===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 8-K/A
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 25, 1999
SALES ONLINE DIRECT INC.
(Exact name of Registrant as specified in charter)
Delaware 0-28720 73-1479833
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
4 Brussels Street
Worcester, Massachusetts 01610
(508) 753-0945
(Address, including zip code and telephone number,
including area code, of Registrant's principal executive offices)
Not Applicable
(Former name or former address of Registrant, if changed since last report)
This Form 8-K/A is being filed to amend Item 7 of the Current Report on Form 8K
of the Registrant, which was filed with the Securities and Exchange Commission
on March 10, 1999, to include the necessary financial statements and pro forma
financial information.
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<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired
INTERNET AUCTION, INC.
Independent Auditors' Report F-1
Balance Sheet as of December 31, 1998 F-2
Statement of Income F-3
Statement of Cash Flows F-4
Notes to Financial Statements F-5
ROTMAN AUCTION, INC.
Independent Auditors' Report F-8
Balance Sheet as of December 31, 1998 and 1997 F-9
Statements of Operations and Retained Earnings (Deficit) F-10
Statement of Cash Flows F-11
Notes to Financial Statements F-12
(b) Pro Forma Financial Information
Pro Forma Financial Information F-15
Pro Forma Balance Sheet as of December 31, 1998 F-16
Pro Forma Statement of Income as of December 31, 1998 F-17
(c) Exhibits
* 2.1 Agreement and Plan of Reorganization dated January 31, 1999
among the Registrant and Gregory Rotman, Richard Rotman, Marc
Stengel and Hannah Kramer.
- ------------------
* Previously filed on Form 8-K on March 10, 1999, dated February 25, 1999 and
incorporated by reference herein.
-1-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SALES ONLINE DIRECT INC.
Date: August 16, 1999 By: /s/ Marc Stengel
-----------------------------------------
Marc Stengel, Vice President
C78921.634
-2-
<PAGE>
FINANCIAL STATEMENTS
As of December 31, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Internet Auction, Inc.
Worcester, Massachusetts
We have audited the accompanying balance sheet of Internet Auction, Inc. as of
December 31, 1998, and the related statements of income and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet Auction, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Wolf & Company, P.C.
Boston, Massachusetts
July 7, 1999
F-1
<PAGE>
INTERNET AUCTION, INC.
BALANCE SHEET
December 31, 1998
ASSETS
Current asset:
Due from affiliate $ 7,164
Property and equipment:
Computer equipment and software $22,755
Accumulated depreciation (2,276)
------
Net property and equipment 20,479
------
Total assets $27,643
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued liabilities $ 5,000
Income taxes payable 2,160
Due to affiliates 8,245
-----
Total current liabilities $15,405
Shareholders' equity:
Common stock, no par value; 200,000 shares
authorized; 40,000 shares issued and outstanding 1,000
Retained earnings 12,238
------
13,238
Less stock subscriptions receivable (1,000)
------
Total shareholders' equity 12,238
------
Total liabilities and shareholders' equity $27,643
=======
See notes to financial statements.
F-2
<PAGE>
INTERNET AUCTION, INC.
STATEMENT OF INCOME
Year Ended December 31, 1998
Revenues $24,755
Operating expenses:
Professional fees $ 6,145
Credit card service charges 406
Office expenses 330
Organization costs 1,200
Depreciation 2,276
-----
Total operating expenses 10,357
Income from operations before provision
for income taxes 14,398
Provision for income taxes 2,160
-----
Net income $12,238
=======
See notes to financial statements.
F-3
<PAGE>
INTERNET AUCTION, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1998
Operating activities:
Net income $12,238
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,276
Changes in assets and liabilities:
Accrued liabilities 5,000
Income taxes payable 2,160
Net advances from affiliates 1,081
-----
Net cash provided by operating activities $22,755
Investing activities:
Property and equipment acquisitions (22,755)
-------
Net change in cash -
Cash - beginning -
-------
Cash - ending $ -
=======
See notes to financial statements.
F-4
<PAGE>
INTERNET AUCTION, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Internet Auction, Inc. (the "Company") provides an online public person to
person trading community that offers sellers a vehicle for listing items
for sale and buyers an opportunity to browse and bid for items included in
the Company's Internet Website. The Company commenced operations on January
1, 1998.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful life of 5 years.
Expenditures for additions, improvements and major renewals are capitalized
while those for repairs and maintenance are charged to expense as incurred.
Revenue Recognition
Commissions earned from public person to person trading are recognized as
income when the related buyer and seller close the transaction. The Company
never takes possession of, or title to, the merchandise and assumes no risk
of collection with respect to the underlying sales.
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 amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
F-5
<PAGE>
INTERNET AUCTION, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. RELATED PARTY TRANSACTIONS
Due from Affiliate
Due from affiliate consists of non-interest bearing cash advances to an
entity owned by one of the Company's shareholders.
