UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
Amendment No. 4
General Form for Registration of Securities of Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
RIM.COM INC.
(Name of Small Business Issuer in Its Charter)
Nevada 86-0995730
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7579 E Main, Suite 600, Scottsdale, AZ 85251
(Address of Principal Executive Offices) (Zip Code)
(as of Date of Filing)
Issuer's Telephone Number (480) 970-3336
Securities to be Registered Under Section 12(b) of the Act:
None
Securities Registered Under Section 12(g) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock None
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RIM.COM INC.
FORM 10-SB
PAGE
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PART I
Item 1. Description of Business......................................... 1
Item 2. Management's Discussion and Analysis or Plan of Operation ...... 3
Item 3. Description of Property ........................................ 5
Item 4. Security Ownership of Certain Beneficial Owners and
Management ..................................................... 5
Item 5. Directors, Executive Officers, Promoters and Control
Persons......................................................... 6
Item 6. Executive Compensation.......................................... 7
Item 7. Certain Relationships and Related Transactions.................. 8
Item 8. Description of Securities....................................... 9
PART II
Item 1. Market Price of and Dividends on Registrant's Common
Equity and Other Shareholder Matters............................ 10
Item 2. Legal Proceedings .............................................. 10
Item 3. Changes In and Disagreements with Accountants................... 10
Item 4. Recent Sales of Unregistered Securities......................... 10
Item 5. Indemnification of Directors and Officers....................... 10
PART F/S
Financial Statements.................................................... 12
PART IV
Item 1. Index to Exhibits............................................... 25
SIGNATURES................................................................... 26
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND
Rim.Com Inc (the "Company" or the "Registrant") was organized in Nevada on
February 14, 2000. On April 6, 2000, the Company closed its acquisition of its
subsidiary, Rimmer Computer Inc., an Arizona corporation which had been in
business in Phoenix, Arizona for over thirteen years ("Rimmer"). The acquisition
of Rimmer was accomplished by exchanging 3,400,000 shares of Company restricted
common stock for 100% of the outstanding shares of Rimmer. The acquisition of
Rimmer by the Company was conditioned upon the Company raising a minimum of
$250,000 from private placement offerings. On June 30, 2000 the Company
simultaneously closed an offering of $260,000 to 13 accredited investors and an
offering of $26,750 to 26 non-accredited investors.
RIMMER COMPUTER
Rimmer Computer, Inc. ("Rimmer") was started on March 1, 1987. The business
started out as a brokerage computer hardware company - buying, selling, and
leasing computer equipment specializing in IBM 3270 terminals or compatibles. By
1990 Rimmer began to do network consulting helping small business set up and use
networked PC's. This line of business continued to grow, initial growth being in
large part supported by a large project management contract with the Arizona
Department of Transportation. As networking systems became more common, Rimmer
became approved as a Novell technical service provider, and Rimmer's target
customer group became larger businesses. Today Rimmer, as a company, is an
approved technical service provider for computer hardware and software system
manufacturers such as Novell, Microsoft, IBM, Compaq, Hewlett Packard, Cisco and
others. Rimmer employs ten people and the individual technicians have received
certifications such as Microsoft Certified System Engineer and Certified NetWare
Engineer. All of Rimmer's customers are currently located in the Phoenix,
Arizona area, although Rimmer expects to obtain some national accounts within
the next year. None of Rimmer's customers accounts for more than 10% of its
annual revenues.
SERVICES OFFERED
Rimmer specializes in refining or upgrading customer computer systems to
achieve full-time and optimum usage by the maximum number of customer employees.
The number one request from Rimmer's customers is for their computer system to
be operating all of the time instead of being "down," because the customer's
employees are not working productively when the computer system is inoperatable.
The second common request from Rimmer's customers is that the existing computer
software perform all of the functions which were advertised for it in the format
the customer wants it. The third common customer request is that all employees,
including those at the new branch offices with newer computers, be fully
integrated into the old computer system. Each customer situation is unique based
upon that customer's hardware and software and that customer's information
needs. Rimmer analyzes the customer's hardware, software and needs and then
spends several hours of time adjusting the hardware and software to the
customer's needs. After refining the computer system to meet the customer's
needs, Rimmer's employees typically return to the customer each month to
maintain the system or to deal with new problems as they develop. The only
training Rimmer provides to a customer's employees is to answer an individual
employee's questions about the computer system. Rimmer charges its customers an
hourly rate between $75 and $135 for the services performed by its six
technicians.
During fiscal year 1999 Rimmer served approximately 70 different customers,
most of which it anticipates serving in fiscal year 2000. As of September 1,
2000 Rimmer had 15 customers which it serves each month and 6 customers it
serves each week.
Rimmer executed a one-page engagement agreement with each of its customers.
In this agreement Rimmer offers the customer its full line of services,
including computer and network support, troubleshooting, repair, training,
planning, technical advice, installation of new hardware/software, upgrades to
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existing hardware/software and other tasks as required or requested by the
customer. Rimmer bills each customer monthly. Regularly scheduled service is
billed in one-half day increments and unscheduled on-site service is billed at a
two-hour minimum. Service provided over the telephone to a customer is billed at
a minimum of one-quarter hour. Rimmer's customer engagement agreement provides
for an annual interest charge of 18% to be paid on services not paid within 30
days of billing. Rimmer's customer engagement agreement warrants that Rimmer's
customer service will be performed in a professional manner, but disclaims any
other warranties on the services it provides or the products it installs. From
each new customer Rimmer currently attempts to obtain an advance on the first
month's bill equal to one week of service.
SERVICE BENEFITS
Rimmer provides customers with a stable, easy-to-manage information
technology infrastructure, which directly affects the customers' bottom line. A
company's information technology infrastructure includes its computer hardware,
software, cables, servers, workstations and network operating system and is the
base upon which a specific application software is run. All of these components,
regardless of when purchased or where located, must be made compatible to each
other and the application software in order for the computer system to work
effectively. Rimmer believes a stable, easy to manage information technology
infrastructure greatly increases employee productivity: the information system
tools are always available for use, and the data is accessible. Rimmer believes
the impact on employee productivity that is provided by a stable computer system
can be enormous.
TARGET MARKET DEFINED
Any businesses that use IBM-compatible microcomputers (PCs) and are
interested in utilizing technology to create a competitive advantage for
themselves are potential clients. Historically, Rimmer has targeted small to
medium businesses with 10 to 250 workstations.
COMPETITION
There are three types of competitors: large, multi-location companies, such
as Novell, EDS and MicroAge; regional and local firms of similar size, such as
JJ Croney & Associates, Sentinel Technologies, and Hughes Callahan; and one-man
companies.
The Company believes most of the one-man companies in the industry are
technology oriented with little or no marketing skills. In contrast, Mr.
Korndorffer and Ms. Strauch, the Company's Chairman and President, both have
sales and marketing experience in the computer industry. The Company believes it
will have a marketing advantage over the one-man companies.
