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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FIRST AMENDMENT TO
FORM 10
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GENERAL FORM FOR REGISTRATION OF
SECURITIES PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
FINDWHAT.COM
(Exact name of registrant as specified in its charter)
Nevada 88-034885
(State of Incorporation) (I.R.S. Employer Identification No.)
121 West 27th Street, Suite 903
New York, New York 10001
(212) 255-1500
(Address and telephone number of registrant's principal executive offices and
principal place of business)
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
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An investment in our common stock involves significant risks which could result
in a loss of your entire investment. Please review "Risk Factors" starting on
page 8.
Forward-Looking Statements
This document contains forward-looking statements which reflect the views
of management with respect to future events and financial performance. These
forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors include, but are not limited
to, the words "anticipates", "believes", "estimates", "expects", "plans",
"projects", "targets" and similar expressions which identify forward-looking
statements. You should not place undue reliance on these forward-looking
statements, which speak only as of the date the statements were made.
Item 1. Business.
History
We were organized under the laws of the State of Nevada under the name
Collectibles America, Inc. in October 1995. We discontinued our business
operations and transferred our assets to satisfy liabilities in 1997. In June
1999, we acquired all of the outstanding capital stock of BeFirst Internet
Corporation, which was organized under the laws of the State of Delaware in
March 1998, from the holders of such stock, in exchange for our issuance to such
stockholders of 8,750,000 shares of our common stock. As the result of such
exchange of stock, the stockholders of BeFirst Internet Corporation acquired
control of us and BeFirst Internet Corporation became our wholly owned
subsidiary. We changed our corporate name to BeFirst.com at the time of the
acquisition. In September 1999, we changed our corporate name to FindWhat.com.
At the time of our acquisition of BeFirst Internet Corporation, it had been in
the business of developing and offering web site "optimization" services to
Internet advertisers.
Unless we state otherwise, all references to us in this registration
statement describe the consolidated operations of FindWhat.com and our
wholly-owned subsidiary, BeFirst Internet Corporation.
Introduction
We offer two Internet-based marketing services designed to increase traffic
flow to the web sites of online advertisers. Our initial offering was a web site
optimization service, which we market under the name BeFirst.com(SM). We
commercially launched our Pay For Position(SM) search service, FindWhat.com(SM),
on September 6, 1999. This search service contains a listing system which is
designed to allow web site owners to pay for position on our FindWhat.com(SM)
web site via an automated open bidding system and preferred search rankings.
FindWhat.com(SM) is intended to enable Internet users to find relevant
information without sorting through the pages of irrelevant information
frequently displayed by other Internet search services.
Our plan of operations includes increasing the promotional activities for
our BeFirst.com(SM) service and devoting substantial resources to the promotion
of our FindWhat.com(SM) search service.
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We recently acquired a database license from Inktomi, Inc., T3 telephone lines,
networking equipment, including a Cisco router and switch and custom-built data
and web servers, and computer work stations for our sales staff. Our target
market includes all of the companies that maintain Internet web sites and desire
to increase the volume of consumers visiting their web sites. As of October 18,
1999, we had 255 advertisers listed on our FindWhat.com(SM) web site and
approximately 300,000 search word placements selected by these advertisers.
Industry Overview
Internet advertisers rely on web sites providing web directories or "search
engines" as one of the means of supplying an audience for their web sites and
advertising message. These search services enable consumers to search the
Internet for a listing of web sites matching a descriptive word or phrase.
Management believes that search services are one of the tools on the Internet
frequently used by persons seeking to obtain information about offerings of
products and services. As a result, web sites providing search services
typically offer advertisers exposure to the Internet audience. These web sites
frequently offer advertisers the opportunity to target consumer interests based
on keyword or topical search requests.
Many web sites providing search services have begun to focus their efforts
on providing content, shopping opportunities and other services, such as e-mail,
for visitors. This business model has earned these web sites, now more commonly
called "portals," advertising and e-commerce revenues. For the consumer seeking
an array of services, the portals offer a valuable package of resources.
However, a visitor looking mainly for consumer information, products or
services, the search process on a typical portal site offering search services
can be cumbersome. According to the October 1999 issue of Web Promote Weekly,
online internet marketing newsletter, search engines rarely obtain a sought
after web site after only one consumer inquiry.
We believe that there is increasing frustration and discontentment among
consumers concerning the lack of comprehensive information regarding offers of
consumer products and services by existing Internet search services and that the
growing inability of consumers to find relevant results for items they wish to
purchase presents a marketplace opportunity. This may account in part for the
results of a recent study by Jupiter Communications (referred to in an article
on the web site of Inc. Online's Guide to Doing Business Online)which estimates
that online commerce obtained from portal traffic will grow slowly, from 18%
presently to 20% in 2002.
We intend to tailor our array of services to improve the consumer search
experience and more effectively link advertisers with their target consumers. We
believe that the pay per visitor business model is becoming more important to
online marketers and that corporate managers will seek out promotional
alternatives or supplements to banner advertisements. As a result, we believe
that companies seeking more effective ways to drive qualified traffic to their
corporate web sites may increasingly include the goal of gaining higher
placements on search engines in their strategy.
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BeFirst.com(SM)
Our BeFirst.com(SM) service, known as web site "optimization," aims to
improve the placement of our clients' web sites in the search results generated
by Internet search services in response to search queries from consumers with
the intent of ultimately increasing the volume of traffic relevant to each
client's business.
Internet search services use qualifying methods to determine which web
sites are listed for specific searches and the order in which those sites will
appear on a search result page. These methods include the use of location and
frequency of key words appearing on a particular web site as a basis for
tracking a response to an inquiry on that search service. Other search engines
employ other steps, such as searching for key words that appear in a web site on
a meta tag (promotional lines of words that appear in the header of the HTML,
the computer language used to create all documents on the world wide web) source
document. We employ several methods to design or modify web pages for our
clients that are intended to allow them to more effectively reach their target
markets.
In providing "web site optimization" services, our technical staff
commences by analyzing the client's web site, including the main goals of such
web site. Our staff then uses one or more methods to help enhance the
probability that the web site will appear in a list of results in response to a
consumer's inquiry on a particular search service, as well as being placed
higher in the ranking in such list. The methods we use for a particular client
might include providing suggestions of how source codes in a client's web site
should be restructured or modified to increase relevancy rankings, modifying the
contents of a client's web site based upon criteria used by particular search
services or modifying information contained in meta tags appearing in a clients
web site. In modifying a client's web site, we may use our proprietary software
to create a template for the client's revised website that is modeled upon a
high ranking website appearing on one or more search services.
Our BeFirst.com(SM) service currently derives revenue from two sources:
o fees charged to new clients and
o click-through rates charged for the traffic the service generates for
a client's web site.
We charge each new client a one-time $500 fee for the web site optimization
services to be performed by us for that client. Click-through rates are
negotiated and generally vary based on the client's industry and, the frequency
with which words or phrases related to that industry are searched. Click-through
rates generally range up to $1.00 per click based on the words or phrases
related to the particular industry being searched (for instance, the
click-through rate for frequently searched words or phrases related to a
particular industry would be less than for words or phrases related to a
particular industry that are infrequently searched). The negotiated
click-through rate is applied to the actual number of consumers clicking on the
various search engine placements established by the Be1st.com(SM) service on
behalf of a client. Each month, a client's bill is determined based upon the
click-through rate multiplied by the number of consumer clicks received. The
traffic for each BeFirst.com(SM) service placement is tracked by Web Trends, an
industry tracking software program, and is updated daily.
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We believe that our BeFirst.com(SM) web site optimization service is
unique, because each client's objectives are assessed on an individual basis,
generating customized programs in an industry where standard "one size fits all"
models typically prevail. Moreover, our BeFirst.com(SM) service seeks to
optimize a client's site on up to 450 search engines, directories and online
yellow pages, while other search optimization services generally limit their
optimization techniques to a smaller number of search engines.
FindWhat.com(SM)
FindWhat.com(SM), our new Internet search service, is designed to assist
both consumers seeking to quickly access specific information and advertisers
seeking to maximize their visibility and traffic. It is an outgrowth of our
BeFirst.com(SM) web site optimization service.
We expect our new Pay-for-Position(SM) search service to generate revenue
based on the number of consumer click-throughs resulting from an advertiser's
listing on our FindWhat.com(SM) web site. The click-through rate will be
determined by an auction among advertisers bidding on the same words or phrases.
We anticipate that the FindWhat.com(SM) search service will also generate
additional revenue from banner advertising to be placed on search result pages.
Search results on the FindWhat.com(SM) search service will be rank-ordered
through a competitive bidding process in which each advertiser's bid will
represent the amount it will pay FindWhat.com(SM) for each consumer
click-through. The advertiser with the highest bid will be listed first in the
search results, with the remaining advertisers appearing in descending bid
amount order. Since advertisers must pay for each click-through to their web
site, we expect that they will select and bid only on those search words or
phrases that they believe are most relevant to their business offerings.
Advertisers desiring placement within the same search categories will bid
against one another for prime placement, with the winning bid being at least
$.01 greater than the next highest bid. The bid rate refers to the price an
advertiser will pay for each click-through on the category search result page.
FindWhat.com(SM) clients will pay only for traffic generated by the listing
placement. FindWhat.com(SM) will allow advertisers to target as many key words
as they wish with the resources they deem appropriate to attract customers. For
example, a client may have 30 different search word placements, but decide it
needs to be ranked first for only 10 of these word searches, with the remaining
20 words having fifth place ranking.
Non-commercial information and community-based services will generally be
ranked below commercial web sites in search results generated by the
FindWhat.com search service because we believe that such data constitutes
non-relevant information or "clutter" for consumers who are seeking commercial
web sites from which they can actually purchase goods or services. Because of
our policy of reducing clutter on our web site, we will also limit the number of
banner advertisements appearing on the FindWhat.com(SM) search result pages. Our
focus is to provide a search service for consumers that will be easy to navigate
and return the most relevant results for each category. We intend for our web
site to be user- and advertiser-friendly.
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We have recently entered into an agreement with Inktomi Corporation, a data
information provider, to provide supplemental data for the FindWhat.com(SM)
search engine so that consumers will receive comprehensive search results in
response to their search queries. Utilizing Inktomi's database of web sites,
FindWhat.com(SM) can display search results in addition to the listings paid for
by our advertisers. We have also entered into a contract with Michigan Internet
Communication Association for Internet services which allows us to connect to
the Internet with sufficient capacity and bandwidth so that our FindWhat.com(SM)
search service can properly function and our FindWhat.com web site can handle
the anticipated increase in traffic.
Growth Strategy
We intend to utilize an off-line promotional campaign and a strategic
marketing online program as separate parts of our overall marketing plan for
growth. Advertisers will be able to position their sites on our FindWhat.com(SM)
search service and enhance and optimize their rankings on other search engines
through our BeFirst.com(SM) service.
BeFirst.com(SM)
To obtain advertising clients for our Befirst.com(SM) service, we utilize a
sales force that uses direct phone and Internet selling to a target client list
culled from the large number of advertisers placing banner advertising on the
top search service web sites as well as smaller advertisers placing
advertisements on more targeted web sites. As of October 18, 1999, we had four
full-time employees engaged in sales. We anticipate that we will hire additional
sales staff in order to increase the direct queries made to potential clients.
We also intend to retain additional personnel or hire third party contractors to
assist in data entry and technical aspects of our service so that we may service
an increased client base.
FindWhat.com(SM)
The advertisers who utilize our BeFirst.com(SM) service are a source of
potential clients for our FindWhat.com(SM) web site. Thus, our strategy to
obtain clients for FindWhat.com(SM) includes extensive cross-marketing. In
addition, we intend to create a consumer base to increase revenue from existing
clients by generating more click-throughs to our clients' web sites and to
attract new clients. We intend to create this base through promotion and
strategic marketing programs.
We plan to link with other companies through a strategic marketing program
as a promotional tool. Participating companies would agree to place either a
general link (represented by our logo) or a search inquiry link on their web
sites which would lead consumers to our web site. We intend to offer to pay
these companies for click-throughs to our web site generated from these links or
from revenue we earn as a result of such click-throughs. We believe we can place
FindWhat.com(SM) links on high traffic, high profile, web sites owned by radio
stations (e.g., kiisfm.com). We intend to pay other web site owners sufficient
fees to provide the necessary incentive for them to enter into link arrangements
with us.
We intend to aggressively utilize public relations, radio, local cable
television in key markets, targeted e-mail, telemarketing and banners to promote
FindWhat.com(SM).
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Competition
The market for Internet-based marketing services is relatively new,
intensely competitive and rapidly changing. Since the advent of web site
optimization services on the Internet, the number of companies offering such
services has proliferated due to, among other reasons, the absence of
substantial barriers to entry. This competition may continue to further
intensify. Such increased competition may lead to reductions in market prices
for search engine optimization marketing and sales.
While we do not believe that any one competitor or group of competitors is
dominant in the web site optimization business, our principal competitors are
Did-it.com, WebsiteResult.com and GreenFlash.com. We believe that we compete on
the basis of the ability of our technology to "anticipate" the changes in search
engine technologies that are likely to be made by portals offering search
services, resulting in a decrease in the time and cost associated with
continuously optimizing client's website. We also seek to optimize a client's
website for up to 450 search services, directories and on-line "yellow pages,"
while we believe that our competitors typically focus on only the top 10 search
services.
In the pay for placement search engine business our primary competitor is
Goto.com, which launched its search service in June 1998. We also compete with
providers of web directories, search and information services, all of whom offer
advertising, including, among others: America Online, Inc. (AOL.com, NetFind and
Netscape Netcenter), AskJeeves, Inc., CNET, Inc. (Snap), Excite, Inc. (including
WebCrawler and Magellan), LookSmart, Ltd., Compaq Computer Corp. (Alta Vista),
Lycos, Inc. (including HotBot), Microsoft Corporation (LinkExchange, Inc. and
msn.com), The Walt Disney Company/Infoseek Corporation (including the Go
Network) and Yahoo! Inc. In addition, other companies may offer directly
competing services in the future. Most providers of web directories, search and
information services offer additional features and content that we have elected
not to offer. In addition, we compete with traditional off-line media such as
television, radio and print for a share of advertising budgets.
Most of our current and potential competitors have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we have. These competitors
may be able to respond more quickly to new or emerging technologies and changes
in search engine requirements and to devote greater resources to the
development, promotion and sale of their services than we can. Accordingly, we
may not be able to compete successfully against our current or future
competitors.
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Research and Development
From March 27, 1998 (date of inception) through December 31, 1998, we spent
$51,444 for research and development expenses. We did not incur any research and
development expenses during the six months ended June 30, 1999.
Facilities
Our executive, administrative and sales offices are located in New York
City. Our technical operations are located in Fort Myers, Florida.
Employees
We currently have 22 employees, including our executive officers. In
addition, WPI Advertising, Inc., an affiliate of one of our executive officers,
currently supplies us with certain services, including office space and
additional staff support.
Available Information
Copies of this registration statement may be inspected, without charge, at
the Public Reference Room of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's New York Regional
offices located at 7 World Trade Center, New York, New York 10048. The public
may obtain information on the operation of the Public Reference Room by calling
the Securities and Exchange Commission at 1-800-SEC-0300. Copies of this
material also should be available through the Internet by using the Commission's
EDGAR Archive, the address of which is http://www.sec.gov.
RISK FACTORS
Our business is subject to numerous risks, including the following:
Our business is difficult to evaluate because we have a limited operating
history.