Due to Affiliates
Due to affiliates consists of non-interest bearing advances to entities
owned by two of the Company's shareholders as follows:
Timeline Editions, Limited $4,745
Rotman Auction, Inc. 3,500
-----
$8,245
======
3. SUBSEQUENT EVENTS
Inventory Purchase Agreement (Unaudited)
On February 12, 1999, the Company acquired collectibles, collectors items
and memorabilia from Rotman Production, a related party, with an estimated
value of approximately $629,000 in exchange for 236 shares of the Company's
common stock. In addition, the seller was assigned the right to acquire
700,000 option shares of Securities Resolution Advisors, Inc. (SRAD) at
$.50 per share. See Agreement and Plan of Reorganization with SRAD
described below.
On February 25, 1999, the Company acquired collectibles, collectors items
and memorabilia from Kim Stengel, a related party, with an estimated value
of approximately $140,000 in exchange for 236 shares of the Company's
common stock.
Purchase of Assets of WorldWide Collectors Digest, Inc. (WWCD) (Unaudited)
On February 25, 1999, the Company purchased the assets of WWCD, a related
party, with an estimated value of approximately $34,000 in exchange for
3,835 shares of the Company's common stock.
Merger with Rotman Auction, Inc.
Effective on February 25, 1999, the Company merged with Rotman Auction,
Inc. (Rotman), a related party. Under the terms of the merger agreement,
the shareholder of Rotman received 870 shares of the Company's common stock
in exchange for the Rotman shares owned by the shareholder. The Company is
the surviving corporation in the merger. As of December 31, 1998, Rotman
had a shareholder's deficit of approximately $33,000.
F-6
<PAGE>
INTERNET AUCTION, INC.
NOTES TO FINANCIAL STATEMENTS (Concluded)
SUBSEQUENT EVENTS (concluded)
Agreement and Plan of Reorganization with SRAD
On February 25, 1999, SRAD acquired 100% of the common stock of the Company
under an Agreement and Plan of Reorganization entered into on January 31,
1999.
The shareholders of the Company received 37,368,912 shares of the common
stock of SRAD in exchange for their shares of the Company. As a result, the
shareholders obtained approximately an eighty percent (80%) controlling
interest in SRAD.
The officers and directors of SRAD resigned their positions and certain
members of the Company's former shareholders were elected officers and
directors of SRAD.
On February 25, 1999, SRAD entered into a Call Option Agreement (the
Agreement) with Universal Funding, Inc. (Universal), a shareholder of SRAD,
that is the beneficial owner of 3,000,000 shares of SRAD's common stock.
Under the Agreement, Universal agreed to grant options to SRAD to acquire
2,000,000 shares of SRAD's common stock owned by Universal at $.50 per
share over a two year period.
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Rotman Auction, Inc.
Worcester, Massachusetts
We have audited the accompanying balance sheets of Rotman Auction, Inc. as of
December 31, 1998 and 1997, and the related statements of operations, changes in
retained earnings (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rotman Auction, Inc. as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Wolf & Company, P.C.
Boston, Massachusetts
July 7, 1999
F-8
<PAGE>
ROTMAN AUCTION, INC.
BALANCE SHEETS
ASSETS
December 31,
----------------
1998 1997
---- ----
Current assets:
Cash $18,216 $42,398
Accounts receivable 4,040 104
Inventory 34,153 600
Due from affiliates 14,099 13,041
------ ------
Total current assets 70,508 56,143
------ ------
Property and equipment:
Computer equipment and software 1,848 -
Accumulated depreciation (92) -
------ ------
Net property and equipment 1,756 -
------ ------
Total assets $72,264 $56,143
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 79,544 $43,179
Accrued liabities 13,061 6,541
Sales tax payable 925 1,818
Due to officer 12,000 20,000
------- ------
Total current liabilities 105,530 71,538
------- ------
Shareholder's equity (deficit):
Common stock, no par value, authorized 200,000 shares;
issued and outstanding 1,000 shares 10,000 10,000
Retained earnings (deficit) (43,266) (25,395)
------- -------
Total shareholder's equity (deficit) (33,266) (15,395)
------- -------
Total liabilities and shareholder's equity (deficit)$72,264 $56,143
======= =======
See notes to financial statements.