The Company believes most of its competitors who are a similar size are
service companies that merely "fix" the customer's computer system when it
breaks down, instead of providing the customers with a system that meets their
continuing needs. The Company believes some larger competitors limit their
service to specific one-time projects, such as installing a new network or a new
software application throughtout the entire network. These competitors focus on
making the one-time sale instead of serving the customers needs on a continuing
basis. Rimmer believes its approach of providing its customers with long-term
computer system stability and performance is superior to its competitors.
FUTURE ACQUISITIONS
The Company believes that there are dozens of computer consulting companies
in the United States which are similar to Rimmer and which would welcome the
opportunity to join the Company. Most likely, these companies would generate
annual revenues in the $500,000 to $2,000,000 range, but would have little or no
net income. The Company is hopeful that it would be able to acquire such
companies in exchange for its restricted common stock in order to preserve its
cash. The Company would hope that these companies could then be made profitable
by economies of scale or improving gross profit margins.
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Since the Company has not completed any acquisitions other than Rimmer,
there is no assurance that the Company will be able to complete any acquisitions
in the future, or that any such companies acquired will ever be profitable.
Further, certain expenses of any future acquisition, such as legal and
accounting costs which may be substantial, would be required to be paid in cash.
The Company will most likely accomplish any future acquisition by merging
the target company into a subsidiary of the Company. Under Nevada law such a
merger would not require shareholder approval if the total number of shares to
be issued in the transaction did not exceed 20% of the Company's total
outstanding shares. Therefore, investors in this offering should plan on the
Company conducting all future acquisitions without receiving shareholder
approval.
EMPLOYEES
Rimmer currently employs 6 systems engineers, three salespeople, one
administrative/accountant, in addition to management. Rimmer is actively
recruiting more engineers for hiring in the next 4 months.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The statements contained in this document which are not historical are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those expressed in the
forward-looking statements, including, but not limited to, the Company's ability
to market its products and services and future customer acceptance for its
products and services, and other risks detailed in this document and other
documents made available to investors.
OVERVIEW
Rim.Com was formed in February 2000 and had no tangible assets and no
liabilities before its acquisition of Rimmer on April 6, 2000. Therefore, the
discussion below focuses on the operations of Rimmer, Rim.Com's wholly-owned
subsidiary. Rimmer has been in existence since 1987 and has been a SubChapter S
corporation since 1991. During February 2000 Rimmer changed its fiscal year end
to September 30 and terminated its SubChapter S status.
RESULTS OF OPERATION
NINE MONTHS ENDING JUNE 30, 2000
During the nine months ended June 30, 2000 Rimmer produced a net loss of
$65,419 on revenues of $446,286, as compared to a net loss of $85,859 on
revenues of $643,970 for the same period of the prior year. Rimmer's revenues in
the nine month period ended June 30, 2000 were $197,684 less than the same
period for the preceding year. This revenue reduction resulted from a $169,505
decrease in hardware/software sales and service revenues decreasing in the 2000
period by $28,179 over the prior year. However, Rimmer's gross profit in the
nine month period ended June 30, 2000 increased by $54,690 over the prior year.
Rimmer plans on continuing the de-emphasis of hardware/software sales because
such sales provide less profit margin than consulting services.
Rimmer's cost of goods sold in the nine months ended June 30, 2000 was
$252,374 less than the same period of the prior year. This cost decrease
resulted primarily from a reduction of technician non-billable time and less
hardware/software sales during the period.
Rimmer's general and administrative expense increased by $13,936 during the
nine month period ended June 30, 2000 in comparison to the same period of the
prior year. This cost increase resulted primarily from an increase in
depreciation expense of $18,747 over the prior year. Administrative expenses may
increase in future quarters, because of the addition of Mr. King and Mr.
Gunderson to the Company's staff. Also, the Company will incur substantial
accounting and legal expenses in the coming months as it attempts to list its
stock for trading and becomes a "fully reporting company."
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Interest expense increased by $20,415 during the nine month period ended
June 30, 2000 over the same period of the prior year, as a result of the credit
card debt (accounts payable) increasing by approximately $70,000 during the
period and the average interest note on the credit card debt increasing to 18.7%
at June 30, 2000 from 11.8% at September 30, 1999. The Company is hopeful this
debt can be reduced substantially in the next year from internally generated
cashflow. The Company is also hoping to consolidate this credit card debt into a
debt with a lower interest rate.
YEAR ENDED SEPTEMBER 30, 1999
During the year ended September 30, 1999 Rimmer produced a net loss of
$72,140 on revenues of $851,207, as compared to a net loss of $7,760 on revenues
of $659,160 for the prior year. Rimmer's revenues in the 1999 fiscal year were
$192,047 higher than in the prior year, because hardware/software sales
increased by approximately $74,500 and consulting sales increased by
approximately $116,000. However, Rimmer's cost of goods sold increased by
$185,057 in the 1999 fiscal year as well, as a result of increased
hardware/software costs, sales commissions paid, and labor cost increases.
Rimmer's general and administrative expense increased by $66,908 during the
1999 fiscal year in comparison to the prior year, as a result increased
professional and consulting expenses, depreciation and office rent. The Company
hopes to increase revenues and its profit margin in fiscal year 2000, but it
will also attempt to manage its cost of goods sold and its general and
administrative expenses in the next year as well.
Interest expense increased in fiscal year 1999 over 1998 by $4,496, as a
result of the debt increasing by approximately $41,000. The Company is hopeful
this debt can be reduced substantially in the next year with internally
generated cashflow.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 2000 the Company obtained additional gross proceeds of $286,750
of capital from its two stock offerings. These funds should provide working
capital for Company growth for approximately six months. After that period, the
Company may attempt to secure additional equity or debt financing to sustain
additional growth. There is no assurance the Company will be able to secure
additional financing if needed in the future, because the Company does not have
any commitment for such financing at this time.
Rimmer's cashflow was adversely impacted in the quarter ended June 30, 2000
because accounts receivable increased from $28,196 at September 30, 1999 to
$41,881 at June 30, 2000 as a result of an overdue receivable of $12,389 accrued
in February, 2000. This customer is a governmental entity which has a complex
payment procedure. Rimmer is currently receiving payments from this customer for
current services and believes the $12,389 due will be received in the near
future.
Rimmer's debt resources have been utilized to the maximum with Rimmer
securing additional credit card debt in the amount of $70,000 during the year
ended June 30, 2000. This debt is comprised of one bank loan and several credit
card loans. Rimmer is paying an annual rate of approximately 11.85% on the bank
line and 18.7% on the credit card debt at June 30, 2000. During the coming year
the Company is hopeful of reducing the amount of this debt through internally
generated cashflow or, possibly, re-financing the credit card debt at a lower
interest rate.
Future acquisitions of the Company will be funded by using the Company's
common stock. The Company does anticipate expending cash to expand the revenues
of any business it may acquire in the future, so the Company may need to obtain
additional funds for such expansion, as well as Rimmer's expansion, in the
future. There is no assurance that the Company will be able to acquire any
business in the future, since the Company has not yet completed any
acquisitions. The Company has entered into acquisition discussions with several
companies, but has yet to reach the stage where any acquisition is probable.