We began offering web site optimization marketing services through our
Be1st.com(SM) service in August 1998 and in September 1999 we commercially
launched FindWhat.com(SM), our new Pay for Position(SM) search service.
Accordingly, we have a limited relevant operating history upon which to base an
evaluation of our prospects. An investor in our securities must consider the
uncertainty, expenses and difficulties frequently encountered by companies such
as ours that are in the early stages of development . Our operations may never
generate significant revenues, and we may never achieve profitable operations.
We may not successfully commercialize our FindWhat.com(SM) service.
We recently commercially launched our FindWhat.com(SM) search service in
September 1999. We may not be able to successfully commercialize this search
service which would have a material adverse effect on our business. Moreover,
upon widespread commercial introduction, we
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may find that this program will not be able to satisfactorily perform all of the
functions for which it is being designed or that it is not reliable or durable
in extensive applications.
We will require additional financing in the near future.
Based on our currently proposed plans and assumptions, we believe that we
will not require additional funds to implement our proposed operations over the
next 12 months. We intend, however, to seek additional financing as needed in
the future to hire additional technical, sales management and marketing
personnel and to expand our technical, marketing and promotional capabilities.
We currently do not have any arrangements with respect to, or sources of,
additional financing (debt or equity) to finance these needs or fund our
operations beyond the next 12 months. If we fail to obtain additional financing
in the future, it would have a material adverse effect on our operations. Any
future equity financing we complete could involve substantial dilution of the
interests of current stockholders. Moreover, any future debt financing we
complete could subject us to the risks associated with leverage, including the
possible risk of an inability to repay the debt as it comes due.
We will need to continue to understand and keep pace with search engine
technology.
The success of our BeFirst.com(SM) service depends on our ability to
understand the technology of search engines. Consequently, we will be required
to stay current with any new technologies used in search engines, in order to
continue to be able to provide our BeFirst.com(SM) service.
We use internally developed proprietary systems for our BeFirst.com(SM)
service. If we are unable to modify our systems as necessary to accommodate
changes in search engine technology which effect optimization, the result could
be unanticipated disruptions, slower retail response times, impaired quality of
optimization, degradation in customer service and delays in reporting accurate
financial information. These events could result in a material adverse effect on
our business, operations and financial condition.
We will need to keep pace with rapid technological change in the Internet search
and advertising industries.
In order to remain competitive, we will be required to continually enhance
and improve the functionality and features of our existing BeFirst.com(SM)
service and FindWhat.com(SM) search engine which could require us to spend
significant funds . If our competitors introduce new products and services
embodying new technologies, or if new industry standards and practices emerge,
our existing services, technology and systems may become obsolete and we may not
have the funds or technical know-how to upgrade our services, technology and
systems If we face material delays in introducing new services, products and
enhancements, our users may forego the use of our services and select those of
our competitors.
The market for our services is uncertain and still evolving.
Internet marketing and advertising, in general, and advertising through
priority placement in an Internet search service, in particular, is at an early
stage of development, is rapidly evolving
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and is characterized by an increasing number of market entrants. The demand and
market acceptance for such recently introduced services is subject to a high
level of uncertainty and risk. Most potential advertisers have only limited
experience advertising on the Internet and have not devoted a significant
portion of their advertising expenditures to Internet advertising. If this trend
continues, the market for our existing services, which are dependent upon
increased internet advertising, may be adversely affected.
We may have difficulty attracting and retaining qualified technical personnel.
We will need to attract and retain highly qualified, technical personnel in
order to maintain and update our products and services, as required. Competition
for such personnel is intense, and high demand for highly qualified technical
personnel results in technology companies, such as ours, to generally have a
higher employee turnover rate than non-technology companies . If we are unable
to attract and retain the necessary technical personnel, it would have a
material and adverse effect on our business, results of operations and financial
condition.
Our FindWhat.com(SM) service depends upon identifying and establishing future
online marketing participants.
We have not yet commenced significant marketing activities relating to our
services and have limited marketing experience and limited financial, personnel
and other resources to undertake extensive marketing activities. Our future
ability to generate revenue from our FindWhat.com(SM) web site will depend upon
our ability to get advertisers and generate traffic to the site. If we are
unable to enter into and maintain marketing agreements or arrangements which
generate significant traffic to our FindWhat.com(SM) web site on commercially
acceptable terms, this significant aspect of our business will be damaged. Even
if enter into strategic marketing agreements with third parties they may not
result in our ability to increase our revenues.
We depend on our agreement with Inktomi to provide us with supplemental search
data.
In order to provide high quality search results in response to search
queries by consumers, FindWhat.com(SM) will require supplemental search results
to display in addition to the search results paid for by our clients.
Supplemental search data is expected to constitute a very high percentage of the
search results displayed by FindWhat.com(SM). We are currently relying upon one
third-party supplier, Inktomi Corporation, as our sole source of supplemental
search results displayed by FindWhat.com(SM). Pursuant to our agreement with
Inktomi, we will be required to make minimum aggregate payments of $600,000 over
the next three years for supplemental search results. If we fail to make any
required payments, Inktomi could terminate its services, which would result in a
material interruption of our operations until such time as we can obtain an
alternative source for such services. Alternative sources may not be available,
and any reliable third-party supplier will likely be a competitor.
We face substantial and increasing competition.
FindWhat.com(SM) may face increased pricing pressure for the sale of paid
listings, advertisements and direct marketing opportunities, which could
adversely affect our future business and operating results. Our competitors may
have or obtain certain intellectual property
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rights which may interfere or prevent the use of our "pay for placement"
business model. Our primary competitor in the pay for placement aspect of our
business, GoTo.com, has advised us of a pending patent application with respect
to this business model, but has refused to provide to us the details of its
application. If a patent is issued to a competitor which interferes or prevents
us from using the pay for placement business model, our business, operations and
financial condition could be materially and adversely affected. In addition, we
may be required to participate in litigation which we may not have the resources
to fund or be required to incur litigation costs which may adversely affect our
financial condition. We also compete against providers of web directories and,
search and information services such as America Online, Inc.
Our principal competitors in our web site optimization business are Did-it.com,
WebsiteResult.com and Greenflash.com.
Most of our current and potential customers have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources than we have.
We depend on third parties for certain software and Internet services for our
FindWhat.com(SM) search service.
We depend on third-party software to operate our FindWhat.com(SM) search
service. Although we believe that several alternative sources for this software
are available, any failure to obtain and maintain the rights to use such
software would have a material adverse effect on our operations. We also are
dependent upon a third party to provide Internet services to allow us to connect
to the Internet with sufficient capacity and bandwidth so that our
FindWhat.com(SM) search service can properly function and our FindWhat.com web
site can handle the anticipated increase in traffic. We currently have a
contract with a term of 12 months with Michigan Internet Communications
Association for such services. Any restrictions or interruption in our
connection to the Internet would cause significant revenue loss.
Our future success will depend on continued growth in the use of the Internet.
Our future success will depend substantially upon continued growth in the
use of the Internet to support the sale of our services and in the acceptance
and volume of commerce transactions on the Internet. As this is a new and
rapidly evolving industry, the ultimate demand and market acceptance for
Internet-related services is subject to a high level of uncertainty. The number
of Internet users may not continue to grow, and commerce over the Internet may
not become more accepted or widespread which would adversely affect the demand
for our services.
Our future success will depend upon the continued development and maintenance of
a viable Internet infrastructure.
Our future success depends upon the continued development and maintenance
of a viable Internet infrastructure to support the continued growth in the use
of the Internet. The maintenance and improvement of this infrastructure will
require timely development of products, such as high speed modems and
communications equipment, to continue to provide reliable Internet access and
improved content. If the current Internet infrastructure is not able to support
an increased number of users or the increased bandwidth requirements of users,
the performance or reliability of the Internet, and therefore its popularity,
may be adversely affected. This could adversely affect our business, operations
and financial condition could be materially and adversely affected.
Current capacity constraints may require us to expand our network infrastructure
and customer support capabilities.
Our ability to provide high-quality customer service largely depends on the
efficient and uninterrupted operation of our computer and communications systems
in order to accommodate
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any significant increases in the numbers of consumers and advertisers using our
services. Although our network infrastructure can readily sustain hundreds of
connections per second to FindWhat.com, and is currently working at
approximately 1% of capacity, we may be required to expand our network
infrastructure and customer support capabilities to support an anticipated
expanded customer base. Any such expansion will require us to make significant
upfront expenditures for servers, routers, computer equipment and additional
Internet and intranet work equipment and to increase bandwidth for Internet
connectivity. Any such expansion or enhancement will need to be completed
without system disruptions. Failure to expand our network infrastructure or
customer service capabilities either internally or through third parties, if and
when necessary, would materially adversely affect our business and operations.
Our technical systems are vulnerable to interruption and damage.
We currently do not have a disaster recovery plan in effect, nor do we have
fully redundant systems for our services at an alternate site. A disaster could
cause interruption of our services for an indeterminate length of time and
severely damage our business and results of operations. Our systems and
operations are vulnerable to damage or interruption from fire, floods, power
loss, telecommunications failures, break-ins, sabotage, computer viruses,
penetration of our network by unauthorized computer users and "hackers", and
similar events. The occurrence of a natural disaster or unanticipated problems
at our technical operations facility could cause interruptions or delays in our
business, loss of data or render us unable to provide services to customers.
Failure to provide the data communications capacity we require, as a result of
human error, natural disaster or other operational disruptions could cause
interruptions in our service and web sites. The occurrence of any or all of
these events could adversely affect our reputation, brand and business.
We may be unable to obtain the Internet domain names that we hope to use.
The Internet domain name we are using for our search service web site is
"FindWhat.com(SM)." This domain name will be an extremely important part of our
business. We may desire or it may be necessary in the future to use other domain
names in the United States and abroad. The acquisition and maintenance of domain
names generally are regulated by governmental agencies and their designees. In
the United States, the National Science Foundation has appointed Network
Solutions, Inc. as the current exclusive registrar for the ".com," ".net" and
".org" generic top-level domains. The regulation of domain names in the United
States and in foreign countries is subject to change in the near future. Future
changes in the United States are expected to include a transition from the
current system to a system that is controlled by a for-profit corporation and
the creation of additional top-level domains. Governmental authorities in
different countries may establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. As a result, we may be unable to acquire or maintain desired and relevant
domain names in all countries in which we will conduct business.
The impact of potential Year 2000 difficulties on our operations is unclear.
Although we believe that all of our internal software and hardware systems
will function properly with respect to dates in the year 2000 and thereafter, we
may experience unanticipated
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negative consequences from year 2000 problems, including material costs caused
by undetected errors or defects in the technology we use in our internal
systems.
We have not inquired as to the year 2000 readiness of our customers, or all
of our suppliers or vendors and are therefore unable to determine what, if any,
consequences their year 2000 failures would have on our operations, liquidity or
financial condition and we have not developed contingency plans to address any
Year 2000 problems by these parties. If our suppliers, and vendors or customers
experience any year 2000 problems it could result in an interruption in, or a
failure of, certain of our business activities and could adversely affect the
revenues generated by our FindWhat.com(SM) business. We could also be required
to incur substantial expenditures in order to adapt our services to changing
technologies or to new protocols as a result of any realized year 2000-related
programming errors.
We may be unable to promote and maintain our brands.
We believe that establishing and maintaining brand identity of our services
is a critical aspect of attracting and expanding a large client base. Promotion
and enhancement of our brands will depend largely on our success in continuing
to provide high quality service. If businesses do not perceive our existing
services to be of high quality, or if we introduce new services or enter into
new business ventures that are not favorably received by businesses, we will
risk diluting our brand identities and decreasing their attractiveness to
existing and potential customers.
In order to attract and retain customers and to promote and maintain brands
in response to competitive pressures, we may also have to substantially increase
our financial commitment to creating and maintaining a distinct brand loyalty
among our customers. If we incur significant expenses in an attempt to improve
our services or to promote and maintain our brands, our business, results of
operations and financial condition could be materially affected. Moreover, any
brand identity we establish may be diluted as a result of any inability to
protect our service marks or domain names.
Government regulation of internet businesses such as ours may increase.
We are not subject to direct regulation by any government agency, other
than regulations applicable to businesses, generally, and Internet businesses,
in particular. Few laws or regulations are currently directly applicable to
access to or commerce on the Internet. However, the increasing popularity and
use of the Internet have caused several laws or regulations to come under
consideration by federal, state, local and foreign governmental authorities. In
the future, laws may be adopted with respect to the Internet relating to such
issues as user privacy, taxation, infringement, pricing and intellectual
property ownership. Any new legislation or regulation, or a new interpretation
of existing laws, could impact us in ways that are impossible to predict at
present.
Our intellectual property rights may not be protectable or of significant value
in the future.
Legal standards relating to the validity, enforceability and scope of
protection of certain intellectual property rights in Internet-related
industries are uncertain and still evolving. The steps we take to protect our
intellectual property rights may not be adequate to protect our future
intellectual property. Third parties may also infringe or misappropriate any
copyrights,
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<PAGE>
trademarks, service marks, trade dress and other proprietary rights we may have.
Any such infringement or misappropriation could have a material adverse effect
on our business, operations and financial condition.
In connection with applications for registration of our service marks for
"BeFirst(SM)" and "Be1st(SM)," we have filed with the United States Patent and
Trademark Office, we have been advised that a prior "intent-to-use" application
has been filed by a third party for "BeFirst" and that we may not have the right
to use or exclusively use the marks "BeFirst" or "Be1st." We have also filed an
application to register "FindWhat.com(SM)" as a servicemark. As a result, it may
prove necessary or advisable to change the name of our BeFirst.com web site,
which may entail additional expense and loss of goodwill. If other companies
also claim the words "BeFirst," "Be1st" and "FindWhat.com", it could involve us
in litigation or additional expense. Effective service mark, copyright and trade
secret protection may not be available in every country in which our services
are distributed or made available through the Internet.
In addition, the relationship between regulations governing domain names
and laws protecting trademarks and similar proprietary rights is unclear. We may
be unable to prevent third parties from acquiring domain names that are similar
to, infringe upon or otherwise decrease the value of our trademarks and other
proprietary rights, which may result in the dilution of the brand identity of
our services.
Our current and future business activities may infringe upon the
proprietary rights of others, and other parties may assert infringement claims
against us. Any such claims and resulting litigation could subject us to
significant liability for damages and could result in the invalidation of our
proprietary rights. Even if not meritorious, such claims could be
time-consuming, expensive to defend and could result in the diversion of our
management's time and attention.
We depend on the efforts of our key personnel, several of whom do not work for
us on an exclusive basis.
Our success is substantially dependent on the performance of our senior
management and key technical personnel. In particular, our success depends
substantially on the continued efforts of Craig A. Pisaris-Henderson, our
President and Chief Technical Officer, Robert D. Brahms, our Chief Executive
Officer, and Courtney P. Jones, and Chairman of our Board of Directors.
We currently do not have key person life insurance on Messrs.
Pisaris-Henderson, Brahms or Jones and may be unable to obtain such insurance in
the near future due to high cost or other reasons. We also do not have written
employment agreements with any of these key personnel. We believe that the loss
of the services of any of our executive officers or other key employees could
have a material adverse effect on our business, operations and financial
condition.
Each of Messrs. Brahms, Jones and Pisaris-Henderson are actively involved
in the ownership, management and operation of other businesses, including other
Internet businesses. Although each such individual currently provides more than
40 hours per week to our business, they may have conflicts of interest in the
allocation of their business time, and that may reduce the amount of time they
can devote to our business and operations in the future.
