SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 1999
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
incorporation or organization) Identification number)
1929 So. 21st Avenue 37212
Nashville, Tennessee (Zip Code)
(Address of Principal Executive offices)
Issuer's telephone number: (888) 855-9872
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock $.001 Par Value
----------------------------
(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 X No
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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. [ X ]
State issuer's revenues for the most recent fiscal year. $3, 283,575.
The aggregate market value of the voting common stock held by non-affiliates of
the Registrant as of January 28, 2000 was $15,823,760. The Company's common
stock is traded on the OTC Electronic Bulletin Board.
There were 12,250,000 shares of common stock $.001 par value outstanding as of
January 28, 2000.
Documents incorporated by reference: None
Transitional Small Business Format (check one); Yes ; No X
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Item 1. Description of Business
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Introduction
The Company was incorporated in the State of Nevada on December 5, 1996,
under the name "Sportsfair Television, Inc." The Company's plan at that time was
to create and promote sporting goods shows for home shopping networks
transmitted via satellite or cable television. These plans did not come into
fruition. On December 31, 1997, the Company acquired from Elizabeth Ann Peters
all of the issued and outstanding common stock of Songs for the Planet in
exchange for 200,000 shares of Common Stock. Songs for the Planet was organized
in August of 1997 and had limited operations at the time of the foregoing
acquisition. These operations primarily consisted of providing copyright
administrative services to affiliates of Mrs. Peters. The Company conducted no
business operations prior to the acquisition of Songs for the Planet. Prior to
the acquisition of Songs for the Planet, the Company conducted no operations
whatsoever. At the time of its formation, the promoter of the Company was Mr.
David Owen, the father of Mrs. Peters. Prior to the acquisition of Songs for the
Planet by the Company, Mr. Owen divested his interests in the Company. Elizabeth
Ann Peters became the Company's sole employee.
In July of 1999, the Company issued 10,000,000 shares of its restricted
common stock to acquire all of the issued and outstanding common stock of 800
America, Inc., a Delaware corporation based in Nashville, Tennessee that had
been incorporated on March 26, 1999 for the purpose of operating an internet
shopping mall and on-line magazine business. 800 America, 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
subsidiary, Songs for the Planet, to its former owner, Elizabeth Ann Peters.
On-line Shopping Portal
The primary business of the Company is to provide an internet shopping
portal for the purpose of allowing subscribers to shop on-line at over two
hundred fifty nationally recognized retailers and specialty boutique stores.
Using the Company's web site at www.800America.com, an on-line shopper can
access the stores 24 hours a day and get the shopper into the store of his or
her choice in just two clicks. The stores which are represented at the Company's
web site pay a monthly rental fee to the Company of between $50 and $200 per
month based upon the category of store. Although anyone can shop on-line using
the Company's web site, only members who pay the Company a one-time fee of
$10.00 are entitled to rebates from the stores where they shop in amounts
ranging from 3% to 10% of the purchase price of the merchandise depending on the
store. These rebates are paid by the Company on the 10th day of the month
following the on-line purchase. The Company earns commissions from the stores
based upon sales volume generated from the Company's web site. These commissions
range from 5% to 20% depending upon the store, the sales volume generated and
other factors. The commissions are paid by the on-line merchant to the Company
anywhere between 30 days and 90 days following the purchase, depending upon the
agreement between the Company and the on-line merchant.
The Company is in the process of expanding its operational capacity to
accommodate the approximately one hundred additional merchants who have
indicated a desire to obtain "floor space" at the Company's web site. Capacity
at a web site is a function of band width capacity. The Company is currently
negotiating with three different telecommunications companies to provide the
<PAGE>
additional band width which will be necessary to accommodate these additional
on-line merchants. The Company also periodically reviews sales volumes at
various stores to ascertain whether continued inclusion at the Company's web
site is warranted. Total sales volume generated through the Company's on-line
shopping portal has risen steadily since the Company merged with 800 America,
Inc. in July 1999 as follows:
Month Sales Volume in Dollars
----- -----------------------
July, 1999 1,507,082
August, 1999 2,666,994
September, 1999 6,526,408
October, 1999 7,940,890
November, 1999 13,261,362
December, 1999 12,833,851
The Company believes that the significant sales volume increases for
November and December were partially a reflection of the holiday shopping
season. However, given the increased operational capacity of the Company's web
site in the upcoming year and the corresponding increase in the number of
merchants whose products and services can be accessed by the consumer, the
Company believes that the monthly sales volumes during the year 2000 may
stabilize at the year end 1999 levels.
Internet Web Guide Magazine
In addition to its shopping portal business, the Company also publishes a
monthly on-line magazine entitled Internet Web Guide Magazine. Located at
www.internetwebguide.com, the magazine at December 31, 1999 had approximately
70,000 subscribers. On January 1, 2000, the Company implemented a new
subscription policy that lowered its annual subscription fee from $19.95 to
$9.95. Management analyzed the subscription history of the Internet Web Guide
Magazine and determined that by lowering the subscription rate, the Company
could attract new subscribers, increase readership and thereby increase
advertising rates. The magazine features articles, reviews of web sites and
features of current interest to its readers. A Spanish language version of the
magazine is also available and the Company expects to have editions available in
Italian, German, Portuguese and French by the end of January 2000. The Company
believes that the primary advantage of offering an on-line magazine is that
readers can browse through each edition until an interesting site is spotted and
then simply click onto that web site directly. No typing, with the potential for
typing errors, is necessary to access the chosen site.
