SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
September 30, 2000
Commission file number 333-51683
800america.com, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 87-0567884
---------------------------- ----------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
1929 21st Avenue, Nashville, TN 37212
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(800) 999-5048
-------------------------
(Issuer's telephone number)
Check whether the issuer (1) 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 be
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
There were 12,450,000 shares of common stock outstanding on October 25, 2000
Transitional Small Business Disclosure Format
(Check one):
Yes No X
--- ---
<PAGE>
Item 1. Financial Statements
800America. Com, Inc.
Balance Sheet
September 30, 2000 and 1999
Assets 2000 1999
Current Assets
Cash and Cash Equivalents $ 1,780,803 $ 383,557
Accounts Receivable-Trade 1,234,444 531,811
Accounts Receivable-Employees 1,650
Less Allowance for Doubtful Accounts (139,000) (80,000)
----------- -----------
Total Current Assets 2,877,897 835,368
=========== ===========
Property and Equipment
Equipment 678,230 174,260
Software 88,899 88,899
Auto 20,738
Subscriber Base 37,000 37,000
Original Web Site 10,000 10,000
----------- -----------
834,867 310,159
Less Accumulated Depreciation (242,292) (37,034)
----------- -----------
Net Property and Equiupment 592,575 273,125
----------- -----------
Other Investment-Rothman 200,000
-----------
Total Assets 3,670,472 1,108,493
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 189,745 52,641
Accrued Expenses 19,766
Rebates Payable 330,982 200,991
Income Tax Payable 415,570 148,000
----------- -----------
Total Current Liabilities 955,563 401,632
----------- -----------
Stockholders' Equity
Preferred Stock $0.001 Par Value
5,000,000 Shares Authorized 0 Issued
Common Stock $0.001 Par Value
50,000,000 Shares Authorized
12,450,000 Shares Issued and Outstanding 12,450 12,250
Additional Paid in Capital 1,402,112 702,312
Retained Earnings 1,300,347 (7,701)
----------- -----------
Total Stockholders Equity 2,714,909 706,861
=========== ===========
Total Liabilities and Stockholders' Equity $ 3,670,472 $ 1,108,493
=========== ===========
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
800America. Com, Inc.
Income Statement
Three Months and Nine Months Ended September 30, 2000 and 1999
2000 2000 1999 1999
Three Nine Three Nine
Months Months Months Months
<S> <C> <C> <C> <C>
Revenues $ 3,922,359 $ 9,501,802 $ 1,173,580 $ 1,178,974
------------ ------------ ------------ ------------
Cost and Expenses
Rebates 1,362,744 4,876,154 394,016 394,016
Advertising 400,820 1,060,112 64,350 64,350
Depreciation and Amortization 74,971 154,273 32,945 37,034
Bad Debt 9,837 180,837 84,640 87,140
Software Cost 486,453 486,453 0 0
General and Administration 329,010 727,011 244,439 287,815
------------ ------------ ------------ ------------
Total Operating Expense 2,663,835 7,484,840 820,390 870,355
------------ ------------ ------------ ------------
Operating Income (Loss) 1,258,524 2,016,962 353,190 308,619
Interest Income 5,189 10,406 1,670 6,670
Interest Expense (14) (727)
------------ ------------ ------------ ------------
Net Income (Loss) Before Income Tax 1,263,713 2,027,368 354,859 314,561
Income Tax Expense (448,305) (689,305) (148,000) (148,000)
------------ ------------ ------------ ------------
Net Income (Loss) $ 815,416 $ 1,338,063 $ 206,859 $ 166,561
Basic earnings Per Share Common Stock $ 0.07 $ 0.11 $ 0.02 $ (0.06)
Basic Weighted Average Common
Shares Outstanding 12,450,000 12,350,000 12,250,000 3,009,928
Diluted Earnings Per Share Common Stock $ 0.06 $ 0.10
Diluted Weighted Average Common Stock 14,000,000 13,900,000
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
800America. Com, Inc.