F-9
<PAGE>
ROTMAN AUCTION, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
Years Ended December 31, 1998 and 1997
1998 1997
---- ----
Revenues $668,543 $520,761
Cost of revenues 93,988 15,700
------ ------
Gross profit 574,555 505,061
------- -------
Operating expenses:
Payroll and payroll taxes 259,147 213,285
Sorting 866 1,219
Advertising 124,282 143,847
Shipping 94,178 39,144
Telephone 6,763 8,089
Motor vehicle 2,968 2,898
Travel and entertainment 1,756 4,360
Credit card service charges 18,212 11,019
Bank service fees 6,044 3,998
Insurance 40,362 31,630
Professional fees 5,237 19,776
Computer and data processing 14,707 25,252
Repairs and maintenance 4,978 8,866
Office supplies and expense 8,887 13,616
Donations 300 -
Taxes - other 85 541
Depreciation 92 -
Miscellaneous expenses 3,562 2,916
-------- --------
Total operating expenses 592,426 530,456
-------- --------
Net loss (17,871) (25,395)
Retained earnings (deficit) - beginning (25,395) -
-------- --------
Retained earnings (deficit) - ending $ (43,266) $ (25,395)
======== ========
See notes to financial statements.
F-10
<PAGE>
ROTMAN AUCTION, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- -------------
Operating activities:
<S> <C> <C>
Net loss $(17,871) $(25,395)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 92 -
Changes in assets and liabilities:
Accounts receivable (3,936) (104)
Inventory (33,553) (600)
Accounts payable 36,365 43,179
Accrued liabilities 6,520 6,541
Sales tax payable (893) 1,818
-------------- -------------
Net cash provided by (used in)
operating activities (13,276) 25,439
-------------- -------------
Investing activities:
Net advances to affiliates (1,058) (13,041)
Property and equipment acquisitions (1,848)
-
-------------- -------------
Net cash used in investing activities (2,906) (13,041)
-------------- -------------
Financing activities:
Advances from (repayments to) officer (8,000) 20,000
Proceeds from sale of common stock 10,000
-
-------------- -------------
Net cash provided by (used in)
financing activities (8,000) 30,000
-------------- -------------
Net increase (decrease) in cash (24,182) 42,398
Cash - beginning 42,398 -
-------------- -------------
Cash - ending $18,216 $42,398
============== =============
</TABLE>
See notes to financial statements.
F-11
<PAGE>
ROTMAN AUCTION, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Rotman Auction, Inc. (the "Company") is a full-service consignment
auction house located in Worcester, Massachusetts. The Company provides
a full range of services to sellers and buyers including live online
bidding, consignment services, authentication of merchandise, digital
photography as well as purchases and sales of authentic memorabilia.
Inventory
Inventory is stated at the lower of cost, using the first-in, first-out
(FIFO) method, or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using the double declining balance method over the estimated useful life
of 5 years.
Expenditures for additions, improvements and major renewals are
capitalized while those for repairs and maintenance are charged to
expense as incurred.
Revenue Recognition
The Company sells merchandise from vendors under one of two types of
sales transactions. The Company either purchases merchandise and sells
it to customers or sells merchandise to customers under consignment-type
revenue sharing agreements with vendors.
For sales of merchandise owned and warehoused by the Company, the
Company is responsible for conducting the auction, billing the customer,
shipping the merchandise to the customer, processing merchandise returns
and collecting accounts receivable. The Company recognizes the gross
sales amount as revenue upon shipment of the merchandise.
For sales of merchandise under consignment-type revenue sharing
agreements, the Company takes physical possession of the merchandise,
but is not obligated to and does not take title to or ownership of the
merchandise. When an auction is completed, consigned merchandise which
has been sold is shipped upon receipt of payment. The Company recognizes
the net commission and service revenues relating to the consigned
merchandise upon receipt of the gross sales proceeds. The Company then
releases the net sales proceeds to the Consignor. Consignors realized
approximately $680,000 and $563,000 in net sales proceeds from the
Company's auctions for years ended December 31, 1998 and 1997,
respectively.
F-12
<PAGE>
ROTMAN AUCTION, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Advertising Costs
Advertising costs are charged to operations when incurred.
Income Taxes
The shareholder has elected to have the corporation taxed as an S
Corporation. Consequently, the Company does not pay corporate income
taxes. Instead, the shareholder is liable for individual income taxes on
the Company's taxable income. Accordingly, there is no provision for
income taxes in the financial statements.
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 amounts reported in the financial statements
and accompanying notes. Although these estimates are based on
management's knowledge of current events and actions it may undertake in
the future, they may ultimately differ from actual results.
2. DUE FROM AFFILIATES
Due from affiliates consists of non-interest bearing cash advances to
entities in which the Company's shareholder has an equity interest.
Amounts outstanding at December 31, 1998 and 1997 are as follows:
1998 1997
---- ----
Timeline Editions, Limited $10,419 $13,041
Internet Auction, Inc. 3,500 -
Gregory Rotman, Inc. 180 -
------- -------
$14,099 $13,041
======= =======
3. DUE TO OFFICER
Due to officer consists of non-interest bearing advances from the
Company's shareholder which are payable on demand.