Advertising revenue derived from the magazine has remained fairly stable at
a level of approximately $12,000 per month. However, with the expiration of most
advertising contracts at December 31, 1999, management has decided to increase
advertising rates by approximately 50%. The Company believes that the expected
increase in advertising revenues will more than offset any decrease in
subscription revenues that would result from a lower subscription rate, even
assuming no increase in the number of subscribers at the lower rate.
Planned Activities
The Company believes strongly in the power of the internet to bring people
into contact with many different types of services and products, as well as
afford people the opportunity for greater interaction. Toward that end, in March
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2000 the Company intends to launch an auction site, Steeplehouse.com. The focus
will be on medium to high-priced items. Revenues, if any, are expected to be
derived almost exclusively from commissions.
In May 2000, the Company plans to launch a shopping site in 3D specifically
targeting those individuals who normally purchase merchandise through television
shopping channels. The Company believes that the advantage this site will have
over TV cable shopping channels is that the shopper will not have to wait hours
until the item of choice is shown. The shopper can click on the category desired
and all items in that category will pop up one by one in 3D with voice
description.
In the third week of February 2000 the Company will launch a new site
DONOTSMOKE.com. This site will feature live and in real time the suffering of a
smoker who has cancer or other disease caused by smoking. The site will show how
the smoker now functions in his or her daily life and will follow the patient's
each move 24 hours a day. The observer will be able to see the pain and
hardships brought on by a life of smoking. After the first month, the site will
have live scenes from the operating rooms of various hospitals. Actual
operations of heart transplants, etc. will be seen. The Company anticipates this
new site may generate as many as 5 million "hits" per month. Revenue, if any, is
expected to be derived from pharmaceutical companies through the advertisement
of their products.
Competition
Competition in the exploding 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 major growth in this segment of their business. In
addition, several companies have emerged with on-line shopping portals similar
to that of the Company. Many of these companies have spent million of dollars in
advertising and marketing in an attempt to carve out a niche and establish their
brand name in this highly competitive market. However, few of these large
national competitors are currently operating profitably since they plow huge
sums of money into advertising in order to establish their market identity. As a
result, the advertising market is becoming saturated with numerous on-line
merchants and confusion among consumers is starting to become a real problem.
The result is that it is becoming more difficult for each company to
differentiate its products and services from those of its rivals. Because of the
Company's limited resources, it will have a difficult time competing with these
large national organizations whose financial strength is significantly greater
than that of the Company. There is no assurance that the Company will be able to
compete effectively with these larger organizations or continue to operate
profitably in the on-line shopping mall business. The Company is also aware that
several new companies have also begun to offer on-line shopping portals with a
customer rebate feature. This particular niche of the on-line shopping industry
is highly fragmented and there are virtually no barriers to entry into this
market. The Company expects on-line shopping sites to proliferate and that the
key to competing successfully will be to offer more services and promotions to
our customers.
Employees
The Company has 14 employees, including 11 full time employees. Three
additional employees work part-time and serve as computer programmers. The
Company may hire additional employees in the ensuing year, both full time and
part time, if its level of operations requires an increase in its work force.
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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 our
management. Often, you can recognize these statements because we use 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 of the Company to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements.
Item 2. Description of Property
-----------------------
The Company does not own any real property. The Company's corporate offices
are located in Nashville, Tennessee where the Company leases an aggregate of
approximately 2000 square feet of space from two nonaffiliates at two different
sites. One lease provides for a monthly rental of $791 per month and increases 7
1/2% per annum over the remaining two years of the lease. The second lease is
also for three years and provides for a monthly rental of $525.
Item 3. Legal Proceedings.
------------------
There are no legal proceedings, pending or threatened, to which the Company
is a party.
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.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
- --------------------------------------------------------------------------
The Company's common stock currently trades on the OTC electronic bulletin
board under the symbol ACCO. Since the common stock began trading in November
1999, it has had a high bid of $5.25 and a low bid of $3.75. The Company intends
to apply for trading on the NASDAQ Small Cap Market in the current quarter, but
there can be no assurance that the Company's application for listing will be
accepted. The Company has not paid any dividends on its common stock and the
Board of Directors presently intends to continue a policy of retaining earnings,
if any, for use in the Company's operations and to finance expansion of its
business. The declaration and payment of dividends in the future, of which there
can be no assurance, will be determined by the Board of Directors in light of
conditions then existing, including earnings, financial condition, capital
requirements and other factors. There are no restrictions that currently limit
the Company's ability to pay dividends or which the Company reasonably believes
are likely to limit the future payment of dividends on common stock.