Changes in Stockholders' Equity
For Three and Nine Month Ended September 30, 2000 and 1999
Common Common Additional Total
Stock Stock Paid In Offering Retained Stockholders
Shares Amount Capital Cost Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance June 30, 2000 12,450,000 $ 12,450 $ 1,402,112 $ 484,931 $ 1,899,493
Net Income for Three Months
Ended September 30, 2000 815,416 815,416
----------- ----------- ----------- ----------- ----------- -----------
Balance September 30, 2000 12,450,000 12,450 1,402,112 1,300,347 2,714,909
----------- ----------- ----------- ----------- ----------- -----------
Balance June 30, 1999 780,000 780 240,720 (26,938) (174,262) 40,300
Common Shares Issued
Pursuant to Merger of July 9, 1999 11,170,000 11,170 (11,170) 0
Common Shares Sold at July 9, 1999 300,000 300 499,700 500,000
Net for Three Months
Ended September 30, 1999 166,561 166,561
----------- ----------- ----------- ----------- ----------- -----------
Balance September 30, 1999 12,250,000 $ 12,250 $ 729,250 $ (26,938) $ (7,701) $ 706,861
----------- ----------- ----------- ----------- ----------- -----------
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
</TABLE>
4
<PAGE>
800America. Com, Inc.
Statement of Cash Flows
Nine Months Ended September 30
2000 1999
Cash Flows From Operating Activities
Net Income (Loss) $ 1,338,063 $ 74,314
Adjustments to Reconcile Net Income
To Cash Flows From Operating Activities
Depreciation and Amortization 154,273 4,521
Bad Debt Allowance - Increase 73,000 66,581
Accounts Receivable - Increase (705,642) (442,352)
Accounts Receivable - Employees (Increase) (1,650)
Accounts Payable - Increase (Decrease) 180,750 17051
Rebates Payable - Increase 431 145,661
Accrued Expenses - Increase 19,266
Deposit On Equipment - Decrease 94,000
Income Tax Payable - Increase 301,570 78,119
Prepaid Advertising - Decrease 121,600
----------- -----------
Net Cash Provided (Used) from Operating Activities 1,575,661 (56,105)
----------- -----------
Cash Flows From Investing Activities
Equipment Purchase (437,422) (42,760)
Software Purchase (25,000)
----------- -----------
Net Cash Used In Investing Activities (437,422) (67,760)
----------- -----------
Cash Flows From Financing Activities
Proceeds From Issuance of Common Stock 500,000
Additional Paid In Capital 250,000
Notes Payable - Increase (Decrease)
Capital Contributed by Shareholder
Payment of Offering Cost
----------- -----------
Net Cash Provided By Financing Activity 250,000 500,000
----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 1,388,239 376,135
Beginning Balance 392,464 9,204
----------- -----------
Ending Balance $ 1,780,703 $ 385,339
----------- -----------
The Accompanying "Notes to Financial Statements"
Are An Integral Part of These Financial Statements
5
<PAGE>
800America. Com Inc.
Notes to Financial Statement
Note 1 - Significant Accounting Policies
Nature of Operations - 800America. Com, Inc. (A Nevada Corporation) IS A
DIVERSIFIED Internet company located in Nashville, TN. The company owns and
operates ten sites in different fields which have proven to be very successful.
Among them are shopping portals for over 305 nationally known stores.
Rothmancloseouts.com is one of a kind global site where buyers and sellers match
their surplus merchandise, recently it is affiliated to Chinese markets also.
Steeplehouse.com an auction house of fine art. Inde4U.com for the independent
artist. Fileshooter.com is one of the best software for transferring data and
messages on the Internet bypassing providers. 21st Ave. Productions, which
design and build web sites and BtoB sites and Internet Web Guide Magazine, a
widely read magazine online with readership round the world.
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 Mergers).