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ITEM 3. DESCRIPTION OF PROPERTY
The Company is currently leasing for three (3) years approximately 1,200 square
feet of space at its principal offices at a monthly rent of approximately $1,212
plus tax. This space is suitable for the current operations. No difficulty is
seen in acquiring additional space in the same general area as it is needed in
the future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of August 31, 2000 there were 4,734,171 shares of Company common stock
outstanding. The following table sets forth the name, address, number of shares
beneficially owned and which could be purchased in the next 60 days, and the
percentage of the Company's total outstanding common stock shares owned by: (i)
each of the Company's Officers and Directors; (ii) the Company's Officers and
Directors as a group; and (iii) other shareholders of 5% or more of the
Company's total outstanding common stock shares.
Number of Percent of
Name of Owner Shares(1) Outstanding
------------- --------- -----------
Robert H. Korndorffer (2)(3) 1,341,000 27.2%
Christina M. Strauch (2)(4) 1,208,700 24.5%
Bruce M. King (2)(5) 450,000 9.1%
Merlin W. Gunderson (2)(6) 250,000 5.3%
Officers and Directors, as
a Group (4 people) (7) 3,249,700 60.9%
James R. Korndorffer (8)
416 Kenilworth Ave.
Gulf Breeze, FL 32561 400,000 8.4%
Michael K. Hair (9)
7407 E. Ironwood Ct.
Scottsdale, AZ 85258 333,333 7.0%
----------
(1) Represents shares in which the individual has a beneficial interest.
(2) The address of this person is 7579 E. Main Street, Suite 600, Scottsdale,
AZ 85251.
(3) Includes 200,000 shares which may be immediately purchased at $.30 per
share. This percentage has not been adjusted for the potential exercise of
Mr. Korndorffer's 300,000 stock options which are not exercisable until
April 7, 2001. In the event Mr. Korndorffer exercises those options, he
would own 1,641,300 shares, which would be 32.6% of the shares currently
outstanding. (See "Management - Compensation.")
(4) Includes 200,000 shares which may be immediately purchased at $.30 per
share. This percentage has not been adjusted for the potential exercise of
Ms. Strauch's 300,000 stock options which are not exercisable until April
7, 2001. In the event Ms. Strauch exercises those options, she would own
1,508,700 shares, which would be 30.0% of the shares currently outstanding.
(See "Management - Compensation.")
(5) Represents 250,000 shares held in the name of Commerce General, Inc. of
which Mr. King is President, a Director and the majority shareholder and
includes 200,000 shares which may be immediately purchased at $.30 per
share. (See "Management - Compensation.")
(6) Represents shares held in the name of a trust of which Mr. Gunderson is a
beneficiary. This percentage has not been adjusted for the potential
exercise of Mr. Gunderson's 250,000 stock options which are not exercisable
until April 7, 2001. In the event Mr. Gunderson exercises those options, he
would own 500,000 shares, which would be 10.0% of the shares currently
outstanding. (See "Management - Compensation.")
(7) Includes 600,000 shares which may be immediately purchased at $.30 per
share. This percentage has not been adjusted for the potential exercise of
management's 850,000 stock options which are not exercisable until April 7,
2001. In the event management exercises all of those options, management
would own 4,099,700 shares, which would be 66.3% of the shares currently
outstanding. (See "Management - Compensation.")
(8) James R. Korndorffer is the brother of the Company's Chairman.
(9) Includes 133,333 shares owned by a corporation in which Mr. Hair is an
officer, director and shareholder.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers of the Company as of July 13, 2000
were as follows:
Name and Address Age Position
---------------- --- --------
Robert H. Korndorffer 65 Director and Chairman
7579 E. Main St., Suite 600
Scottsdale, AZ 85251
Christina M. Strauch 45 Director and President
7579 E. Main St., Suite 600
Scottsdale, AZ 85251
Bruce M. King 47 Director and
7579 E. Main St., Suite 600 Vice President
Scottsdale, AZ 85251
Merlin W. Gunderson 78 Director and
7579 E. Main St., Suite 600 Secretary/Treasurer
Scottsdale, AZ 85251
ROBERT H. KORNDORFFER became a Director and President of the Company on
April 6, 2000. On July 5, 2000 he became Chairman of the Company. Mr.
Korndorffer has been a principal shareholder and officer of Rimmer Computer Inc.
since its formation in 1987 and is currently President of Rimmer. He has a BS in
Chemical Engineering from the University of Mississippi (1956). He redirected
his interest in computers in the chemical industry when he left in 1965 to work
for IBM as a data processing sales representative for 13 years and for the ITT
Corporation for five years. After starting Rimmer Computer, Mr. Korndorffer has
continued his technical education in various curricula such as becoming a
Certified NetWare Engineer for the Novell Corporation.
CHRISTINA M. STRAUCH became a Director and Vice President - Marketing of
the Company on April 6, 2000. On July 5, 2000 she became President. Ms. Strauch
has been a principal shareholder and officer of Rimmer Computer Inc. since April
1990 and is currently Secretary of Rimmer. She was awarded an MBA in finance and
marketing from UCLA in 1981, and worked for IBM in technical sales for five and
a half years. After that she worked in commercial real estate for two years,
then returned to the technology sector in 1989 with Rimmer Computer, Inc. She is
a certified Novell sales professional and a certified Cisco salesperson. She is
also currently an adjunct faculty member in the Business and Technology division
of Scottsdale and Gateway Community Colleges.
BRUCE M. KING became a Director and Chairman of the Company on April 6,
2000. On July 5, 2000 he resigned as Chairman of the Company and became Vice
President. Mr. King has a Master in Business Administration and Administrative
Management from Bowie State University (1995) and a Masters in Spanish from
Middlebury College (1984). From June 1995 until September 1997, Mr. King served
as chief financial officer for Kings Onion House, Inc., a produce distributor in
Phoenix, Arizona. From September 1997 to present Mr. King has been the majority
shareholder and President of Commerce General, Inc., a management consulting
company in Mesa, Arizona. Previously Mr. King had a twenty-year career as a
professional military officer, which included experience in business management
and international relations.
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MERLIN W. GUNDERSON has been a Director and Treasurer of the Company since
April 6, 2000. On July 11, 2000 he became Secretary as well. Mr. Gunderson has a
CPA degree from the University of Illinois. As senior partner, Mr. Gunderson
grew a two person accounting firm (Clifton-Gunderson, LLC) to be the 18th
largest CPA firm in the United States. Since 1989 Mr. Gunderson has served as an
independent consultant, assisting numerous clients in restructuring,
capitalization and financial management. In 1997 he assisted a manufacturing
company with a public offering that raised $1,500,000 and assisted in debt
financing of $1,200,000. Mr. Gunderson served several years on lecture circuits
and participated actively with the American Institute of CPAs. He was also an
adjunct Professor of Accounting for Bradley University.
ITEM 6. EXECUTIVE COMPENSATION
Rimmer has employment contracts with Mr. Korndorffer, Ms. Strauch, Mr. King
and Mr. Gunderson. The contracts with Mr. Korndorffer and Ms. Strauch have a
two-year term ending January 25, 2002 and the contracts with Mr. King and Mr.