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Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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General
The Company's primary business involves the operation of a shopping portal
web site. The Company derives revenue from different aspects of the shopping
site. For example, an annual $10.00 membership fee is charged to members that
entitles such members to a rebate for shopping on-line through the Company's web
site. The web site allows members access to over two hundred fifty stores,
including many nationally known and recognized retailers, and offers such
members a rebate of from 3% to 10% on purchases made through the web site. The
Company also derives revenues from the payment of rent and commission fees from
the merchants and retailers whose stores are represented at the Company's web
site. Rents vary between fifty and two hundred dollars per month per retailer
and commissions, which vary between 5% and 20%, are based upon the volume of
sales. The Company also devotes substantial time and resources to, and derives
significant revenues from, the publication of an on-line family magazine by the
name of "Internet Web Guide Magazine". The Company currently has approximately
70,000 subscribers worldwide. On January 1, 2000, The Company lowered its annual
subscription rate from $19.95 to $9.95.
The following discussion, which compares the operating results, liquidity
and capital resources for the year ended December 31, 1999 with the year ended
December 31, 1998 reflects the fact that the Company changed its business in
July 1999 from a company providing trademark and copyright protection for the
Nashville music industry to an on-line shopping portal and on-line magazine. As
such, results of operations for these respective years are not comparable
because the business in which the Company was engaged from July 9, 1999 through
December 31, 1999 was substantially different from its prior business.
REUSLTS OF OPERATIONS
- ---------------------
Years Ended December 31, 1999 and December 31, 1998
- ---------------------------------------------------
The Company had revenues of $3,283,575 for the year ended December 31, 1999
compared to revenues of $27,398 for the year ended December 31, 1998. Net income
for the year ended December 31, 1999 was $166,980 compared to a net loss of
$70,856 for the year ended December 31, 1998. The annual results of operations
were not comparable because of the completely different nature of the businesses
in which the Company was engaged in the respective years. By way of example,
99.8% of the revenues and all of the net income for the year ended December 31,
1999 was derived from operations since the Company acquired 800 America, Inc. on
July 9, 1999. Costs and expenses for the year ended December 31, 1999 were
$3,008,405, resulting in operating income for the year of $275,170. This
compares with costs and expenses of $91,793 that resulted in an operating loss
of $64,395 for the year ended December 31, 1998. Customer rebates totaled
$2,135,668 for the year ended December 31, 1999 and represented approximately
71% of total costs and expenses. All of this rebate expense was incurred after
July 9, 1999. Other than customer rebates, 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 depreciating and amortization expenses of $88,019. There were no comparable
rebate, advertising, or depreciation and amortization expenses incurred in the
year ended December 30, 1998. Management expects that advertising expenses will
increase in the quarter ending March 31, 2000 as the Company's television
advertising campaign accelerates. Because of the Company's limited operating
5
<PAGE>
history 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. In
particular, the bad debt expense category may be reduced significantly as the
Company gains experience in managing its accounts receivable and as the stores
which are represented in the Company's on-line shopping mall establish a payment
history with the Company.
The Company believes that its revenues and expenses will increase
substantially in the year ending December 31, 2000, both because of the
continuing expansion of the Company's business and because the year end results
at December 31, 2000 will reflect a full year of operations as a shopping portal
and on-line magazine business, whereas the results of operations for the year
ended December 31, 1999 reflected only six months as a shopping portal and
on-line magazine business. Additional expenses are also likely to be incurred as
the Company expands its bandwidth capacity in order to accommodate new stores at
its web site as well as the planned on-line auction site. The Company is also in
the process of mounting a major advertising campaign in certain select
geographic areas and expects that these advertising efforts will result in
additional on-line members and a corresponding increase in shopping volume.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net cash used in operating activities was $185,660 in the year ended
December 31, 1999 compared to net cash used in operations of $8,830 for the year
ended December 31, 1998. The Company's net cash increase for the year ended
December 31, 1999 was $391,987 compared to a net cash decrease for the year
ended December 31, 1998 of $7,132. The Company's ending cash balance at December
31, 1999 was $392,564 compared to and ending cash balance at December 31, 1998
of $577. Net cash inflows from operations are expected to continue during the
ensuing fiscal year ending December 31, 2000.
The Company's cash and cash equivalents as of December 31,1999 were
$392,564. The Company had working capital (current assets less current
liabilities) of $617,420 at December 31, 1999 and no material long-term
commitments or material commitments for capital or operational expenditures.
The Company believes that its current capital resources and liquidity are
adequate for its present level of activity for at least the next twelve months.
Other than advertising, marketing and promotional expenses and additional
development of additional on-line sites, the Company does not have any plans for
significant capital or operating expenditures above its current level. However,
if the Company determines that significant additional advertising and marketing
expenses are warranted over the next twelve months, the Company may seek
additional funds, including the sale of its common stock in either public or
private transactions.
