<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-29781
AMERICABILIA.COM, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Florida 65-0142472
-------------------------------------- ---------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
9155 LAS VEGAS BOULEVARD SOUTH, SUITE 242, LAS VEGAS, NEVADA 89123
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
702-914-8411
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(ISSUER'S TELEPHONE NUMBER)
Not Applicable
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
As of October 30, 2000, the Company had 6,652,692 shares of its $.001
par value common stock issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) ----
<S> <C>
Condensed Consolidated Balance Sheets (Unaudited)
at September 30, 2000 and December 31, 1999..........................................3
Condensed Consolidated Statements of Operations (Unaudited)
for the Three Months ended September 30, 2000 and 1999, for the Nine Months
ended September 30, 2000, and for the period from
March 2, 1999 (Date of Inception) to September 30, 1999..............................5
Condensed Consolidated Statement of Stockholders' Equity
(Unaudited) for the Nine Months ended September 30, 2000.............................6
Condensed Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months ended September 30, 2000 and for the period
from March 2, 1999 (Date of Inception) to September 30, 1999.........................7
Notes to Unaudited Condensed Consolidated Financial Statements.........................9
</TABLE>
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<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 98,775 $ 323,127
Accounts receivable, net 330,755 236,583
Inventories 1,058,481 446,448
Prepaid expenses and deposits 16,371 23,796
---------- ----------
Total current assets 1,504,382 1,029,954
PROPERTY AND EQUIPMENT, Net 131,372 154,399
GOODWILL, Net 191,416 282,061
OTHER ASSETS 8,354 7,494
---------- ----------
TOTAL $1,835,524 $1,473,908
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(Continued)
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<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
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<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 127,375 $ 224,422
Current portion of long-term debt 9,394 9,122
Advances from stockholder 290,000
Income taxes payable 3,549
----------- -----------
Total current liabilities 426,769 237,093
LOANS FROM STOCKHOLDERS, including accrued
interest of $13,882 and $1,123 412,778 34,508
LONG-TERM DEBT, Less current portion 205,408 12,092
----------- -----------
Total liabilities 1,044,955 283,693
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; authorized 50,000,000 shares;
6,652,692 shares issued and outstanding at September 30, 2000
and December 31, 1999 6,653 6,653
Additional paid-in capital 1,679,525 1,637,525
Notes receivable from stockholders for stock (111,040) (104,412)
Accumulated deficit (784,569) (349,551)
----------- -----------
Total stockholders' equity 790,569 1,190,215
----------- -----------
TOTAL $ 1,835,524 $ 1,473,908
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(Concluded)
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<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999, NINE MONTHS ENDED
SEPTEMBER 30, 2000 AND PERIOD FROM MARCH 2, 1999 (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999
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<TABLE>
<CAPTION>
THREE THREE NINE PERIOD FROM
MONTHS MONTHS MONTHS MARCH 2, 1999
ENDED ENDED ENDED TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES:
Retail/wholesale $ 741,798 $ 210,779 $ 1,549,302 $ 232,978
Cost of sales 503,073 125,118 1,095,013 139,630
----------- ----------- ----------- -----------
Gross profit 238,725 85,661 454,289 93,348
----------- ----------- ----------- -----------
OPERATING EXPENSES:
General and administrative
expenses 210,547 114,429 671,482 162,945
Marketing expenses 26,535 63,103 87,794 63,979
Depreciation and amortization 46,430 6,301 116,114 8,518
Organization costs 32,275 34,532
----------- ----------- ----------- -----------
Total operating expenses 283,512 216,108 875,390 269,974
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS BEFORE
INTEREST AND TAXES (44,787) (130,447) (421,101) (176,626)
----------- ----------- ----------- -----------
OTHER (EXPENSE) INCOME:
Interest expense (3,984) (2,067) (13,010) (2,067)
Interest expense - shareholder loans (8,681) (1,765) (12,756) (1,765)
Interest income and other 4,124 4,237 11,849 4,237
----------- ----------- ----------- -----------
Total other expense, net (8,541) 405 (13,917) 405
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS
BEFORE INCOME TAXES (53,328) (130,042) (435,018) (176,221)
BENEFIT FOR INCOME TAXES -
Deferred tax benefit
----------- ----------- ----------- -----------
NET LOSS $ (53,328) $ (130,042) $ (435,018) $ (176,221)
=========== =========== =========== ===========
EARNINGS PER SHARE:
Basic -
Net loss $ (53,328) $ (130,042) $ (435,018) $ (176,221)
=========== =========== =========== ===========
Weighted-average common
shares outstanding 6,652,692 5,922,564 6,652,692 3,116,098