Gunderson have a one-year term ending March 1, 2001. These employment agreements
provide for no severance arrangements with these officers. These employment
agreements prohibit these officers from being engaged in or involved with any
competitive or similar business within 100 miles of Scottsdale, Arizona for a
period of four years. These employment agreements also prohibit these officers
from disclosing any information relating to Rimmer's business to third parties.
The current annual salaries of the Company's current officers are as
follows: Mr. Korndorffer - $60,000, Ms. Strauch - $60,000; Mr. King - $36,000
and Mr. Gunderson - $36,000. The Company may, at some future time, increase
salaries or grant bonuses to its officers, but such increases and/or bonus
payments, and the actual payment of salaries will be made only if the Company is
successful and they do not materially adversely affect the Company's cash flow
from operations.
STOCK OPTIONS
At its last fiscal year end, September 30, 1999, the Company had no stock
option plans in existence.
On April 6, 2000 the Company and its shareholders adopted its 2000
Management and Employee Stock Option Plan (the "Plan"). 3,000,000 Company shares
are reserved for issuance under the Plan.
The Plan provides for the granting of stock options which, at the
discretion of the Board, may be either "incentive stock options" within the
meaning of Section 422A of the U.S. Internal Revenue Code or non-qualified stock
options which do not qualify as incentive stock options. With respect to any
participant who owns stock possessing more than 10% of the voting rights of the
Company's outstanding capital stock, the exercise price of any incentive stock
option under the Plan to such a participant must be not less than 110% of fair
market value on the date of grant. Options under the Plan may be granted to
officers, directors, key employees of, and professional consultants to, the
Company and its subsidiaries. Under the terms of the Plan, the aggregate fair
market value (determined at the time an option is granted, which will normally
be equal to the option exercise price per share) of Common Stock exercisable
under an incentive stock option for the first time in any calendar year may not
exceed $100,000.
The maximum term for each option under the Plan is ten years or less. No
option granted may be transferred by the optionee other than by will, the laws
of descent and distribution, or by a qualified domestic relations order, and
each option will be exercisable during the lifetime of the optionee only by such
optionee. Options under the Plan will be exercisable in whole or in part at such
times after the date of grant as set forth in an option agreement as determined
by the Committee or the Board of Directors. Each option granted will be for a
term, and exercisable only in accordance with option agreements approved by the
Board.
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The Plan contains provisions which authorize the Board in the event of a
sale or merger of all or substantially all of the Company's assets, or a merger
or consolidation in which the Company is not the surviving corporation, to take
certain action in its discretion. In the event of such a transaction the Board
may accelerate the exercisability of any option to permit its exercise in full
during such period as the Board may prescribe following the public announcement
of a sale of assets or merger, and may elect to earlier grant that right at the
time an individual option is granted. The Board may also require an optionee in
the event of such a transaction to surrender an option in return for a
substitute option issued by a surviving corporation which is determined by the
Committee to have a value substantially equal to the value of the surrendered
option.
The Board of Directors will determine who will receive any stock options,
the number of shares subject to each option granted, the option period, any
vesting schedules which defer the optionee's rights to exercise an option and
the exercise price. The issuance of any stock options may have the effect of
diluting the percentage of ownership in the Company of the then existing
shareholders.
As of September 1, 2000 the Company had granted stock options for the
following number of shares to the indicated persons, all exercisable at $.30 per
share: Robert Korndorffer - 500,000; Christina Strauch - 500,000; Bruce King -
200,000 and Merlin Gunderson - 250,000. 300,000 of the share options to
Korndorffer and Strauch and Gunderson's option are intended to qualify as IRS
incentive stock options and, as such, may not be exercised until April 7, 2001.
200,000 of the share options to Korndorffer, Strauch and King do not qualify as
IRS incentive stock options and, as such, may be exercised immediately.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon the incorporation of the Company on February 14, 2000, 200,000 shares
of common stock were issued to Michael K. Hair, the sole officer and Director at
that time. In exchange, $200 cash was paid for the incorporation and for
services totalling $5,000 in value. Mr. Hair continues to serve as securities
counsel to the Company.
On April 6, 2000 in an exchange agreement with Rimmer an additional
3,400,000 shares were issued by the Company to 8 individuals, companies and
trusts. The distributions to affiliates were as follows:
Bruce M. King (to a corporation of which he is President and a limited
liability company of which he is a member) - 1,248,600 shares; Robert H.
Korndorffer - 442,000 shares; Christina M. Strauch - 309,400; Norman King (Bruce
King's brother) Family Trust - 1,000,000 shares; Merlin Gunderson (to a trust of
which he is a beneficiary) - 250,000 shares. In July 2000 Mr. Korndorffer and
Ms. Strauch purchased some of Mr. Bruce King's and Mr. Norman King's shares. See
"Item 4" above.
At December 31, 1999 Rimmer owed Mr. Korndorffer approximately $12,326 from
loans Mr. Korndorffer had made to Rimmer over the years. This debt bears no
interest. In March 2000, Mr. Korndorffer converted this debt to equity with no
additional shares being issued.
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At December 31, 1999 Christina M. Strauch owed Rimmer approximately $73,636
as interest free salary advances. On January 25, 2000 Ms. Strauch repaid $20,000
of this advance. Ms. Strauch intends to repay the balance of this advance
over the next two years from her salary.
On January 25, 2000 Commerce General, Inc., a company of which Mr. Bruce M.
King is President and majority shareholder invested $27,500 into Rimmer as a
contribution of capital.
On May 25, 2000 Michael K. Hair, then an Officer and Director of the
Company, loaned Rimmer $20,000. This sum was repaid on July 3, 2000 with no
interest.
ITEM 8. DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company is 20,000,000 shares of Common
Stock, and 10,000,000 Shares of Preferred Stock, all with par value of $.001 per
Share. As of September 1, 2000, the capitalization of the Company consists of
4,734,171 outstanding shares of Common Stock and 0 shares of Preferred Stock
outstanding.
COMMON STOCK
The holders of the Common Stock are entitled to receive dividends when and
as declared by the Board of Directors, out of funds legally available therefore,
subject to the rights of the holders of any shares of Preferred Stock that may
be issued by the Company. The Company has not paid cash dividends in the past
and does not expect to pay any within the foreseeable future since any earnings
are expected to be invested. In the event of liquidation, dissolution or winding
up of the Company, either voluntarily or involuntarily, each outstanding share
of the Common Stock is entitled to share equally in the Company's assets,
subject to any preferential liquidation rights of the holders of shares of
Preferred Stock which may then be outstanding. Each outstanding share of the
Common Stock is entitled to equal voting rights, consisting of one vote per
share.
PREFERRED STOCK
The Company is currently authorized to issue 10,000,000 Shares of Preferred
Stock. As of July 13, 2000, no shares of Preferred Stock have been issued. The
Board of Directors is authorized, subject to any limitation prescribed in the
laws of the State of Nevada, by without further action by the Company's
shareholders, to provide for the issuance of Preferred Stock in one or more
series, to establish from time to time the number of shares of each such series
and any qualifications, limitations or restrictions thereof, and to increase or
decrease the number of shares of any such series without any further vote or
action by shareholders. The Board of Directors may authorize and issue Preferred
stock with voting or conversion rights that could adversely affect the voting
power or other rights of the holders of common stock. In addition, the issuance
of Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no present plans to issue any
additional shares of Preferred Stock.