YEAR 2000 ISSUES
The Company did not experience any material disruptions in its operations
or activities as a result of the so-called "Y2K Problem". Nor did the Company
incur material expenses in correcting perceived or suspected Y2K problems. In
addition, the Company is not aware that any of its suppliers, customers or
on-line partners has experienced any material disruptions in their operations or
activities. The Company does not expect to encounter any such problems in the
foreseeable future, although it continues to monitor its computer operations for
signs or indications of such a problem.
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It is possible, however, that if "Year 2000" problems are incurred by the
customers or on-line partners of the Company, such problems could have a
negative impact on future operations and financial performance of the Company,
although the Company has not been able to specifically identify any such
problems among its clients or suppliers. Furthermore, the Year 2000 problem may
impact other entities with which the Company transacts business and the Company
cannot predict the effect of the Year 2000 problem on such entities or the
resulting effect on the Company.
7
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Item 7. Financial Statements.
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800America. com, Inc.
Audited Financial Statements
December 31, 1999 an 1998
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<PAGE>
800America.com, Inc.
Audited Financial Statements
Table of Contents
Independent Auditors Letter ....................................... F-1
Balance sheet ..................................................... F-2
Income Statement .................................................. F-3
Analysis of Stockholders' Equity .................................. F-4
Cash Flow Statement ............................................... F-5
Notes to Financial Statements ..................................... F-6
<PAGE>
Jack F. Burke, Jr.
Certified Public Accountant
P. O. Box 15728
Hattiesburg, Mississippi 39404
Report of Independent Auditor
The Board of Directors
800 America . Com
P. O. Box 291029
Nashville, TN 37229
I have audited the accompanying balance sheet of 800 America. Com a Delaware
Corporation, as of December 31, 1999 and 1998 and the related statements of
income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management. As well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of 800 America . Com at December 31,
1999 and 1998 and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
Sincerely,
Jack F. Burke, Jr.
January 21, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
800America. com, Inc.
Balance Sheet
December 31
Assets 1999 1998
<S> <C> <C>
Current Assets
Cash and Cash Equivalents $ 392,564 $ 577
Accounts Receivable 528,802
Allowance for Doubtful Accounts (66,000)
Prepaid Advertising 121,600
Deposit on Equipment 94,000
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Total Current Assets 1,070,966 577
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Property and Equipment
Equipment 219,308 16,849
Software 157,399
Auto 20,738
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397,445 16,849
Less Depreciation and Amortization (88,019)
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Net Property and Equipment 309,426 16,849
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Other Assets
Deposit 450
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Total Assets 1,380,392 17,876
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable - Trade 8,995 27,244
Rebates Payable 330,551
Income Tax Payable 114,000
Notes Payable - Related Parties 143,750
Other Notes Payable 13,750
Other Current Liabilities 31,059
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Total Current Liabilities 453,546 215,803
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Stockholders' Equity
Preferred Stock $0.001 Par Value
5,000,000 Shares Authorized 0 Issued 0 0
Common Stock $0.001 Par Value
700,000 Shares Issued and Outstanding 700
50,000,000 shares Authorized At $0.001 Par value
12,250,000 Shares Issued and Outstanding 12,250
Additional Paid In Capital 952,312 6,069
Retained Earnings (Deficit) (37,716) (204,696)
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Total Stockholders' Equity and (Deficit) 926,846 (197,927)
----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) $ 1,380,392 $ 17,876
=========== ===========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-2
<PAGE>
800America. com, Inc.
Income Statement
For Years Ended December 31
1999 1998 1997
Revenues $ 3,283,575 $ 27,398 $ 1,553
----------- ----------- -----------
Cost and Expenses
General, Selling and Administration 320,980 64,396 6,115
Rebates to Customers 2,135,668
Advertising 397,738
Depreciation and Amortization 88,019
Bad Debts 66,000 9,199 100,000
Other Operating Expense 18,198 25,884
----------- ----------- -----------
Total 3,008,405 91,793 131,999
----------- ----------- -----------
Operating Income (Loss) 275,170 (64,395) (130,446)
Other Income (Expense)
Interest Income 5,810 10,699
Interest Expense (17,160) (3,379)
----------- ----------- -----------
Income (Loss) Before Income Tax 280,980 (70,856) (133,825)
Income Tax (Expense) (114,000)
----------- ----------- -----------
Net Income (Loss) $ 166,980 ($ 70,856) ($ 133,825)
----------- ----------- -----------
Basic Earnings Per Share Common Stock $ 0.03 ($ 0.10) ($ 0.19)
Basic Weighted Average Common Shares
Outstanding 6,243,132 700,000 700,000
Diluted Earnings Per Share
Common Stock $ 0.03
Diluted Weighted Average
Common Shares Outstanding 6,432,989
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-3
<PAGE>
800America. com, Inc.