Cash and Cash Equivalents - The company's cash consist of unrestricted checking
and saving accounts. Cash equivalents are defined as short term instruments with
an original maturity date of three months or less. The company has no cash
equivalents at September 30, 2000 and 1999.
Accounts Receivable - The company has acquired accounts receivable balances of
$1,234,444 which consist primarily of discounts due from stores. Allowance for
doubtful accounts has been established on the existing balance. The directors
wrote off $107,837 worth of accounts receivable in nine months and increased
allowance for doubtful accounts by $73,000.
Customer Rebates Payable - Verified rebates due to subscribers amount to
$1,362,744 for the September 30, 2000 quarter. As compared with $394,016 for the
1999 quarter.
Accounts Payable - Consist of normal trade accounts and amounts to $189,745 at
September 30, 2000 and $52,641 at September 30, 1999.
6
<PAGE>
Income Taxes - The company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS109) is
an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been recognized in the company's financial statements or tax returns. In
estimating future consequences, SFAS 109 generally considers all expected future
events other than enactments of changes in the tax law or rates. Estimated
income tax due at September 30, 2000 is $415,570 and for September 30, 1999 is
52,641.
Income before income tax and provision for income tax expense from continuing
operations.
September 30, 2000 September 30, 1999
Income Before Taxes $2,027,368 $314,561
Current Federal Income Tax 689,305 148,000
---------- --------
Income After Taxes $1,338,063 $166,561
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 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 nine months ended September 30, 2000 is
$154,273 and $37,034 at September 30, 1999.
Operating Leases - Lease expense for the nine months ended September 30, 2000
was $5,984 and for nine months ended September 30, 1999 was $1,500 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 $5,500
2nd Year 9,004 5,400
3rd Year 9,679 5,400
7
<PAGE>
The company also leases a T3 line from Bell South for $12,800 per month.
1st Year $153,600
2nd Year $153,600
Note 2 - Mergers
Mergers with 800 America Inc. - The company's merger consummated at July 7, 1999
qualified as a tax free reorganization ans accounted for as a pooling of
interest. World 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. An additional three hundred thousand(300,000) shares were sold
immediately after the merger for five hundred thousand dollars $500,000.
Purchase of Rothman Closeouts - The company purchased Rothman Closeouts, an
Internet sales site. The company issued 200,000 shares and values the investment
at $200,000.
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 $ 1,780,803 which is federally insured for up to $100,000 at
September 30, 2000, which is represented by its cash in bank. The company has
extended unsecured credit to regular customers of $1,234,444 at September 30,
2000. The company has additionally established an allowance for doubtful
accounts of 11% against their receivables. The company does not require
collateral to support financial instruments subject to credit risk. The company
directly wrote off $9,837 of accounts during the quarter.
Note 4 - Capitalization of Assets
Related Parties
The merged company, 800 America Inc., acquired its beginning operations from a
related, 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, agreed that Internet Web guide Inc. cost for developing
8
<PAGE>
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
Note 5 - Supplemental Cash Flow Information
September 30, 2000 September 30, 1999
Interest Paid 0 0
Income Tax Paid $387,735 0
Note 6 - Non Cash Transaction
Office Space Contributed (Fair Value) 0 $6,000
200,00 Shares Common Stock
was issued for the purchase of
Rothman Closeouts $200,000
Note 7 - Stock Option Plan
September 30, 2000 2000 1999 1998
Options Outstanding Beginning of the Quarter $1,650,000 0 0
Granted 0 0 0
Exercised 0 0 0
Options Outstanding End of the Quarter $1,650,000 0 0
9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operations.
