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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
Amendment No. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Fiscal Year ended June 30, 2000
Commission File No. 000-25275
SalesRepCentral.com, Inc.
(Exact Name of Registrant as Specified in its Charter)
Nevada 91-1918742
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
16099 N. 82nd Street
Suite B1
Scottsdale, Arizona 85260
(Address of Principal Executive Offices) (Zip Code)
480-922-8444
(The Registrant's telephone number, including area code)
Securities Registered pursuant to section 12(b) of the act:
None
Securities Registered pursuant to section 12(g) of the act:
Common Stock, $0.001 par value per share
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) if the Securities Exchange Act of
1934 during the preceding 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 [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III if this form 10-K (SB) or any
amendment to this Form 10-KSB: [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the closing price per share of the common stock on
October 2, 2000 of $0.843, as reported on the OTCBB, was approximately
$2,387,516. Shares of common stock held by each officer and director and by each
person known to SalesRepCentral.com who own 5% or more of the outstanding common
stock have been excluded in that such persons may be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.
As of October 2, 2000, the registrant had 15,117,762 shares of common stock
outstanding.
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EXPLANATORY NOTE
This amendment to the Annual Report of Form 10-KSB for the period ended
June 30, 2000 is being filed due to a miscommunication with the Filing Agent
which resulted in an improper draft being filed. The principal difference
contained in the amendment is a revision of the weighted average shares
outstanding and basic loss per share.
SalesRepCentral.com
2000 Annual Report on Form 10-KSB/A
Table of Contents
Part I
Page
----
Item 1. Business............................................................ 3
Item 2. Property............................................................ 14
Item 3. Legal Proceedings................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders................. 14
Part II
Item 5. Market for Common Equity and Related Stockholder's Matters.......... 15
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 16
Item 7. Financial Statements................................................ 21
Item 8. Changes in and Disagreements with Accountants and
Financial Disclosure............................................... 31
Part III
Item 9. Directors, Executive Officers, Promoters, and Control Persons....... 32
Item 10. Executive Compensation.............................................. 32
Item 11. Security Ownership of Certain Beneficial Owners and Management...... 33
Part IV
Item 12. Exhibits, Financial Statement Schedules and Reports on Form 8-K..... 35
Signatures................................................................... 36
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PART I
ITEM 1. BUSINESS
WE MAKE MANY STATEMENTS IN THIS ANNUAL REPORT, SUCH AS STATEMENTS REGARDING
OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS, WHICH ARE FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT. WE MAY IDENTIFY THESE STATEMENTS BY THE USE OF WORDS
SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE", "INTEND", "PLAN" AND SIMILAR
EXPRESSIONS. THESE FORWARD-LOOKING STATEMENTS INVOLVE SEVERAL RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING
THOSE WE DISCUSS IN "RISK FACTORS" AND ELSEWHERE IN THIS ANNUAL REPORT. THESE
FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS ANNUAL REPORT, AND
WE CAUTION YOU NOT TO RELY ON THESE STATEMENTS WITHOUT ALSO CONSIDERING THE
RISKS AND UNCERTAINTIES ASSOCIATED WITH THESE STATEMENTS AND OUR BUSINESS
ADDRESSED IN THIS ANNUAL REPORT.
OVERVIEW
SalesRepCentral.com, Inc. (SalesRepCentral) was incorporated in May of
1999. SalesRepCentral is an online sales community and content provider of
online B2B Internet resources for the corporate sales team. Our content is
specifically designed to provide comprehensive sales resources, daily training
articles, and other features that meet the needs of the sales-professional. We
have designed our products and services to enhance interaction and communication
within the sales-team by offering a complete on-line sales solution.
Our web-portal was developed exclusively for the sales community including
professional sales-representatives, sales-managers and corporate executives. The
site is designed to create a user-friendly, informative and personalized
experience while providing members with the convenience of transacting business
on-line. The portal was designed by former sales-professionals and provides all
of the latest tools used by sales-professionals to facilitate the sales process.
SalesRepCentral's web-site features 11 content "channels" offering
exclusive products and services that also provide "value-added" features
allowing the sales-professional to perform his job more effectively. Visitors to
our web-site will find comprehensive content developed specifically for the
sales-professional combining education, sales tools and resources, services and
strategic partnerships in one easy-to-use location. Other features of our
Internet-site include employment and job-placement, a full-service travel
agency, leasing and lending services and sales leads. Our web-site also provides
banner advertising, promotional spotlights and channel sponsorships.
STRATEGY
SalesRepCentral's strategy is to become the premier Internet portal of
choice by catering to the sales-professional and corporate sales teams
worldwide. We feel that we can achieve this goal by providing the highest
quality sales-based on-line content and services that facilitate the sales
process and allow our members to become more productive sales professionals. Key
elements of our strategy include:
PROVIDE A SUPERIOR ON-LINE EXPERIENCE WITH OUR CONTENT, PRODUCTS AND
SERVICES
We seek to provide a superior on-line experience through innovative
technologies, content and services. The Company's future success will depend on
its ability to compete and to offer products and services that are perceived to
be superior to those of our competitors. The Company will continue to recruit,
hire and train the most qualified personnel to design and implement our unique
web experience. We will also continually enhance our existing technologies and
expand our line of products and services in order to keep pace with the changing
environment and customer preferences; and, we will continually seek new
strategic business partners in order to offer new and improved products and
services.
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PROVIDE A SINGLE-SOURCE LOW-COST SOLUTION FOR TRAVEL RELATED EXPENSES
Because costs relating to airline travel, lodging, rental cars,
communication and entertainment are commonly such a significant portion of
travel related expenses, The Company strives to offer the most competitive
prices for these routine expenditures and rewards members for purchases and
activity on our site with REPPOINTS(TM) ?, our proprietary loyalty program.
BUILD BRAND AWARENESS
We believe that increased brand recognition is critical to the ability to
increase our membership and SalesRepCentral's attractiveness to retailers,
service providers and advertisers. SalesRepCentral intends to increase brand
awareness through a combination of strategic traditional and online advertising
and promotional activities. Our sales and marketing strategy includes a
nationwide, industry-focused advertising campaign using both print and web-based
advertisements.
EXPAND CORPORATE-RELATED SERVICE OFFERINGS
The Company believes that customized corporate portals are a growing
segment of the market, especially those developed to support a company's sales
resources. We intend to continue to expand our line of goods and services to
include web-hosting to corporate clientele who do not want to make the
commitment or have the resources to develop and maintain their own web-sight.
While SalesRepCentral actually "hosts" the site, it is designed to match the
look of the client's. The client's employees can access this secure portal each
day to be updated with the latest news, to communicate with secure client
bulletin boards, to review sales-teams calendars, to access group documents and
much more. These sites can also be linked to SalesRepMall so that our own
products and services can be offered to them.
DIVERSIFY REVENUE STREAMS ACROSS E-COMMERCE, DIRECT MARKETING AND
ADVERTISING
We believe that our revenue model is unique in that unlike many web-sites,
ours does not rely solely on advertising revenues. Instead, our model is based
on a diversification of revenue streams that minimize the reliance on any one
stream. Our revenues are generated from the sale of the products and services
offered on its web-site, fees earned from the development of customized portals
for clients, revenue sharing arrangements and advertising.
EXPAND INTO INTERNATIONAL MARKETS.
We believe that it is feasible to expand into international markets with
our business strategy.
SALES AND MARKETING
SalesRepCentral's sales effort targets sales professionals and corporate
executives. To reach the independent sales representative, we advertise on
airport billboards in eleven major cities, in various magazines including
in-flight airline magazines and sales-industry periodicals, and use millions of
Internet banner ad impressions per month. To reach potential corporate clients,
SalesRepCentral uses a dedicated, in-house sales team that seeks out senior
corporate executives and sales managers who may be interested in our customized
hosted portals and related services.
CHANNELS OF DISTRIBUTION
Multiple channels of distribution are used to market our goods and services
including:
* SalesRepCentral's web-site;
* Hosted corporate web portals;
* Toll-free customer service phone numbers;
* Traditional "brick and mortar" locations;
* Direct "outbound" sales efforts;
* Co-marketing opportunities;
* Manufacturers and distributors;
* Magazines and other initiatives.
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ONLINE CONTENT
SalesRepCentral's web site features 11 "channels" offering a variety of
content, products and services. They are designed to assist in maximizing
production by the sales-professional and includes the following features:
CHANNEL FEATURES
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1. SREP Team Room Developed by SalesRepCentral, team room
provides corporate sales management with an
online collaboration tool that functions as
an intranet for sales teams that features
real-time company news, group documents, team
roster, team bulletin boards, sales article
archives and group calendaring.
2. SalesJobs Central Features the sales industry's most unique
employment application featuring an advanced
profiling and matching technology to provide
employers with the highest quality sales
candidates with a confidential searching
process.
3. Travel Full-service, in-house company-owned travel
center for both business and personal travel
with reservations, travel merchandise, travel
tips, news and city guides.
4. My Account Member account information, order status,
personal preferences for member's "My
SalesRepCentral" home page and a detailed
account of members REPPOINTS(TM) (The
Company's incentive and loyalty rewards
program).
5. SalesResource Information on education, training, business
resources, tips & tricks, inspiration, call
scripts, sales forms, seminars, conventions
and prospecting lists.
6. Community Bulletin boards for member interaction also
featuring sales and marketing professionals.