F-13
<PAGE>
ROTMAN AUCTION, INC.
NOTES TO FINANCIAL STATEMENTS (Concluded)
4. SUBSEQUENT EVENTS
Merger with Internet Auction, Inc.
Effective February 25, 1999, the Company merged with Internet Auction,
Inc. (Internet), a related party. Under the terms of the merger
agreement, the shareholder of the Company received 870 shares of
Internet's common stock in exchange for the total shares outstanding
(1,000 shares) owned by the shareholder.
Internet is the surviving company in the merger.
F-14
<PAGE>
Proforma Financial Information
Effective February 25, 1999, Securities Resolution Advisors, Inc. (SRAD)
acquired all of the outstanding common stock of Internet Auction, Inc. (IA) in
exchange for 37,368,912 shares of SRAD stock. The transaction will be accounted
for as a reverse acquisition with IA being the acquirer. Concurrent with this
transaction Rotman Auction, Inc. (RA) was merged into IA in a transaction
accounted for was a purchase and the assets of WorldWide Collectors Digest, Inc.
(WWCD) were contributed to IA. Finally, during February 1999 approximately
$769,000 of inventory was contributed to IA. Subsequent to these transactions
SRAD changed its name to Sales OnLine Direct, Inc.
The proforma exhibits are based upon the audited financial statements of IA and
RA as of, and for the year ended, December 31, 1998. The proforma exhibits
include:
1) A combining proforma balance sheet as of December 31, 1998 that
reflects:
a) the merger of IA and RA and the recording of the fair value
adjustment to RA and the related goodwill, giving effect to the
purchase accounting,
b) contribution of the assets of WWCD,
c) contribution of the inventories by shareholders,
d) the effect of the stock issued in the acquisition, giving effect
to the reverse acquisiton and
e) elimination of intercompany balances
2) A combining proforma statement of operations that presents income (loss)
from continuing operations for the year ended December 31, 1998 as if
the above transactions took place on January 1, 1998. The proforma
adjustments relate to:
a) Recording amortization of goodwill and
b) Elimination of the income tax expense due to the proforma net
loss.
F-15
<PAGE>
Sales OnLine Direct, Inc.
Proforma Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
Securities
Resolution Internet Rotman
Proforma Advisors, Auction Auction
Proforma Adjustments Inc. Inc. Inc.
<S> <C> <C> <C> <C> <C>
Current assets $835,055 c $769,000 $488 $ - $56,409
b 9,158
Related party
Receivables 13,336 e (10,664) - 7,164 14,099
b 2,737
Property & Equipment 52,112 b 29,877 - 20,479 1,756
Other assets 33,266 a 33,266 - - -
Total assets $933,769 $833,374 $488 $27,643 $72,264
Current liabilities $100,690 $ - $ - $7,160 $93,530
Related party
Payables 18,124 e (10,664) - 8,245 12,000
b 8,543
Shareholders' Equity:
Common stock 43,894 d (47,528) $90,422 1,000 10,000
a (10,000)
Paid in Capital 759,823 c 769,000 811,308 - -
b 33,229
d (853,714)
Retained earnings
(Accumulated
deficit) 12,238 d 901,242 (901,242) 12,238 (43,266)
a 43,266
subtotal 815,955 792,229 488 13,238 (33,266)
Less stock sub-
scriptions
receivable (1,000) - - (1,000) -
Total shareholders'
equity 814,955 792,229 488 12,238 (33,266)
Total liabilities
and shareholders'
equity $933,769 $833,374 $488 $27,643 $72,264
</TABLE>
a Record merger of Rotman Auction, Inc. into Internet Auction, Inc. and related
goodwill
b Record contribution of WorldWide Collectors Digest assets
c Record inventories contributed by shareholders
d Record reverse merger on February 25, 1999
e Eliminate intercompany loans
F-16
<PAGE>
Sales OnLine Direct, Inc.
Proforma Statement of Income
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Securities
Resolution Internet Rotman
Proforma Advisors, Auction Auction
Proforma Adjustments Inc. Inc. Inc.
<S> <C> <C> <C> <C> <C>
Sales $693,298 $ - $ - $ 24,755 $668,543
Cost of sales 93,988 - - - 93,988
Gross profit 599,310 - - 24,755 574,555
Operating expenses 613,783 f 11,000 - 10,357 592,426
Income (Loss) before
provision for
income taxes (14,473) (11,000) - 14,398 (17,871)
Provision for
income taxes - g (2,160) - 2,160 -
Net income (loss) $(14,473) $(8,840) $ - $12,238 $(17,871)
Weighted average
number of shares
outstanding 43,893,912 37,368,912 6,525,222
Basic and diluted
earnigs (loss)
per share $ - $ -
</TABLE>
f Record amortization for goodwill
g Eliminate income tax due to loss
F-17