=========== =========== =========== ===========
Loss per share $ 0.01 $ 0.02 $ 0.07 $ 0.06
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2000
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<TABLE>
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL RECEIVABLE
--------------------- PAID-IN FROM ACCUMULATED
SHARES AMOUNT CAPITAL STOCKHOLDERS DEFICIT TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
JANUARY 1, 2000 6,652,692 $ 6,653 $1,637,525 $ (104,412) $ (349,551) $1,190,215
Contributed services of officers
and employees 42,000 42,000
Interest income from notes
receivables from stockholders (6,628) (6,628)
Net loss (435,018) (435,018)
---------- ---------- ---------- ---------- ---------- ----------
BALANCE,
SEPTEMBER 30, 2000 6,652,692 $ 6,653 $1,679,525 $ (111,040) $ (784,569) $ 790,569
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
PERIOD FROM MARCH 2, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS MARCH 2, 1999
ENDED TO
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (435,018) $ (176,221)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 116,114 8,518
Provision for bad debts 6,763
Contributed services of officers and employees 42,000 25,000
Accrued interest on stockholder loans 12,756 1,765
Changes in operating assets and liabilities, net of effects from
acquisition of businesses:
Increase in trade accounts receivable (94,172) (22,311)
Increase in inventories (612,033) (320,870)
(Increase) decrease in prepaid assets and deposits 7,425 (39,040)
Increase in other assets (860) (5,799)
Decrease in trade accounts payable and accrued expenses (99,243) 82,243
Advances from stockholder 290,000
Decrease in income taxes payable (3,549) (31,249)
----------- -----------
Net cash used in operating activities (776,580) (471,201)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,442) (94,871)
Acquisition of businesses, net of cash acquired (394,434)
----------- -----------
Net cash used in investing activities (2,442) (489,305)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in interest receivables from loans to stockholders (6,628)
Proceeds from loans 200,000 129,468
Payments on loans (4,216)
Loans from stockholders 365,514 132,393
Common stock issued, net of receivable from stockholders 1,301,881
----------- -----------
Net cash provided by financing activities 554,670 1,563,742
----------- -----------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (224,352) 603,236
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 323,127
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 98,775 $ 603,236
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(Continued)
-7-
<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
PERIOD FROM MARCH 2, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD FROM
NINE MONTHS MARCH 2, 1999
ENDED TO
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Stock issued for notes receivable $ 104,412
Inventory acquired through loan to stockholder 34,506
The Company purchased all of the capital stock of Unique Images for
$500,000. In conjunction with the acquisition, liabilities were assumed
as follows:
Fair value of assets through purchase of Unique Images, Inc. 586,128
Cash paid for capital stock (400,000)
---------
Liabilities assumed through purchase of Unique Images, Inc. $ 186,128
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 13,008 $ 1,261
======== =========
Income taxes $ 3,700
========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
(Concluded)
-8-
<PAGE>
AMERICABILIA.COM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements include the consolidated
accounts of americabilia.com, Inc. together with its subsidiaries
(collectively referred to herein as the "Company"). All material
intercompany balances and transactions have been eliminated. These
statements have been prepared in conformity with accounting principles
generally accepted in the United States of America and used in preparing
the Company's annual audited consolidated financial statements but do not
contain all of the information and disclosures that would be required in a
complete set of audited financial statements. They should, therefore, be
read in conjunction with the Company's audited consolidated financial
statements and related notes thereto for the period from March 2, 1999
(inception) to December 31, 1999. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements reflect
all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial results for the interim
periods presented.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 clarifies existing accounting principles related to
revenue recognition in financial statements. The Company is required to
comply with the provisions of SAB 101 by the fourth quarter of 2000.
Management does not believe that the implementation of SAB 101 will have a
material impact on the Company's results of operations.
The Financial Accounting Standards Board recently issued FAS No. 137,
"Deferral of FAS 133 Accounting for Derivatives," which delays the
implementation of that pronouncement to June 15, 2000. The Company has not
determined what effect, if any, that FAS 133 may have on its financial
position or results of operations.
