001, prepaid advertising of $75,000 at
December 31, 2000 was expensed in 2001.
Use of Estimates - The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Rebates - In prior years, 2000 and 1999, the Company offered rebates to its
customers who patronized its shopping portals. The Company received an agreed
discount from the stores comprising the shopping portals and from this discount
paid rebates to its customers. The Company ceased the rebate procedure at the
end of year 2000.
Note 2 - Acquisitions
The Company acquired the following companies or businesses during 2001:
Operations Stock Cost
Included Shares Stock Contingent
Method From Cash Issued Value Cost Goodwill (1) Commitment (2)
Fileshooter Purchase 06-30-2001 $ 500,000 500,000
Inshop . com Purchase 02-02-2001 1,817,493 $1,817,493 $1,817,493 $ 900,000
ebiz4biz . com, Inc. Purchase 05-30-2001 1,082,500 200,000 133,333 1,215,833 133,333
iGain, Inc. (3) Purchase 10-09-2001 1,050,000 2,205,000 2,205,000 1,205,000
cslive - Assets Purchase 09-24-2001 50,000 450,000 900,000 950,000 450,000 770,892
Wizard World Inc.(4) Purchase 12-03-2001 660,000 1,716,000 1,716,000
Total $1,632,500 4,177,493 $6,771,826 $8,404,326 $2,688,333 $770,892
F-9
(1) \Goodwill acquired before July 1, 2001 was initially being amortized over
fifteen (15) years. On January 1, 2002 the Company adopted Financial
Accounting Standards No. 142, Goodwill and Intangible Assets. Upon the
adoption of this pronouncement the Company no longer amortizes goodwill but
performs an impairment evaluation annually, or more frequently should
circumstances or conditions arise which merit such a review.
(2) Amount due members of cslive if, the members make a claim for funds due
them. Any amounts not claimed by September 24, 2002 will revert to the
Company.
(3) The Company agreed to repurchase, for $2.60 per share at the option of the
holders, under certain conditions, one million (1,000,000) shares of the
common stock issued in the merger.
(4) The Company agreed to repurchase at $2.60 per share, six hundred sixty
thousand (660,000) shares of common stock issued in the merger at the
option of the holder for a period up to one year from the date of the
merger.
The Company's potential exposure on the buy back provisions (3)& (4) is
approximately $2,831,000.
In 2000 the Company purchased RothmanCloseout.com for two hundred thousand
(200,000) shares of stock valued at $1 which was the approximate market value of
the stock. Rothman is a business to business closeout portal for manufacturers,
wholesalers and retailers to sell and buy surplus inventories internationally.
The purchase price of two hundred thousand dollars ($200,000) was allocated to
goodwill.
Note 3 - Contingent Liability
As noted in Note 2 Acquisitions (3) and (4), the Company is potentially liable
within the next year for $2,831,000 on its buy back agreements with the former
stockholders' of iGain, Inc. and Wizard World Inc. two companies acquired during
2001.
The Company has also agreed to buy back 51,028 shares of its stock issued to
iGain, Inc. employees. (See Note 1 Stock Escrow). The agreement specifies the
employees who may sell their stock at $2.25 per share. The total possible
repurchase cost to the Company is $114,813.
Note 4 - Financial Instruments
Fair Value - The carrying value of cash, accounts receivable and accounts
payable approximates fair value due to the short term to maturity.
Concentrations of Credit Risk - Financial instruments that potentially subject
the Company to credit risk include cash on deposit at financial institutions in
the amount $13,201,125 at December 31, 2001, which is Federally Insured up to
$100,000. The Company has extended unsecured credit to regular customers of
$53,752 December 31, 2001 and $995,634 at December 31, 2000. The Company had no
bad debt for year 2001 and wrote off $197,795 in bad debts in 2000.
F-10
Note 5 - Related Party Transactions
Compensation paid majority Stockholder was $191,663 and $75,000 for the years
ended December 31, 2001 and 2000 respectively. Additional services contributed
by stockholders' were $6,000 for the year ended December 31, 1999.