9
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
STOCKHOLDER MATTERS
MARKET INFORMATION. The Company's common stock has not previously been
actively traded. The principal market in which the Company's common shares will
be trading is the over-the-counter market automated quotation system commonly
known as the Bulletin Board. The Company does not know what its trading symbol
will be at this time. Such over-the-counter market quotations reflect
inter-dealer prices without retail markup, markdown or commission and may not
necessarily represent actual transactions.
HOLDERS. As of September 1, 2000 the Company had 47 stockholders of record.
DIVIDENDS. The Company has not paid or declared any dividends upon its
common shares since its inception and, by reason of its present financial status
and its contemplated financial requirements, does not intend to pay or declare
any dividends upon its common shares in the near future.
ITEM 2. LEGAL PROCEEDINGS
There were no legal proceedings involving the Company pending or threatened
at September 1, 2000.
ITEM 3. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS
The Company has not changed its accountants or had any disagreements with
its accountants since Semple & Cooper, LLP, was engaged in February 2000. Rimmer
had not engaged any independent accountants prior to July 2000.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On February 15, 2000 the Company issued 200,000 restricted shares of its
common stock to the sole officer and Director of the Company in exchange for
services and cash valued at $5,200. This transaction was made without a general
solicitation to the public and the sole officer and Director of the Company
qualified as an "accredited investor" pursuant to Rule 501 of Regulation D.
Therefore, the Company believes this transaction was exempt from registration
pursuant to Section 4(2) of the Act.
On April 6, 2000 the Company issued 3,400,000 restricted shares of its
common stock to a total of 7 non-accredited individuals and trusts in the
acquisition of Rimmer. At March 31, 2000, the book value of Rimmer was negative
$7,157. This transaction was accounted for as a reverse acquisition with Rimmer
as the acquiring entity. (See "Financial Statements.") The Company made its
stock offering to the four officers and directors of Rimmer and the three
additional shareholders of Rimmer without general public solicitation and
pursuant to a Plan of Reorganization and Exchange. Therefore, the Company
believes this transaction was exempt from registration pursuant to Section 4(2)
of the Act and Rule 506 of Regulation D as promulgated under the Act.
On June 30, 2000 the Company issued 866,671 shares of its common stock to
13 accredited investors in exchange for $260,000 of gross offering proceeds. The
Company made this offering to a limited number of potential investors located in
states which permit Rule 504 offerings, by means of a written private placement
memorandum without general public solicitation. The investors executed
subscription agreements which contained representations concerning the
investor's income, wealth and level of financial sophistication, acknowledging
the receipt of unregistered shares and declaring the intention to hold for an
indefinite time period. Therefore, the Company believes this transaction was
10
<PAGE>
exempt from registration pursuant to Section 3(b) of the Act and Rule 504 of
Regulation D as promulgated under the Act. The Company made a commitment to
these investors to make application to list the Company's common stock for
trading after the completion of this offering.
On June 30, 2000 the Company issued 267,500 restricted shares of its common
stock to 26 non-accredited investors in exchange for $26,750 of gross offering
proceeds. Fifteen of these investors were employees of the Company and the
remaining eleven of these investors were friends and relatives of Company
employees prior to this offering. These 26 investors received a private
placement memorandum which contained the information required to be in a
registration statement of the Company, including audited financial statements.
The Company limited each investor's investment to $5,000. These investors
executed subscription agreements which contained representations concerning the
investor's income and wealth in relation to their investment, acknowledging the
receipt of unregistered and legended shares, and declaring the intention to hold
the shares for an indefinite time. Therefore, the Company believes this
transaction was exempt from registration pursuant to Rule 505 of Regulation D as
promulgated under Section 3(b) of the Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
No officer or Director of the Company shall be liable to the Company or its
shareholders for the damages for the breach of a fiduciary duty as a Director or
officer other than: (a) acts or omissions which involve intentional misconduct,
fraud or a known violation of the law: or (b) the payment of dividends in
violation of NRS 78.300.
The Company may purchase or maintain insurance or make other financial
arrangements on behalf of any person who is or was a Director, officer,
employee, or agent of the Company, or is or was serving at the request of the
Company as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise asserted against him in
his capacity as Director, officer, employee or agent, or arising of his status
as such, whether or not the Company has the authority to indemnify him against
such liability or expense.
The Company shall indemnify all of its officers and Directors, past,
present, and future against any and all expenses incurred by them, and each of
them, including but not limited to, legal fees, judgments and penalties which
may be incurred, rendered or levied in any legal action or administrative
proceeding brought against them for any act or omission alleged to have been
committed while acting within the scope of their duties as officers or Directors
of the Company. The expenses of officers and Directors incurred and in advance
of final disposition of the action or proceeding upon receipt of an undertaking
by or on behalf of the officer or Director to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he/she is not
entitled to be indemnified by the Company. Such right of indemnification shall
not be exclusive of any other rights of indemnification which the officers and
Directors may have or hereafter acquire. Without limitation of the foregoing,
the Board of Directors may adopt by-laws from time to time to provide the
fullest indemnification permitted by the laws of the State of Nevada.
11
<PAGE>
PART F/S
FINANCIAL STATEMENTS
RIM.COM INC.