2. LONG-TERM DEBT
During the first and second quarters of 2000, the Company's chairman and
president each loaned the Company $50,000 under terms similar to their
previous loans (see Note 6 - Related Party Transactions).
The Company secured a $350,000 line of credit in April 2000 and has drawn
down approximately $200,000 for inventory purchases. The line of credit
bears interest at nine percent and must be paid in full for at least 30
days during any 12-month period.
3. LEASES
During the first quarter of 2000, the Company rented production equipment
under a three-year operating lease for $1,600 per month, which included
maintenance and certain supplies.
4. STOCKHOLDERS' EQUITY
EARNINGS PER SHARE - Basic earnings per share ("EPS") is computed by
dividing net income or loss by the weighted-average number of common
shares outstanding for the period. Diluted EPS is
-9-
<PAGE>
computed by dividing net income by common and common equivalent shares
outstanding for the period. Options to purchase common stock, whose
exercise price was greater than the average market price for the period,
have been excluded from the computation of diluted EPS. For the interim
periods presented, there were no dilutive options, as the options would
have been anti-dilutive due to the net loss for the periods.
5. INCOME TAXES
Statement of Financial Accounting Standards No. 109 requires a valuation
allowance to be recorded when it is more likely than not that some or all
of the deferred tax assets will not be realized. A valuation allowance has
been established for the deferred tax asset at September 30, 2000 and
December 31, 1999 due to the uncertainties associated with realizing such
assets in the future.
6. RELATED PARTY TRANSACTIONS
During the first and second quarters of 2000, the Company's chairman and
president each loaned the Company $50,000 under terms similar to their
previous loans.
During the second and third quarters of 2000, the Company's chairman also
advanced approximately $100,000 and $190,000, respectively, to the Company
for purchases of inventory by the wholesale segment of the Company. The
advances are secured by the inventory and must be repaid by proceeds from
inventory purchased with the advances. In any event, the advances are due
January 31, 2001. The Company expects to be able to pay these advances on
or before January 31, 2001.
7. COMMITMENTS AND CONTINGENCIES
The Company, through its wholly owned subsidiary, Unique Images, entered
into a supply contract with Art Vivant, Ltd. of Japan. Under the contract,
Unique Images will grant Art Vivant, Ltd. of Japan the exclusive right to
market Unique Images' sports and movie collectibles in Japan. The Company
expects to satisfy the contract with its existing manufacturing capacity.
8. SEGMENT REPORTING
The Company has two reportable segments based upon products offered:
retail sales and corporate operations, and wholesale distribution and
manufacturing.
The Company evaluates each segment's performance based on segment
operating profit. The accounting policies of the operating segments are
the same as those described in the summary of significant accounting
policies.
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<PAGE>
Information pertaining to the operations of reportable segments is as
follows:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 WHOLESALE
RETAIL AND DISTRIBUTION AND
CORPORATE MANUFACTURING TOTAL
<S> <C> <C> <C>
Revenues from external customers $ 156,250 $ 585,548 $ 741,798
Intersegment revenues 15,305 7,645 22,950
Depreciation and amortization 41,651 4,779 46,430
Interest income and other 1,233 2,891 4,124
Intersegment interest income 4,758 -- 4,758
Interest expense 5,572 7,093 12,665
Intersegment interest expense -- 4,758 4,758
Segment profit (loss) before interest and taxes (134,859) 90,072 (44,787)
Net profit (loss) before taxes (139,198) 85,870 (53,328)
Income tax (benefit) provision -- -- --
Net property and equipment 50,760 80,612 131,372
RECONCILIATION OF SEGMENT REVENUES TO
CONSOLIDATED REVENUES
Total revenues for reportable segments $ 764,748
Elimination of intersegment revenues (22,950)
---------
Total consolidated revenues $ 741,798
=========
</TABLE>
Significantly all (over 95 percent) of the Company's sales are in the United
States.
-11-
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
WHOLESALE
RETAIL AND DISTRIBUTION AND
CORPORATE MANUFACTURING TOTAL
<S> <C> <C> <C>
Revenues from external customers $ 70,209 $ 140,570 $ 210,779
Intersegment revenues -- 45,130 45,130
Depreciation and amortization 4,533 1,768 6,301
Interest income and other -- 4,237 4,237
Intersegment interest income 428 -- 428
Interest expense 1,765 2,067 3,832
Intersegment interest expense -- 428 428
Segment loss before interest and taxes (117,548) (12,899) (130,447)
Net loss before taxes (115,831) (14,211) (130,042)
Income tax (benefit) provision -- -- --
Net property and equipment 58,199 95,706 153,905
RECONCILIATION OF SEGMENT REVENUES TO
CONSOLIDATED REVENUES
Total revenues for reportable segments $ 255,909
Elimination of intersegment revenues (45,130)
---------
Total consolidated revenues $ 210,779
=========
</TABLE>
Significantly all (over 95 percent) of the Company's sales are in the United
States. Prior to August 11, 1999, the Company had no wholesale distribution and
manufacturing segment.