Changes in Stockholders' Equity
Years Ended December 31, 1999 and 1998
Common Common Additional Total
Stock Stock Paid In Offering Retained Stockholders'
Shares Amount Capital Cost Earnings Equity
Balance December 31, 1997 700,000 $ 700 $ 13,800 ($ 4,336) ($ 133,840) ($ 123,676)
Services Contributed by
Stockholder At Fair Value 12,000 12,000
Office Space Contributed by
Stockholder At Fair Value 6,000 6,000
Deferred Offering Cost (21,395) (21,395)
Net Loss From Year Ended
December 31, 1998 (70,856) (70,856)
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Balance December 31, 1998 700,000 $ 700 $ 31,800 ($ 25,731) ($ 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 $ 199,920 ($ 1,207) $ 198,793
Services And Rental Contributed
By Corporate Office 9,000 9,000
Common Shares Issued Pursuant To
Merger At July 9, 1999 11,170,000 11,170 (11,170)
Common Shares Sold At July 9, 1999 300,000 300 499,700 500,000
Additional Paid In Capital
November 2, 1999 250,000 250,000
Net Profit For Year Ended
December 31, 1999 166,980 166,980
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Balance December 31, 1999 1,225,000 $ 12,250 $ 979,250 ($ 26,938) ($ 37,716) $ 926,846
-------------------------------------------------------------------------------------
The Accompanying "Notes to Financial Statements'
Are An Integral Part of These Financial Statements
F-4
</TABLE>
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800America. com, Inc.
Statement of Cash Flows
Year Ended December 31, 1999
1999 1998
Cash Flows From Operating Activities
Net Income (Loss) $ 166,980 ($ 70,856)
Adjustments to Reconcile Net Income
To Cash Used in Operating Activities
Depreciation and Amortization 88,017 8,534
Bad Debts 66,000
Accounts Receivable - Increase (528,802)
Prepaid Advertising - Increase (121,600)
Deposit on Equipment - Increase (94,000)
Accounts Payable - Decrease (Increase) (18,249) 35,492
Other Current Liabilities - Decrease (31,059)
Rebates Payable - Increase 330,551
Income Tax Payables - Increase 114,000
Notes Payable - Decrease (157,500)
Service and Office Space Contributions 18,000
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Net Cash Used In Operations (185,660) (8,830)
--------- ---------
Cash Flows From Investing Activities
Equipment Purchased (202,009) (1,321)
Software Purchased (157,399)
Auto Purchased (20,738)
--------- ---------
Net Cash Used In Investing Activity (380,146) (1,321)
--------- ---------
Cash Flows From Financing Activities
Common Stock Increase 11,550
Additional Paid In Capital Increase 946,243
Offering Cost Incurred (25,731)
Proceeds From Notes Payable 28,750
--------- ---------
Net Cash Provided By Financing Activity 957,793 3,019
--------- ---------
Net Cash Increase (Decrease) 391,987 (7,132)
Beginning Cash Balance 577 7,709
--------- ---------
Ending Cash Balance $ 392,564 $ 577
--------- ---------
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
F-5
<PAGE>
800America. com, Inc.
Notes to Financial Statements
Note 1 - Significant Accounting Policies
Nature of Operations - 800America. com, Inc. (A Nevada Corporation), is an
Internet Rebate Shopping Portal located in Nashville, Tennessee. The Internet
portal allows customers access to the web sites of stores from all parts of the
country ranging from some of the largest and best known stores to some of the
smaller regional stores. Each store offers subscribers a rebate on all purchases
ranging from three to ten percent based on each store's policy. Upon proof of
purchase from the subscriber, the company accrues and pays the rebate expense.
In turn, the selling store pays the company a commission ranging from five to
twenty percent depending on the store. 800America. com, Inc. has been in full
operation for nine months. The operations were developed during February and
March of 1999 by a related company and was then purchased by 800 America Inc.,
(see Note 4 Capitalization of Assets - Related Parties).
Principles of Consolidation - The consolidated statement contains the accounts
of 800 America Inc. which was merged with and into World House Entertainment
Inc. which name has been changed to 800America. com, Inc. (See Note 2 Merger
With 800 America Inc.).
Cash and Cash Equivalents - The company's cash consists of unrestricted checking
and savings accounts. Cash equivalents are defined as short term instruments
with an original maturity date of three months or less. The company holds U.S.
Treasury Notes due in ninety days from purchase of $199,506. Amounts are as
follows:
Cash in Bank $193,058
Treasury Notes 199,506
--------
Total $392,564
========
Accounts Receivable - The company in its nine months of operations has acquired
accounts receivable balances of $528,802 which consist primarily of discounts
due from stores. A 12 1/2% allowance for doubtful accounts have been established
on the existing balance. There were no accounts receivable at December 31, 1998.
Customer Rebates Payable - Verified rebates due to subscribers amount to
$330,551 at December 31, 1999 and zero at December 31, 1998.
F-6
<PAGE>
Accounts Payable - Consist of normal trade accounts and amounts to $8,995 at
December 31, 1999 and $27,244 at December 31, 1998.
Income Taxes - The company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109),
SFAS 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, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Estimated income tax due at December 31, 1999 is $114,000 and for December 31,
1998 is zero
Reconciliation of book income and taxable income:
Net Operating Income Before Income Tax $280,980
Provision For Doubtful Accounts 66,000
--------
Taxable Income $346,980
Income before income tax and provision for income tax expense from continuing
operations at December 31, 1999.