General
The Company's primary business involves the operation of several
Internet Web sites, the most significant of which is its shopping portal web
site, 800america.com. The shopping site derives revenue primarily from
commissions earned from retailers who are represented at the shopping site. The
web site allows customers access to over three hundred stores, including many
nationally known and recognized retailers. Until January 1, 2000, the Company
allowed members who paid a $10.00 annual membership fee to shop through the
Company's web site and offered such members a rebate of from 3% to 10% on
purchases made through the web site. As of January 1, 2000, the Company no
longer charges an annual fee and new customers are no longer entitled to a
rebate on purchases made through the web site. Customers who had paid the annual
membership fee prior to January 1, 2000 are still entitled to rebates until
their annual membership expires which, in no event, will be latter that December
31, 2000. The Company's commission structure with its merchants and retailers
whose stores are represented at the Company's web site vary between 5% and 20%,
and are based upon the volume of sales.
In the quarter ended March 31, 2000, the Company also acquired
Rothmancloseouts.com, Inc., an on-line, business to business venture that
specializes in buying and selling general brand name and licensed closeout
merchandise. After acquiring this enterprise, the Company spent approximately
$200,000 to further develop the web site to make the whole site completely
electronic. Rothmancloseouts.com now allows buyers and sellers from around the
world to directly match and negotiate transactions electronically to purchase
closeout goods and merchandise. Management expects that revenues and earnings
from Rothmancloseouts.com will continue to increase in the third and subsequent
quarters and constitute a significant portion of the Company's total revenues
and earnings. Other Internet Web sites operated by the Company include
Steeplehouse.com, an on-line auction house featuring a large variety of luxury
items including paintings from Picasso to Warhol, and other high-end items such
as Persian rugs and classic cars. The Company also operates moneydrops.com, an
on-line game where visitors can earn money by clicking on links to different
advertisers; internetwebguide.com, an on-line magazine, and DoNotSmoke.com,
which is dedicated to preventing smoking and features medical videos.
Results of Operations
Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999.
------------------------------------------------------------------------------
The Company had revenues of $3,922,359 for the quarter ended September
30, 2000 compared to revenues of $1,173,580 for the quarter ended September 30,
1999. Net income for the quarter ended September 30, 2000 was $815,416 compared
to net income of $206,859 for the quarter ended September 30, 1999. Total
operating expenses for the quarter ended September 30, 2000 were $2,663,835
resulting in operating income for the quarter of $1,258,524 This compares to
10
<PAGE>
total operating expenses of $820,390 for the quarter ended September 30, 1999,
resulting in operating income of $353,190. Customer rebates for the quarter
ended September 30, 2000 totaled $$1,362,744 and represented approximately 51%
of total operating expenses. This compared to customer rebates of $394,016 for
the quarter ended September 30, 1999 that represented approximately 48% of total
operating expenses. The Company does not expect that customer rebates will
continue to be a material component of Company expenses beginning January 1,
2001. The Company has instituted a policy of not paying rebates after that date.
Other than customer rebates, the largest categories of costs and expenses were
software costs of $486,453, advertising expenses of $400,820 and general and
administrative expenses in the amount of $329,010. Management expects that
advertising expenses will continue to increase in the quarter ending December
31, 2000 as the Company's television advertising campaign continues to
accelerate. General and administrative expenses are also expected to increase
with the hiring of additional personnel and the development of additional web
sites. Because of the Company's limited operating history with its various web
sites, management cannot predict, based upon past performance, whether the above
listed cost and expense categories are relatively stable or subject to a
substantial degree of volatility.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
--------------------------------------------------------------------------------
1999.
-----
Revenues for the nine months ended September 30, 2000 were $9,501,802
compared with $1,178,974for the nine months ended September 30, 1999. Net income
for the nine months ended September 30, 2000 was $1,338,063, compared to net
income of $166,561 for the prior nine-month period ended September 30, 1999.