14
<PAGE>
Our current members of management are also controlling stockholders.
Craig A. Pisaris-Henderson, Robert D. Brahms and Courtney P. Jones
collectively own over 50% of our outstanding common stock and, therefore, are in
a position to control all matters requiring approval of our stockholders,
including the election of directors and certain extraordinary transactions such
as amendments to our Certificate of Incorporation or merger, without the
approval of the remaining stockholders.
We may not be able to maintain a liquid public market for our common stock.
Our shares of common stock currently appear in the National Quotation
Bureau Inc.'s over-the-counter "pink sheets." However, prior to June 18, 1999,
there was no significant or long-term established public trading market for our
common stock. A regular and established market may not be maintained for our
common stock, and there can also be no assurance as to the depth or liquidity of
any market for our common stock or the prices at which holders may be able to
sell our common stock.
The market price of our common stock may be extremely volatile.
The public market for our common stock has been established relatively
recently. In addition, the trading prices of our common stock, like those the
securities of other Internet companies, has fluctuated widely in recent months.
The market price of our common stock will be influenced by many factors and may
be subject to significant fluctuations in response to variations in our
operating results, investor perceptions, supply and demand, interest rates,
developments with regard to our activities, our future financial condition,
changes in our management, general economic conditions and conditions specific
to the industry.
We may become subject to regulations associated with low priced securities.
Recently, our common stock has frequently traded at a price below $5.00 per
share. Trading in securities priced below $5.00 per share is subject to the
requirements of certain rules promulgated under the Securities Exchange Act of
1934, as amended, which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a "penny stock"
(generally, any non-Nasdaq equity security that has a market price share of less
than $5.00 per share). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated with it and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally defined as an investor with a net worth in
excess of $1,000,000 or annual income exceeding $200,000 individually or
$300,000 together with a spouse). For these types of transactions, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
the sale. The broker-dealer also must disclose the commissions payable to the
broker-dealer, current bid and offer quotations for the penny stock and whether
the broker-dealer is the sole market-maker with presumed control over the
market. Such information must be provided to the customer orally or in writing
before or with the written confirmation of trade sent to the customer. Monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks. The
additional burdens imposed upon broker-dealers by such requirements could
discourage broker-dealers from effecting
15
<PAGE>
transactions in our common stock which could severely limit its market liquidity
and the ability of holders of our common stock to sell it.
Our charter documents limit the liability of our directors and officers.
Our Articles of Incorporation include provisions which limits the personal
liability of our directors and officers for monetary damages arising from a
breach of their fiduciary duties as directors. In addition, our By-laws require
us to indemnify any person who is or was involved in any manner, or who is
threatened to be involved, pending or completed action or proceeding, including
a derivative action brought by us or in our name, by reason of the fact such
person is or was a director, officer, employee or agent of ours, or was serving
at our request as an officer, director, employee or agent of another entity,
enterprise or employee benefit plan, against all liabilities and expenses
actually and reasonably incurred by such person in connection with any such
action or proceeding.
A significant portion of our common stock is eligible for immediate public
trading.
Of the 12,500,000 shares of our common stock outstanding, 2,500,000 shares
are freely tradeable or immediately eligible for resale under Rule 144
promulgated pursuant to the Securities Act of 1933, as amended. The remaining
10,000,000 shares will become eligible for sale under Rule 144 commencing in
June 2000. Sales of substantial amounts of our common stock in the public market
could adversely affect the market price of the common stock.
Our Articles of Incorporation authorize us to issue additional shares of stock.
We are authorized to issue up to 50,000,000 shares of common stock which
may be issued by our board of directors for such consideration as they may
consider sufficient without seeking shareholder approval. The issuance of
additional common stock in the future will reduce the proportionate ownership
and voting power of current stockholders.
Our Articles of Incorporation also authorize us to issue up to 500,000
shares of preferred stock, the rights and preferences of which may be designated
by the board of directors. Such designations may be made without shareholder
approval. The designation and issuance of preferred stock in the future could
create additional securities which would have dividend and liquidation
preferences over the outstanding shares of common stock. These provisions could
also impede a non-negotiated change in control.
We do not intend to pay future cash dividends.
We currently do not anticipate paying cash dividends on our common stock at
any time in the near future. Any decision to pay dividends will depend upon our
profitability at the time, cash available and other factors. We may never pay
cash dividends or distributions on our common stock.
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<PAGE>
Item 2. Financial Information
Selected Financial Data
The following tables set forth selected historical financial data for
FindWhat.com(SM) that reflect the acquisition of all of the outstanding capital
stock of BeFirst Internet Corporation by us in June 1999. Since as a result of
the transaction, the stockholders of BeFirst acquired effective control of us,
the accounting for the acquisition is identical to that resulting from a reverse
acquisition, except that no goodwill is recorded. Under reverse acquisition
accounting, our post-reverse acquisition historical financial statements are
those of BeFirst. Accordingly, our financial statements included elsewhere
herein are the audited historical financial statements of BeFirst as of December
31, 1998 and for the period from March 27, 1998 (the date of inception of
BeFirst) through December 31, 1998. The financial data as of December 31, 1998
and for the period from March 27, 1998 through December 31, 1998 have been
derived from our audited financial statement included elsewhere herein. The
interim financial data as of June 30, 1999 and for the six months ended June 30,
1999 and for period from March 27, 1998 to June 30, 1998 have been derived from
our unaudited financial statements included elsewhere herein and include, in the
opinion of management, all necessary adjustments (consisting of normal and
recurring accruals) for the fair presentation of such information. Interim
results may not necessarily be indicative of our results of operations for a
full year or any other future period. Also see Management's Discussion and
Analysis of Financial Information and our financial statements included
elsewhere herein.
<TABLE>
<CAPTION>
Period from Period From Consolidated
March 27, 1998 March 27, 1998 Six Months
(date of inception) to (date of inception) Ended
December 31, 1998 to June 30, 1998 June 30, 1999
---------------------- ------------------- ------------
Statement of Operations Data: (unaudited) (unaudited)
- -----------------------------
<S> <C> <C> <C>
Revenues $58,818 $1,500 $217,504
Cost of revenues 36,837 6,282 56,444
--------- --------- ---------
Gross profit 21,981 (4,782) 161,060
Operating Expenses
Selling, general and administrative 44,146 10,506 188,594
Executive compensation 45,000 15,000 36,000
Stock option compensation -- -- 211,000
--------- --------- ---------
Total Operating Expenses 89,146 25,506 435,594
--------- --------- ---------
Net Loss $(67,165) $(30,288) $(274,534)
========= ========= =========
Loss per share - basic and diluted $(0.01) $0.00 $(0.03)
Unaudited pro forma information*:
Contractual increase to be made in officer
salaries $270,000 $90,000 $180,000
Pro forma net loss after contractual
increase to be made in officer salaries $(337,165) $(120,288) $(454,534)
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C> <C>
Pro forma loss per share after contractual
increase to be made in officer salaries $(0.04) $(0.01) $(0.05)
Weighted-average number of
shares common shares
outstanding 8,750,000 8,750,000 9,375,000
</TABLE>
As of As of
Balance Sheet Data: December 31, 1998 June 30, 1999
- ------------------- ----------------- ------------
(unaudited)
Cash and cash equivalents $ 6,702 $2,442,545
Total Assets 16,525 2,539,192
Total current liabilities 38,690 153,787
Stockholders' equity (deficit) (22,165) 2,385,405
* The supplemental pro forma information is provided to show the impact of
employment arrangements with three of our executive officers entered into
as of July 1, 1999. The pro forma adjustments reflect increased
compensation costs under such employment arrangements effective July 1,
1999, as if the arrangements had been effective March 27, 1998. These
arrangements are discussed under Item 6, "Executive Compenstaion," below.
Management's Discussion and Analysis of Financial Condition and Results of
Operation
Overview
In June 1999, we acquired all of the outstanding common stock of BeFirst
Internet Corporation, a Delaware corporation, in exchange for the issuance to
the holders of the outstanding capital stock of BeFirst of 8,750,000 shares of
our common stock. Such acquisition gives effect to the following transactions,
each of which was deemed to have occurred simultaneously with the acquisition:
o we cancelled 8,600,000 of our outstanding common stock contributed to
us by certain stockholders and we effected a one-for-two reverse split
of our outstanding common stock, resulting in a decrease in our
outstanding common stock to 2,500,000 shares;
o we issued 1,250,000 post-split shares of our common stock in a private
transaction for a price of $2.00 per share;
o we changed our corporate name from Collectibles America, Inc. to
BeFirst.com; and
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<PAGE>
o the individual that had served as our sole officer and director prior
to our acquisition of BeFirst resigned and was replaced by a board of
directors consisting of the former holders of the outstanding capital
stock of BeFirst.
As a result of such transactions, BeFirst became a wholly-owned subsidiary
of ours and the former holders of capital stock of BeFirst acquired effective
control of us as the parent of BeFirst. In September 1999, we changed our
corporate name to FindWhat.com.
We were incorporated in October 1995. In 1997, we discontinued business
operations and transferred our operating assets to creditors to satisfy
outstanding liabilities. Therefore, the following discussion is a discussion of
the business of BeFirst.
BeFirst was incorporated in March 1998. BeFirst completed development of
proprietary methodology and software tools designed to optimize our clients' web
sites and achieve improved ranking results in response to searches conducted by
consumers on major Internet web sites, offering search services, for search
words and phrases selected by our clients within their respective business
categories. We have also recently commercially launched our Internet search
service, which is designed to assist consumers who search the Internet to locate
desired providers of information, products and services to quickly and easily
locate relevant information and pass through our portal to the desired
information.
Our web site optimization service, which we market under the
BeFirst.com(SM) service mark, and our web site search service, which we market
under the FindWhat.com(SM) service mark, are designed to increase traffic to our
clients' web sites. Our BeFirst.com(SM) service derives revenues from fees
charged to new clients for web site optimization services performed by us for
such clients and click-through rates charged for traffic the service generates
for a client's web site. Our search service is designed to generate revenues
based on the number of consumer click-throughs resulting from a client's listing
on our FindWhat.com(SM) web site. The click-through rate will be determined by
an auction among clients in the same category. Clients desiring placement within
a search category will bid against one another, with the winning bid being at
least $.01 greater than the next highest bid. We anticipate that our search
service will generate additional revenue from banner advertisements to be placed
on search result pages.
We began offering our Internet web site optimization service in August 1998
and we commercially launched our FindWhat.com(SM) search service on September 6,
1999. We have not yet generated any significant revenues and do not expect to
generate any significant revenues until the number of clients we service and the
volume of click-throughs at our clients' web sites substantially increase.
In order to significantly increase revenues we will be required to incur
significant advertising and promotional expenses. In anticipation of an
expansion of our operations, we have recently employed additional management
personnel, including individuals to serve as our chief financial officer and
director of sales. We intend to employ additional personnel in such areas as
sales, technical support and finance. These actual and proposed increases in
personnel will significantly increase our selling, general and administrative
expenses.
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<PAGE>
Our limited operating history and the uncertain nature of the markets we
address or intend to address make prediction of our future results of operations
difficult. Our operations may never generate significant revenues and we may
never achieve profitable operations.
Results of Operations
The following table sets forth our results of operations expressed as
percentage of total revenues:
<TABLE>
<CAPTION>
Period from
Period from March 27, 1998
March 27, 1998 (Date of Consolidated
(Date of Inception) to Inception) to Six months Ended
December 31, 1998 June 30, 1998 June 30, 1999
----------------------- --------------- -------------
<S> <C> <C> <C>
Revenues .............................. 100% 100% 100%
Cost of Revenues ...................... 63% 419% 26%
Operating expenses .................... 152% 700% 200%
Net loss .............................. (114)% (2019)% (126)%
</TABLE>
Comparison of Six Months Ended June 30, 1999 to the Period from March 27, 1998
(Date of Inception) to June 30, 1998; and Comparison of the Six Months Ended
June 30, 1999 to the Period from Inception to December 31, 1998.
Revenues. Revenues increased from $1,500 for the period from March 27, 1998 to
June 30, 1998 to $217,504 for the six months ended June 30, 1999. In addition,
revenues increased from $58,818 for the period from inception to December 31,
1998 to $217,504 for the six months ended June 30, 1999. We introduced our
BeFirst.com(SM) web site optimization service in August 1998. The increase in
revenue is primarily due to the increase in the number of clients using our
BeFirst.com(SM) service, which increased from 25 as of December 31, 1998 to 105
as of June 30, 1999.
Cost of Revenues. Cost of revenues consists primarily of sales representative
commissions, domain registration expenses for clients and web site design
expenses. Our cost of revenues increased from $6,282 for the period from
inception to June 30, 1998 to $56,444 for the six months ended June 30, 1999. In
addition, our cost of revenues increased from $36,837 for the period from
inception to December 31, 1998 to $56,444 for the six months ended June 30,
1999. The increases were primarily attributable to increases in sales
representative commissions and additional client domain registration fees
required in connection with the expansion of our operations.
Operating Expenses. The components of our operating expenses are selling,
general and administrative expenses, stock option compensation and executive
compensation. Selling, general and administrative expenses consist primarily of
advertising, salaries and related costs for general corporate functions,
including professional fees and depreciation of computer equipment. Stock option
compensation consists of a non-cash charge of $211,000 during the six months
ended June 30, 1999 which was recognized for the excess of the fair market value
over the exercise price of options granted to non-employees.
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<PAGE>
Operating expenses increased from $25,506 for the period from March 27,
1998 to June 30,1998 to $435,594 for the period ended June 30, 1999. In
addition, operating expenses increased from $89,146 for the period from March
27, 1998 to December 31, 1998 to $435,594 for the six months ended June 30,
1999. Selling, general and administrative costs for the six months ended June
30, 1999 included $145,501 for advertising, professional fees and payroll.
Increases in advertising and salaries (other than the non-cash charge) are the
result of the expansion of our operation, the development of our FindWhat.com
search service and increased sales efforts. We anticipate additional increases
in advertising, payroll, professional fees and depreciation in the future. Also
included in selling, general and administrative expenses for the periods ended
December 31, 1998 and June 30, 1999 are $18,000 and $43,000, respectively for
rent allocation, support and other administrative services provided by WPI
Advertising, Inc. Executive compensation increased from $15,000 for the period
from March 27, 1998 to June 30, 1998 to $36,000 for the six month period ended
June 30, 1999. In addition, executive compensation decreased from $45,000 for
the period from March 27, 1998 to December 31, 1998 to $36,000 for the six
months ended June 30, 1999.
Net Loss. As a result, our net loss increased from $15,288 for the period from
inception to June 30, 1998 to $238,534 for the six months ended June 30. 1999.
In addition, our net loss increased from $22,165 for the period from inception
to December 31, 1998 to $238,534 for the six months ended June 30, 1999.
Liquidity and Capital Resources
Through June 30, 1999, space and support services were provided to us by
WPI Advertising, Inc., an affiliate of our Chief Executive Officer, Robert D.
Brahms, and Internet Services International, Inc., an affiliate of our
President, Craig Pisaris-Henderson. Our cash requirements during this period
were financed primarily from operating cash flow and the net proceeds of a
private placement of common stock. As of June 30, 1999, we had cash and cash
equivalents of approximately $2,443,000 representing the net cash proceeds from
the sale of 1,250,000 shares of our common stock in a private placement. For the
six months ended June 30, 1999, operating activities provided net cash of
approximately $21,600, due to cash flows from operating activities. Net cash
used in investing activities was approximately $20,800, reflecting purchase of
equipment.