Income Before Taxes $280,980
Current Federal Income Tax 114,000
--------
Income After Taxes $166,980
Statutory and effective tax rates are the same.
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 these estimates.
Other Comprehensive Income - There are no attributes of other comprehensive
income. Comprehensive income and net income are the same.
Property and Equipment/Depreciation - Property and equipment are recorded at
cost (see Note 4 Capitalization of Assets - Related Parties) and depreciated on
the straight line basis over their estimated useful lives ranging from three to
five years. Depreciation for the period ended December 31, 1999 is $88,019 and
zero at December 31, 1998.
F-7
<PAGE>
Operating Leases - Lease expense for year ended December 31, 1999 was $17,800
and for year ended December 31, 1998 was $6,000. The company has leased new
facilities at 1301 Mt. Juliet Road for $698 per month and increasing 7 1/2% in
each of the next two years. The company has leased additional facilities at 1929
21st Street, Nashville for three years at $450 per month for each year. The
details for the new lease are as follows:
1301 Mt. Juliet Rd 1929 21st. Street
Mt. Juliet Nashville, TN
---------- -------------
1st Year $8,376 $5,400
2nd Year 9,004 5,400
3rd Year 9,679 5,400
Note 2 - Merger With 800 America Inc.
The company's merger qualified as a tax free reorganization and was accounted
for as a pooling of interest. Word House Entertainment Inc. is not a significant
component of the merger and will continue the on going operations of 800 America
Inc. under the new name of 800America. com, Inc. Ten million (10,000,000) shares
of common stock were issued to 800 America Inc. stockholders' and one million
nine hundred fifty thousand (1,950,000) shares were issued to World House
Entertainment Inc. shareholders. The previously outstanding shares of both
corporations were canceled. Three hundred thousand (300,000) shares were sold
immediately after the merger for five hundred thousand dollars ($500,000).
Note 3 - Financial Instruments
Fair Value - The carrying value of cash accounts receivable, accounts payable,
and customer rebates approximates fair value.
Concentrations of Credit Risk - Financial instruments that potentially subject
the company to credit risk include cash on deposit at a financial institution in
the amount of $193,058 which is federally insured for up to $100,000 at December
31, 1999, which is represented by its Accounts Receivable. The company has
additionally established an allowance for doubtful accounts of 12 1/2% against
the receivables. The company has extended unsecured credit to regular
customers of $528,802 at December 31, 1999. There were no concentrations of
credit risk at December 31, 1998. The company does not require collateral to
support financial instruments subject to credit risk.
Note 4 - Capitalization of Assets
Related Parties
The merged company, 800 America Inc., acquired its beginning operations from a
related party, Internet Web Guide, Inc.. Internet Web Guide, Inc. developed the
web site and collected income from subscribers and from stores. 800 America Inc.
and Internet Web Guide Inc. agreed that Internet Web Guide Inc. cost for
developing the web site was $10,000.
F-8
<PAGE>
800 America Inc. entered into an agreement with Internet Web Guide Inc. to
purchase the web site and other assets from Internet Web Guide Inc. for the
approximate amount of income collected in the development period ($127,000). The
purchase price was allocated as follows:
Equipment $70,000
Fixtures 10,000
Web Site 10,000
Subscriber Base 37,000
-------
Total $127,000
Notes 5 - Revenues Recognition
The company derives income from three sources. Individual subscribers (shoppers)
pay an annual subscription of ten dollars ($10), rental from stores comprising
the shopping portal ranging from fifty dollars ($50) to two hundred dollars
($200) per month and commissions from store sales. Revenues are accrued when
they become due.
Note 6 - Supplemental Cash Flow Information
1999 1998
---- ----
Interest Paid $728 $17,160
Income Tax Paid 0 0
Note 7 - Non Cash Transactions
Office Space Contributed
(Fair Value) $9,000 $6,000
Note 8 - Stock Option Plan
The company started a stock option plan (the Plan) which provide for the
granting of incentive stock options to all full time employees as well as non
qualified options to non employee directors and consultants. The Plan is
designed so that options under the Plan are granted at 100% of Fair Market Value
at date of grant date. The following summerize the options granted, exercised
and outstanding:
December 31, 1999 1998 1997
- ------------ ---- ---- ----
Options outstanding beginning
of year 0 0 0
Granted 1,650,000 0 0
Exercised 0 0 0
Options outstanding end of year 1,650,000 0 0
F-9
<PAGE>
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
- -----------------------------------------------------------------------
On August 9, 1999 the Company dismissed Cordovano and Harvey, P.C., an
accounting firm located in Denver, Colorado and hired Jack F. Burke, Jr., a
certified Public Accountant located in Hattiesburg, Mississippi. None of the
accountants reports of Cordovano and Harvey, P.C. contained any adverse opinion
or disclaimer of opinion, or were modified as to uncertainty, audit scope, or
accounting principles, except that their report dated March 18, 1999 includes a
"going concern" qualification which describes the uncertainty resulting from the
substantial doubt as to the Company's ability to continue as a going concern.