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<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
WHOLESALE
RETAIL AND DISTRIBUTION AND
CORPORATE MANUFACTURING TOTAL
<S> <C> <C> <C>
Revenues from external customers $ 467,400 $ 1,081,902 $ 1,549,302
Intersegment revenues 19,438 83,214 102,652
Depreciation and amortization 102,270 13,844 116,114
Interest income and other 7,812 4,037 11,849
Intersegment interest income 11,567 -- 11,567
Interest expense 14,741 11,025 25,766
Intersegment interest expense -- 11,567 11,567
Segment loss before interest and taxes (357,300) (63,801) (421,101)
Net loss before taxes (364,229) (70,789) (435,018)
Income tax (benefit) provision -- -- --
Net property and equipment 50,760 80,612 131,372
RECONCILIATION OF SEGMENT REVENUES TO
CONSOLIDATED REVENUES
Total revenues for reportable segments $ 1,651,954
Elimination of intersegment revenues (102,652)
-----------
Total consolidated revenues $ 1,549,302
===========
</TABLE>
Significantly all (over 95 percent) of the Company's sales are in the United
States.
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<PAGE>
<TABLE>
<CAPTION>
WHOLESALE
FOR THE PERIOD FROM MARCH 2, 1999 (DATE OF RETAIL AND DISTRIBUTION AND
INCEPTION) TO SEPTEMBER 30, 1999 CORPORATE MANUFACTURING TOTAL
<S> <C> <C> <C>
Revenues from external customers $ 92,408 $ 140,570 $ 232,978
Intersegment revenues -- 45,130 45,130
Depreciation and amortization 6,750 1,768 8,518
Interest income and other 3,494 743 4,237
Intersegment interest income 428 -- 428
Interest expense 1,765 2,067 3,832
Intersegment interest expense -- 428 428
Segment loss before interest and taxes (163,727) (12,899) (176,626)
Net loss before taxes (162,000) (14,221) (176,221)
Income tax (benefit) provision -- -- --
Net property and equipment 58,199 95,706 153,905
RECONCILIATION OF SEGMENT REVENUES TO
CONSOLIDATED REVENUES
Total revenues for reportable segments $ 278,108
Elimination of intersegment revenues (45,130)
---------
Total consolidated revenues $ 232,978
=========
</TABLE>
Significantly all (over 95 percent) of the Company's sales are in the
United States. Prior to August 11, 1999, the Company had no wholesale
distribution and manufacturing segment.
******
-14-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
OVERVIEW
SPECIAL FACTORS AFFECTING THE COMPARABILITY OF CURRENT PERIOD AND PRIOR PERIOD
OPERATING RESULTS
The following discussion should be read in conjunction with, and is qualified in
its entirety by our unaudited condensed consolidated financial statements as of
and for the nine months ended September 30, 2000 and for the period from March
2, 1999 (Date of Inception) through September 30, 1999. The Company was formed
on March 2, 1999. The Company did not achieve substantial operations until after
September 30, 1999. Further, the Company acquired Unique Images in the third
quarter of 1999. The period presented in the unaudited condensed consolidated
financial statements from March 2, 1999 through September 30, 1999 is not a full
nine months of operations and was during the development stage of the Company.
Such period may not be comparable to the nine months ended September 30, 2000.
The period from March 2, 1999 through September 30, 1999 is referred to herein
as the "September 1999 period" while the period from January 1, 2000 through
September 30, 2000 is referred to herein as the "September 2000 period". The
period from July 1, 1999 through September 30, 1999 is referred to herein as the
"September 1999 quarter" while the period from July 1, 2000 through September
30, 2000 is referred to herein as the "September 2000 quarter".