7. SalesRepMall Online store featuring a wide variety of
products for the sales professional such as
organizers, sales training merchandise,
software, business accessories and golf
clubs.
8. Golf Professional golf tips, golf news, tournament
schedules, ability to book tee times on-line,
a complete pro-shop and a USGA sanctioned
golf club.
9. Investing Full service investment center with advice,
education, news, stock ticker and the ability
to customize investment portfolios.
10. Lending Mortgage products and lending services
specific to commission-based professionals.
11. News Latest headlines on initial public offerings,
the stock market, world events, business
acquisitions, appointments of new sales
executives, sports scores, mergers,
entertainment, health and politics.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Our intellectual property includes trademarks, copyrights, trade secrets
and other proprietary rights. We believe that our intellectual property is
important to our success and we try to protect it. We rely on a combination of
trademark, trade secret and copyright law to protect our propriety rights. We
have no patents, nor do we currently have any confidentiality or similar
agreements in place with any of our employees. To date, we have sought to
protect our copyright and trademark rights by placing a standard trademark or
copyright notice in the appropriate places. We have also hired legal counsel to
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help us better protect our intellectual property and we have filed for trademark
protection. However, the steps we take to protect our intellectual property may
be inadequate. Unauthorized parties may try to disclose, obtain or use our
proprietary information, which could harm our business. Others may also claim
that we have violated their proprietary rights. This could subject us to
significant liability for damages and invalidate our proprietary rights. Any
efforts to protect or defend our rights could be time-consuming and costly.
Other parties may also independently develop similar or competing technology.
CUSTOMERS
In 1999, there were more than 10 million sales and marketing professionals
in the United States at the executive level that we target. They spent over $2
billion and approximately 82% used the Internet daily. These professionals have
disposable income, expense accounts, and busy lives. They need convenient, time
saving access to information about the latest sales and marketing tools and
related information. These are our potential customers.
Our customers also include various companies for whom we have developed
customized corporate portals, as well as companies that advertise or sponsor
channels on our web site. Our custom corporate portal customers with whom we
have mostly oral agreements, include:
* American Medical Capital
* Avnet Computer
* Border to Border Incorporated
* Boston Credit Corporation
* Coleman Spas
* Computer Associates
* Cooley Group USA
* Creative Business Concepts
* Hub Construction Co.
* InfoImage
* Insight
* Kenda
* Knowledgenet
* Panasonic
* Xerox
STRATEGIC BUSINESS PARTNERSHIPS
SalesRepCentral has developed numerous alliances and partnerships with
companies that offer both on-line and "brick and mortar" related services that
are instrumental to the success of the sales-professional. SalesRepCentral
believes that these partnerships improve the products and services that we
offer, and provide valuable co-marketing opportunities as well.
* THOUGHTSTAR INC., THE DEVELOPER OF QUICKTEAM AND QUICKTEAM
PROFESSIONAL SOFTWARE. QuickTeam is an online workspace that allows
users to communicate, collaborate and contribute to ongoing projects
within and across organizations. It features live chat, an online team
site, surveys and voting, contact manager, event calendar, team news,
home page customization, project scheduling and task management.
QuickTeam Professional is an enhanced version that includes instant
messaging capabilities, e-mail notification, database integration,
paging and the ability to work off-line. These applications should
give us the ability to create customized corporate workspaces that
allow sales managers to communicate privately and securely with their
sales force.
* ON24, A LEADING FINANCIAL MULTIMEDIA NETWORK. Our partnership with
ON24 will allow our members to access broadcast information on their
investment portfolios when they click on any ON24 news headline on our
web site.
* SWITCHBOARD INC., AN INTERNET DIRECTORY AND LOCAL MERCHANT NETWORK.
Switchboard Inc. will provide a custom-designed version of its yellow
and white pages on our web site. Members will be able to locate the
businesses and services they most often use and need when traveling.
* NET2PHONE, A LEADING PROVIDER OF VOICE-ENHANCED INTERNET
COMMUNICATIONS SERVICES. Net2Phone provides PC-to-phone, PC-to-PC, and
PC-to-fax calling, as well as voice e-mail. Net2Phone offers these
services for free or at reduced rates. Members may use Net2Phone to
cut expenses while staying in touch with their customers.
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* HEALTHAXIS.COM, AN ONLINE PROVIDER OF INDIVIDUAL AND SMALL GROUP
MEDICAL AND HEALTH INSURANCE. Through our portal, members and visitors
to our site may buy health insurance and receive information and
services to help them choose the proper coverage.
In addition to these specific partnerships, we have oral and written
agreements related to our products and services with various other entities.
These entities include, among others, individual news aggregators and media
providers, newspapers, magazines, authors, speakers and national columnists,
software and hardware companies, Internet companies, training companies and
financial institutions.
EMPLOYEES
As of June 30, 2000, SalesRepCentral had 18 full-time employees excluding
temporary personnel and consultants including six in web design and development,
five in sales, three in management, and two each in marketing and
administration. We expect an increase in our officers from three to five and an
increase in the number of employees from 18 to approximately 30 over the next
three years. None of our employees are represented by a labor union, and we
consider our relations with our employees to be good. Our ability to achieve our
financial and operational objectives depends in large part upon the continued
service of our senior management and key technical personnel and our continuing
ability to attract and retain highly qualified technical and managerial
personnel. Competition for such qualified personnel in our industry and
geographical location in the Phoenix/Scottsdale area is intense. Our future
success depends on our ability to attract, retain and motivate highly skilled
employees.
RISK FACTORS
THE RISKS DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY.
ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US, OR THAT WE CURRENTLY DEEM
IMMATERIAL, MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS COULD BE SERIOUSLY HARMED BY ANY OF THESE
RISKS; AND, THE TRADING PRICE OF OUR COMMON STOCK COULD ALSO DECLINE DUE TO ANY
OF THESE RISKS.
WE HAVE INCURRED OPERATING LOSSES
SalesRepCentral was incorporated in May of 1999 and has incurred losses in
its initial years of operations. As of June 30, 2000 we had an accumulated
deficit of approximately $1.58 million which includes depreciation and
amortization and the cost and amortization of acquisition related intangibles.
In addition, we currently intend to increase capital expenditures and operating
expenses in order to expand lines of products and services to potential clients
and customers.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE BECAUSE OF A NUMBER OF FACTORS
Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside of our control.
These factors include:
* The level of usage of the Internet in general and use of web sites in
particular;
* General economic conditions;
* Seasonal nature during the year of demand for our products and
services;
* Timing of marketing expenditures to promote our products and services;
* The introduction of new products and services by our competitors;
* The addition of loss of clients and customers;
* Costs incurred with respect to acquisitions and investments.
Due to all of the foregoing factors and other risks described in this
section, you should not rely on quarter-to-quarter comparisons of our results of
operations as an indication of future performance. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. In this event, the price of our common stock may
fall.
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WE MUST DEVELOP AND MAINTAIN THE AWARENESS OF OUR BRANDS TO ATTRACT CUSTOMERS
Maintaining and strengthening our brands is critical to achieving
widespread acceptance of our products and services by our clients and customers,
particularly in light of the competitive nature of the market. Promoting and
positioning our brand will depend largely on the success of our marketing
efforts, and our ability to provide high quality services. We may find it
necessary to increase our marketing budget or otherwise increase our financial
commitment to creating and maintaining brand loyalty among our clients and
customers. If we fail to promote and maintain our brands or incur excessive
expenses in an attempt to promote and maintain our brands our business could be
harmed.
WE MAY BE LIABLE FOR OUR LINKS TO THIRD-PARTY WEB SITES
We could be exposed to liability with respect to the third-party web sites
that may be accessible through our services. These claims may allege, among
other things, that by linking to web sites operated by third parties, we may be
liable for copyright or trademark infringement or other unauthorized actions by
third parties through these web sites. Other claims may be based on errors or
false or misleading information provided by our services. Our business could be
harmed due to the cost of investigating and defending these claims, even to the
extent these types of claims do not result in liability.
WE MAY FACE POTENTIAL LIABILITY FROM OUR ELECTRONIC
COMMERCE-RELATED ADVERTISING ARRANGEMENTS
Some of our advertising relationships provide that we may receive payments
based on the amount of goods or services purchased by consumers clicking from
our services to the seller's web site. These arrangements may expose us to legal
risks and uncertainties, including potential liabilities to consumers of the
advertised products and services. Although we carry general liability insurance,
our insurance may not cover potential claims of this type or may not be adequate
to indemnify us from all liability that may be imposed. Some of the liabilities
that may result from these arrangements include:
* Potential liabilities for illegal activities that may be conducted by
the sellers;
* Product liability or other tort claims relating to goods or services
sold through third-party e-commerce sites;
* Claims for consumer fraud and false or deceptive advertising or sales
practices;
* Breach of contract claims relating to purchases;
* Claims that items sold through these sites infringe third-party
intellectual property rights.
Even to the extent these types of claims do not result in material
liability, investigating and defending these claims could harm our business.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS
THAT ARE COSTLY TO DEFEND AND COULD LIMIT OUR ABILITY TO
USE CERTAIN TECHNOLOGIES IN THE FUTURE
Many parties are actively developing Internet-related technologies. We
believe that these parties will continue to take steps to protect these
technologies, including seeking patent protection. As a result, we believe that
disputes regarding the ownership of these technologies are likely to arise in
the future. From time to time, parties assert patent infringement claims against
us in the form of letters, lawsuits and other forms of communications. In
addition to patent claims, third parties may assert claims against us alleging
infringement of copyrights, trademark, rights, trade secret rights or other
proprietary rights or alleging unfair competition.