We have been using, and anticipate that we will continue to apply, the net
cash proceeds from the private placement of our common stock in June 1999 to
purchase equipment, and to finance salaries and other general expenses in
anticipation of an expansion in our customer base and activities.
We currently anticipate that the net proceeds from our private placement,
together with cash flow from operations, will be sufficient to finance our needs
for working capital and capital expenditures over at least the next 12 months.
Although we believe that there are sufficient funds to implement our
proposed operations over the next 12 months, we intend to seek additional funds
as needed in the future in order to finance additional technical, sales,
management and marketing personnel and to expand our marketing and promotional
capabilities. However, currently, we have no arrangements with
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<PAGE>
respect to, or sources of. additional financing (debt or equity) to finance
these needs or to fund our operations beyond the next 12 months. Moreover, we
cannot assume that we will be able to obtain any additional funds when required
on commercially reasonable terms, or at all.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these code fields will need to accept four digit entries to distinguish
the year 2000 and 21st century dates from other 20th century dates. As a result,
computer systems and/or software products used by many companies may need to be
upgraded or replaced to solve this problem.
We have completed our internal information technology and non-information
technology assessments. Based on such assessments, we believe that our internal
software and hardware systems will function properly with respect to dates in
the year 2000 and thereafter. We do not expect to incur any significant costs in
the future for year 2000 problems. However, we have not developed any
contingency plan in the event of a year 2000 problem nor do we currently intend
to develop a contingency plan. We may experience unanticipated negative
consequences from year 2000 problems, including material costs, caused by
undetected errors or defects in the technology used in our internal systems.
We have not inquired as to the year 2000 readiness of our customers or all
of our suppliers or vendors and are unable to determine what, if any,
consequences their year 2000 failures would have on our operations, liquidity or
financial condition. However, we have requested year 2000 compliance letters
from Inktomi and certain of our other major vendors and suppliers, but have not
yet received any responses to our requests. We have not developed any
contingency plans, nor do we currently intend to develop any contingency plans,
in the event any of our suppliers or vendors experience year 2000 problems. If
our suppliers, vendors or customers experience any year 2000 problems, it could
affect the revenues of our FindWhat.com(SM) services. In most cases, we believe
that we could find replacement vendors or suppliers which are year 2000
compliant without significant delay or expense. However, if substantially all of
our suppliers and vendors prove not to be year 2000 compliant and if we
experience difficulties in finding replacement suppliers and vendors, then our
business could be materially harmed. If our customers, suppliers and vendors
experience year 2000 problems, it could result in an interruption in, or a
failure of, certain of our normal business activities or operations. We could
also be required to incur substantial expenditures in order to adapt our
services to changing technologies or to new protocols as a result of any
realized year 2000-related programming errors.
Item 3. Properties.
We lease approximately 3,200 square feet of office space in Fort Myers,
Florida for current annual rent of $28,000. The lease commenced September 1,
1999 and has a three-year term.
Our executive, financial and administrative functions and our sales
activities are conducted out of the Manhattan offices of WPI Advertising, Inc.,
a business owned and operated by Robert D. Brahms, our Chief Executive Officer.
WPI is providing us with office space and support services on a cost allocation
basis. As our sales operations expand, we will determine whether to
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<PAGE>
maintain our presence in the WPI offices or to seek alternate space in
Manhattan. We believe that this space is sufficient for our current and
anticipated sales activities.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of October 27, 1999
with respect to the beneficial ownership of our common stock by the following
individuals and groups:
o each of our directors;
o each of our executive officers;
o each person whom we know beneficially owns five percent (5%) or more
of our outstanding common stock; and
o all directors and executive officers as a group
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage of Shares
Beneficial Owner Beneficially Owned Beneficially Owned
---------------- ------------------ ------------------
<S> <C> <C>
Courtney P. Jones 2,413,688 19.1
Craig A. Pisaris-Henderson 2,418,688 19.1
Robert D. Brahms 2,350,658 18.6
Peter W. Miller 1,562,500 12.5
Michael Schulman -- --
All directors and executive officers
as a group (4 persons) 7,183,034 54.9
</TABLE>
The address of Messrs. Jones, Pisaris-Henderson, Brahms and Schulman is
care of FindWhat.com, 121 West 27th Street, Suite 903, New York, New York 10001.
The address of Mr. Peter Miller is care of Proskauer Rose LLP, 1545 Broadway,
New York 10036, attention: Jack P. Jackson, Esq.
We believe that all of the persons named in the above table have sole
voting and investment power over all shares they beneficially own. Each person
in the table above is considered the beneficial owner of securities that he can
acquire through the exercise of options, warrants or convertible securities
within 60 days from the date of this registration statement. In calculating each
beneficial owner's percentage ownership, we have assumed that options held by
that person that are exercisable within 60 days from the date of this
registration statement have been exercised.
Messrs. Brahms, Jones and Pisaris-Henderson were granted options to
purchase 122,667, 125,667 and 130,667 shares of common stock, respectively, at
$2.20 per share pursuant to our 1999 Stock Option Plan. The applicable
percentage ownership amounts in the above table are based on 12,500,000 shares
of common stock outstanding as of October 27, 1999.
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<PAGE>
Item 5. Directors and Executive Officers.
The following table sets forth our directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Courtney P. Jones 40 Chairman of Board of Directors and a Director
Craig A. Pisaris-Henderson 30 President, Chief Technology Officer, Secretary and a
Director
Robert D. Brahms 42 Chief Executive Officer,
Treasurer and a Director
Michael Schulman 43 Chief Financial Officer
</TABLE>
Courtney P. Jones has served as our Chairman and as one of our directors
since we acquired BeFirst Internet Corporation in July 1999. Prior to that time,
he served as the President and as a director of BeFirst since its inception in
March 1998. He has served as President and a Director of V-Lite Video
Corporation, a direct marketing production and distributing company, for more
than the past five years. In 1993, Mr. Jones also created, wrote and produced
the "Electronic Entrepreneur," a program for aspiring electronic retailers that
was sold on television and radio. Mr. Jones attended the University of Missouri
for four years before leaving to begin his radio career.
Craig A. Pisaris-Henderson has served as our President, Secretary and Chief
Technology Officer and as one of our directors since we acquired BeFirst in June
1999. Prior to that time he served as the Vice President and Secretary and a
director of BeFirst since its inception in March 1998. He served as President
and Chief Executive Officer of Internet Services International, Inc. and its
predecessor, H.E. Internet Services (founded under the name Henderson
Enterprises) from 1993 to May 1999. Since May 1999, he has served as Chairman,
President and Chief Executive Officer of E-troop.com. E-Troop.com acquired the
assets of Internet Services International, Inc. in May 1999. E-Troop.com and its
predecessor have provided business-to-business multimedia Internet content,
website design and distribution services.
Robert D. Brahms has served as our Chief Executive Officer and Treasurer
and as one of our directors since we acquired BeFirst in June 1999. Prior to
that time he served as a Vice President and Treasurer and as a director of
BeFirst since May 1998. Mr. Brahms has served as the President and director of
WPI Advertising Inc. since it was founded in 1986. WPI is a general advertising
firm and sales representative of other advertising media, including print and
Internet. Mr. Brahms is a graduate of the State University of New York.
Michael Schulman has served as our Chief Financial Officer since July 1999.
From 1996 to July 1999, he served as Vice President and Chief Financial Officer
for IPO, LLC/Fashion Express Worldwide. From 1991 to 1996, Mr. Schulman served
as Vice President and Chief Financial Officer of Gotham Apparel Corp. Mr.
Schulman has BS and MBA degrees from St. John's University in New York City.
24
<PAGE>
Messrs. Brahms, Jones and Pisaris-Henderson are each actively involved in
the ownership, management and operation of other businesses, including other
Internet businesses, although such businesses do not compete with our business.
As such, even though they currently each devote more than 40 hours per week to
our business they may have future conflicts of interest in the allocation of
their business time which may have an adverse affect on our business and
operations.
Directors are elected for a period of one year and serve until the next
annual meeting at which their successors are duly elected by the stockholders.
Officers and other employees serve at the will of the board of directors. There
are currently no arrangements or understandings regarding the length of time
each director is to serve in such a capacity. We have no audit or compensation
committees of our board of directors.
Item 6. Executive Compensation.
Commencing July 1, 1999, Robert D. Brahms, Courtney P. Jones and Craig A.
Pisaris-Henderson are being compensated at a rate of $120,000 per year. From
March 27, 1998 (the date of BeFirst's inception) through June 30, 1999, none of
our executive officers received any compensation from us. Messrs. Brahms, Jones
and Pisaris-Henderson have been granted incentive stock options to purchase
122,667, 125,667 and 130,667 shares of common stock, respectively, at an
exercise price of $2.20 per share under our 1999 Stock Option Plan. Each option
expires five years from its date of grant.
Michael Schulman, the Company's Chief Financial Officer, was employed by us
in July 1999 and is being compensated at a rate of $125,000 per year. In
addition, Mr. Schulman was granted incentive stock options to purchase 20,000
shares of common stock pursuant to our 1999 Stock Option Plan at an exercise
price of $2.00 per share. Such options expire five years from their date of
grant.
Directors' Compensation
Directors do not receive any compensation for services rendered in such
capacities.
Stock Option Plan
In June 1999, we adopted our 1999 Stock Option Plan. Pursuant to this Plan,
we may grant options to purchase up to 1,000,000 shares of common stock to our
key employees, officers, directors, consultants and other agents and advisors.
Awards under this Plan will consist of stock options (both non-qualified options
and options intended to qualify as "incentive stock options" under Section 422
of the Internal Revenue Code of 1986, as amended), restricted stock awards,
deferred stock awards, stock appreciation rights and other stock-based awards.
The Plan is administered by our board of directors, which may determine the
persons to whom awards will be granted, the number of awards to be granted and
the specific terms of each grant, including vesting, subject to the provisions
of the Plan.
The exercise price of incentive stock options may not be less than 100% of
the fair market value of our common stock on the date of grant (110% of the fair
market value in the case of a
25
<PAGE>
grantee holding more than 10% of our outstanding stock). The aggregate fair
market value of shares for which qualified stock options are exercisable for the
first time by a grantee who is a 10% shareholder during any calendar year may
not exceed $100,000. Non-qualified stock options granted under the Plan may be
granted at a price determined by our board of directors, which may not be less
than the fair market value per share of our common stock on the date of grant.
The Plan also contains certain change in control provisions which could
cause options and other awards to become immediately exercisable and
restrictions and deferral limitations applicable to other awards to lapse in the
event any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, including a "group" as defined in Section
13(d), but excluding certain stockholders of the Company, becomes the beneficial
owners of more than 25% of the outstanding shares of common stock.
To date, we have granted options to purchase up to 379,001 and 73,000
shares of common stock at $2.00 and $2.20 per share, respectively, to employees
and options to purchase up to an additional 216,712 shares at $2.00 per share to
non-employees.
Item 7. Certain Relationships and Related Transactions.
Our sales activities are conducted out of the Manhattan offices of WPI
Advertising Inc., a business owned and operated by Robert D. Brahms, an
executive officer and director of ours. As our sales operations expand, we will
determine whether to maintain our presence in the WPI offices or to seek
alternate space in Manhattan. From our inception in March 1998 through the date
hereof, WPI has provided office space and support and administrative services to
us. Through September 9, 1999, we paid expenses to WPI of $70,980 and Internet
Services International, Inc. of $8,172 for providing us with all of our sales
personnel, including sales managers (through June 1999), as well as for rent
allocation and administrative costs.
We believe that prior transactions with our officers, directors and
principal stockholders were on terms that were no less favorable than we could
have obtained from unaffiliated third parties. We intend that all future
transactions between us and our officers, directors and stockholders
beneficially owning 5% or more of our outstanding voting securities or their
affiliates will be on terms no less favorable to us than we could obtain in
arm's-length negotiations from unaffiliated third parties.
Item 8. Legal Proceedings.
We are not a party to any pending legal proceedings and are not aware of
any threatened legal proceedings.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Shareholder Matters.
Market Information. From June 17, 1999 until October 7, 1999, our common
stock traded on the NASD's OTC Bulletin Board under the symbol "FWHT." Since
October 7, 1999, our common stock appears in the National Quotation Bureau
Inc.'s over-the-counter "pink sheets." Prior to June 17, 1999, our common stock
was listed under the symbol "CAMJ" and traded
26
<PAGE>
infrequently. For the period from June 17, 1999 through October 7, 1999 the high
and low, bid prices for our common stock as reported by the NASD's OTC Bulletin
Board were $8.50 and $3.00, respectively. The last reported trade of our common
stock as reported by the OTC Bulletin Board on October 7, 1999 was $3.875. Such
prices reflect inter-dealer quotations, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
The number of record holders of our common stock was 126 as of October 27,
1999.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least one year is entitled to sell, within any three month period,
a number of shares that does not exceed the greater of (i) one percent of the
shares outstanding, or (ii) the average weekly volume of trading in such shares
for the four calendar weeks preceding such sale, subject to the filing of a Form
144 with respect to such sale and certain other limitations and restrictions. In
addition, a person who is not deemed to have been one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, would be entitled to sell
such shares under Rule 144(k) without regard to the volume, manner of sale and
other limitations described above.
Dividend Policy. To date, we have not declared or paid any cash dividends
on our common stock. The payment of dividends, if any, in the future is within
the discretion of the board of directors and will depend upon our earnings,
capital requirements and financial condition and other relevant factors. We
presently intend to retain all earnings to finance our continued growth and the
development of our business and do not expect to declare or pay any cash
dividends in the foreseeable future.
Item 10. Recent Sales of Unregistered Securities.
In October 1997, we sold 12,000,000 shares of common stock to a former
officer for a purchase price of $15,000 pursuant to Section 4(2) of the
Securities Act of 1933.
In June 1999, we cancelled 8,600,000 shares of common stock contributed to
us by certain stockholders and then effected a 1-for-2 reverse stock split of
the remaining outstanding shares of common stock.
Following the reverse split, in June 1999, we completed a private offering
of 1,250,000 shares of common stock to 39 individual and corporate accredited
investors purchasers for gross proceeds of $2,500,000 pursuant to Rule 506 of
Regulation D under the Securities Act of 1933, as amended.
In June 1999, we acquired all of the outstanding capital stock of BeFirst
Internet Corporation in exchange for the issuance of 8,750,000 shares of common
stock to the former shareholders of BeFirst Internet Corporation pursuant to
Section 4(2) of the Securities Act of 1933.
In June 1999, we issued options under our 1999 Stock Option Plan to
purchase up to an aggregate of 668,713 shares of our common stock to certain
employees and non-employees of the
27
<PAGE>
Company at exercise prices of $2.00 and $2.20 per share pursuant to Rule 701
under the Securities Act of 1933.
Item 11. Description of Registrant's Securities to be Registered.
Our authorized capital stock consists of 50,000,000 shares of common stock,
$.001 par value per share, and 500,000 shares of preferred stock, $.001 par
value per share. As of October 27, 1999, there are 12,500,000 shares of our
common stock outstanding, which as of such date, were held of record by 126
holders. No shares of our preferred stock are outstanding.