FOR THE YEARS ENDED
SEPTEMBER 30, 1999 AND 1998 AND
FOR THE NINE MONTH PERIODS ENDED
JUNE 30, 2000 AND 1999 (UNAUDITED)
PAGE
----
Independent Auditors' Report 13
Balance Sheets September 30, 1999 and June 30, 2000 (Unaudited) 14
Statements of Operations for the Years Ended September 30, 1999
and 1998 and for the Nine Month Periods Ended June 30, 2000
and 1999 (Unaudited) 16
Statements of Stockholders' Equity (Deficit) for the Years Ended
September 30, 1999 and 1998 and for the Nine Month Periods Ended
June 30, 2000 and 1999 (Unaudited) 17
Statements of Cash Flows for the Years Ended September 30, 1999
and 1998 and for the Nine Month Periods Ended June 30, 2000
and 1999 (Unaudited) 18
Notes to Financial Statements 20
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
Rim.Com Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Rim.Com Inc. and
Subsidiary as of September 30, 1999, and the related consolidated statements of
operations, changes in stockholders' equity (deficit), and cash flows for the
years ended September 30, 1999 and 1998. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Rim.Com Inc. and
Subsidiary as of September 30, 1999, and the results of its operations, changes
in stockholders' equity (deficit), and its cash flows for the years ended
September 30, 1999 and 1998, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has negative working capital and a deficit
stockholders' equity. These conditions raise substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Certified Public Accountants /s/ Semple & Cooper, LLP
Phoenix, Arizona
April 10, 2000
13
<PAGE>
RIM.COM INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND JUNE 30, 2000 (UNAUDITED)
ASSETS
(UNAUDITED)
September 30, June 30,
1999 2000
--------- ---------
Current Assets:
Cash (Note 1) $ 7,641 $ 289,755
Accounts receivable - trade, net (Note 1) 28,196 41,881
Inventory (Note 1) 796 2,766
--------- ---------
Total Current Assets 36,633 334,402
--------- ---------
Property and Equipment: (Note 1)
Furniture and fixtures 1,996 1,996
Computer equipment 10,098 14,884
Computer system 64,904 107,450
Copying equipment 672 807
Office equipment 5,706 7,134
--------- ---------
83,376 132,271
Less: accumulated depreciation (14,395) (34,596)
--------- ---------
68,981 97,675
--------- ---------
Other Assets:
Licenses, net (Note 1) -- 19,000
Cash surrender value of life insurance 7,862 8,720
Accounts receivable - related party (Note 3) 73,346 48,976
--------- ---------
81,208 76,696
--------- ---------
Total Assets $ 186,822 $ 508,773
========= =========
The Accompanying Notes are an Integral Part of the Financial Statements
14
<PAGE>
RIM.COM INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
SEPTEMBER 30, 1999 AND JUNE 30, 2000 (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
September 30, June 30,
1999 2000
--------- ---------
Current Liabilities:
Notes payable (Note 2) $ 80,727 $ 80,967
Note payable - related party (Note 3) 12,326 20,000
Accounts payable
- trade 73,117 157,865
- other (Note 4) 40,365 43,284
Deferred Revenues (Note 1) -- 17,050
Accrued expenses 15,077 14,503
--------- ---------
Total Current Liabilities 221,612 333,669
--------- ---------
Commitments: (Note 5) -- --
Stockholders' Equity (Deficit): (Note 3)
Common stock, .001 par value, 20,000,000 shares
authorized; 3,400,000 and 4,734,171 (unaudited)
shares issued and outstanding as of
September 30, 1999 and June 30, 2000,respectively 3,400 4,734
Preferred Stock, 10,000,000 shares authorized;
no shares issued or outstanding as of June 30, 2000 -- --
Additional paid in capital (1,400) 272,579
Accumulated deficit (36,790) (102,209)
--------- ---------
Total Stockholders' Equity (Deficit) (34,790) 175,104
--------- ---------
Total Liabilities and Stockholders'
Equity (Deficit) $ 186,822 $ 508,773
========= =========
The Accompanying Notes are an Integral Part of the Financial Statements
15
<PAGE>
RIM.COM INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 AND
FOR THE NINE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
September 30, September 30, June 30, June 30,
1999* 1998* 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Service 501,797 384,343 344,908 373,087
Products 349,410 274,817 101,378 270,883
----------- ----------- ----------- -----------
851,207 659,160 446,286 643,970
Cost of Revenues:
Service (297,845) (186,295) (181,595) (229,180)
Products (321,755) (248,248) (74,656) (279,445)
----------- ----------- ----------- -----------
(619,600) (434,543) (256,251) (508,625)
----------- ----------- ----------- -----------
Gross Profit 231,607 224,617 190,035 135,345
----------- ----------- ----------- -----------
General and Administrative Expenses (292,805) (225,897) (228,634) (214,698)
----------- ----------- ----------- -----------
Income (Loss) from Operations (61,198) (1,280) (38,599) (79,353)
----------- ----------- ----------- -----------
Other Income (Expense):
Interest income 34 -- 135 34
Interest expense (10,976) (6,480) (26,955) (6,540)
----------- ----------- ----------- -----------
(10,942) (6,480) (26,820) (6,506)
----------- ----------- ----------- -----------
Net Loss $ (72,140) $ (7,760) $ (65,419) $ (85,859)
=========== =========== =========== ===========
Basic Loss per Share $ (.02) $ (.00) $ (.02) $ (.03)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 3,400,000 3,400,000 3,500,000 3,400,000
=========== =========== =========== ===========
</TABLE>
* As restated, for comparative purposes only.
The Accompanying Notes are an Integral Part of the Financial Statements
16
<PAGE>
RIM.COM INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 AND
FOR THE NINE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Stock-
Common Stock Additional Retained holders'
-------------------- Paid-in Earnings Equity
Shares Amount Capital (Deficit) (Deficit)
--------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1997 3,400,000 $3,400 (1,400) $ 43,110 $ 45,110
Net loss for the year ended
September 30, 1998 -- -- -- (7,760) (7,760)
--------- ------ -------- --------- ---------
Balance at September 30, 1998 3,400,000 $3,400 (1,400) 35,350 37,350
Net loss for the year ended
September 30, 1999 -- -- -- (72,140) (72,140)
--------- ------ -------- --------- ---------
Balance at September 30, 1999 3,400,000 $3,400 (1,400) (36,790) (34,790)
February 2000 offering 200,000 200 5,000 -- 5,200
June 2000 issuance 1,134,171 1,134 229,153 -- 230,287
Conversion of debt to equity -- -- 12,326 -- 12,326
Additional capital contribution -- -- 27,500 -- 27,500
Net Loss for the nine month period
ended June 30, 2000 (Unaudited) -- -- -- (65,419) (65,419)
--------- ------ -------- --------- ---------
Balance at June 30, 2000 (Unaudited) 4,734,171 $4,734 $272,579 $(102,209) $ 175,104
========= ====== ======== ========= =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
17
<PAGE>
RIM.COM INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 AND
FOR THE NINE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
September 30, September 30, June 30, June 30,
1999 1998 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Increase (Decrease) in Cash:
Cash flows from operating activities:
Cash received from customers $ 918,138 $ 613,054 $ 432,601 $ 671,187
Cash paid to suppliers and employees (883,214) (612,877) (362,369) (657,480)
Interest paid (10,720) (6,480) (26,955) (6,540)
Interest received 34 -- 135 34
--------- --------- --------- ---------
Net cash provided (used) by operating
activities 24,238 (6,303) 43,412 7,201
--------- --------- --------- ---------
Cash flows from investing activities:
Collection of loan receivable 16,238 1,398 24,370 12,564
Purchase of Licenses -- -- (20,000) --
Purchase of fixed assets (70,797) (3,151) (48,895) (45,166)
--------- --------- --------- ---------
Net cash used by investing activities (54,559) (1,753) (44,525) (32,602)
--------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from debt 37,396 28,523 20,240 12,571
Proceeds from sale of stock -- -- (262,987) --
Repayment of debt (14,932) (8,592) -- --
--------- --------- --------- ---------
Net cash provided by financing activities 22,464 19,931 283,227 12,571
--------- --------- --------- ---------
Net increase (decrease) in cash (7,857) 11,875 282,114 (12,830)
Cash at beginning of period 15,498 3,623 7,641 15,498
--------- --------- --------- ---------
Cash at end of period $ 7,641 $ 15,498 $ 289,755 $ 2,668
========= ========= ========= =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
18
<PAGE>
RIM.COM INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998 AND
FOR THE NINE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
September 30, September 30, June 30, June 30,
1999 1998 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Reconciliation of Net Income (Loss) to
Net Cash Provided (Used) by Operating
Activities:
Net Income (Loss) $ (72,140) $ (7,760) $ (65,419) $ (85,859)
--------- --------- --------- ---------
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation/Amortization 8,008 2,144 21,201 1,454
Changes in Assets and Liabilities:
Accounts receivable
- trade 66,931 (46,106) (13,685) 27,217
Inventory 1,121 (770) (1,970) (2,154)
Cash surrender value of life insurance (1,085) -- (858) (866)
Accounts payable
- trade 1,807 37,057 84,748 72,856
- other 18,687 944 2,919 (2,754)
Accrued expenses 909 8,188 (574) (2,693)
Deferred revenue -- -- 17,050 --
--------- --------- --------- ---------
96,378 1,457 108,831 93,060
--------- --------- --------- ---------
Net cash provided (used) by
operating activities $ 24,238 $ (6,303) $ 43,412 $ 7,201
========= ========= ========= =========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements
19
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES:
Basis of Presentation:
On April 6, 2000, Rim.Com Inc. acquired all of the outstanding common stock
of Rimmer Computer, Inc. in a transaction accounted for as a
recapitilization. Under the terms of the exchange agreement the
stockholder's of Rimmer Computer, Inc. received 94.4% of the outstanding
common stock of Rim.Com Inc. in exchange for 100% of the stock of Rimmer
Computer, Inc. Rimmer Computer, Inc. was incorporated in Arizona on June
19, 1991. The accompanying financial statements represent the operating
activity of Rimmer Computer, Inc. for all periods presented.