We may incur substantial expenses in defending against third-party infringement
claims regardless of the merit of the claims, In the event that there is a
determination that we have infringed on third-party proprietary rights we could
incur substantial monetary liability and be prevented from using the rights in
the future.
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OUR BUSINESS DEPENDS ON THE CONTINUED GROWTH IN INTERNET USE
We operate in a new and rapidly evolving market. Our business may be
adversely affected if usage of the Internet or other online services does not
continue to grow. This growth could be hindered by a number of factors including
the adequacy of the Internet's infrastructure to meet increased usage demand,
privacy and security concerns and the availability of cost-effective services.
Any of these issues could cause the Internet's performance or level of usage to
decline.
OUR FUTURE DEPENDS ON OUR ABILITY TO ATTRACT, RETAIN AND
MOTIVATE HIGHLY SKILLED EMPLOYEES
Our future success depends on our ability to attract, retain and motivate
highly skilled employees. Competition for employees in the e-commerce industry
is intense, particularly in Phoenix/Scottsdale where we are headquartered.
Additionally, it is often more difficult to attract employees once a company's
stock is publicly traded because the exercise price of equity awards such as
stock options are based on the public market, which is highly volatile. We may
be unable to attract, assimilate or retain other highly qualified employees in
the future. We have from time to time experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining highly skilled
employees with appropriate qualifications. Furthermore, certain key employees
possess marketing, technical and other expertise, which is important to the
operations of our business, and if these employees leave, we may not be able to
replace them with employees possessing comparable skills.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE
INTERNET COULD HINDER THE POPULARITY OF THE INTERNET
NEW INTERNET AND PRIVACY LAWS. There are currently few laws or regulations
that specifically regulate communications or commerce on the Internet. However,
laws and regulations may be adopted in the future that address issues such as
user privacy, pricing, content and the characteristic and quality of products
and services. For example:
* The United States Federal government and various state governments
have proposed limitations on the collections and use of information
regarding Internet users. In October 1998, the European Union adopted
a directive that may result in limitations on our ability to collect
and use information regarding Internet users in Europe;
* A portion of the Telecommunications Act, which has since been ruled
unconstitutional, sought to prohibit transmitting certain types of
information and content over the Internet.
Moreover, it may take several years to determine the extent to which existing
laws relating to issues such as property ownership, libel, and personal privacy
are applicable to the Internet. Any new laws or regulations relating to the
Internet could harm our business.
TAX LAWS: The tax treatment of the Internet and electronic commerce is
currently unsettled. A number of proposals have been made at the federal, state
and local level that could impose taxes on the sale of goods and services and
certain other Internet activities. Our business may be harmed by the passage of
laws in the future imposing taxes or other burdensome regulation on online
commerce.
OTHER JURISDICTIONS: Because our services are available in multiple states,
these jurisdictions may claim that we are required to qualify to do business as
a foreign corporation in each of these states. If we file to qualify as a
foreign corporation in a jurisdiction where we are required to do so, we could
be subject to taxes and penalties.
PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS IS COSTLY AND DIFFICULT
We regard our intellectual property, including patents, copyrights,
trademark, trade secrets, and similar intellectual property as critical to our
success. We rely upon patents, trademark and copyright law, trade secret
protection and confidentiality and license agreements to protect our proprietary
rights. We cannot guarantee that the steps that we have taken to protect our
proprietary rights will be adequate.
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FUTURE ACQUISITIONS DEPEND ON THE CONTINUED GROWTH IN INTERNET USE
In the future, we may effect other large or small acquisitions by using
stock, and this will dilute our stockholders. We may also use cash to buy
companies or technologies in the future and we may need to incur additional debt
to pay for these acquisitions. Acquisition financing may not be available on
favorable terms or at all. In addition, we will likely be required to amortize
significant amounts of goodwill and other intangible assets in connection with
future acquisitions, which will have a material effect on our results of
operations.
WE MUST MANAGE OUR GROWTH
Our growth, recent acquisition and investments have placed a significant
strain on our managerial, operational, and financial resources. In addition, we
plan to continue to hire additional personnel. To manage our growth we must
continue to implement and improve our operational and financial systems and to
expand, train and manage our employee base. Any failure to manage our growth
effectively could harm our business.
OUR BUSINESS PROSPECTS ARE DIFFICULT TO EVALUATE BECAUSE WE ARE A NEW COMPANY
We began operations in July of 1999 and launched our web site,
SalesRepCentral, in January of 2000. Because we have a short operating history,
it may be difficult for you to assess our growth and earnings potential. We have
faced many of the difficulties that companies in the early stages of their
development often face. These have included, among others:
* competition from larger, more established companies;
* limited financial resources;
* high marketing and other costs;
* difficulty recruiting qualified employees for management and other
positions;
* developing and marketing a new product for which a market is not yet
established and may never become established;
* delays in reaching our marketing goals;
* challenges related to the development and coding of software to
support our web site;
* lack of sufficient customers, revenues and cash flow.
We may continue to face these and other difficulties in the future, some of
which may be beyond our control. If we are unable to successfully address these
problems, our future growth and earnings will be negatively affected.
WE HAVE LOST MONEY, EXPECT FUTURE LOSSES, AND MAY NEVER BECOME PROFITABLE
Due in large part to our development and start up costs, we have lost
approximately $1.51 million, in the current year. It is possible that we could
continue to lose money until we are able to improve our revenues and/or lower
our costs. You should keep in mind that there is no assurance that we will ever
generate enough revenue to cover our costs and we may never earn or sustain a
profit. If we continue to lose money over an extended period of time, we may be
unable to expand or to continue our business.
WE MAY FAIL TO GAIN MARKET ACCEPTANCE OF OUR BUSINESS MODEL,
PRODUCTS AND SERVICES
Our future depends on the success of our business model, products and
services. Our web site is designed to provide a comprehensive "portal" of
resources that meet the daily needs of members of the sales community including
professional sales representatives, sales managers and corporate executives, and
to provide a meeting place and commerce site dedicated to the sales community.
This business model is new and unproven and there is no guarantee that members
of the sales community will be interested in such a service, will visit our web
site or purchase any products or services. If the market does not accept our
business model, products and services, our revenues and earnings will not grow
and we may never become profitable. It is difficult to predict the future growth
of our business and the size of the market for our products and services because
the market is new and evolving.
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OUR FUTURE REVENUE AND OPERATING RESULTS ARE UNPREDICTABLE AND MAY FLUCTUATE
Our short operating history and the rapidly changing nature of the market
in which we compete make it difficult to accurately forecast our revenues and
operating results. Our operating results are unpredictable and we expect them to
fluctuate in the future due to a number of factors. These factors may include,
among others:
* Internet growth;
* demand for our services;
* our ability to develop and introduce new products and services in
response to changing market conditions and customer preferences;
* the amount and timing of operating costs and capital expenditures
relating to the growth of our business;
* the announcement or introduction of new or enhanced products or
services by our competitors;
* technical difficulties with customers' use of our web site or service;
* interruptions;
* changes in general economic or industry conditions.
Period-to-period comparisons of our operating results are not a good
indication of our future performance. It is likely that our operating results in
some periods will fall short of market expectations. If this occurs, the price
of our stock may fall.
WE MAY NEED ADDITIONAL FINANCING, WHICH MAY OR MAY NOT BE AVAILABLE
We anticipate that we can meet future cash needs with improved product and
advertising sales, sponsorship and partner revenues, services revenue, the sale
of equity securities and/or debt financing. There is no guarantee, however, that
we will be able to meet our cash requirements from these sources. If our capital
requirements or cash flow vary significantly from our current estimates or if
unforeseen circumstances occur, we may require additional financing sooner than
we currently anticipate. Our failure to raise these funds may:
* restrict our growth;
* limit our development of new products or services or improvements to
existing products and services;
* limit our ability to take advantage of future opportunities;
* lessen our ability to compete;
* limit our ability to continue operations.
There is no assurance that additional financing will be available, if
needed, or that it will be available on attractive terms. In addition, any sale
of equity securities may involve substantial dilution to our then-existing
shareholders. Rising interest rates could increase the costs of any debt
financing.
WE MAY FACE SIGNIFICANT COMPETITION
Competition from other sales-related software, service or web companies is
significant and we expect it to grow as vertical web marketing trends grow. Our
customers' needs and the technology available to meet those needs are constantly
changing. Therefore, we must be able to respond to these changes to be
competitive. Our competitors may have a longer operating history, larger
customer base and greater financial, marketing and other resources than we have.
This may make it easier for them to respond more quickly to new or changing
opportunities, technologies or customer needs. Our competitors may also develop
products and services that are better than ours or that achieve greater market
acceptance. We may never be able to capture and maintain the market share
necessary for growth and profitability and there is no guarantee that we will be
able to compete successfully against current or future competitors.
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WE MAY BE UNABLE TO OBTAIN PRODUCTS FROM OUR VENDORS
We rely on the sale of certain merchandise and products on our web site for
a portion of our total revenues. Although we will take steps to try to ensure
that these products are available, there is no guarantee that the products will
be available from manufacturers or distributors when needed. If certain products
become unavailable or if we are unable to obtain sufficient amounts of products
to meet customer demand, our business, operating results and financial condition
could be harmed.