DESCRIPTION OF BUSINESS
The Company is engaged in direct internet merchandising of American-themed
collectibles, gifts, and memorabilia. The Company manufactures and assembles its
own products and also purchases products from a number of sources. The Company's
products are marketed on an internet shopping site, www.americabilia.com. The
Company strives to offer its customers a broad selection of products, a
convenient shopping experience, and a competitive price. The Company commenced
with organizational and operational activities on March 2, 1999 in Nevada as
americabilia.com.
The Company offers both framed memorabilia which it manufactures and products
which it acquires from suppliers. Generally, the products acquired from
suppliers are purchased by the Company, shipped by the supplier to the Company's
facilities in Nevada and held in inventory until sale and shipment to customers.
In selected instances, the Company purchases products from suppliers which drop
ship the products to the Company's customers. In each instance, the Company
acquires title to the product from the supplier and has all risks and rewards of
ownership of the product. In each instance, the Company and not the supplier
bears the risk of collection. In the case the customer returns the product, the
product is returned to the Company and held by the Company in inventory for sale
to a future customer. The Company acts as principal and not agent in connection
with all product sales.
-15-
<PAGE>
On August 11, 1999, the Company acquired the outstanding capital stock of Veltre
Enterprises, Inc. dba Unique Images. Unique Images designs and manufactures
Hollywood and sports memorabilia for fine art and memorabilia galleries. Unique
Images also provides high volume and custom picture framing services. Unique
Images uses computerized joiner and mat cutting equipment. The purchase price
paid for Unique Images consisted of (i) $200,000 in cash, (ii) a Promissory Note
in the original principal amount of $200,000 and (iii) 100,000 shares of the
Rule 506 common stock of americabilia.com Nevada. The stock was issued at its
fair value on the issue date of $1.00 per share or $100,000 in total. The
Promissory Note was paid in full in November 1999. As part of the purchase,
americabilia.com Nevada agreed to lease from Keith Veltre and his affiliates the
premises that are used for Unique Images' business operations as well as certain
business equipment.
The Company was originally organized under the laws of the state of Florida on
August 22, 1989 under the name First Zurich Investments, Inc. On November 15,
1996, the name of the entity was changed to Terra International Pharmaceuticals,
Inc. On September 7, 1999, the entity's name was changed to americabilia.com,
Inc. On September 17, 1999, the Company conducted a recapitalization through the
merger of americabilia.com Nevada with and into Worldwide Collectibles, Inc., a
Nevada corporation and a wholly owned subsidiary of the Company formed for the
purpose of the merger. Pursuant to an Agreement of Merger dated September 14,
1999, each of the former stockholders of americabilia.com Nevada received one
(1) share of Common Stock, in exchange for their shares of americabilia.com
Nevada. As a result of the acquisition, a total of 6,115,000 shares of common
stock were issued to the former shareholders of americabilia.com Nevada. Prior
to its acquisition of americabilia.com Nevada, the Company did not have any
operations. For accounting purposes, the acquisition has been treated as a
recapitalization of americabilia.com with americabilia.com as the acquirer
(reverse merger). As a result of this transaction the Company became a publicly
traded company.
The recapitalization was accounted for by adjusting common stock by $537 for the
537,692 shares of common stock held by the shareholders at the time that the
entity was known as Terra International Pharmaceuticals, Inc. In addition,
because the net assets of Terra International Pharmaceuticals, Inc. were $0,
paid in capital was decreased by an amount equal to the par value of the 537,692
shares. Prior to the reverse merger, Terra Pharmaceuticals had no operations.
The companies involved in the recapitalization included Terra Pharmaceuticals,
Terra's wholly owned subsidiary, Worldwide Collectibles, and americabilia.com
Nevada. Unique Images is a wholly owned subsidiary of Worldwide Collectibles.
RESULTS OF OPERATIONS - SEPTEMBER 2000 QUARTER COMPARED TO SEPTEMBER 1999
QUARTER
REVENUES
The Company's revenues increased $531,019 from $210,779 in the September 1999
quarter to $741,798 in the September 2000 quarter. The increase is due to
increased sales of Unique Images for the September 2000 quarter compared to the
September 1999 quarter. In the September 1999 quarter, the Company's sales were
limited due to the fact that the Company's retail sales outlet at that time was
not yet well recognized. Additionally, Unique Images customer base was not as
developed at that time. In the September 2000 quarter, Worldwide
-16-
<PAGE>
Collectibles sales were $156,250 compared to $70,209 for the September 1999
quarter. Unique Images sales for the September 2000 quarter were $585,548
compared to $140,570 for the September 1999 quarter.