The decision to change accountants was due to the fact that Mr. Burke had acted
as auditor for 800 America, Inc. at and prior to the time it was merged into the
Company. The Board of Directors of the Company believed it would be in the best
interest of the Company if Mr. Burke continued in that role for the Company
following completion of the merger and therefore approved the change of
accountants.
At the time the Company changed accountants, there were no disagreements
with Cordovano and Harvey, P.C., whether or not resolved, on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of Cordovano and
Harvey, P.C., would have caused Cordovano and Harvey, P.C. to make reference to
the subject matter of the disagreement in connection with any of its reports.
8
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
- --------------------------------------------------------------------------------
The executive officers and directors of the Company and their ages are as
follows:
Name Age Position
---- --- --------
Elie Rabi 61 President, Treasurer, and Director
Bobby Walley 59 Director
Darvin D. Pierce 58 Director
Elie Rabi has served as the President of the Company since July 9, 1999 and
before that served as President of 800 America, Inc. from its inception in March
1999. He is responsible for general management of the Company as well as the
marketing of its on-line shopping site and the publication of its on-line
Internet Web Guide Magazine. Mr. Rabi had been in retirement since 1994, after
serving as a financial and marketing consultant to various international
companies in Africa and South America. From 1980 to 1990, he served as President
and CEO of the Carmel Group of companies, a multinational privately held
corporation based in South America, with 14 international offices, sales of
approximately $1.5 billion and over 6,800 employees. Between 1990 and 1994, Mr.
Rabi acted as an international business and financial consultant. Mr. Rabi's
education includes a Bachelors Degree in Business Administration and a Masters
Degree in Economics and Finance from the Sorbonne University in France, as well
as various courses in finance, economics and special courses in political
science.
Bobby Walley attended Mississippi State University where he received a
Bachelors Degree in Business Administration, a Masters Degree in Forestry and an
AAA Degree (similar to a Ph.D.) in Forestry. Mr. Walley owned a forestry
consulting firm, Walley Consulting Co., in Hattiesburg, Mississippi for
approximately 10 years prior to its sale in 1998.
Darvin D. Pierce received an MBA from Northwestern University in Finance
and Economics in 1975. He has been a professional investment advisor for over 20
years. Presently, he is the co-manager of five mutual bank loan funds for Van
Kampen Funds of Oakbrook, Terrace, Illinois, with whom he has been employed
since 1990. 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 1990k 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.
The directors of the Company 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.
Executive officers of the Company are appointed by the Board of Directors on an
annual basis.
The Company's executive officers and directors are required to file reports
of ownership and changes in ownership of the Company's securities with the
Securities and Exchange Commission as required under provisions of the
Securities Exchange Act of 1934. Based solely on the information provided to the
Company by individual directors and executive officers, the Company believes
that during the last fiscal year all directors and executive officers have
complied with applicable filing requirements.
9
<PAGE>
Item 10. Executive Compensation
----------------------
Summary Compensation Table
The following table shows all cash compensation paid or to be paid by the
Company during the fiscal years indicated to the chief executive officer and the
highest paid executive officers of the Company as of the end of the Company's
last fiscal year whose salary and bonus for such period in all capacities in
which the executive officer served exceeded $100,000. Except for Mr. Elie Rabi,
no executive officer received or held any stock options, stock appreciation
rights, stock grants or any other similar rights to receive additional
compensation of any kind as of December 31, 1999.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted
Name and Annual Stock LTIP All other
Principal Compen- Awards Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) $ SARs(#) ($) sation($)
- -------- ---- --------- -------- --------- - ------- --- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Elie Rabi 1999 $120,000 0 0 0 250,000 0 0
Chief 1998 0 0 0 0 0 0 0
Executive 1997 0 0 0 0 0 0 0
Officer
Options/SAR Exercises and Holdings
----------------------------------
The following table sets forth information with respect to the named
executives, concerning the exercise of options and/or limited SARs during the
last fiscal year and unexercised options and limited SARs held as of the end of
the fiscal year December 31, 1999.
Aggregated Options/SAR Exercises in Last Fiscal Year and FY-End Options/SAR
Values:
(a) (b) (c) (d) (e)
Number of Securities Value of
Underlying Unexercised Unexercised In-the-Money
Shares Options/SARs at FY Options/SARs at FY
Acquired Value End (#) End ($)
Name On Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------------------------------------------------------------------------------------------
Elie Rabi 250,000 0 250,000 0 62,500 0
</TABLE>
There are no employment agreements between the Company and any of its
executive officers. Mr. Rabi currently receives a salary of $120,000 per year.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
The following table sets forth information concerning the beneficial
ownership of the Company's common stock as of January 28, 2000 for (a) each
10
<PAGE>
person known to the Company to be a five percent beneficial owner of the common
stock; (b) each director; (c) each executive officer designated in the section
captioned "MANAGEMENT-Executive Compensation;" and (d) all directors and
executive officers as a group. Except as otherwise noted, each person named
below had sole voting and investment power with respect to such securities.