WE MAY NEED TO FIND ALTERNATIVE SERVICE PROVIDERS
We have developed alliances and partnerships with various companies. These
companies provide technology, software, information, access and other services
that improve and add to the products and services we are able to offer. If any
of these companies end their relationship with us, we would need to find an
alternative source for the products and/or services they provided. If we are
unable to find another source or one that is comparable, the content and quality
of the products and services we offer could suffer. If this occurs, our
business, operating results and financial condition could be harmed.
WE DO NOT HAVE POLICIES OR PROCEDURES FOR RESOLVING CONFLICTS OF INTEREST
One of our officers, directors, and largest shareholders, Mr. Ralph
Massetti, is also a director of Regency Group Ltd. Mr. Massetti devotes roughly
5% of his time to Regency Group Ltd., for whom he provides limited consulting
services, and the balance of his time to us. We have not established any polices
or procedures for resolving current or potential conflicts of interest between
sales reported and our management or management-affiliated entities. There is no
guarantee that Mr. Massetti will resolve any conflicts of interest in our favor.
ONE OF OUR OFFICERS AND DIRECTORS CONTROLS 59% OF OUR COMMON STOCK
As of June 30, 2000, Mr. Ralph Massetti owned approximately 59% of our
outstanding common stock. Mr. Massetti would be able to significantly influence
all matters requiring shareholder approval, including the election of directors
and the approval of significant corporate transactions. This concentration of
ownership may also have the effect of delaying, deterring or preventing a change
in control of our company and may make some transactions more difficult or
impossible to complete without his support.
WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE
We currently intend to retain any future earnings to finance the growth and
development of our business. Therefore, we do not expect to pay any cash
dividends in the foreseeable future. Any future dividends will depend on our
earnings, if any, and our financial requirements.
OUR SUCCESS WILL DEPEND ON OUR ABILITY TO KEEP PACE WITH ADVANCES IN TECHNOLOGY
To be successful, we must be able to adapt to rapidly changing Internet
technologies by continually enhancing our products and services and introducing
new services to meet our customers' changing needs. If we need to modify our
products and services, we could incur significant costs. If we are unable to
adapt, our existing web site, services and technology could become obsolete and
our customers may switch to the products and services of our competitors. Higher
costs, fewer customers and lower revenues could negatively affect our business,
results of operation and financial condition.
OUR BUSINESS DEPENDS ON THE CONTINUED GROWTH OF THE INTERNET
Our future success depends in part on the continued growth of the Internet.
Rapid growth in the use of, and interest in the Internet is a recent phenomenon
and it may not continue. Our business could be harmed if any of the following
occur:
* the use of the Internet does not continue to grow or grows slower than
expected;
* the Internet's infrastructure does not effectively support the growth
that may occur; and
* the performance and reliability of the Internet suffers as usage
grows.
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GOVERNMENT REGULATION MAY AFFECT HOW WE DO BUSINESS IN THE FUTURE
Due to the increasing popularity and use of the Internet, a number of laws
and regulations may be adopted covering issues such as user privacy, taxation of
goods and services provided on the Internet, intellectual property, content and
quality of goods and services, and information security. These laws and
regulations could decrease the growth of the Internet and the demand for our
products and services and could increase our costs. The applicability of
existing laws to the Internet is also uncertain.
WE MAY BE UNABLE TO PROTECT OUR TRADEMARKS AND PROPRIETARY RIGHTS
Our ability to compete depends on our systems and technology. We have no
patents or registered trademarks. Although we have taken steps to protect our
proprietary rights and intellectual assets, unauthorized parties may attempt to
copy aspects of our services or obtain and use information we consider
proprietary. Policing the unauthorized use of our proprietary rights is
difficult. We cannot guarantee that no harm or threat will be made to our
intellectual property. The misappropriation of our intellectual property or
potential litigation to enforce our rights could increase our costs and harm our
business.
WE MAY UNINTENTIONALLY INFRINGE ON THE PROPRIETARY RIGHTS OF OTHERS
We may be subject to claims alleging that we have infringed on the
proprietary rights of others. These claims could result in significant damages.
Even if any of these claims ultimately prove to be without merit, the time and
costs associated with defending such claims could harm our business.
OUR ONLINE SECURITY MEASURES MAY FAIL
Our relationships with our customers and our business may be negatively
affected if the security measures we use to protect the privacy of personal or
confidential information do not work. Our computer infrastructure is potentially
vulnerable to physical or electronic computer break-ins, viruses and similar
disruptions. Someone who is able to get around our security measures could also
misappropriate our proprietary information. We may need to incur significant
costs to protect against security breaches or to resolve problems caused by any
breaches. There is no guarantee that we will be able to prevent any security
breach, and our failure to do so could harm our reputation, operations and
financial condition.
WE MAY BE UNABLE TO ATTRACT AND RETAIN QUALIFIED EMPLOYEES OR KEY PERSONNEL
Our future success depends on our ability to find, hire, train, motivate
and keep highly qualified technical, managerial and other personnel. The
competition for qualified employees is high and we may be unable to attract,
assimilate, motivate and keep the personnel we need. This could have a negative
affect on our business, operating results and financial condition.
We rely heavily on the performance of our executive officers and key
technical and graphic employees. We do not have employment agreements or "key
person" life insurance policies on any of our officers or other employees. If we
lose the services of any of our executive officers or key employees, it could
harm our business.
OUR STOCK PRICE MAY BE VOLATILE
The stock market in general, and the stock prices of technology and
Internet-related companies in particular, have experienced dramatic fluctuations
that have often been unrelated to the operating performance of any particular
company or companies. In addition, small company stock prices have tended to be
volatile due to their less certain growth prospects, the lower degree of
liquidity in the markets for such stock, and the greater sensitivity of small
companies to changing economic conditions. These market fluctuations could cause
the price of our stock to go down regardless of our actual operating
performance, and you could lose all or a part of your investment.
FUTURE SALES OF COMMON STOCK COULD CAUSE OUR STOCK PRICE TO GO DOWN
The sale of a large number of our shares, or the perception that such a
sale may occur, could lower our stock price. These sales may make it more
difficult for us to sell equity securities in the future at a time and price
that we consider appropriate.
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As of June 15, 2000, 10,282,761 shares of our common stock may be
considered "restricted securities" and may only be sold pursuant to a
registration statement, in compliance with Rule 144 of the Securities Act of
1933, as amended, or pursuant to another exemption from registration. Many of
these shares will be eligible for sale in the public market by the end of 2000
or in early 2001.
THERE ARE RULES FOR LOW-PRICED STOCKS THAT MAY AFFECT YOUR
ABILITY TO RE-SELL YOUR SHARES
Our common stock is currently considered "penny stock" under federal
securities laws. Penny stock rules generally impose additional sales practice
and disclosure requirements on broker-dealers who sell our shares to certain
investors. These rules may affect the ability of broker-dealers to make a market
in or trade our shares. This, in turn, may affect your ability to resell those
shares in the public market.
WE MAY INCUR SUBSTANTIAL COSTS UNDER OUR INDEMNIFICATION POLICY
Under certain circumstances, we may indemnify (secure against loss or
damages) our officers, directors and agents against attorney's fees and other
expenses they incur and judgments against them in any litigation that are due to
their association with us or activities on our behalf. We may also incur the
expenses of such litigation or of any of our officers, directors, employees or
agents if they promise to repay the expenses should it later be determined that
they are not entitled to indemnification. We may incur substantial costs under
this policy, which we may be unable to recover even if entitled to do so.
WE EXCLUDE CERTAIN LIABILITIES ON THE PART OF OUR DIRECTORS
We exclude personal liability on the part of our directors for monetary
damages for breach of fiduciary duty, except in certain cases. This means we
will have a more limited right of action against our directors than we would
otherwise have. This will not, however, affect the liability of any director
under federal or applicable state securities laws.
ITEM 2. PROPERTY
SalesRepCentral's corporate offices are headquartered in facilities
consisting of approximately 6,300 square feet in Scottsdale, Arizona which we
occupy under a 1-year sublease. Our headquarters facilities include general
office and warehouse buildings that were constructed during 1999. We believe
that the current facilities will be adequate to accommodate our growth for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
SalesRepCentral was not involved in any legal proceedings during the period
covered by this filing.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY VOTERS (NONE NOTED)
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET FOR THE REGISTRANT'S COMMON EQUITY
SalesRepCentral's common stock trades on the OTC bulletin board under the
symbol "SREP." The following table sets forth, on a per share basis, the high
and low sales prices of our common stock for the periods indicated as reported
by the NASDAQ National Market. The market represented by the OTC bulletin board
is extremely limited and the price for our common stock quoted on the OTC
bulletin board is not necessarily a reliable indication of the value of our
common stock. Quotations reflect inter-dealer prices without retail mark-up,
mark-down or commissions and may not represent actual transactions
HIGH LOW
---- ---
FISCAL YEAR ENDED JUNE 30, 2000 (1)
Quarter ended September 30, 1999.................. (2) (2)
Quarter ended December 31, 1999................... 9.625 2.250
Quarter ended March 30, 1999...................... 9.750 3.687
Quarter ended June 30, 2000....................... 4.500 .7810
----------
(1) SalesRepCentral commenced operations in May of 1999
(2) No trading data available
As of June 30, 2000 there were 116 stockholders of record. We have never
declared or paid cash dividends on our common stock. We presently intend to
retain future earnings, if any, for use in our business, and therefore we do not
anticipate paying any cash dividends on our capital stock in the foreseeable
future.