Rim.Com Inc. was incorporated in Nevada on February 14, 2000 and had no
operating activity prior to the time of the exchange on April 6, 2000. As
such, the exchange has been accounted for as a recapitilization. The effect
of the recapitilization has been presented retroactively.
Nature of Operations:
Rim.Com Inc. (the "Company") provides installation and consulting services
pertaining to computer hardware, software and systems. It provides the
majority of its services to small businesses throughout the Southwestern
United States.
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation:
The consolidated financial statements include the financial position,
results of operations, and cash flows of Rim.Com Inc. and its wholly-owned
subsidiary, Rimmer Computer, Inc.. All material intercompany transactions,
accounts and balances have been eliminated in consolidation.
20
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
Estimates: (CONTINUED)
Interim Financial Statements:
The unaudited interim financial statements include all
adjustments(consisting of normal recurring accruals) which, in the opinion
of management, are necessary. Operating results for the nine months ended
June 30, 2000 are not necessarily indicative of the results that may be
expected for the entire year ending September 30, 2000.
Accounts Receivable:
The Company provides for potentially uncollectible accounts receivable by
use of the allowance method. The allowance is provided based upon a review
of the individual accounts outstanding, and the Company's prior history of
uncollectible accounts receivable. As of September 30, 1999 and June 30,
2000, no allowance has been provided for potentially uncollectible accounts
receivable and, in the opinion of management, all accounts are considered
fully collectible.
Inventory:
Inventory consists of various computer cables and other computer hardware
to be used on an as needed basis. Inventories are stated at the lower of
cost or market. Cost is determined using the average cost method. Market is
based upon current sales prices. Provisions are made periodically for
obsolete and slow moving inventory.
Property and Equipment:
Property and equipment are recorded at cost. Depreciation is provided for
on the straight-line method over the estimated useful lives of the assets.
The average lives range from three (3) to seven (7) years. Maintenance and
repairs that neither materially add to the value of the property nor
appreciably prolong its life are charged to expense as incurred.
Betterments or renewals are capitalized when incurred. For the years ended
September 30, 1999 and 1998, depreciation expense was $8,008 and $2,144,
respectively. For the nine month periods ended June 30, 2000 and 1999,
depreciation expense was $20,201 and $1,454 (unaudited), respectively.
Licenses:
Licenses are comprised of the rights to market intellectual properties
comprised primarily of software packages. The licenses are amortized over
their expected economic useful lives of 2 years.
21
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
Estimates: (CONTINUED)
Revenue Recognition:
The Company derives its revenues from the sale of computer systems as well
as sales of application software, parts and components. The Company also
derives revenues by providing maintenance and consulting services to its
customers. The Company recognizes revenues from sales of its systems,
application software, parts and components at the time of shipment.
Revenues from consulting and maintenance services are recognized as the
service is provided.
Retainer fees are recorded as deferred revenues when received. They are
recognized as income when they are earned, which is calculated on an hours
charged basis. Unearned fees are refundable.
Impairment of Long-Lived Assets:
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future undiscounted net
cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeded the fair
value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
Fair Value of Financial Instruments:
The carrying values of cash, cash equivalents, accounts receivable,
accounts payable, deferred revenue, accrued expenses and notes payable
approximate their fair values because of the short maturity of these
instruments.
Income Taxes:
Rimmer Computer, Inc. previously operated as a Sub-chapter S tax option
corporation. As such, all taxable income and related tax credits were
passed through to the stockholders who were responsible for any resulting
income tax. In January, 2000, the Sub-chapter S tax option was terminated,
and the Company became a C-Corporation.
Deferred income taxes are provided on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary
differences and operating loss carryforwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities and
their tax basis.
22
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
Estimates: (CONTINUED)
Income Taxes: (Continued)
Deferred tax assets are reduced by a valuation allowance when in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
The Company performs ongoing credit evaluations of its customers' financial
condition, but does not require collateral to support customer receivables.
The Company maintains cash balances at a single financial institution. At
June 30, 2000, the Company has approximately $140,000 (unaudited) of
uninsured cash balance on deposit with the institution.
Employee Stock Options:
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for stock issued to employees" (APB 25) and related
interpretations in accounting for its employee stock options and to adopt
the "disclosure only" alternative treatment under Statement of Financial
Accounting Standards No. 123, "Accounting for stock-based compensation"
(SFAS 123). SFAS No. 123 requires the use of fair value option valuation
models that were developed for use in valuing employee stock options. Under
SFAS No. 123, deferred compensation is recorded for the excess fair value
of the stock on the option date of the option grant, over the exercise
price of the option. The deferred compensation is amortized over the
vesting period of the option.
Net Loss Per Share:
Basic net loss per common share is computed based on weighted average
shares outstanding and excludes any potential dilution from stock options,
warrants or other common stock equivalents. Basic net loss per share is
computed by dividing loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted net
loss per common share reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock. Assumed exercise of the outstanding options at June 30, 2000
of 1,750,000 have been excluded from the calculation of diluted net loss
per common share as their effect is antidilutive. In addition, as the
Company has a net loss available to common shareholders for all periods
presented, the calculation of diluted net loss per share has been excluded
from the financial statements.
23
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. NOTES PAYABLE:
Notes payable at September 30, 1999 and June 30, 2000 consisted of three
(3) notes and four (4) notes with total outstanding balances of $80,727 and
$80,967 (unaudited), respectively. The balances at September 30, 1999 and
June 30, 2000 consists primarily of a line of credit, with interest at
prime plus 2.35% per annum (10.6% on September 30, 1999 and 11.85% on June
30, 2000), due June, 2000. The total credit limit of $72,500 was fully
utilized.