<TABLE>
<CAPTION>
Amount and Nature Percent
of of
Name and Address Title Beneficial Ownership Class (1)
- ---------------- ----- -------------------- ---------
<S> <C> <C> <C>
Elie Rabi President and Treasurer 250,000(2) .02%
1301 North Mt. Juliet Road and Director
Mt. Juliet, TN 37212
Bobby Walley Director 23,000 *
1301 North Mt. Juliet Road
Mt. Juliet, TN 37212
Darvin D. Pierce Director 33,000(3) *
114 Northhampdon Drive
Osego, Illinois 60543
American Deductible, Inc. 9,358,000(4) 76.4%
1300 Market Street
Wilmington, Delaware
Owen Enterprises LLC 776,459(5) 6.1%
11011 King Street, Suite 260-B
Overland Park, KS 66210
Peterson and Sons Holding Company 842,500(6) 6.6%
4001 W 104th Terrace
Overland Park, KS 66207
All officers and directors
as a group 9,404,000(7) 76.8%(7)
</TABLE>
* less than one percent
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting and
investment power with respect to all such shares. Under Rule 13d-3(d),
shares not outstanding which are subject to options, warrants, rights or
conversion privileges exercisable within 60 days are deemed outstanding for
11
<PAGE>
the purpose of calculating the number and percentage owned by such person,
but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) Also includes 250,000 stock options issued in the name of Elie Rabi.
(3) Includes options to purchase 10,000 shares of common stock.
(4) American Deductible, Inc. is 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 such common stock.
(5) Includes the beneficial interest of Owen Enterprises LLC in 500,000 common
stock purchase warrants and its beneficial interest in an option to
purchase 500,000 shares. Both warrants and options are held by Owen &
Associates IBG, LLC, which is 50% controlled by Owen Enterprises LLC which,
in turn, is controlled by David C. Owen.
(6) Includes the beneficial interest of Peterson and Sons Holding Company in
500,000 common stock purchase warrants and its beneficial interest in an
option to purchase 500,000 shares. Both warrants and options are held by
Owen & Associates IBG, LLC which is 50% controlled by Peterson and Sons
Holding Company which, in turn, is controlled jointly by Mark Peterson and
Steve Peterson.
(7) Includes shares beneficially owned by American Deductible, Inc. over which
Mr. Rabi may be deemed to have direct voting control.
There are no arrangements or understandings among members of both the
former and new control groups and their associates with respect to election of
directors or other matters.
Item 12. Certain Relationships and Related Transactions.
-----------------------------------------------
On July 9, 1999, 800 America, Inc., a Delaware corporation was merged into
the Company. As part of the Agreement and Plan of Merger, the Company issued
10,000,000 shares of its common stock to the three shareholders of 800 America,
Inc. The Company also changed its name to 800America.com, Inc. Of the restricted
shares of the Company 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 Elie Rabi, the President
and a director of the Company and the former president and controlling
shareholder of 800 America, Inc. Mr. Rabi does not act as trustee of the trust
but holds a power of attorney on behalf of the trust and may be deemed to hold
direct voting control of such shares.
In December of 1999, the Company issued to Elie Rabi a total of 250,000
incentive stock options under its Stock Option Plan. The Company also issued
1,000,000 common stock purchase warrants to Owen & Associates IBG, LLC at an
exercise price of $4.00 per share. Such warrants expire one year from the date
of issuance. The Company also issued 1,000,000 options to Owen & Associates, LLC
under its Stock Option Plan.
12
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.01 Articles of Incorporation (1)
3.02 Bylaws (2)
10.01-10.18 Material Contracts (3)
16.0 Letter on change in certifying accountant (4)
23.0 Consent of Jack E Burke Jr.
27.01 Financial Data Schedule
(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 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).
(3) Incorporated by reference to Exhibits 10.01 to 10. 17 respectively to
the registration statement of Form SB-2 filed with the Securities and
Exchange Commission on July 17, 1998 (file no. 333-51683) and Exhibit
2.04 to Form 8-K filed July 16, 1999.
(4) Incorporated by reference to Exhibit 16 to Form 8-K filed with the
Securities and Exchange Commission on August 12, 1999.
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1999.
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/ Elie Rabi
------------------------------
Elie Rabi
President and Principal Executive Officer
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/ Elie Rabi President, Director January 28, 2000
- --------------------- Principal Executive Officer
Elie Rabi Principal Financial Officer
/s/ Bobby Walley Director January 28, 2000
- ---------------------
Bobby Walley
/s/ Darvin D. Pierce Director January 28, 2000
- ---------------------
Darvin D. Pierce
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 528,802
<ALLOWANCES> 66,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,070,000
<PP&E> 0
<DEPRECIATION> 88,019
<TOTAL-ASSETS> 1,380,392
<CURRENT-LIABILITIES> 453,546
<BONDS> 0
0
0
<COMMON> 12,250
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,380,392
<SALES> 3,283,575
<TOTAL-REVENUES> 3,283,575
<CGS> 0
<TOTAL-COSTS> 3,008,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 66,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 280,980
<INCOME-TAX> 114,000
<INCOME-CONTINUING> 166,980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,980
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