PENNY STOCK
The Securities and Exchange Commission has adopted Rule 15g-9 which
established the definition of a "penny stock," for the purposes relevant to The
Company, as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require: (i) that a broker or dealer approve a person's account for
transactions in penny stocks; and (ii) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or dealer must:
(i) obtain financial information and investment experience objectives of the
person; and
(ii) make a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
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OUTSTANDING RESTRICTED STOCK
10,282,761 outstanding shares of common stock are restricted securities
within the meaning of Rule 144 and may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemption from registration offered by Rule 144. In
general, under Rule 144, as currently in effect, a person who has beneficially
owned restricted shares for at least one year, including a person who may be
deemed to be our affiliate, may sell within any three-month period a number of
shares of common stock that does not exceed a specified maximum number of
shares. This maximum is equal to the greater of 1% of the then outstanding
shares of common stock or the average weekly trading volume in the common stock
during the four calendar weeks immediately preceding the sale. Sales under Rule
144 are also subject to restrictions relating to manner of sale, notice and
availability of current public information about us. In addition, under Rule
144(k) of the Securities Act, a person who is not our affiliate, has not been an
affiliate of ours within three months prior to the sale and has beneficially
owned shares for at least two years would be entitled to sell such shares
immediately without regard to volume limitations, manner of sale provisions,
notice or other requirements of Rule 144.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES CONTAINED IN ITEM 8 OF THIS ANNUAL REPORT. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. WE MAY IDENTIFY THESE
STATEMENTS BY THE USE OF WORDS SUCH AS "BELIEVE", "EXPECT", "ANTICIPATE",
"INTEND", "PLAN" AND SIMILAR EXPRESSIONS. THESE FORWARD-LOOKING STATEMENTS
INVOLVE SEVERAL RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF VARIOUS FACTORS, INCLUDING THOSE PREVIOUSLY DESCRIBED UNDER THE
CAPTION "RISK FACTORS" IN " ITEM 1. BUSINESS" ABOVE. THESE FORWARD-LOOKING
STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS ANNUAL REPORT, AND WE CAUTION YOU
NOT TO RELY ON THESE STATEMENTS WITHOUT ALSO CONSIDERING THE RISKS AND
UNCERTAINTIES ASSOCIATED WITH THESE STATEMENTS AND OUR BUSINESS ADDRESSED IN
THIS ANNUAL REPORT.
OVERVIEW
SalesRepCentral, a Nevada corporation (SalesRepCentral) incorporated in May
of 1999, is an early growth stage company and plans to be the Internet's leading
on-line sales community, targeting professional sales representatives, corporate
executives and business managers/owners. The Company provides and maintains a
comprehensive Internet portal designed to meet the daily needs of the sales
professionals and to provide a meeting place dedicated to their field of
expertise.
SalesRepCentral's web-site features 11 content "channels" offering
exclusive products and services that also provide "value-added" features
allowing the sales-professional to perform his job more effectively. Visitors to
our web-site will find comprehensive content developed specifically for the
sales-professional combining education, sales tools & resources, services and
strategic partnerships in one easy-to-use location. Other features of our
Internet-site include employment and job-placement, a full-service travel
agency, leasing and lending services and sales leads. Our web-site also provides
banner advertising, promotional spotlights and channel sponsorships.
We have a limited operating history on which to base an evaluation of our
business and prospects. You must consider our prospects in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development. To address these risks we must establish, maintain and
expand our customer base, implement and successfully execute our business and
marketing strategy, provide superior customer service, anticipate and respond to
competitive developments and attract, retain and motivate qualified personnel.
We cannot assure that we will be successful in addressing these risks, and our
failure to do so could have a negative impact on our business, operating results
and financial condition.
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RECENT EVENTS:
MERGER OF VAN AMERICAN CAPITAL, LIMITED
In October of 1999, SalesRepCentral merged its operations with Van American
Capital, Ltd. Ralph Massetti, President, Chief Executive Officer and Director of
SalesRepCentral received 8,898,750 shares of The Company in the merger based on
his majority ownership position in SalesRepCentral prior to the merger.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
In conjunction with the filing of SalesRepCentral's registration statement,
we Amended and Restated our Articles of Incorporation to authorize the issuance
of 24,200,000 shares of common stock, $.001 par value per share and 10,000,000
shares of preferred stock, $.001 par value per share.
PRIVATE STOCK PLACEMENT
In November 1999, The Company offered and sold 468,000 shares of common
stock for $362,000 cash and $106,000 for services. This offering was not
accompanied by general advertisement or general solicitation. The Company relied
on Rule 505 of Regulation D as the basis of exemption from registration, as
identified on the Form D filed with Commission.
FILING OF SB-2 AND REGISTRATION OF SECURITIES FOR SALE TO THE PUBLIC
On June 23, 2000, SalesRepCentral filed Form SB-2 with the Securities and
Exchange Commission in conjunction with its proposed sale of 17,000,000 shares
of common stock to the public.
ISSUANCE OF PREFERRED STOCK
There are 14,525 shares of preferred stock currently outstanding held by 3
shareholders of record. Each preferred share will automatically convert to 1,000
shares of common stock of SalesRepCentral on October 12, 2001. The shares of
common stock to be issued upon the conversion of the preferred stock may not be
sold in the absence of registration under the Securities Act unless an exemption
from registration is available, including the exemption from registration
offered by Rule 144.
ISSUANCE OF WARRANTS
The Company issued warrants for 648,000 shares of common stock, at an
initial exercise price of $1.88 per share, to Swartz Private Equity in
connection with the Investment Agreement of June 9, 2000. The warrants are
subject to a provision which resets the exercise price at the lowest closing
price of SalesRepCentral's common stock for the five trading days ending on each
six-month anniversary of the date of issuance of the warrants. Additional
warrants exercisable for common stock are issuable to Swartz Private Equity
under the Investment Agreement. None of the warrants have been exercised to
date.
INVESTMENT AGREEMENT
On June 9, 2000, SalesRepCentral entered into an Investment Agreement with
Swartz Private Equity, LLC. The Investment Agreement entitles us to issue and
sell our common stock for up to an aggregate of $30 million from time to time
during a three-year period following the effective date of our registration
statement on Form SB-2. This is also referred to as a put right.
PUT RIGHTS. In order to invoke a put right, we must have an
effective registration statement on file with the SEC registering
the resale of the common shares which may be issued as a
consequence of the invocation of that put right. Additionally, we
must give at least ten but not more than twenty business days'
advance notice to Swartz of the date on which we intend to
exercise a particular put right, and we must indicate the number
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of shares of common stock we intend to sell to Swartz. At our
option, we may also designate a maximum dollar amount of common
stock (not to exceed $2 million) which we will sell to Swartz
during the put and/or a minimum purchase price per common share
at which Swartz may purchase shares during the put. The number of
common shares sold to Swartz may not exceed 15% of the aggregate
daily reported trading volume, excluding block trades of the
greater of 20,000 shares of common stock or $50,000 worth of
common stock, during a period which begins on the business day
immediately following the day we invoked the put right and ends
on and includes the day which is twenty business days after the
date we invoked the put right.
Swartz will pay us the market price minus a $.10 discount or 92%
of the market price for each share of common stock under the put,
whichever is less. Market price is defined as the lowest
intra-day trade price for the common stock during the applicable
pricing period which consists of the twenty business-day period
following the date notice of the put which was provided to
Swartz. However, the market price may not be less than the
designated minimum per share price, if any, that we indicated in
our notice.
WARRANTS. Within five business days after the end of each pricing
period, we are required to issue and deliver to Swartz a warrant
to purchase a number of shares of common stock equal to 10% of
the common shares issued to Swartz in the applicable put. Each
warrant will be exercisable at a price which will initially equal
115% of the market price for the applicable put. The warrants
will have semi-annual reset provisions. Each warrant will be
immediately exercisable and have a term beginning on the date of
issuance and ending five years thereafter.
LIMITATIONS AND CONDITIONS PRECEDENT TO OUR PUT RIGHTS. Swartz is
not required to acquire and pay for any common shares with
respect to any particular put for which:
* we have announced or implemented a stock split or
combination of our common stock;
* we have paid a common stock dividend or set a record date
for the payment of a dividend;
* we have made a distribution of our common stock or of all or
any portion of our assets between the put notice date and
the date the particular put closes;
* we have announced or consummated a major transaction
(including a transaction which constitutes a change of
control) between the advance put notice date and the end of
the pricing period for that put.
SHORT SALES. Swartz and its affiliates are prohibited from
engaging in short sales of our common stock unless they have
received a put notice and the amount of shares involved in a
short sale does not exceed the number of shares specified in the
put notice.
CANCELLATION OF PUTS. We must cancel a particular put if, between
the date of the advance put notice and the last day of the
pricing period:
* we discover an undisclosed material fact relevant to
Swartz's investment decision;
* the registration statement registering resales of the common
shares becomes ineffective;
* shares are delisted from the then primary exchange.
However, the put will remain in effect for the number of shares
specified in the put notice for the shortened pricing period
which will end on the day prior to the date of delivery of the
put cancellation notice.
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SHAREHOLDER APPROVAL. We may currently issue more than 20% of our
outstanding shares. If we become listed on the Nasdaq Small Cap
Market or Nasdaq National Market, then we must get shareholder
approval to issue more than 20% of our outstanding shares. Since
we are currently a bulletin board company, we do not need
shareholder approval.