3. RELATED PARTY TRANSACTIONS:
Note Payable - Related Party:
As of September 30, 1999, the note payable to a related party consisted of
a non-interest bearing short-term note to an officer and director of Rimmer
Computer, Inc., with an outstanding balance of $12,326. The note payable
was converted to equity subsequent to September 30, 1999. No additional
shares were issued as a result of this conversion.
As of June 30, 2000 the note payable to a related party consisted of a
non-interest bearing short-term note to the former sole shareholder,
officer and director of Rim.Com Inc., with an outstanding balance of
$20,000. The note payable was repaid in cash subsequent to June 30, 2000.
Accounts Receivable - Related Party:
As of September 30, 1999 and June 30, 2000 (unaudited), the accounts
receivable to a related party consisted of one (1) note. The account
receivable is considered short-term in nature and is non-interest bearing.
Stockholders Equity:
During the nine month period ended June 30, 2000, Commerce General, Inc., a
stockholder of Rim.Com Inc., made an additional capital contribution in the
amount of $27,500.
4. ACCOUNTS PAYABLE - OTHER:
Accounts payable - other consists of seven credit card balances, with
annual percentage rates averaging 11.76% on September 30, 1999 and
averaging 18.7% (unaudited) on June 30, 2000.
24
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS:
The Company has entered into an operating lease agreement for office space
through October 31, 2002.
The approximate future minimum lease payments under the operating lease
agreement, are as follows:
Year Ending
September 30, Amount
------------- ------
2000 $ 16,044
2001 16,044
2002 16,044
2003 1,337
----------
$ 49,469
==========
6. GOING CONCERN:
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has a stockholders' deficit at September 30, 1999, in the amount of
$34,790. The Company also has negative working capital at September 30,
1999 in the amount of $184,979. The Company has also generated losses from
operations in prior years. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
7. STOCK OPTION PLAN:
Effective April 6, 2000 the Company's Board of Directors and stockholders
formally approved the Company's stock option plan, which permit the
granting of options to purchase shares of the Company's stock to eligible
employees and directors. The Plan reserves 3,000,000 shares of the
Company's common stock for grant. The plan provides that the options may be
either incentive or non-incentive stock options. The exercise price for the
incentive stock options shall not be less than 100% of the fair market
value of the stock at the date of grant and 50% of the fair market value
with respect to the non-incentive stock options. Options granted under the
Plan must be exercised in whole or in part within on average 10 years of
the date of grant. As of June 30, 2000 1,250,000 stock options under the
Plan were available for grant.
25
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCK OPTION PLAN: (CONTINUED)
The per share weighted average fair value of the stock options granted
during 2000 was $.16 on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions:
expected dividend yield 0%, expected volatility of .001%, and an expected
life of 10 years. The risk free interest rate was 8% for 2000.
The Company applies APB Opinion No. 25 in accounting for its Plan, and
accordingly, no compensation cost has been recognized for its stock options
to employees in the financial statements. Had the Company determined
compensation cost based on the fair value of the grant date for its stock
options under SFAS No. 123, the Company's net income and net loss and net
loss per common share for the nine month period ended June 30, 2000 would
have been adjusted to the proforma amount indicated below.
Nine Month Period Ended
June 30, 2000
(Unaudited)
-------------
Net income (loss):
As reported $ (65,419)
Proforma $(345,419)
Loss per common share:
As reported $ (.02)
Proforma $ (.10)
A summary of the aformentioned stock plan for the nine month period ended
June 30, 2000 is as follows:
Weighted Average
----------------------
Number Exercise
of Share Price
-------- -----
Balance at October 1, 1999 -- $ --
Granted 1,750,000 .30
Forfeited -- --
Exercised -- --
--------- ----
Balance at June 30, 2000 1,750,000 $.30
========= ====
Exercisable at June 30, 2000 1,750,000 $.30
========= ====
Weighted average fair value
of options granted during year $.16
====
26
<PAGE>
RIM.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCK OPTION PLAN: (CONTINUED)
All 1,750,000 stock options granted on April 6, 2000 are exercisable as of
June 30, 2000,with a remaining contractual life of 9 years and 9 months.
8. INCOME TAXES:
As of June 30, 2000 the Company has approximately $65,000 (unaudited) of
net operating loss carryforward available to offset future federal and
state taxable income through 2019.
The deferred tax asset arising from the net operating loss carryforward for
the period ended June 30, 2000 would be as follows:
June 30, 2000
-------------
(unaudited)
Deferred tax asset:
Net operating loss $ 22,000
Less: Valuation allowance (22,000)
--------
Income tax effect $ --
========
As of June 30, 2000 the Company had a deferred tax asset valuation
allowance in the approximate amount of $22,000 (unaudited). In assessing
the realizability of deferred tax assets, management considers whether it
is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible. Management believes
that the inability to utilize net operating loss carryforwards to offset
future taxable income within the carryforward periods is more likely than
not. Accordingly, a 100 percent valuation allowance has been recorded
against the net deferred tax assets.
Rimmer Computer, Inc. had no current income taxes for the years ended
September 30, 1999 and 1998 due to the fact that the Company operated as a
Sub-chapter S tax option corporation until January 2000. Had the Company
operated as a C-Corporation the proforma tax benefit of the net operating
losses would have been completely offset by a deferred tax asset valuation
allowance, resulting in no income tax benefit for the periods presented.
9. Non-Cash Transactions:
During the period ended June 30, 2000, the Company had a non-cash financing
transaction from the conversion of debt to equity in the amount of $12,326.
27
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit Number Description
-------------- -----------
2.1* Agreement of Exchange and Plan of Reorganization
3.1* Articles of Incorporation
3.2* Bylaws
10.1* 2000 Stock Option Plan
10.2* Stock Option Agreement with Bruce M. King
10.3* Stock Option Agreement with Robert H. Korndorffer
10.4* Stock Option Agreement with Robert H. Korndorffer
10.5* Stock Option Agreement with Christina M. Strauch
10.6* Stock Option Agreement with Christina M. Strauch
10.7* Stock Option Agreement with Merlin W. Gunderson
10.8* Employment Agreement with Bruce M. King
10.9* Employment Agreement with Robert H. Korndorffer
10.10* Employment Agreement with Christina M. Strauch
10.11* Employment Agreement with Merlin W. Gunderson
10.12* Office Lease
10.13* Office Lease
10.14* Form of Customer Letter of Engagement
10.15* Private Placement Offering Memorandum
21.1* Subsidiaries
----------
* Previously filed.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf on November 9, 2000 by the undersigned, thereunto authorized.
RIM.COM INC.
By: /s/ Robert H. Korndorffer
------------------------------------
Robert H. Korndorffer, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities on the date(s) indicated.
/s/ Robert H. Korndorffer Chairman (Chief Dated: November 9, 2000
------------------------- Executive Officer)
Robert H. Korndorffer Director
/s/ Christina M. Strauch President (Chief Dated: November 9, 2000
-------------------------- Operating Officer),
Christina M. Strauch Director
Vice President Dated:
-------------------------- Director
Bruce M. King
/s/ Merlin W. Gunderson Secretary/Treasurer Dated: November 9, 2000
-------------------------- (Chief Financial
Merlin W. Gunderson Officer), Director
42