Common Stock
Holders of common stock are entitled to share equally in all dividends and
distributions that the board of directors, in its discretion, declares from
legally available funds. No holder of common stock has a preemptive right to
subscribe for any securities. No shares of common stock are subject to
redemption or convertible into other securities. Upon our liquidation,
dissolution or winding up, and after payment of creditors and preferred
stockholders, if any, our assets will be divided pro-rata on a share-for-share
basis among the holders of common stock. All shares of common stock now
outstanding are fully paid, validly issued and nonassessable. Each share of
common stock is entitled to one vote on all matters for which shareholders are
required or permitted to vote. Holders of common stock do not have cumulative
voting rights. The holders of more than 50% of the combined shares voting for
the election of directors may elect all of the directors, if they choose to do
so. In that event, holders of the remaining shares of common stock will not be
able to elect any members to the board of directors.
Certain Provisions of Nevada Law
Anti-Takeover Provisions. Nevada law provides that any agreement providing
for the merger or consolidation for sale of all or substantially all of the
assets of a corporation be approved by the owners of at least the majority of
the outstanding shares of that corporation, unless a different vote is provided
for in our Articles of Incorporation. Our Articles of Incorporation do not
provide for a super-majority voting requirement in order to approve any such
transactions. Nevada law also gives appraisal rights for certain types of
mergers, plans of reorganization, or exchanges or sales of all or substantially
all of the assets of a corporation. Under Nevada law, a stockholder does not
have the right to dissent with respect to:
(a) a sale of assets or reorganization, or
(b) any plan of merger or any plan of exchange, if
(i) the shares held by the stockholder are part of a class of
shares which are listed on a national securities exchange or the
NASDAQ National Market System, or are held of record by not less than
2,000 shareholders, and
(ii) the stockholder is not required to accept for his shares any
consideration other than shares of a corporation that, immediately
after the effective time of the merger or exchange, will be part of a
class of shares which are listed on a national
28
<PAGE>
securities exchange or the Nasdaq National Market System, or are held
of record by not less than 2,000 holders.
Control Share Acquisition Provision. Under Nevada law, when a person has
acquired or offers to acquire one-fifth, one-third, or a majority of the stock
of a corporation, a meeting of stockholders must be held after delivery of an
"offeror's" statement, at the offeror's expense, so that the stockholders of the
corporation can vote on whether the owner(s) of the shares proposed to be
acquired (the "control shares") can exercise voting rights. Except as otherwise
provided in a corporation's articles of incorporation, the approval of the
owner(s) of a majority of the outstanding stock not held by the offerors is
required so that the stock held by the offerors will have voting rights. The
control share acquisition provisions are applicable to any acquisition of a
controlling interest, unless the articles of incorporation or by-laws of a
corporation in effect on the tenth day following the acquisition of a
controlling interest by an acquiring person provide that the control share
acquisition provisions do not apply. We have not elected out of the control
share acquisition provisions of Nevada law.
Combination Moratorium Provision. Nevada law provides that a corporation
may not engage in any "combinations," which is broadly defined to include
mergers, sales and leases of assets, issuances of securities and similar
transactions, with an "interested stockholder" (defined as the beneficial owner
of 10% or more of the voting power of the corporation) and certain affiliates or
their associates for three years after an interested stockholder's date of
acquiring the shares, unless the combination or the purchase of the shares by
the interested stockholder is approved by the board of directors by the date the
interested stockholder acquires the shares. After the initial three-year period,
any combination must still be approved by majority of the voting power not
beneficially owned by the interested stockholder or the interested stockholders,
affiliates or associates, unless the aggregate amount of cash and the market
value of the consideration other than cash that could be received by
stockholders as a result of the combination is at least equal to the highest of:
(a) the highest bid per share of each class or series of shares,
including the common shares, on the date of the announcement of the
combination or on the date the interested stockholder acquired the shares;
or
(b) for holders of preferred stock, the highest liquidation value of
the preferred stock.
Other Provisions. Under Nevada law, the selection of a period for achieving
corporate goals is the responsibility of the directors. In addition, the
officers, in exercising their respective powers with a view to the interests of
the corporation, may consider:
(a) the interests of the corporation's employees, suppliers,
creditors, and customers;
(b) the economy of the state and the nation;
(c) the interests of the economy and of society; and
29
<PAGE>
(d) the long-term, as well as short-term, interests of the corporation
and its stockholders, including the possibility that those interests may be
best served by the continued independence of the corporation.
The directors may resist any change or potential change of control of the
corporation if the directors, by majority vote of a quorum, determine that a
change or potential change is opposed to or not in the best interests of the
corporation "upon consideration of the interest of the corporation's
stockholders," or for one of the other reasons described above. The directors
may also take action to protect the interests of the corporations' stockholders
by adopting or executing plans that deny rights, privileges, powers, or
authority to a holder of a specific number of shares or percentage of share
ownership or voting power.
Transfer Agent
Our transfer agent and registrar is Interwest Transfer Co., Inc., 1981 East
4800 South, Salt Lake City, Utah 84117, telephone number (801) 272-9294.
Dividend Policy
We have not paid any dividends on common stock to date and do not
anticipate paying dividends on common stock in the foreseeable future. We intend
to follow a policy of retaining all earnings, if any, for the foreseeable future
in order to finance the development and expansion of our business.
Item 12. Indemnification of Directors and Officers.
Our Articles of Incorporation do not provide for the indemnification of a
present or former director or officer. However, pursuant to Nevada Revised
Statutes Section 78.750 and 78.751, we must indemnify any of our directors,
officers, employees or agents who is successful on the merits or otherwise in
defense of any action or suit. Such indemnification includes expenses, including
attorney's fees actually or reasonably incurred. Nevada law also provides for
discretionary indemnification for each person who serves as or at our request as
our officer or director. We may indemnify such individuals against all costs,
expenses, and liabilities incurred in a threatened, pending, or completed
action, suit or proceeding brought because such individual is our director or
officer. Such individual must have conducted himself in good faith and
reasonably believed that his conduct was in, or not opposed to, our best
interests. In a criminal action he must not have had a reasonable cause to
believe his conduct was unlawful.
Our by-laws provide:
Unless prohibited by Nevada law, we must indemnify any person who is or was
involved in any manner (including, without limitation, as a party or a witness),
or is threatened to be so involved, in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, including without limitation, any action, suit or proceeding
brought by us or in our right to procure a judgment in our favor, by reason of
the fact that he is or was our director, officer, employee or agent, or is or
was serving at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust,
30
<PAGE>
employee benefit plan or other entity or enterprise, against all expenses and
liabilities actually and reasonably incurred by him in connection with any such
action, suit or proceeding. The right to indemnification conferred by our
by-laws shall be presumed to have been relied upon by our directors, officers,
employees and agents and shall be enforceable as a contract right and inure to
the benefit of heirs, executors and administrators of such individuals.
Our board of directors is authorized, on our behalf, to enter into, deliver
and perform agreements or other arrangements to provide any indemnitee with
specific rights of indemnification in addition to the rights provided hereunder
to the fullest extent permitted by Nevada Law. Such agreements or arrangements
may be provide:
(i) that the expenses of our officers and directors incurred in defending a
civil or criminal action, suit or proceeding, must be paid by us as they are
incurred and in advance of the final disposition of any such action, suit or
proceeding provided that, if required by Nevada Law at the time of such advance,
the officer or director provides an undertaking to repay such amounts if it is
ultimately determined by a court of competent jurisdiction that such individual
is not entitled to be indemnified against such expenses;
(ii) that the indemnitee shall be presumed to be entitled to
indemnification under our by-laws or such agreement or arrangement and we will
have the burden of proof to oversome that presumption;
(iii) for procedures to be followed by us and the indemnitee in making any
determination of entitlement to indemnification or for appeals therefrom; and
(iv) for insurance or such other financial arrangements, all as may be
deemed appropriate by the board of directors as the time of execution of such
agreement or arrangement.
We may, unless prohibited by Nevada Law, purchase and maintain insurance or
make other financial arrangements on behalf of any indemnitee for any liability
asserted against him and liability and expenses incurred by him in his capacity
as a director, officer, employee or agent, or arising out of his status as such,
whether or not the corporation has the authority to indemnify him against such
liability and expenses. Such other financial arrangements may include:
o the creation of a trust fund;
o the establishment of a program of self-insurance;
o the securing of our obligation of indemnification by granting a
security interest or other lien on any of our assets; or
o the establishment of a letter of credit, guaranty or surety.
The foregoing by-law provisions, as well as this provision, may be amended
by our stockholders only by vote of the holders of 66 2/3% of the entire number
of shares of each class, voting separately, of our outstanding capital stock
(even though the right of any class to vote is otherwise restricted or denied),
provided that no amendment or repeal of these by-law provisions will adversely
affect the indemnification rights of any indemnitee existing at the time such
repeal or amendment becomes effective.
31
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to our directors, officers and controlling
persons pursuant to these provisions or otherwise, we have been advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
32
<PAGE>
Item 13. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
Page
----
FindWhat.com
Report of Independent Certified Public Accountants F-2
Balance Sheets, December 31, 1998 and June 30, 1999
(unaudited) F-3
Statements of Operations, from inception on March 27,
1998 through December 31, 1998, from inception through
June 30, 1998 (unaudited) and for the six months ended
June 30, 1999 (unaudited) F-4
Statement of Stockholders' Equity (Deficit), from
inception on March 27, 1998 through December 31, 1998,
and for the six months ended June 30, 1999 (unaudited) F-5
Statements of Cash Flows, from inception on March 27,
1998 through December 31, 1998, from inception on March
27, 1998 though June 30, 1998 (unaudited), and for the
six months ended June 30, 1999 (unaudited) F-6
Notes to Financial Statements F-7-F-14
Collectibles America, Inc. - Unaudited
Unaudited Balance Sheet, June 16, 1999 F-15
Unaudited Statements of Operations, for the period
ended June 16, 1999, for the period ended June 30,
1998, and from inception on October 25, 1995 through
June 16, 1999 F-16
Unaudited Statement of Stockholders' Equity, from
inception on October 25, 1995 through June 16, 1999 F-17
Unaudited Statements of Cash Flows, for the period
ended June 16, 1999, for the period ended June 30,
1998, and from inception on October 25, 1995 through
June 16, 1999 F-18
Notes to Unaudited Financial Statements F-19-F-21
Collectibles America, Inc.
Independent Auditors' Report F-22
Balance Sheets, December 31, 1998 and 1997 F-23
Statements of Operations, for the years ended December
31, 1998 and 1997 and from inception on October 25,
1995 through December 31, 1998 F-24
Statement of Stockholders' Equity, from inception on
October 25, 1995 through December 31, 1998 F-25
Statements of Cash Flows, for the years ended December
31, 1998 and 1997 and from inception on October 25,
1995 through December 31, 1998 F-26
Notes to Financial Statements F-27-F-29
Collectibles America, Inc.
Independent Auditors' Report F-30
Balance Sheet, December 31, 1997 and 1996 F-31
Statement of Operations, for the years ended December
31, 1997 and 1996 and from inception on October 25,
1995 through December 31, 1997 F-32
Statement of Stockholders' Equity, from inception on
October 25, 1995 through December 31, 1997 F-33
Statement of Cash Flows, for the years ended December
31, 1997 and 1996 and from inception on October 25,
1995 through December 31, 1997 F-34
Notes to Financial Statements F-35-F-37
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
FindWhat.com
We have audited the accompanying balance sheet of FindWhat.com as of December
31, 1998, and the related statements of operations, stockholders' equity
(deficit) and cash flows for the period from March 27, 1998 (date of inception)
through December 31, 1998. These financial statements are the responsibility of
FindWhat.com's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FindWhat.com as of December 31,
1998 and the results of its operations and its cash flows for the period from
March 27, 1998 (date of inception) through December 31, 1998 in conformity with
generally accepted accounting principles.
/s/ GRANT THORNTON LLP
New York, New York
October 29, 1999
F-2
<PAGE>
FindWhat.com
BALANCE SHEETS
Consolidated
December 31, June 30,
1998 1999
----------- -----------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,702 $ 2,442,545
Accounts receivable 8,463 78,421
Prepaid expenses 200
----------- -----------
Total current assets 15,165 2,521,166
EQUIPMENT - NET 1,360 18,026
----------- -----------
$ 16,525 $ 2,539,192
=========== ===========
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 11,348 $ 92,473
Customer deposits 19,353 6,000
Due to related party 7,989 55,314
----------- -----------
Total current liabilities 38,690 153,787
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (Deficit)
Preferred stock, $.001 par value; authorized,
500,000 shares; none issued and outstanding
Common stock, no par value; authorized,
issued and outstanding, 1,000 shares 1,000
Common stock, $.001 par value;
authorized, 50,000,000 shares; issued
and outstanding, 12,500,000 shares 12,500
Additional paid-in capital 54,000 2,724,604
Accumulated deficit (67,165) (341,699)
----------- -----------
(12,165) 2,395,405
Less stock subscription receivable (10,000) (10,000)
----------- -----------
(22,165) 2,385,405
----------- -----------
$ 16,525 $ 2,539,192
=========== ===========
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
FindWhat.com
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from Period from
March 27, March 27, Consolidated
1998 (date of 1998 (date of Six months
inception) to inception) to ended
December 31, June 30, June 30,
1998 1998 1999
----------- ----------- -----------
--------(unaudited)-------
<S> <C> <C> <C>
Revenues $ 58,818 $ 1,500 $ 217,504
Cost of revenues 36,837 6,282 56,444
----------- ----------- -----------
Gross profit 21,981 (4,782) 161,060
Operating expenses
Selling, general and administrative 44,146 10,506 188,594
Executive compensation 45,000 15,000 36,000
Stock option compensation 211,000
----------- ----------- -----------
Total Operating Exp 89,146 25,506 435,594
NET LOSS $ (67,165) $ (30,288) $ (274,534)
=========== =========== ===========
Loss per share - basic and diluted $ (0.01) $ (0.00) $ (0.03)
=========== =========== ===========
Unaudited pro forma information (i):
Contractual increase to be made in officer
salaries $ 270,000 $ 90,000 $ 180,000
=========== =========== ===========
Pro forma net loss after contractual increase
to be made in officer salaries $ (337,165) $ (120,288) $ (454,534)
=========== =========== ===========
Pro forma loss per share after contractual
increase to be made in officer salaries $ (0.04) $ (0.01) $ (0.05)
=========== =========== ===========
Weighted-average number of common
shares outstanding 8,750,000 8,750,000 9,375,000
=========== =========== ===========
</TABLE>
(i) The supplemental pro forma information is provided to show the impact of
employment arrangements with three officers of the Company entered into as
of July 1, 1999. The pro forma adjustments reflect increased compensation
costs under such employment arrangements effective July 1, 1999 as if the
arrangements had been effective March 27, 1998. These arrangements are
discussed at "Executive Compensation" in Item 6 of this registration
statement.