TERMINATION OF INVESTMENT AGREEMENT. We may also terminate our
right to initiate further puts or terminate the Investment
Agreement by providing Swartz with notice of such intention to
terminate; however, any such termination will not affect any
other rights or obligations we have concerning the Investment
Agreement or any related agreement.
RESTRICTIVE COVENANTS. During the term of the Investment
Agreement and for a period of one year thereafter, we are
prohibited from certain transactions. These include the issuance
of any debt or equity securities in a private transaction which
are convertible or exercisable into shares of common stock and
the issuance of certain other equity securities. We are also
prohibited from entering into any private equity line type
agreements similar to the Investment Agreement without obtaining
Swartz's prior written approval.
RIGHT OF FIRST REFUSAL. Swartz has a right of first refusal to
purchase any equity securities or convertible debt securities
offered by us in any private transaction which closes on or prior
to one year after the termination of the investment agreement.
SWARTZ'S RIGHT OF INDEMNIFICATION. We are obligated to indemnify
Swartz (including their shareholders, officers, directors,
employees and agents) from all liability and losses resulting
from any misrepresentations or breaches we made in connection
with the Investment Agreement, our registration rights agreement,
other related agreements, or the registration statement.
RESULTS OF OPERATIONS:
REVENUES
Total revenues equaled $51,570 for the fiscal year and coincide with
continued development and use of SalesRepCentral's Internet portal. This figure
represents approximately two months of operational activity and is attributable
to the sale of retail items only.
COST OF SALES
Our cost-of-sales equaled $84,427 for the fiscal year and represents the
cost to SalesRepCentral of the retail items sold on its web site.
GENERAL AND ADMINISTRATIVE EXPENSES
Total General and Administrative expense increased to $1,026,907 over the
prior year. The increase is attributable to the commencement of our operating
activities in the current year. Total General and Administrative expense for the
period ending June 30, 2000 was $1,101,232 and was primarily attributable to the
following factors in the proportions indicated:
* Approximately $330K or 30% related to advertising,
promotional and marketing expenses.
* Approximately $50K or 5% related to licensing fees.
* Approximately $249K or 23% related to salaries and benefits.
* Approximately $122K or 11% related to consulting and
professional fees.
* Approximately $81K or 7% related to facilities rent.
* Approximately $34K or 3% related to travel expenses.
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RESEARCH AND DEVELOPMENT COSTS
Our research and development costs represent those costs incurred for which
technological feasibility has not been achieved and which has no alternative
future use. These costs are charged to operations as incurred and totaled
approximately $376,000 which consisted of consulting fees, salaries and employee
benefits and software costs incurred to develop our Internet portal.
NET LOSS
Our net losses for the years ended June 31, 2000 and 1999 were $1,509,753
and $74,325 respectively. The net loss in 2000 was due predominantly to
SalesRepCentral not commencing our sales operations until the 4th quarter of the
fiscal year as well as management's decision to expense certain other costs and
expenses that could have been deferred and amortized over a longer period of
time. SalesRepCentral's future net loss or income will depend upon our future
revenues and the costs and expenses required to generate those revenues.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through a
combination of private and public sales of equity. At June 30, 2000, our
principal source of liquidity was approximately $83K in cash and cash
equivalents compared with approximately $66K in cash and cash equivalents at
June 30, 1999. We believe that we have the financial resources and sales
activity needed to meet our presently anticipated business requirements,
including capital expenditure and strategic operating programs, for at least the
next 12 months. Thereafter, if cash generated by operations is insufficient to
satisfy our liquidity requirements, we may need to seek alternative financing
such as selling additional equity or debt securities or obtaining additional
credit facilities. However, depending on market conditions, we may consider
alternative financing even if our financial resources are adequate to meet
presently anticipated business requirements. The sale of additional equity or
convertible debt securities may result in additional dilution to our
stockholders. Financing may not be available on terms acceptable to us or at
all.
OPERATING ACTIVITIES
Net cash used by operating activities increased $1,356,799 over the prior
year while the net loss increased from $74,325 to $1,509,753, an increase of
$1,435,428. Charges to operations that do not require the use of cash include
$244,022, which is comprised of our issuance of stock in-lieu of payment for
services as well as depreciation expense and an increase in accounts payable and
accrued expenses. We also loaned funds totaling $100,584 to certain related
parties, which decreased the amount of operating capital on hand during the
year.
INVESTING ACTIVITIES
Net cash used by investing activities increased $113,915 over the prior
year. The majority of this amount is comprised of $100,641 of property and
equipment purchased during the year by us.
FINANCING ACTIVITIES
Net cash provided by financing activities increased $1,402,355 over the
prior year. During the year ended June 30, 2000, SalesRepCentral offered common
stock for sale to the public generating approximately $1,506,000 in cash
proceeds. The cash was used primarily for operating purposes in the current
year.
20
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
SalesRepCentral.com, Inc.
We have audited the accompanying balance sheets of SalesRepCentral.com, Inc. as
of June 30, 2000 and 1999, and the related statements of operations, changes in
stockholders' equity, and cash flows for the year ended June 30, 2000, and for
the period from the date of inception (May 12, 1999) through June 30, 1999.
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 audits 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 SalesRepCentral.com, Inc. as of
June 30, 2000 and 1999, and the results of its operations, changes in
stockholders' equity, and its cash flows for the year ended June 30, 2000 and
for the period from the date of inception (May 12, 1999), through June 30, 1999,
in conformity with generally accepted accounting principles.
Certified Public Accountants /s/ Semple & Cooper, LLP
Phoenix, Arizona
October 9, 2000
21
<PAGE>
SALES REPCENTRAL.COM, INC.
BALANCE SHEETS
June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 62,631 $ 65,535
Due from related parties (Note 3) 100,584 --
Inventory (Note 1) 12,075 --
Other current assets 12,312 6,084
----------- -----------
TOTAL CURRENT ASSETS 187,602 71,619
PROPERTY AND EQUIPMENT, NET (NOTES 1 AND 2) 116,150 6,646
OTHER ASSETS:
Certificate of deposit (Note 7) 20,000 --
----------- -----------
TOTAL ASSETS $ 323,752 $ 78,265
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 125,955 $ 32,590
Note payable - current portion (Note 6) 8,091 --
Accrued liabilities 20,730 --
----------- -----------
TOTAL CURRENT LIABILITIES 154,776 32,590
LONG-TERM LIABILITIES:
Note payable-long-term portion (Note 6) 9,943 --
----------- -----------
TOTAL LIABILITIES 164,719 32,590
----------- -----------
COMMITMENTS: (NOTE 5) -- --
STOCKHOLDERS' EQUITY: (NOTE 8)
Preferred Stock 15 15
Common stock 15,117 9,798
Additional paid-in capital 1,727,979 1,240,187
Accumulated deficit (1,584,078) (74,325)
----------- -----------
159,033 1,175,675
Less: subscription receivable -- (1,130,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 159,033 45,675
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 323,752 $ 78,265
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
22
<PAGE>
SALESREPCENTRAL.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000, AND
FOR THE PERIOD FROM THE DATE OF INCEPTION,
MAY 12, 1999 THROUGH JUNE 30, 1999
2000 1999
------------ ------------
REVENUES $ 51,570 $ --
COST OF REVENUES 84,427 --
------------ ------------
GROSS LOSS (32,857) --
GENERAL AND ADMINISTRATIVE EXPENSES 1,100,771 74,325
RESEARCH AND DEVELOPMENT COSTS 375,664 --
------------ ------------
LOSS FROM OPERATIONS (1,509,292) (74,325)
OTHER EXPENSES - INTEREST (461) --
------------ ------------
NET LOSS $ (1,509,753) $ (74,325)
============ ============
BASIC LOSS PER COMMON SHARE $ (0.11) $ (0.01)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 13,567,634 9,540,586
============ ============
The Accompanying Notes are an Integral Part of the Financial Statements
23
<PAGE>
SALESREPCENTRAL.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 2000, AND
FOR THE PERIOD FROM THE DATE OF INCEPTION,
MAY 12, 1999 THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
PREFERRED COMMON ADDITIONAL STOCK
--------------- ----------------- PAID IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
------ ------ ------ ------ ------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at inception,
May 12, 1999 -- $ -- -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock
for services 14,000 14 9,444,000 9,444 10,542 -- -- 20,000
Sale of stock 525 1 354,150 354 1,229,645 (1,130,000) -- 100,000
Net loss -- -- -- -- -- -- (74,325) (74,325)
------ ---- ---------- ------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 14,525 15 9,798,150 9,798 1,240,187 (1,130,000) (74,325) 45,675
Reverse merger with Van
American Capital, Ltd. -- -- 4,826,251 4,826 (4,826) -- -- --
Sale of common stock -- -- 376,000 376 375,624 -- -- 376,000
Collection of stock
subscription receivable -- -- -- -- -- 1,130,000 -- 1,130,000
Issuance of common stock
for services -- -- 117,111 117 116,994 -- -- 117,111
Net loss -- -- -- -- -- -- (1,509,753) (1,509,753)
------ ---- ---------- ------- ----------- ----------- ----------- -----------
Balance at June 30, 2000 14,525 $ 15 15,117,512 $15,117 $ 1,727,979 $ -- $(1,584,078) $ 159,033
====== ==== ========== ======= =========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
24
<PAGE>
SALESREPCENTRAL.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2000, AND
FOR THE PERIOD FROM THE DATE OF INCEPTION,
MAY 12, 1999 THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,509,753) $ (74,325)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 12,816 --
Stock issued for services 117,111 20,000
Changes in Assets and Liabilities:
Inventory (12,075) --
Due from related parties (100,584) --
Other current assets (6,228) (6,084)
Accounts payable - trade 93,365 32,590
Accrued liabilities 20,730 --
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (1,384,618) (27,819)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (100,641) (6,646)
Purchase of certificate of deposit (20,000) --
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (120,641) (6,646)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (3,645) --
Proceeds from stock transactions 1,506,000 100,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,502,355 100,000
----------- -----------
Net change in cash and cash equivalents (2,904) 65,535
Cash and cash equivalents at beginning of the period 65,535 --
----------- -----------
Cash and cash equivalents at end of the period $ 62,631 $ 65,535
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ (461) $ --
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services $ 117,111 $ 20,000
=========== ===========
Equipment purchased through note payable $ 21,679 $ --
=========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
25
<PAGE>
SALESREPCENTRAL.COM, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1
--------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
NATURE OF OPERATIONS AND USE OF ESTIMATES:
--------------------------------------------------------------------------------
NATURE OF OPERATIONS:
SalesRepCentral.com, Inc. (the "Company"), is a Nevada corporation formed on May
12, 1999. The principal business purpose of the Company is to be the Internet's
leading on-line site providing services for sales representatives. The site
targets professional sales representatives, corporate executives and business
managers/owners to meet their needs for discussion groups, promotional and
motivational items, communication and message boards, scheduling and travel
services, and a host of other items.