EXPENSES
Costs of sales in the September 2000 quarter were $503,073, or 68% of sales
compared to $125,118, or 59% of sales in the September 1999 quarter. The
increase in the costs of sales compared to 1999 activity relates to the fact
that the September 2000 quarter includes operations from both Worldwide
Collectibles and Unique Images for a full three months; whereas, the 1999
results included three months of Worldwide Collectibles activity, but only one
and one-half months of Unique Images activity. Additionally, during the
September 1999 quarter, the Company was not renting inventory warehouse space
and had limited operations and inventory.
General and administrative expenses increased $96,118 from $114,429 in the
September 1999 quarter to $210,547 in the September 2000 quarter due to the
Company adding significant staff and operations for the reasons mentioned above.
Marketing expenses decreased $36,568 from $63,103 in the September 1999 quarter
to $26,535 in the September 2000 quarter. Marketing was 4% of revenues for the
September 2000 quarter vs. 30% for the September 1999 quarter. The decrease was
a result of focused marketing in 2000 by the Company.
Several officers of the Company are currently not receiving salaries. However,
contributed salary expense has been recognized in the form of contributed
capital during the September 2000 quarter ($14,000) and the September 1999
quarter ($14,000).
Depreciation and amortization increased in 2000 compared to 1999 as a result
of a full period of operations in 2000 and the expected amortization of
goodwill from the purchase of Unique Images in August of 1999.
OTHER INCOME (EXPENSE)
Interest expense in the September 2000 quarter was $12,665 due to debt carried
by the Company that did not exist in the September 1999 quarter. Approximately
$8,600 of this expense relates to shareholder loans to the Company. Interest
income for the September 2000 quarter was $4,124 due to available and interest
bearing cash in the September 2000 quarter that did not exist in the September
1999 quarter as well as interest earned on the loans to shareholders of $2,192.
The loans to shareholders related to stock issued in exchange for loans
receivable in 1999.
NET LOSS
The Net Loss in the September 2000 quarter compared to the September 1999
quarter decreased by $76,714 from $130,042 to $53,328 as a result of reduced
marketing expenses and due to the results of operations for Worldwide
Collectibles and from Unique Images whose operations were acquired on August 11,
1999 as discussed above.
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RESULTS OF OPERATIONS - SEPTEMBER 2000 PERIOD COMPARED TO SEPTEMBER 1999 PERIOD
REVENUES
The Company's revenues increased $1,316,324 from $232,978 in the September 1999
period to $1,549,302 in the September 2000 period. The increase is due to the
fact that in the September 2000 period, the Company had nine months of
operations from both Worldwide Collectibles as well as Unique Images. In the
September 1999 period, however, the Company's sales were limited due to the
short operating period and the fact that the Company's only sales outlet at that
time was through Ebay and a retail outlet that was not yet well recognized. In
the September 2000 period, Worldwide Collectibles sales were $467,400 compared
to $92,408 for the September 1999 period. Unique Images sales for the September
2000 period were $1,081,902.
EXPENSES
Cost of sales in the September 2000 period were $1,095,013, or 71% of sales
compared to $139,630 or 60% of sales in the September 1999 period. The increase
in cost of sales compared to 1999 activity relates to the fact that the
September 2000 period includes operations from both Worldwide Collectibles and
Unique Images whereas the 1999 results included only Worldwide Collectibles
activity. Additionally, during the September 1999 period, the Company was not
renting inventory warehouse space and had limited operations and inventory.
General and administrative expenses increased $508,537 from $162,945 in the
September 1999 period to $671,482 in the September 2000 period due to the
Company adding significant staff and operations for the reasons mentioned above.
Marketing expenses increased $23,815 from $63,979 in the September 1999 period
to $87,794 in the September 2000 period as the Company increased its marketing
efforts once a viable Internet and retail showroom were available for customers
to visit. Marketing was 6% of revenues for the September 2000 period compared to
27% in the September 1999 period due to a more focused marketing effort in 2000.
Several officers of the Company are currently not receiving salaries. However,
contributed salary expense has been recognized in the form of contributed
capital during the September 2000 period ($42,000) and the September 1999 period
($25,000).
Depreciation and amortization increased in 2000 compared to 1999 as a result
of a full period of operations in 2000 and the expected amortization of
goodwill from the purchase of Unique Images in August of 1999.