Total operating expense for the nine months ended September 30, 2000 was
$7,484,840 resulting in net income before taxes of $2,027,368. This compares
with total operating expenses in the nine months ended September 30, 1999 of
$870,356 and net income before taxes of $314,561. The largest categories of
operating expenses in the nine months ended September 30, 2000 were customer
rebates in the amount of $4,876,154; advertising in the amounts of $1,060,112;
general and administrative expense in the amount of $727,011 and software costs
in the amount of $486,453. For the nine months ended September 30, 1999 these
expenses were $394,016, $64,350, $287,815 and -0- respectively. Management
expects that advertising as well as general and administrative expenses will
continue to increase as the Company expands its operations. However, all
customer rebates will end as of December 31, 2000 in accordance with the
Company's policy adopted as of January 1, 2000. While the Company expects some
erosion in the Company's shopping web site customer base as a result of this
policy, customer loyalty to the site as well as additional revenues from the
Company's other web sites are expected to offset any loss of business on the
shopping web site.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided from operating activities was $1,575,661 in the nine
months ended September 30, 2000 compared to net cash used in operations of
$56,105 for the nine months ended September 30, 1999. Net cash used in investing
activities was $437,422 during the nine months ended September 30, 2000 compared
to $67,760 in the nine months ended September 30, 1999. Net cash provided by
financing activity was $250,000 for the nine months ended September 30, 2000
compared to $500,000 in the nine months ended September 30, 1999.
The Company's cash and cash equivalents as of September 30, 2000 were
$$1,780,803. At September 30, 2000, the Company had current assets of $2,877,897
and current liabilities of $955,563, resulting in working capital at September
30, 2000 (current assets less current liabilities) of $1,922,334. At September
30, 2000, the Company's only material financial obligation was a two-year lease
for use of a T-3 from Bell South at a monthly rental rate of $12,800. This lease
obligation was incurred in order to increase the band width capacity of the
Company's web sites. Except for this lease obligation, the Company had no long
term financial obligations 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 at least the next twelve months. Other than advertising and
promotional expenses, the Company does not have any plans for significant
capital or operating expenditures above its current level unless it determines
to develop additional web sites that could result in additional development
costs.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133 "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments embedded in other contracts, and
for hedging activities. The Statement requires that entities recognize all
derivatives as either assets or liabilities on the balance sheet and measure
these derivatives at fair value. SFAS 133 also specifies a new method of
accounting for hedging transactions, prescribes the type of items and
transactions that may be hedged, and specifies detailed criteria to be met to
qualify for hedge accounting. This Statement as amended is effective for
financial statements for periods beginning after June 15, 2000. The Company does
not expect the adoption of this Statement to have a material impact on its
financial statements.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin 101 "Revenue Recognition in Financial Statements" ("SAB
101") which the Company expects to adopt no later than the fourth quarter of
12
<PAGE>
fiscal 2001. SAB 101 provides guidance on revenue recognition issues. The
Company does not expect the adoption of SAB 101 to have a material impact on its
financial statements.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44 "Accounting for Certain Transactions Involving Stock
Compensation, an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 will
be effective July 1, 2000. This interpretation provides guidance for applying
APB Opinion No. 25 "Accounting for Stock Issued to Employees". The Company does
not expect the adoption of FIN 44 to have a material impact on its financial
statements.
In March 2000, the Emerging Issues Task Force of the Financial
Accounting Standards Board reached a consensus on Issue No. 00-02, "Accounting
for Web Site Development Costs" which provides guidance on when to capitalize
versus expense costs incurred to develop a web site. The consensus for web site
development costs is effective July 1, 2000. The Company is currently analyzing
the possible effects that this Statement may have on its financial statements
since the Company devotes significant resources to the continued development of
its web sites. However, the Company does not presently expect this Statement to
have a material impact on its financial statements.
PART II OTHER INFORMATION
Item 1. Legal proceedings.
The Company is not a party to any pending or threatened legal
proceedings of a material nature.
Item 2. Changes in Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other information
None.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
27.1 Financial Data Schedule
(b) Reports of Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
800america.com, Inc.
Date: November 3, 2000 By: /s/ Elie Rabi
------------------- ----------------------------------
Elie Rabi
Chief Executive Officer
Principal Financial Officer
14