REVERSE MERGER:
On October 12, 1999, Van American Capital, Ltd. acquired all of the outstanding
common stock of SalesRepCentral.com, Inc. in a transaction accounted for as a
recapitalization. Under the terms of the exchange agreement the stockholders of
SalesRepCentral.com, Inc. received 67% of the outstanding common stock of Van
American Capital, Ltd. in exchange for 100% of the stock of SalesRepCentral.com,
Inc. The accompanying financial statements represent the operating activity of
SalesRepCentral.com, Inc. for all periods presented.
Van American Capital, Ltd. was incorporated in Nevada on July 23, 1998 and had
no operating activity prior to the time of the exchange on October 12, 1999. As
such, the exchange has been accounted for as a recapitalization. The effect of
the recapitalization has been presented retroactively. As a result of the
reverse merger, the corporate entity, SalesRepCentral.com, Inc. ceased to exist
and Van American Capital Ltd. changed their name to SalesRepCentral.com, Inc.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents are considered to be all highly liquid investments
purchased with an initial maturity of three (3) months or less. As of June 30,
2000, and 1999 balances of cash and cash equivalents at a financial institution
exceeded the federally insured limit of $100,000 by approximately $15,000 and
$0, respectively. These balances fluctuate greatly during the year and can
exceed this $100,000 limit.
INVENTORY:
Inventory, consisting primarily of electronic equipment and other miscellaneous
goods, is stated at the lower of cost or market. The Company periodically
reviews its inventory and makes provisions for damaged or obsolete inventory, if
necessary. No provisions for damaged or obsolete inventory has been included in
the accompanying financial statements.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost. Depreciation is provided for on the
straight-line method over the estimated useful lives of the assets. The average
life of the assets is five years. Maintenance and repairs that neither
materially add to the value of the property nor appreciably prolong its life are
charged to expense as incurred. Betterments or renewals are capitalized when
incurred. Property and equipment are reviewed each year to determine whether any
events or circumstances indicate that the carrying amount of the assets may not
be recoverable. Such review includes estimating future cash flows. Property and
equipment costs are expensed when determined to be not realizable.
26
<PAGE>
SALESREPCENTRAL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1
--------------------------------------------------------------------------------
Summary of Significant Accounting Policies,
Nature of Operations and Use of Estimates: (Continued)
--------------------------------------------------------------------------------
INCOME TAXES:
Deferred income taxes are provided on an asset and liability method, whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, there is uncertainty of the utilization of the operating
losses in future periods. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
NET LOSS PER SHARE:
Basic net loss per common share is computed based on weighted average shares
outstanding and excludes any potential dilution from stock options, warrants or
other common stock equivalents. Basic net loss per share is computed by dividing
loss available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted net loss per common share reflects
potential dilution from the exercise or conversion of securities into common
stock or from other contracts to issue common stock. Assumed exercise of the
outstanding options and convertible preferred stock at June 30, 2000 of 648,000
and 14,525,000, respectively, have been excluded from the calculation of diluted
net loss per common share as their effect is antidilutive. In addition, as the
Company has a net loss available to common shareholders for all periods
presented, the calculation of diluted net loss per share has been excluded from
the financial statements.
START-UP COSTS:
During the year ended June 30, 2000, the Company paid $50,000 for a license with
the Airline Regulatory Commission. The expenditure was written off as an
operating expense as it related to start-up cost for the year then ended.
ADVERTISING EXPENSE:
The Company charges advertising costs to operations when incurred. Advertising
expense totaled $223,627 and $0 for the periods ended June 30, 2000 and 1999,
respectively.
FAIR VALUE OF FINANCIAL:
Accounts payable, due from related party, and accrued liabilities are
substantially current or bear reasonable interest rates. As a result, the
carrying values of these financial instruments approximate fair value.
NOTE 2
--------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT:
--------------------------------------------------------------------------------
Property and equipment consists of the following at June 30, 2000 and 1999:
2000 1999
--------- ---------
Computers and equipment $ 42,783 $ --
Furniture and fixtures 44,504 6,646
Vehicles 41,679 --
--------- ---------
128,966 $ 6,646
Less: accumulated depreciation (12,816) --
--------- ---------
$ 116,150 $ 6,646
========= =========
Depreciation expense for the year-ended June 30, 2000 and for the period from
the date of inception, May 12, 1999, through June 30, 1999, was $12,816 and $0,
respectively.
27
<PAGE>
SALESREPCENTRAL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3
--------------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS:
--------------------------------------------------------------------------------
DUE FROM RELATED PARTIES:
As of June 30, 2000, the Company has receivables due from shareholders in the
amount of $100,584. The receivables are considered short-term in nature,
non-interest bearing, and are unsecured.
NOTE 4
--------------------------------------------------------------------------------
INCOME TAXES:
--------------------------------------------------------------------------------
As of June 30, 2000, and 1999, long-term deferred tax assets (liabilities)
consist of the following:
2000 1999
--------- --------
Net operating loss carryforwards $ 481,900 $ 23,200
Depreciation (1,700) -
--------- --------
480,200 23,200
Less: valuation allowance (480,200) (23,200)
--------- --------
$ -- $ --
========= ========
The Company has established a valuation allowance equal to the full amount of
the net deferred tax asset, due to the uncertainty of the utilization of the net
operating loss carryforwards.
At June 30, 2000, the Company has federal and state net operating loss
carryforwards in the approximate amount of $1,584,000 available to offset future
taxable income through 2020 and 2005, respectively.
NOTE 5
--------------------------------------------------------------------------------
COMMITMENTS:
--------------------------------------------------------------------------------
The Company currently leases office space in Scottsdale, Arizona under a
non-cancelable operating lease agreement, which expires in January 2001. For the
year ended June 30, 2000, expense under the aforementioned non-cancelable
operating lease agreement was approximately $38,000.
The Company has future minimum lease payments due under the operating lease
agreement in the amount of $52,861 for the year ended June 30, 2001.
28
<PAGE>
SALESREPCENTRAL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6
--------------------------------------------------------------------------------
NOTES PAYABLE:
--------------------------------------------------------------------------------
The note payable at June 30, 2000 consisted of a 3.9% note payable to Ford Motor
Credit with 36 monthly payments of $602; including principal and interest; due
in full, November, 2002, collateralized by a vehicle. Total outstanding
principal balance at June 30, 2000 is $18,034.
A schedule of future minimum principal payments due on the above note payable as
of June 30, 2000, is as follows:
YEAR ENDING
JUNE 30, AMOUNT
-------- ------
2001 $ 8,091
2002 6,961
2003 2,982
-------
$18,034
=======
NOTE 7
--------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT:
--------------------------------------------------------------------------------
The Company, under the terms of the Airline Regulatory Commission, (ARC) has
agreed to maintain a balance of $20,000 in a certificate of deposit. The current
agreement provides for the deposit to remain in place for approximately two
years, at which time the requirements will be reviewed.
NOTE 8
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
--------------------------------------------------------------------------------
PREFERRED STOCK:
The Company has 10,000,000 shares authorized of $.001 par value convertible
preferred stock. As of June 30, 2000 and 1999, there were 14,525 and 14,525,
shares issued and outstanding, respectively. The preferred stock is convertible
into 1,000 shares of common stock as of October 12, 2002. The stock is
non-voting, and has no dividend preference stated.
COMMON STOCK:
As of June 30, 2000 and 1999, the Company had 24,200,000 of $.001 par value
common shares authorized. As of June 30, 2000 and 1999, there were 15,117,512
and 9,798,150 shares issued and outstanding, respectively.
PENDING ISSUANCE:
On May 3, 2000, the Company entered into an Investment Agreement with an
underwriter, Swartz Private Equity, LLC., for the sale of additional common
stock. The Investment Agreement entitles the Company to issue and sell our
common stock for up to an aggregate of $30 million from time to time during a
three-year period following the effective date of this registration statement.
This is also referred to as a put right.