OTHER INCOME (EXPENSE)
Interest expense in the September 2000 period was $25,766 due to debt carried by
the Company that did not exist in the September 1999 period. Interest income for
the September 2000 period was $11,849 due to available and interest bearing cash
in the September 2000 period that did not
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exist in the September 1999 period as well as interest earned on the loans to
shareholders of $6,628. The loans to shareholders related to stock issued in
exchange for loans receivable in 1999.
NET LOSS
The Net Loss in the September 2000 period compared to the September 1999
period increased by $258,797 from $176,221 to $435,018 primarily due to the
September 1999 period having only seven months of expenses, compared to nine
months of expenses in the September 2000 period. See also revenue and expense
fluctuations described above. Additionally, the results of operations for the
Unique Images operations were acquired on August 11, 1999 as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, the Company had cash and cash equivalents of $98,775.
The Company had working capital of $1,077,613 and stockholders' equity of
$790,569. The cash decreased at September 30, 2000 as compared to December
31, 1999 due to increased inventory purchases and normal activity with
accounts payable. The Company's debt increased approximately $280,000 due to
increased bank loans and loans from related parties in the September 2000
period.
During the September 2000 period, cash used in operating activities increased
from $471,201 in the September 1999 period to $776,580. The increase is due,
primarily, to increased purchases in inventory for pending sales.
Cash flow from operations is expected to be sufficient to pay operating costs of
the Company during the remainder of fiscal 2000. However the Company expects to
raise additional funds through a combination of private placements, public
offerings of its stock or bank loans in order to expand operations and increase
its technical infrastructure and inventory. However, there can be no assurance
that any additional financing, if needed to meet liquidity needs, will be
available to us on favorable terms or at all. There can be no assurance that our
estimate of foreseeable liquidity needs is accurate or that no new business
developments or other unforeseen events will not occur, any of which could
result in the need to raise additional funds. We expect that the adequacy of our
operating cash flow will depend upon:
- customer acceptance of our products;
- the continued development of the Internet market as a source for our
products;
- the intensity of our competition;
- the efficiency of operations;
- the depth of customer demand, and the effectiveness of our marketing
and promotional efforts.
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LOANS FROM RELATED PARTIES
During the September 2000 period, Henry E. Cartwright, the Company's Chairman of
the Board and Gary Moore, the Company's President, each loaned the Company
$50,000. Each of these loans bear interest at the rate of eight percent (8%) per
annum and are due and payable on February 28, 2001.
During the September 2000 period, Henry E. Cartwright, also agreed to loan up to
$500,000 to the Company's wholly owned subsidiary, Unique Images, for purchases
of specific inventory items. The loan bears interest at the rate of ten percent
per annum and is payable as the inventory purchased is sold and on or before
January 31, 2001 or upon the earlier sale of securities of the Company
resulting in gross proceeds in excess of $1,000,000. The note is secured by a
pledge of the specific inventory items purchased with the loan proceeds. At
September 30, 2000, Mr. Cartwright had loaned the Company $290,000 pursuant to
this arrangement.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued FAS No. 137, "Deferral
of FAS 133 Accounting for Derivatives" which delays the implementation of that
pronouncement to June 15, 2000. The Company has not determined what effect, if
any, that FAS 133 may have on its financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB
101 clarifies existing accounting principles related to revenue recognition in
financial statements. The Company is required to comply with the provisions of
SAB 101 by the fourth quarter of 2000. Management does not believe that the
implementation of SAB 101 will have a material impact on the Company's results
of operations.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act provides a "safe harbor" for
certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company invests its cash and cash equivalents in FDIC insured savings
accounts which, by their nature, are not subject to interest rate fluctuation.
As of September 30, 2000, the Company had $917,580 in borrowings, including
accrued interest of $13,882. The borrowings are related to bank loans,
capitalized leases and loans from officers and directors which, by their nature,
are not subject to interest rate fluctuations.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Inapplicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Inapplicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Inapplicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Inapplicable.
ITEM 5. OTHER INFORMATION.
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICABILIA.COM, INC.
(Registrant)
Dated: November 1, 2000 By: /s/ HENRY E. CARTWRIGHT
-----------------------------------
Henry E. Cartwright, Chairman of
the Board
Dated: November 1, 2000 By: /s/ DIXIE L. CARTWRIGHT
-----------------------------------
Dixie L. Cartwright, Treasurer
(Principal Financial Officer)
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