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
FindWhat.com
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Note B)
Period from March 27, 1998 (date of inception)
to December 31, 1998 and for the
six months ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Common stock, Common stock,
no par value $.001 par value Additional
-------------------------- ------------------------- paid-in Accumulated
Shares Amount Shares Amount capital deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock 1,000 $ 1,000 $ 9,000
Executive compensation 45,000
Net loss $ (67,165)
----------- ----------- ----------- -----------
Balance at December 31, 1998 1,000 1,000 54,000 (67,165)
Reclassification of no par value
common stock into $.001
common stock (1,000) (1,000) 2,500,000 $ 2,500 (250)
Issuance of common stock in
connection with private
placement 1,250,000 1,250 2,432,604
Issuance of common stock, in
connection with acquisition
of BeFirst Internet Corporation 8,750,000 8,750 (8,750)
Executive compensation 36,000
Stock option compensation 211,000
Consolidated net loss, June 30, 1999 (274,534)
----------- ----------- ----------- ----------- ----------- -----------
Consolidated balance at June 30, 1999
(unaudited) $ -- $ -- 12,500,000 $ 12,500 $ 2,724,604 $ (341,699)
=========== =========== =========== =========== =========== ===========
<CAPTION>
Stock
subscription
receivable Total
----------- -----------
<S> <C> <C>
Issuance of common stock $ (10,000) 45,000
Executive compensation
Net loss $ (67,165)
----------- -----------
Balance at December 31, 1998 (10,000) (22,165)
Reclassification of no par value
common stock into $.001
common stock 1,250
Issuance of common stock in
connection with private
placement 2,433,854
Issuance of common stock, in
connection with acquisition
of BeFirst Internet Corporation
Executive compensation 36,000
Stock option compensation 211,000
Consolidated net loss, June 30, 1999 (274,534)
----------- -----------
Consolidated balance at June 30, 1999
(unaudited) $ (10,000) $ 2,385,405
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
FindWhat.com
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from Period from
March 27, March 27, Consolidated
1998 (date of 1998 (date of Six months
inception) to inception) to ended
December 31, June 30, June 30,
1998 1998 1999
----------- ----------- -----------
-------(unaudited)--------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (67,165) $ (30,288) $ (274,534)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation 340 4,167
Stock option compensation 211,000
Executive compensation 45,000 15,000 36,000
Changes in operating assets and liabilities
Accounts receivable (8,463) (69,958)
Other current assets (200)
Accounts payable and accrued expenses 11,348 18,410 81,125
Customer deposits 19,353 6,995 (13,353)
Due to related party 7,989 1,000 47,325
----------- ----------- -----------
Net cash provided by operating activities 8,402 11,117 21,572
----------- ----------- -----------
Cash flows from investing activities
Purchase of equipment (1,700) (1,700) (20,833)
----------- ----------- -----------
Net cash used in investing activities (1,700) (1,700) (20,833)
----------- ----------- -----------
Cash flows from financing activities
Gross proceeds from private placement 2,500,000
Payment of financing costs (64,896)
----------- ----------- -----------
Net cash provided by financing activities 2,435,104
----------- ----------- -----------
INCREASE IN CASH AND
EQUIVALENTS 6,702 9,417 2,435,843
Cash and cash equivalents at beginning of period 6,702
----------- ----------- -----------
Cash and cash equivalents at end of period $ 6,702 $ 9,417 $ 2,442,545
=========== =========== ===========
Supplemental noncash investing and financing activities
Capital contributions for stock subscription $ 10,000
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE A - NATURE OF BUSINESS
BeFirst.com was organized under the laws of the State of Nevada and,
beginning June 17, 1999, conducts its operations through its wholly-owned
subsidiary, BeFirst Internet Corporation. In September 1999, the Company
changed its name from BeFirst.com to FindWhat.com ("FindWhat" or the
"Company").
FindWhat offers internet optimization tools to increase traffic flow to
clients' web sites. The Company charges an initial set-up fee to enhance a
client's web page using key words and utilizes software that tracks
click-through rates. The Company currently derives revenue from two
sources: set-up fees charged to new clients and click-through rates charged
for the traffic the service generates for a client's web site. The Company
operates in one reportable business segment.
NOTE B - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of FindWhat.com
and its wholly-owned subsidiary, BeFirst Internet Corporation.
On June 17, 1999, Collectibles America, Inc. ("Collectibles"), a
nonoperating public company with immaterial net assets, acquired 100% of
the outstanding common stock of BeFirst Internet Corporation, whose date of
inception was March 27, 1998 (the "Acquisition"). The Acquisition resulted
in the owners and management of BeFirst Internet Corporation having
effective control of the combined entity. Concurrent with the Acquisition,
Collectibles changed its name to BeFirst.com. In September 1999,
BeFirst.com changed its name to FindWhat.com.
Under generally accepted accounting principles, the Acquisition is
considered to be a capital transaction in substance, rather than a business
combination. That is, the Acquisition is equivalent to the issuance of
stock by BeFirst Internet Corporation for the net monetary assets of
FindWhat.com, accompanied by a recapitalization, and is accounted for as a
change in capital structure. Accordingly, the accounting for the
Acquisition is identical to that resulting from a reverse acquisition,
except that no goodwill is recorded. Under reverse takeover accounting, the
post-reverse-acquisition comparative historical financial statements of the
"legal acquirer" (FindWhat.com), are those of the "accounting acquirer"
(BeFirst Internet Corporation).
Accordingly, the financial statements of FindWhat.com as of December 31,
1998 and for the period from March 27, 1998 through December 31, 1998, are
the historical financial statements of BeFirst Internet Corporation for the
same period. The basic structure and terms of the Acquisition and related
events, all of which are deemed to have occurred simultaneously on June 17,
1999, together with the applicable accounting effects, were as follows:
F-7
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE B (continued)
o FindWhat.com cancelled 8,600,000 unissued shares of common stock and
effected a 2-to-1 reverse stock split of its outstanding shares of
common stock, resulting in a decrease in the number of outstanding
shares to 2,500,000.
o FindWhat.com issued 1,250,000 post-split shares of common stock in a
private placement for $2.00 per share in cash (see Note K).
o FindWhat.com acquired all of the outstanding shares of common shares
of common stock of BeFirst Internet Corporation in exchange for
8,750,000 post-split shares of FindWhat.com. The common stock
exchanged, in addition to the existing FindWhat.com shares
outstanding, collectively resulted in the recapitalization of the
Company. Earnings per share ("EPS") calculations include the Company's
change in capital structure for all periods presented.
o The sole officer and director of FindWhat.com was replaced by a board
of directors from BeFirst Internet Corporation.
o The Company adopted a 1999 Stock Incentive Plan (see Note L) for
employees.
NOTE C - Unaudited Interim Results
The accompanying consolidated balance sheet as of June 30, 1999, the
consolidated statements of operations, cash flows and stockholders' equity
for the six months ended June 30, 1999, and the statements of operations
and cash flows for the period from March 27, 1998 to June 30, 1998, are
unaudited. The unaudited interim financial statements have been prepared on
the same basis as the annual financial statements and, in the opinion of
management, reflect all adjustments, which include only normal recurring
adjustments, necessary to present fairly the Company's financial position,
results of operations and cash flows as of and for the six months ended
June 30, 1999 and for the period March 27, 1998 (inception) through June
30, 1998. The financial data and other information disclosed in these notes
to the financial statements related to these periods are unaudited The
results for the six months ended June 30, 1999 are not necessarily
indicative of the results to be expected for the year ending December 31,
1999. Intercompany balances and transactions have been eliminated in the
June 1999 financial statements.
F-8
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
2. Equipment
Equipment is stated at cost. Depreciation is computed using the
double-declining method over the estimated useful lives of five years.
Depreciation expense consists of the depreciation of computer
equipment. Accumulated depreciation was $340 at December 31, 1998 and
$4,507 at June 30, 1999.
3. Revenues
The Company currently derives revenues from two sources: through
set-up fees charged to new clients and through click-through rates
charged for the traffic the service generates to a client's web site.
Revenue is recognized when the set-up services are completed and
during the periods click-throughs are generated.
4. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions in determining the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
5. Basic and Diluted Loss Per Share
Basic and diluted loss per share is calculated by dividing the net
loss by the weighted average number of shares of common stock
outstanding during each period. Stock options have been excluded from
the calculation of diluted loss per share as their effect would have
been antidilutive.
The issuance of 8,750,000 shares as described in Note B has been
reflected as of March 27, 1998.
F-9
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following:
December 31, June 30,
1998 1999
------- -------
(unaudited)
Accounts payable $ 9,332 $ 6,998
Professional fees 871 40,510
Salaries and bonuses 1,145 44,965
------- -------
$11,348 $92,473
======= =======
NOTE F - RELATED PARTY TRANSACTIONS
The Company shares space both in New York and Florida with WPI Advertising
Inc. ("WPI") and Internet Solutions International ("ISI"), whose respective
owners are also the shareholders and officers of the Company.
Through June 30, 1999, the Company paid a 30% commission to WPI for sales
generated by WPI. The commission covered sales costs as well as rent
allocation and other administrative costs provided by WPI. These expenses
for the period ended December 31, 1998 and June 30, 1999 were approximately
$18,000 and $63,000 respectively, which are included in selling, general
and administrative expenses.
Beginning July 1, 1999, the Company hired its own sales staff and entered
into a revised arrangement with WPI whereby an allocation of the
above-mentioned rent and administrative expenses will be apportioned to the
Company. In addition, in July 1999, the Company signed a lease (with an
unrelated lessor) and will move its technical operations out of ISI's
offices. The lease term is for three years at $34,800 annually.
F-10
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE G - DUE TO RELATED PARTY
Due to related party consists of the following:
December 31, June 30,
1998 1999
------- -------
(unaudited)
Commissions payable due to WPI $ 4,989 $37,914
Other payables due to WPI 17,400
Loan due to WPI 3,000
------- -------
$ 7,989 $55,314
======= =======
NOTE H - CUSTOMER DEPOSITS
Customer deposits represents advances on account for future click-through
sales.
NOTE I - COMMITMENTS AND CONTINGENCIES
Beginning August 1, 1999, the Company leased office space under the terms
of an operating lease that expires in 2002.
Future minimum payments under noncancellable operating leases consisted of the
following at December 31, 1998:
1999 $11,700
2000 28,500
2001 30,300
2002 18,200
------
$88,700
F-11
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE J - CONCENTRATION OF FINANCIAL INSTRUMENTS
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents. The Company
places its cash and cash equivalents with EAB Bank. In general, such
instruments exceeded the FDIC insurance limit of $100,000. The amount of
funds as of June 30, 1999, in excess of this insurance coverage, was
approximately $2,400,000.
NOTE K - PRIVATE PLACEMENT
In June 1999, a private placement to offer 1,250,000 shares of $.001 par
value common stock at a price of $2.00 per share was completed by the
Company. The proceeds from the offering are being used as follows: (a)
upgrades to transactions processing systems; (b) the hiring of additional
sales and technical personnel; (c) development of a new search engine,
which is scheduled to be released in Fall 1999; and (d) purchase of
additional computer hardware and software.
As a result of the private placement, approximately $65,000 of legal costs
were incurred, which are being reflected as a reduction to additional
paid-in-capital.
NOTE L - STOCK INCENTIVE PLAN
In June 1999, the Board of Directors of the Company adopted the 1999 Stock
Incentive Plan ("the Plan"). The total number of shares reserved and
available for distribution to the Company's key employees, officers,
directors, consultants and other agents and advisors under this Plan will
be 1,000,000 shares. Awards under the Plan will consist of stock options
(both qualified and non-qualified options), restricted stock awards,
deferred stock awards and stock appreciation rights.
On June 17, 1999, the Company granted 450,000 options under the terms of
the Plan to its employees and 207,000 options to nonemployees, exercisable
at $2.00 per share. Total expense recognized for stock options given to
nonemployees amounted to approximately $211,000, which is included in the
statement of operations for the six months ended June 30, 1999.
F-12
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE L (continued)
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), "Accounting for Stock Based
Compensation." It applies APB Opinion 25, "Accounting for Stock Issued to
Employees," and does not recognize compensation expense for its stock-based
compensation plans. If the Company had elected to recognize compensation
expense based upon the fair value at the grant date for awards under these
plans, consistent with the methodology prescribed by SFAS No. 123, then the
Company's net loss and loss per share would be increased to the pro forma
amounts indicated below:
Six months ended June, 30 1999 (unaudited) Actual Pro forma
------------------------------------------ ------ ---------
Net loss $(274,534) $(278,169)
========= =========
Loss per share - basic and diluted $(0.03) $(0.03)
===== =====
The fair value of these options for the six months ended June 30, 1999 was
estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions:
Volatility 50%
Risk-free rate 6%
Expected life 5 years
Forfeiture rate 0%
The weighted-average fair value of options granted during the six months
ended June 30, 1999, for which the exercise price equals the market price
on the grant date, was $1.02, and the weighted-average exercise price was
$2.00.
Stock option activity during the six months ended June 30, 1999 is
summarized below:
Weighted-
average
exercise
Options price
------- ---------
Balance, December 31, 1998 0 $ --
Granted 450,000 $2.00
-------
450,000 $2.00
======= =====
F-13
<PAGE>
FindWhat.com
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1998
(information relating to June 30, 1999 and 1998 is unaudited)
NOTE L (continued)
The following table summarizes information concerning currently outstanding
and exercisable stock options:
<TABLE>
<CAPTION>
Weighted-
average Weighted- Weighted-
Range remaining average average
of exercise Number contractual exercise Number exercise
price outstanding life (years) price exercisable price
----- ----------- ------------ ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$2.00 450,000 5.01 $2.00 0.00 N/A
===== ==== ===
</TABLE>
NOTE M - SUBSEQUENT EVENT
In August 1999, the Company acquired a database license from Inktomi, Inc.
which will require minimum aggregate payments of $600,000 over the next
three years.
F-14
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
UNAUDITED BALANCE SHEET
ASSETS
June 16,
1999
--------
CURRENT ASSETS:
Cash $ --
--------
Total Current Assets --
--------
$ --
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ --
--------
Total Current Liabilities --
========
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
25,000,000 shares authorized,
13,600,000 shares issued
and outstanding at June 16, 1999 13,600
Capital in excess of par value 73,000
Deficit accumulated during the
development stage (86,600)
--------
Total Stockholders' Equity --
--------
$ --
========
The accompanying notes are an integral part of
these unaudited financial statements.
F-15
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
UNAUDITED STATEMENTS OF OPERATIONS
For the For the From Inception
Period Ended Period Ended on October 25,
June 16, June 30, 1995 Through
-------- -------- June 16,
1999 1998 1999
-------- -------- --------
REVENUES $ -- $ -- $ --
COST OF GOODS SOLD -- -- --
-------- -------- --------
GROSS PROFIT -- -- --
-------- -------- --------
EXPENSES:
General and administrative
expenses 12,957 120 15,195
-------- -------- --------
LOSS BEFORE INCOME TAXES (12,957) (120) (15,195)
CURRENT TAX EXPENSE -- -- --
DEFERRED TAX EXPENSE -- -- --
-------- -------- --------
LOSS FROM CONTINUING
OPERATIONS (12,957) (120) (15,195)
DISCONTINUED OPERATIONS:
Loss from operations of
discontinued line of business -- -- (71,405)
-------- -------- --------
NET LOSS $(12,957) $ (120) $(86,600)
-------- -------- --------
LOSS PER COMMON SHARE:
Continuing operations $ (.00) $ (.00) $ (.00)
Discontinued operations (.00) (.00) (.01)
-------- -------- --------
Net Income (.00) (.00) (.01)
======== ======== ========
The accompanying notes are an integral part of
these unaudited financial statements.