29
<PAGE>
SALESREPCENTRAL.COM, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY: (CONTINUED)
--------------------------------------------------------------------------------
Put Rights:
In order to invoke a put right, we must have an effective registration statement
on file with the SEC registering the resale of the common shares which may be
issued as a consequence of the invocation of that put right. Additionally, we
must give at least ten but not more than twenty business days' advance notice to
Swartz of the date on which we intend to exercise a particular put right, and we
must indicate the number of shares of common stock we intend to sell to Swartz.
At our option, we may also designate a maximum dollar amount of common stock
(not to exceed $2 million) which we will sell to Swartz during the put and/or a
minimum purchase price per common share at which Swartz may purchase shares
during the put. The number of common shares sold to Swartz may not exceed 15% of
the aggregate daily reported trading volume, excluding block trades of the
greater of 20,000 shares of common stock or $50,000 worth of common stock,
during a period which begins on the business day immediately following the day
we invoked the put right and ends on and includes the day which is twenty
business days after the date we invoked the put right and may not exceed 15% of
the aggregate daily reported trading volume, excluding block trades of the
greater of 20,000 shares of common stock or $50,000 worth of common stock, for
the 20 business days immediately preceding the day we invoked the put right.
Swartz will pay us the market price minus a $.10 discount or 92% of the market
price for each share of common stock under the put, whichever is less. Market
price is defined as the lowest intra-day trade price for the common stock during
the applicable pricing period which consists of the twenty business-day period
following the date of the put which was provided to Swartz. However, the market
price may not be less than the designated minimum per share price, if any, that
we indicated in our notice.
Warrants:
Within five business days after the end of each pricing period, we are required
to issue and deliver to Swartz a warrant to purchase a number of shares of
common stock equal to 10% of the common shares issued to Swartz in the
applicable put. Each warrant will be exercisable at a price which will initially
equal 115% of the market price for the applicable put. The warrants will have
semi-annual reset provisions. Each warrant will be immediately exercisable and
have a term beginning on the date of issuance and ending five years thereafter.
Status:
As of June 30, 2000, there are no put rights or warrants exercised or issued
under the terms of the agreement.
Commitment Warrants:
To induce Swartz Private Equity, LLC. to enter into the investment agreement,
they granted on June 23, 2000, an aggregate of 648,000 common stock warrants,
exercisable at $1.88 per share, reset every six months to the lower of the date
of issuance or the lowest closing price of the Company's common stock for the
five (5) trading days prior to the six month ending. The warrants are
exercisable through June, 2005. As of June 30, 2000, none of the warrants have
been exercised.
30
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On September 25, 2000 SalesRepCentral's Board of Directors approved a
change of accountants. The Company replaced Barry Friedman as its independent
accountant and engaged Semple & Cooper, LLP. During the audited period from
inception and ending August 31, 1999 and through the subsequent interim period
ending September 15, 2000, there were no disagreements with the former
accountant on any matter of accounting principles or practices, financial
statement disclosures, or auditing scope or procedure, which disagreements if
not resolved to the satisfaction of the former accountant, would have caused him
to make reference to the subject matter of the disagreements in connection with
his report. The accountants report on the financial statements did not contain
an adverse opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles. During the interim period, we have not consulted
Semple & Cooper, LLP regarding any matter requiring disclosure under Regulation
S-K, Item 304 (E)(2).
31
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table shows the name, age and position of each of our executive
officers and directors as of June 30, 2000:
Name Age Position
---- --- --------
Ralph Massetti........ 34 President, Chief Executive Officer and Director
Greg Reeve............ 37 Vice President - Sales
Todd Sumney........... 35 Vice President - Marketing
RALPH MASSETTI has served in this capacity since founding SalesRepCentral
in 1999. Previously, from March 1998 through May 1999 he was a Consulting
Marketing Specialist for Computer Associates, Inc. marketing enterprise level
management software solutions at the executive level. He was a stockbroker for
Dean Witter Reynolds, Inc. from March 1997 to March 1998, and was an Account
Executive for Commerce Clearing House from September 1994 through September
1996. He holds a Bachelor of Science Degree in Management and is currently
pursuing both an MBA and Master Degree in Finance with a specialization in High
Technology.
GREG REEVE has served in this capacity since February 2000 and brings over
14 years of related sales development, sales management and operational
experience. From January 2000 until joining SalesRepCentral as Vice President of
Sales, he was a consultant for The Company. Previously, he served as Regional
Vice President with Computer Associates, Inc. from June 1996 through February
2000 where he was responsible for recruiting, hiring, and training sales
personnel, and negotiating and maintaining contracts for software applications,
services and product training. He was an Account Manager with Mastering
Computers from September 1995 through June 1996 and was Sales Manager with First
Portland Corporation from February 1993 through September 1995.
TODD SUMNEY has served in this capacity since May of 2000 where he is
responsible for the continuing development The Company's B2B web corporate web
hosting initiative. Previously, he served as Director of Marketing for
SalesRepCentral from February 2000 through April 2000 and as a consultant from
January 2000 through February 2000. Prior to his affiliation with
SalesRepCentral he was a Vice President at Young Associates from September 1999
through December 1999 and served as Vice President of The M. Group Graphic
Design, Inc. from September 1989 through September 1999.
COMPLIANCE UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires our directors and certain of our
officers, and persons who own more than 10% of our common stock, to file initial
reports of ownership and reports of changes in ownership with the Securities and
Exchange Commission and the NASDAQ National Market. Such persons are required by
Securities and Exchange Commission regulation to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of the copies of such
forms furnished to us and written representation from these officers and
directors, we believe that all Section 16(a) filing requirements were met during
the year ended June 30, 2000
32
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table provides compensation awarded to, earned by or paid for
services rendered to SalesRepCentral in all capacities for the years ended June
30, 1999 and 2000 by our President and other highly compensated executive
officers and who were serving as executive officers at the end of 2000. We did
not grant any other compensation, restricted stock awards or stock appreciation
rights to these individuals in 1999 or 2000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------ ---- ------ ----- ------- ---------------
Ralph Massetti 2000 $108,000 -0- -0- -0-
1999 -0- -0- -0- -0-
Greg Reeve 2000 96,000 -0- -0- -0-
1999 (2) -0- -0- -0-
Todd Sumney 2000 96,000 -0- -0- -0-
1999 (2) -0- -0- -0-
----------
(1) Represents life insurance premiums paid for by SalesRepCentral
(2) Hired in 2000
STOCK OPTION GRANTS IN 2000
SalesRepCentral did not grant any stock options in 1999 or 2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information as to the beneficial owners of our
common stock as of June 30, 2000 by:
* Each stockholder known by us to be the beneficial owner of more than
5% of our common stock;
* Each of our directors;
* Each executive officer listed in the SUMMARY COMPENSATION TABLE,
listed above;
* All of our executive officers and directors as a group.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Unless indicated above, to our knowledge, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned, subject to community property laws
where applicable. Percentage ownership is based on 15,117,512 shares of common
stock outstanding as of June 30, 2000.
33
<PAGE>
Shares of common stock subject to options or warrants exercisable on or
before August 31, 2000 (within 60 days of June 30, 2000) are deemed to be
outstanding and beneficially owned by the person holding such options or
warrants for the purpose of computing the percentage ownership of such person,
but are not treated as outstanding for the purpose of computing the percentage
ownership of any other person. At June 30, 2000, SalesRepCentral had not granted
any options on its common stock. Unless indicated above, the address for each
director and executive officer listed below is:
SalesRepCentral.com
16099 N. 82nd Street
Suite B1
Scottsdale, Arizona 85260
BENEFICIAL STOCK OWNERSHIP AT JUNE 30, 2000
PERCENTAGE
COMMON STOCK PERCENTAGE VOTING
BENEFICIALLY RIGHTS OF
NAME COMMON STOCK OWNED COMMON STOCK
---- ------------ ----- ------------
Ralph Massetti.................. 8,898,320 59% 59%
Cede & Co. (1).................. 3,387,026 22% 22%
All directors and executive
officers as a group............ 12,285,346 81% 81%
----------
(1) PO Box 20
Bowling Green Station
New York, NY 10004
34
<PAGE>
PART IV
ITEM 12. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Change in control of the registrant, dated November 5, 1999 pursuant to the
agreement and plan of merger between the Registrant and Van American
Capital, Ltd., dated October 12, 1999. Incorporated by reference to Exhibit
99.3 in the Registrants Current Report on Form 8-K filed on November 15,
1999.
Acquisition agreement, dated May 1, 2000, between the Registrant and
Avenues of Travel to purchase 100% of The Company. Incorporated by
reference to Exhibit 1.1 in the Registrants Current Report on Form 8-K
filed on June 30, 2000.
Agreement and plan of merger, dated October 12, 1999, between the
Registrant and Van American Capital, Ltd. Incorporated by reference to the
Registrants Schedule 13D filed on June 21, 2000.
Registration statement and proposed sale of securities to the public, on
Form SB-2 filed on June 23, 2000. File No. 333-40080.
Change in registrant's certifying accountant to Semple & Cooper, LLP, dated
September 25, 2000. Incorporated by reference to Exhibit 16.1 in the
Registrants Current Report on Form 8-K filed on September 25, 2000.
27. Financial Data Schedule. Filed herewith.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: October 23, 2000 SalesRepCentral.com
By: /s/ Ralph Massetti
-------------------------------------
Ralph Massetti
President and Chief Executive Officer
36