Note 6 - Supplemental Cash Flow Information
For years ended 12/31/2001 12/31/2000 12/31/1999
Interest Paid 0 0 0
Income Tax Paid $3,572,439 $856,305 0
Note 7 - Non Cash Transaction
12/31/2001 12/31/2000 12/31/1999
200,000 shares common stock was
issued for the purchase of
Rothman Closeouts $200,000
Shares issued for services $216,250 $12,000 $6,000
4,177,493 shares of common
issued in acquisitions $6,771,826
Note 8 - Stock Option Plan
The Company 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. The exercises price of the options range from $1.00 to $4.25
per share. The following summarize the options granted and outstanding.
December 31 2001 2000 1999
Options outstanding beginning of year 1,650,000 1,650,000 0
Granted 770,000 0 1,650,000
Exercised 0 0 0
Options outstanding end of year 2,420,000 1,650,000 1,650,000
No compensation expense results from the grant recorded according the Accounting
Principle Board Opinion No.25.
F-11
Note 9 - Income Tax
The Company accounts from income taxes under Statement of Financial Accounting
Standards No. 109, Accounting from Income Taxes (FAS No. 109) is an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In estimating
future consequences, FAS No.109 generally considers all expected future events
other than enactments of changes in the tax law or rates.
The deferred tax asset account resulted from temporary differences between the
amounts of assets and liabilities recognized for financial reporting and tax.
The components of the net deferred income tax asset are as follows:
2001 2000 1999
Provisions for Doubtful Accounts 0 $24,820 $22,440
Income Taxes are:
2001 2000 1999
Current Tax Expense $4,323,804 $1,092,469 $117,973
Deferred Tax Benefit 0 (24,820) (22,440)
---------------------------------------------
Provision for Income Tax $4,323,804 $1,067,649 $95,533
The Provision for income taxes and the reconciliation between federal income
taxes at the statutory effective rates are as follows:
2001 2000 1999
Amount % Amount % Amount %
Federal Income Tax at Statutory Rate Amount $4,323,804 34.0 $1,067,649 34.0 $95,533 34.0
------------ ---------- -------
Provision for Income Tax $4,323,804 34.0 $1,067,649 34.0 $95,533 34.0
Note 10 - Operating Leases
Lease expense for the year ended December 31, 2001 was $157,959 and for the year
ended December 31, 2000 was $25,465. The Company leased facilities at Mt.
Juliet, TN for $891 per month and increasing 7-1/2% for the next year. The
Company has leased additional facilities in Nashville, TN on a month to month
lease at $650 per month. The Mt. Juliet lease expires at December 2002. The
Company also leases office space in New York, at $3,460 per month, Ottawa,
Canada where the rent is $26,481 per year, Beijing, China at $1,000 per month
and Fairfield CT with rent of $1,576 per month.
Fairfield CT Beijing Mt. Juliet, TN Nashville New York Ottawa
1st Year $18,912 $12,000 $9,576 $11,494 $41,520 $26,481
2nd Year $41,520 $26,481
3rd Year $41,520 $26,481
4th Year $41,520 $26,481
F-12
The Company also leases a T3 line from Bell South for $11,275 per month. The
lease expires May 2002.
1st Year 2002 $135,300
Note 11 - Treasury Stock
The Company purchased 12,400 shares of its outstanding stock at $4.03 per share
resulting in the Treasury Stock transaction of $50,000.
Note 12 - Subsequent Event
The Company purchased In January 2002 the assets of YOUtopia.com Inc. in
exchange for five hundred thousand (500,000) shares of common stock. Cost
allocation to assets has not yet been established. The Company also repurchased
from iGain employees the Company's common stock as detailed in Note 1 Stock
Escrow and Note 3 Contingent Liability.
F-13
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
800America.com, Inc.
By: /s/ David E. Rabi
------------------------
David E. Rabi,
Chief Executive Officer
Date: April 12, 2002
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ David E. Rabi Chief Executive Officer (Principal April 12, 2002
---------------------- Executive Officer) Director and Chief
David E. Rabi Financial Officer (Principal
Accounting Officer)
/s/ Bobby Walley Director April 12, 2002
----------------------
Bobby Walley
/s/ Darvin D. Pierce Director April 12, 2002
----------------------
Darvin D. Pierce
/s/ Richard Sullivan Director April 12, 2002
----------------------
Richard Sullivan