F-16
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
UNAUDITED STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON OCTOBER 25, 1995
THROUGH JUNE 16, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------------- Excess of Development
Shares Amount Par Value Stage
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, October 25, 1995 -- $ -- $ -- $ --
Issuance of common stock upon initial
Organization for cash at $.0125 per
Share, October, 1995 1,200,000 1,200 13,800 --
Issuance of common stock, for cash
Pursuant to public offering,
December, 1995 at $.25 per
Share, less offering costs of $43,400 400,000 400 56,200 --
Net loss for the period ended
December 31, 1995 -- -- -- (2,851)
---------- ---------- ---------- ----------
BALANCE, December 31, 1995 1,600,000 1,600 70,000 (2,851)
Net loss for the year ended
December 31, 1996 -- -- -- (66,300)
---------- ---------- ---------- ----------
BALANCE, December 31, 1996 1,600,000 1,600 70,000 (69,151)
Issuance of common stock for cash
October 14, 1997 at $.00125 per share 12,000,000 12,000 3,000 --
Net loss for the year ended
December 31, 1997 -- -- -- (2,588)
---------- ---------- ---------- ----------
BALANCE, December 31, 1997 13,600,000 13,600 73,000 (71,739)
Net loss for the year ended
December 31, 1998 -- -- -- (1,904)
---------- ---------- ---------- ----------
BALANCE, December 31, 1998 13,600,000 13,600 73,000 (73,643)
Net loss for the period ended
June 16, 1999 -- -- -- (12,957)
---------- ---------- ---------- ----------
BALANCE, June 16, 1999 13,600,000 $ 13,600 $ 73,000 $ (86,600)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of
these unaudited financial statements.
F-17
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the From Inception
Period Ended Period Ended on October 25,
June 16, June 30, 1995 Through
--------- --------- June 16,
1999 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows used by Operating Activities:
Net income (loss) $ (12,957) $ (120) $ (86,600)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Non-cash expenses -- -- 2,844
Depreciation -- -- --
Amortization 72 20 195
Change in assets and liabilities:
(Decrease) in accounts payable -- -- --
(Decrease) in accrued liabilities -- -- --
--------- --------- ---------
Net Cash Flows Used by
Operating Activities (12,885) (100) (83,561)
--------- --------- ---------
Cash Flows used by Investing Activities:
Additions of property and equipment -- -- (2,844)
Payment of organization costs -- -- (195)
--------- --------- ---------
Net Cash Used by Investing Activities -- -- (3,039)
--------- --------- ---------
Cash Flows provided by Financing Activities:
Proceeds from stock issuance -- -- 130,000
Payment of stock offering costs -- -- (43,400)
--------- --------- ---------
Net Cash Provided by Financing
Activities -- -- 86,600
--------- --------- ---------
Net Increase (Decrease) in Cash (12,885) (100) --
Cash at Beginning of Period 12,885 15,000 --
--------- --------- ---------
Cash at End of Period $ -- $ 14,900 $ --
--------- --------- ---------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
Supplemental Schedule of Noncash Investing and Financing Activities:
For the period ended June 16, 1999:
None
</TABLE>
The accompanying notes are an integral part of
these unaudited financial statements.
F-18
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Collectibles America, Inc. (the Company) was organized under
the laws of the State of Nevada on October 25, 1995 and has elected a
fiscal year end of December 31. The Company has not been successful in
establishing ongoing operations and is considered a development stage
company as defined in SFAS No. 7. The Company was formed to engage in the
business of acquiring and marketing collectible items such as trading cards
and autographed memorabilia from athletes and celebrities. During 1997 the
Company discontinued the marketing of collectibles, and is presently
considering other business opportunities. The Company has, at the present
time, not paid any dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors.
Organization Costs - The Company was amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60]
months using the straight line method. During the period ended June 16,
1999, the Company adopted Statement of Position 98-5 and amortized the
remaining $72.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with FASB 128 "Earnings Per Share". [See Note 5]
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Accounting 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, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual results
could differ from those estimated.
Recently Enacted Accounting Standards - SFAS No. 130, "Reporting
Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", SFAS No. 132, "Employer's Disclosure
about Pensions and Other Postretirement Benefits", SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", and SFAS
No. 134, "Accounting for Mortgage-Backed Securities..." were recently
issued. SFAS No. 130, 131, 132, 133 and 134 have no current applicability
to the Company or their effect on the financial statements would not have
been significant.
NOTE 2 - DISCONTINUED OPERATIONS
During 1997, the Company abandoned and discontinued its collectibles
marketing operations. The Company's property and equipment were transferred
to a former officer of the company in satisfaction of consulting fees, and
the remaining assets were used to satisfy, in full, remaining liabilities.
The total revenues generated by the discontinued operations amounted to $0
and $120,744 during the years ended 1997 and 1996 respectively. The Company
currently has no on-going operations. At the point in time when the Company
discontinued its operations, there were 1,600,000 shares of common stock
issued and outstanding. The discontinued operations have been segregated on
the Statements of Operations.
F-19
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 3 - CAPITAL STOCK
Change in Control - During October, 1997, an individual purchased
12,000,000 shares of common stock of the Company giving him an 88%
controlling interest in the company. Total proceeds from the sale of stock
amounted to $15,000 or $.00125 per share. The former officers and directors
resigned and the individual was elected as the new president and board
member.
Public Stock Offering - During December, 1995, the Company completed a
public stock offering of 400,000 shares of common stock. Total proceeds
raised amounted to $100,000 and offering costs of $43,400 were offset
against the proceeds. The offering was believed to be exempt from
registration with the Securities and Exchange Commission under Rule 504 of
Regulation D.
Initial Organization - In connection with its organization the Company
issued 1,200,000 shares of common stock during October, 1995, to its
initial shareholders for $15,000 ($.0125 per share).
NOTE 4 - RELATED PARTY TRANSACTIONS
Management Compensation - During the period ended June 16, 1999, the
Company did not pay any regular salary or compensation to its officers and
directors. However, during October, 1997, fixed assets with a book value of
$2,078 were transferred to a former officer of the Company in settlement of
consulting fees.
Office Space - During the period ended June 16, 1999, the Company did not
have a need to rent office space. An officer/shareholder of the Company is
allowing the Company to use his office as a mailing address, as needed, at
no expense to the Company.
NOTE 5 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share for
the periods presented:
<TABLE>
<CAPTION>
For the For the From Inception
Period Ended Period Ended on October 25,
June 16, June 30, 1995 Through
----------- ----------- June 16,
1999 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Loss from continuing operations
available to common shareholders
(numerator) $(12,957) $(120) $(15,195)
----------- ----------- ------------
Loss from discontinued operations
available to common shareholders
(numerator) - - (71,405)
----------- ----------- ------------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 13,600,000 13,600,000 7,242,384
----------- ----------- ------------
</TABLE>
F-20
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At June 16, 1999, the Company
has available unused operating loss carryforwards of approximately $86,600,
which may be applied against future taxable income and which expire in
various years through 2019. The amount of the net operating loss
carryforward which can be utilized by the Company will be subject to annual
limitations due to the substantial change in ownership which has occurred
in the Company.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the tax effect of
the loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax asset is
approximately $29,000 as of June 16, 1999, with an offsetting valuation
allowance at June 30, 1999 of the same amount. The change in the valuation
allowance for the period ended June 16, 1999 is approximately $4,000.
NOTE 7 - SUBSEQUENT EVENTS
Business Acquisition - Subsequent to the date of these financial
statements, the Company completed an acquisition of all the issued and
outstanding shares of common stock of BeFirst Internet Corporation ("
BeFirst"), a Delaware corporation, in a stock-for-stock exchange. The
Company proposes to issue 8,750,000 shares of post-split common stock in
the exchange. Upon completion of the exchange, the Company further proposes
to issue 1,250,000 additional shares of post-split common stock in a
limited offering at a proposed price of $2.00 per share for cash. In the
event the acquisition is completed, the current shareholders of the Company
would only own approximately 20% of the combined enterprise after the
exchange and the limited offering. The current officers and directors of
the Company would resign and the shareholders of BeFirst would gain control
(approximately 70%) of the Company. Ultimate consummation of the
acquisition is subject to various terms including the signing of a
Definitive Agreement.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
COLLECTIBLES AMERICA, INC.
Salt Lake City, Utah
We have audited the accompanying balance sheets of Collectibles America, Inc. [A
Development Stage Company] at December 31, 1998 and 1997, and the related
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1998 and 1997 and from inception on October 25, 1995 through
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of
Collectibles America, Inc. for the period from inception on October 25, 1995
through December 31, 1996 were audited by other auditors whose report dated
April 14, 1997, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements audited by us present fairly, in all material respects, the
financial position of Collectibles America, Inc. as of December 31, 1998 and
1997, and the results of its operations and its cash flows for the years ended
December 31, 1998 and 1997 and for the period from inception through December
31, 1998, in conformity with generally accepted accounting principles.
/s/ Pritchett, Siler & Hardey, P.C.
March 4, 1999
Salt Lake City, Utah
F-22
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
BALANCE SHEETS
ASSETS
December 31,
--------------------
1998 1997
-------- --------
CURRENT ASSETS:
Cash $ 12,885 $ 15,000
-------- --------
Total Current Assets 12,885 15,000
ORGANIZATION COSTS, net 72 111
-------- --------
Total Assets $ 12,957 $ 15,111
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $ -- $ 250
-------- --------
Total Current Liabilities -- 250
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
25,000,000 shares authorized,
13,600,000 shares issued
and outstanding at December 31, 1998
and 1997 13,600 13,600
Capital in excess of par value 73,000 73,000
Deficit accumulated during the
development stage (73,643) (71,739)
-------- --------
Total Stockholders' Equity 12,957 14,861
-------- --------
$ 12,957 $ 15,111
======== ========
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
on October 25,
December 31, 1995 Through
----------------------------- December 31,
1998 1997 1998
-------- -------- --------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
COST OF GOODS SOLD -- -- --
-------- -------- --------
GROSS PROFIT -- -- --
-------- -------- --------
EXPENSES:
General and administrative expenses 1,904 289 2,238
-------- -------- --------
LOSS BEFORE INCOME TAXES (1,904) (289) (2,238)
CURRENT TAX EXPENSE -- -- --
DEFERRED TAX EXPENSE -- -- --
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS (1,904) (289) (2,238)
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
Line of business -- (2,299) (71,405)
-------- -------- --------
NET LOSS $ (1,904) $ (2,588) $(73,643)
-------- -------- --------
LOSS PER COMMON SHARE:
Continuing operations $ (.00) $ (.00) $ (.00)
Discontinued operations (.00) (.00) (.01)
-------- -------- --------
Net Income (.00) (.00) (.01)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON OCTOBER 25, 1995
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
----------------------------- Excess of Development
Shares Amount Par Value Stage
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, October 25, 1995 -- $ -- $ -- $ --
Issuance of common stock upon initial
Organization for cash at $.0125 per
Share, October, 1995 1,200,000 1,200 13,800 --
Issuance of common stock, for cash
Pursuant to public offering,
December, 1995 at $.25 per
Share, less offering costs of $43,400 400,000 400 56,200 --
Net loss for the period ended
December 31, 1995 -- -- -- (2,851)
---------- ---------- ---------- ----------
BALANCE, December 31, 1995 1,600,000 1,600 70,000 (2,851)
Net loss for the year ended
December 31, 1996 -- -- -- (66,300)
---------- ---------- ---------- ----------
BALANCE, December 31, 1996 1,600,000 1,600 70,000 (69,151)
Issuance of common stock for cash
October 14, 1997 at $.00125 per share 12,000,000 12,000 3,000 --
Net loss for the year ended
December 31, 1997 -- -- -- (2,588)
---------- ---------- ---------- ----------
BALANCE, December 31, 1997 13,600,000 13,600 73,000 (71,739)
Net loss for the year ended
December 31, 1998 -- -- -- (1,904)
---------- ---------- ---------- ----------
BALANCE, December 31, 1998 13,600,000 $ 13,600 $ 73,000 $ (73,643)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
For the Years Ended on October 25,
December 31, 1995 Through
------------------------ December 31,
1998 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows used by Operating Activities:
Net income (loss) $ (1,904) $ (2,588) $ (73,643)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Non-cash expenses -- 2,844 2,844
Depreciation -- (539) --
Amortization 39 39 123
Change in assets and liabilities:
(Decrease) in accounts payable (250) -- --
(Decrease) in accrued liabilities -- (178) --
--------- --------- ---------
Net Cash Flows Used by
Operating Activities (2,115) (422) (70,676)
--------- --------- ---------
Cash Flows used by Investing Activities:
Additions of property and equipment -- -- (2,844)
Payment of organization costs -- -- (195)
--------- --------- ---------
Net Cash Used by Investing Activities -- -- (3,039)
--------- --------- ---------
Cash Flows provided by Financing Activities:
Proceeds from stock issuance -- 15,000 130,000
Payment of stock offering costs -- -- (43,400)
--------- --------- ---------
Net Cash Provided by Financing
Activities -- 15,000 86,600
--------- --------- ---------
Net Increase (Decrease) in Cash (2,115) 14,578 12,885
Cash at Beginning of Period 15,000 422 --
--------- --------- ---------
Cash at End of Period $ 12,885 $ 15,000 $ 12,885
========= ========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
Supplemental Schedule of Noncash Investing and Financing Activities:
For the period ended December 31, 1998:
None
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the State of
Nevada on October 25, 1995 and has elected a fiscal year end of December
31. The Company has not been successful in establishing ongoing operations
and is considered a development stage company as defined in SFAS No. 7. The
Company was formed to engage in the business of acquiring and marketing
collectible items such as trading cards and autographed memorabilia from
athletes and celebrities. During 1997 the Company discontinued the
marketing of collectibles, and is presently considering other business
opportunities. The Company has, at the present time, not paid any dividends
and any dividends that may be paid in the future will depend upon the
financial requirements of the Company and other relevant factors.
Organization Costs - The Company is amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60]
months using the straight line method. Amortization expense was $39 and $39
for the periods ended December 31, 1998 and 1997.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with FASB 128 "Earnings Per Share". [See Note 5]
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Accounting 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, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual results
could differ from those estimated.
Recently Enacted Accounting Standards - SFAS No. 130, "Reporting
Comprehensive Income", SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", SFAS No. 132, "Employer's Disclosure
about Pensions and Other Postretirement Benefits", SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", and SFAS
No. 134, "Accounting for Mortgage-Backed Securities..." were recently
issued. SFAS No. 130, 131, 132, 133 and 134 have no current applicability
to the Company or their effect on the financial statements would not have
been significant.
NOTE 2 - DISCONTINUED OPERATIONS
During 1997, the Company abandoned and discontinued its collectibles
marketing operations. The Company's property and equipment were transferred
to a former officer of the company in satisfaction of consulting fees, and
the remaining assets were used to satisfy, in full, remaining liabilities.
The total revenues generated by the discontinued operations amounted to $0
and $120,744 during 1997 and 1996 respectively. The Company currently has
no on-going operations. At the point in time when the Company discontinued
its operations, there were 1,600,000 shares of common stock issued and
outstanding. The discontinued operations have been segregated on the
Statements of Operations.
F-27
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - CAPITAL STOCK
Change in Control - During October, 1997, an individual purchased
12,000,000 shares of common stock of the Company giving him an 88%
controlling interest in the company. Total proceeds from the sale of stock
amounted to $15,000 or $.00125 per share. The former officers and directors
resigned and the individual was elected as the new president and board
member.
Public Stock Offering - During December, 1995, the Company completed a
public stock offering of 400,000 shares of common stock. Total proceeds
raised amounted to $100,000 and offering costs of $43,400 were offset
against the proceeds. The offering was believed to be exempt from
registration with the Securities and Exchange Commission under Rule 504 of
Regulation D.
Initial Organization - In connection with its organization the Company
issued 1,200,000 shares of common stock during October, 1995, to its
initial shareholders for $15,000 ($.0125 per share).
NOTE 4 - RELATED PARTY TRANSACTIONS
Management Compensation - During the years ended December 31, 1998 and
1997, the Company did not pay any regular salary or compensation to its
officers and directors. However, during October, 1997, fixed assets with a
book value of $2,078 were transferred to a former officer of the Company in
settlement of consulting fees.
Office Space - During the years ended December 31, 1998 and 1997, the
Company did not have a need to rent office space. An officer/shareholder of
the Company is allowing the Company to use his office as a mailing address,
as needed, at no expense to the Company.
NOTE 5 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share for
the periods presented:
<TABLE>
<CAPTION>
For the From Inception
Year Ended on October 25,
December 31, 1995 Through
------------------------------ December 31,
1998 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Loss from continuing operations
available to common shareholders
(numerator) $ (1,904) $ (289) $ (2,238)
------------ ------------ ------------
Loss from discontinued operations
available to common shareholders
(numerator) -- (2,299) (71,405)
------------ ------------ ------------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 13,600,000 4,164,384 6,170,937
------------ ------------ ------------
</TABLE>
F-28
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At December 31, 1998, the
Company has available unused operating loss carryforwards of approximately
$73,600, which may be applied against future taxable income and which
expire in various years from 2010 to 2018. The amount of the net operating
loss carryforward which can be utilized by the Company will be subject to
annual limitations due to the substantial change in ownership which has
occurred in the Company.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the amount of the
loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax asset is
approximately $25,000 as of December 31, 1998, with an offsetting valuation
allowance at December 31, 1998 of the same amount. The change in the
valuation allowance for 1998 is approximately $1,000.
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
COLLECTIBLES AMERICA, INC.
Salt Lake City, Utah
We have audited the accompanying balance sheet of Collectibles America, Inc. [A
Development Stage Company] at December 31, 1997, and the related statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1997 and from inception on October 25, 1995 through December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Collectibles America, Inc. as of December
31, 1996 and for the period from inception on October 25, 1995 through December
31, 1996 were audited by other auditors whose report dated April 14, 1997,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements audited by us present fairly, in all material respects, the
financial position of Collectibles America, Inc. as of December 31, 1997, and
the results of its operations and its cash flows for the year ended December 31,
1997 and for the period from inception through December 31, 1997, in conformity
with generally accepted accounting principles.
/s/ Pritchett, Siler & Hardey, P.C.
April 17, 1998
Salt Lake City, Utah
F-30
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
BALANCE SHEET
ASSETS
December 31,
--------------------
1997 1996
-------- --------
CURRENT ASSETS:
Cash $ 15,000 $ 422
-------- --------
Total Current Assets 15,000 422
PROPERTY AND EQUIPMENT, net -- 2,305
ORGANIZATION COSTS, net 111 150
-------- --------
$ 15,111 $ 2,877
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities $ 250 $ 428
-------- --------
Total Current Liabilities 250 428
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value,
25,000,000 shares authorized,
13,600,000 and 1,600,000 shares issued
and outstanding at December 31, 1997
and 1996 13,600 1,600
Capital in excess of par value 73,000 70,000
Deficit accumulated during the
development stage (71,739) (69,151)
-------- --------
Total Stockholders' Equity 14,861 2,449
-------- --------
$ 15,111 $ 2,877
======== ========
The accompanying notes are an integral part of this financial statement.
F-31
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
STATEMENT OF OPERATIONS
From Inception
on October 25,
December 31, 1995 Through
-------------------- December 31,
1997 1996 1997
-------- -------- --------
REVENUES $ -- $ -- $ --
COST OF GOODS SOLD -- -- --
-------- -------- --------
GROSS PROFIT -- -- --
-------- -------- --------
EXPENSES:
General and administrative expenses (289) (39) (334)
-------- -------- --------
LOSS BEFORE INCOME TAXES (289) (39) (334)
CURRENT TAX EXPENSE -- -- --
DEFERRED TAX EXPENSE -- -- --
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS (289) (39) (334)
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
operation (2,299) (66,261) (71,405)
Loss on disposal of discontinued
operation -- -- --
-------- -------- --------
NET LOSS (2,588) $(66,300) $(71,739)
-------- -------- --------
LOSS PER COMMON SHARE:
Continuing operations $ (.00) $ (.00) $ (.00)
Discontinued operations (.00) (.04) (.03)
-------- -------- --------
Net Income (.00) (.04) (.03)
======== ======== ========
The accompanying notes are an integral part of this financial statement.
F-32
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION ON OCTOBER 25, 1995
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
----------------------------- Excess of Development
Shares Amount Par Value Stage
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE, October 25, 1995 -- $ -- $ -- $ --
Issuance of common stock, for cash
October 25, 1995 at $.071875 per
share less offering costs of $43,400 1,600,000 1,600 70,000 --
Net loss for the period ended
December 31, 1995 -- -- -- (2,851)
---------- ---------- ---------- ----------
BALANCE, December 31, 1995 1,600,000 1,600 70,000 (2,851)
Net loss for the year ended
December 31, 1996 -- -- -- (66,300)
---------- ---------- ---------- ----------
BALANCE, December 31, 1996 1,600,000 1,600 70,000 (69,151)
Issuance of common stock for cash
October 14, 1997 at $.00125 per share 12,000,000 12,000 3,000 --
Net loss for the year ended
December 31, 1997 -- -- -- (2,588)
---------- ---------- ---------- ----------
BALANCE, December 31, 1997 13,600,000 $ 13,600 $ 73,000 $ (71,739)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
For the Years Ended on October 25,
December 31, 1995 Through
----------------------------- December 31,
1997 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows used by Operating Activities:
Net income (loss) $ (2,588) $ (66,300) $ (71,739)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Non-cash expenses 2,844 -- 2,844
Depreciation (539) 539 --
Amortization 39 39 84
Change in assets and liabilities:
Increase (decrease) in accounts payable -- -- --
Accrued liabilities (178) 233 250
--------- --------- ---------
Net Cash Flows Used by
Operating Activities (422) (65,489) (68,561)
--------- --------- ---------
Cash Flows used by Investing Activities:
Additions of property and equipment -- (2,844) (2,844)
Payment of organization costs -- -- (195)
--------- --------- ---------
Net Cash Used by Investing Activities -- (2,844) (3,039)
--------- --------- ---------
Cash Flows provided by Financing Activities:
Proceeds from stock issuance 15,000 -- 130,000
Payment of stock offering costs -- -- (43,400)
--------- --------- ---------
Net Cash Provided by Financing
Activities 15,000 -- 86,600
--------- --------- ---------
Net Increase (Decrease) in Cash 14,578 (68,333) 15,000
Cash at Beginning of Period 422 68,755 --
--------- --------- ---------
Cash at End of Period $ 15,000 $ 422 $ 15,000
========= ========= =========
Supplemental Disclosures of Cash Flow information:
Cash paid during the period for:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
Supplemental schedule of Noncash Investing and Financing Activities:
For the period ended December 31, 1997:
None
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-34
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - The Company was organized under the laws of the State of
Nevada on October 25, 1995 and has elected a fiscal year end of December
31. The Company has not been successful in establishing ongoing operations
and is considered a development stage company as defined in SFAS No. 7. The
Company was formed to engage in the business of acquiring and marketing
collectible items such as trading cards and autographed memorabilia from
athletes and celebrities. During 1997 the Company discontinued the
marketing of collectibles, and is presently considering other business
opportunities. The Company has, at the present time, not paid any dividends
and any dividends that may be paid in the future will depend upon the
financial requirements of the Company and other relevant factors.
Property and Equipment - Property and equipment are stated at cost.
Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized, upon being placed in
service. Expenditures for maintenance and repairs are charged to expense as
incurred. Depreciation is computed for financial statement purposes on a
straight-line basis over the estimated useful lives of the assets. For
federal income tax purposes, depreciation is computed under the modified
accelerated cost recovery system. [See Note 3]
Organization Costs - The Company is amortizing its organization costs,
which reflect amounts expended to organize the Company, over sixty [60]
months using the straight line method. Amortization expense was $39 and $39
for the periods ended December 31, 1997 and 1996.
Loss Per Share - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in
accordance with FASB 128 "Earnings Per Share". [See Note 7]
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Accounting 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, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual results
could differ from those estimated.
NOTE 2 - DISCONTINUED OPERATIONS
During 1997 the Company abandoned and discontinued its collectibles
marketing operations. The Company's property and equipment were transferred
to a former officer of the company in satisfaction of consulting fees, and
the remaining assets were used to satisfy, in full, remaining liabilities.
The total revenues generated by the discontinued operations amounted to $0
and $120,744 during 1997 and 1996 respectively. The Company currently has
no on-going operations. At the point in time when the Company discontinued
its operations, there were 1,600,000 shares of common stock issued and
outstanding. The discontinued operations have been segregated on the
Statements of Operations.
F-35
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1997 and
1996:
1997 1996
------- ------
Equipment $ -- $2,844
------- ------
Less Accumulated Depreciation -- (539)
------- ------
$ -- $2,305
======= ======
Depreciation expense for the periods ended December 31, 1997 and 1996
amounted to $227 and $539.
NOTE 4 - CAPITAL STOCK
Common Stock - During October 1997, the Company issued 12,000,000 shares of
its previously authorized, but unissued common stock. Total proceeds from
the sale of stock amounted to $15,000 or $.0125 per share.
NOTE 5 - CHANGE IN CONTROL
During October, 1997, an individual purchased 12,000,000 shares of common
stock of the Company [See Note 4] giving him an 89% controlling interest in
the company. The former officers and directors resigned and the individual
was elected as the new president and board member.
NOTE 6 - RELATED PARTY TRANSACTIONS
Management Compensation - The Company has not paid any regular salary or
compensation to its officers and directors. However, during October, 1997,
fixed assets with a book value of $2,078 were transferred to a former
officer of the Company in settlement of consulting fees.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use his
office as a mailing address, as needed, at no expense to the Company.
F-36
<PAGE>
COLLECTIBLES AMERICA, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share for
the periods ended December 31, 1997 and 1996:
1997 1996
--------- ---------
Loss from continuing operations
available to common shareholders
(numerator) $(289) $(39)
--------- ---------
Loss from discontinued operations
available to common shareholders
(numerator) (2,299) (66,261)
--------- ---------
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 4,164,384 1,600,000
========= =========
NOTE 8 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes". FASB
109 requires the Company to provide a net deferred tax asset/liability
equal to the expected future tax benefit/expense of temporary reporting
differences between book and tax accounting methods and any available
operating loss or tax credit carryforwards. At December 31, 1997, the
Company has available unused operating loss carryforwards of approximately
$71,500, which may be applied against future taxable income and which
expire in various years from 2010 to 2012. The amount of the net operating
loss carryforward which can be utilized by the Company will be subject to
annual limitations due to the substantial change in ownership which has
occurred in the Company.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the amount of the
loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax asset is
approximately $24,000 as of December 31, 1997, with an offsetting valuation
allowance at December 31, 1997 of the same amount. The change in the
valuation allowance for 1997 is approximately $800.
F-37
<PAGE>
Item 14. Changes in and Disagreements with Accountants.
In August 1999, our board of directors retained Grant Thornton LLP as our
independent accountants and dismissed Pritchett, Siler & Hardy, P.C., the
accountants for Collectibles America, Inc., and Levine, Levine & Meyrowitz,
CPAs, P.C., the accountants for BeFirst Internet Corporation.
During the periods Pritchett, Siler & Hardy, P.C. and Levine, Levine &
Meyrowitz, CPAs, P.C. were retained, there were no disagreements with the former
accountants on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which would have caused them
to make reference to the subject matter in connection with their reports. No
accountants report prepared by the former auditors on our financial statements
for either of the past two years contained an adverse opinion or disclaimer of
opinion or was modified as to uncertainty, audit scope or accounting principles.
Prior to engaging Grant Thornton LLP, neither we nor anyone acting on our
behalf consulted with Grant Thornton LLP regarding the application of accounting
principles to any specific transaction or the type of audit opinion that might
be rendered on our financial statements.
Item 15. Financial Statements and Exhibits.
Number Exhibit
- ------ -------
a) Financial Statements
FindWhat.com Financial Statements as of December 31, 1998
(audited) and June 30, 1999 (unaudited) and from March 27, 1998
(date of inception) to December 31, 1998 (audited), from
March 27, 1998 (date of inception through June 30, 1998
(unaudited) and for the six months ended June 30, 1999
(unaudited).
33
<PAGE>
Collectibles America, Inc. - Unaudited Financial Statements as of
June 16, 1999 and June 30, 1998 and for the periods ended June
16, 1999 and June 30, 1998 and from October 25, 1995 (date of
inception) through June 16, 1999.
Collectibles America, Inc. - Audited Financial Statements as of
December 31, 1998 and 1997 and for the years ended December 31,
1998 and 1997 and from October 25, 1995 (date of inception)
through December 31, 1998.
Collectibles America, Inc. - Audited Financial Statements as of
December 31, 1997 and 1996 and for the years ended December 31,
1997 And 1996 and from October 25, 1995 (date of inception)
through December 31, 1997
b) Exhibits
2.1 Agreement and Plan of Reorganization dated June 17, 1999 by and
among BeFirst Internet Corporation, Collectibles America, Inc.
and Mick Jardine.*
3.1 Articles of Incorporation of Collectibles America, Inc.*
3.2 By-laws of FindWhat.com(SM)*
10.1 Portal Services Agreement dated June 18, 1999 between Inktomi
Corporation and BeFirst Internet Corporation.*
10.2 Lease Agreement by and between Cambridge Management Associates
and BeFirst.com Inc.*
10.3 Agreement dated August 18, 1999 between Michigan Internet
Communication Association and BeFirst.com Inc.*
10.4 BeFirst 1999 Stock Incentive Plan*
10.5 Form of Incentive Stock Option Agreement*
10.6 Form of Non-Qualified Stock Option Agreement*
16.1 Letter from Pritchett, Siler & Hardy, P.C.
16.2 Letter from Levine, Levine & Meyrowitz, CPA's, P.C.
27 Financial Data Schedule
*Previously filed
34
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
FINDWHAT.COM
Date: October 29, 1999 By: /s/ Robert D. Brahms
---------------------------------
Robert D. Brahms, Chief Executive
Officer
Letterhead of Pritchett, Siler & Hardy, P.C.
October 27, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the statements of FindWhat.com (formerly known as Collectibles
America, Inc.) pertaining to our firm included under Item 14 of Form 10 filed on
September 14, 1999 and agree with such statements as they pertain to our firm.
We have no basis to agree or disagree with other statements of the registrant
contained therein.
/s/ Pritchett, Siler & Hardy, P.C.
PRITCHETT, SILER & HARDY, P.C.
Letterhead of Levine, Levine & Meyrowitz, CPAS, P.C.
October 22, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
To Whom it May Concern:
We have reviewed Item 14 of FindWhat.coms Form 10 filed on September 14, 1999.
We are in full agreement with the contents of Item 14, as it relates to Levine,
Levine & Meyrowitz, CPAs, P.C., former accountants.
Very truly yours,
LEVINE, LEVINE, & MEYROWITZ, CPAs, P.C.
/s/ David J. Meyrowitz
David J. Meyrowitz
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