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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 11, 2001
800America.com, Inc.
(Exact name of issuer as specified in its charter)
Nevada 000-28547 87-0567884
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
420 Lexington Avenue
New York, NY 10170
(Address of principal executive offices and zip code)
(800) 999-5048
(Registrant's telephone number, including area code)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously reported, on October 11, 2001, 800America.com, Inc. (the
"Company") through its wholly-owned subsidiary, 800America.com Acquisition
Corp., a Delaware corporation, acquired all of the then outstanding capital
stock of iGain, Inc. ("iGain"), a Delaware corporation, in a stock-for-stock
merger (such transaction being referred to as the "Merger") pursuant to a
certain Merger Agreement and Plan of Reorganization dated as of October 11,
2001. iGain, headquartered in Fairfield, Connecticut, is a provider of private
label customer loyalty programs for business. Each iGain preferred share was
converted into .44444444 shares of the Company's Common Stock and each iGain
common share was converted into .01011941 shares of the Company's Common Stock.
In connection with the closing of the Merger, the Company issued a
total of 1,050,000 shares of its common stock, which had a value of
approximately $2,226,000 based on the closing price of the Company's common
stock on October 11, 2001. The consideration paid by the Company was determined
by the parties through a privately negotiated arms' length transaction. Holders
of 1,000,000 shares of common stock received in the transaction have the right
to put the shares back to the Company for repurchase. The Company is filing the
following information relating to the transaction.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
(b) Pro Forma Financial Information.
(c) Exhibits.
Exhibit Number Description
-------------- -----------------------------------------------------
2 Form of Merger Agreement and Plan of Reorganization
by and among 800America.com, Inc., iGain, Inc. and
800 America.com, Inc. Acquisition Corp. dated as of
October 11, 2001 (previously filed).
ITEM 7a
Jack F. Burke, Jr.
Certified Public Accountant
P. O. Box 15728
Hattiesburg, Mississippi 39404
Independent Auditors Letter
To the Board of Directors and Stockholders' of iGain, Inc.
I have audited the accompanying balance sheet of iGain, Inc. as of December 31,
2000 and the related statements of income, retained earnings, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express and opinion on these
financial statements based on my audit.
I conducted my audit in accordance with auditing standards generally accepted in
the United States of America. Those standards require that I 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. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of iGain, Inc. as of December 31,
2000, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations,
which raise substantial doubt about its ability to continue as a going concern.
Management's' plans regarding those matters also are described in Note A. The
financial statements do no include any adjustments that might result from the
outcome of this uncertainty.
Jack F. Burke, Jr.
May 1, 2002
Hattiesburg, Mississippi
iGain, Inc.
Balance Sheet
December 31, 2000
Assets
Current Assets
Cash in Bank $978,989
Account Receivables 119,544
Federal Notes - Deposit Account 400,912
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Total Current Assets $1,499,445
Equipment
Computer Hardware 130,268
Computer Software 234,938
Accumulated Depreciation -3,515
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Total Equipment 361,691
Other Assets
Prepaid Assets 1,603
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Total Other Assets 1,603
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Total Assets 1,862,739
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Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 250,790
Capital Lease Obligations 125,499
Member Deposits 913,533
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Total Current Liabilities 1,289,822
Stockholders' Equity
Preferred Stock - Series A Convertable Preferred
Stock $0.01 par 5,000,000 Shares Authorized
1,125,000 Shares Issued 11,250
Common Stock - $0.01 Par Value, 10,000,000 Shares
Authorized 4,941,001 Shares Issued 49,000
Additional Paid in Capital 843,030
Retained Earnings (Deficit) ($330,363)
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Total Stockholders' Equity 572,917
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Total Liabilities and Stockholders' Equity $1,862,739
==========
The Accompanying Notes Are An Integral Part of These Financial Statements.
iGain, Inc.
Income Statement
Eleven Days Ended December 31, 2000
Revenues $170,319
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Cost of Revenues
Cost of Goods Sold 13,993
Technology Development 140,925
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Total Cost of Revenues 154,918
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Selling, General and Administrative
Depreciation and Amortization 3,515
Compensation and Benefits 34,975
Bad Debts 45,781
General and Administrative 10,398
Research and Development 250,000
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Total Selling General and Administrative 344,669
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Operating Income (Loss) -329,268
Interest Expense 1,095
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Net (Loss) ($330,363)
Earning Per Common Share Outstanding ($0.07)
Weighted Average Common Share Outstanding 4,936,001
Diluted Earnings Per Share of Fully Diluted Common Share ($0.05)
Fully Diluted Common Share 7,321,001
The Accompanying Notes Are An Integral Part of These Financial Statements
iGain, Inc.
Statement of Cash Flows
Eleven Days Ended December 31, 2000
Cash Flows From Operating Activities
Net Loss From Operations ($330,363)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operations
Depreciation and Amortization 3,515
Accounts Receivables - Increase -119,544
Prepaid Assets - Increase -1,603
Accounts Payables - Increase 250,790
Capital Lease - Increase 125,499
Member Deposits - Increase 913,533
Stock Issue for Compensation 120,000
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Net Cash Provided by Operations 961,827
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Cash Flows From Investing Activities
Purchase of Federal Notes -400,912
Purchase of Computer Equipment -130,268
Purchase of Software -234,938
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Net Cash (Used) by Investments -766,118
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Cash flows From Financing
Sale of Preferred Stock 715,000
Conversion to C Corporation Common Stock
from Partnerships 68,280
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Net Cash Provided by Financing 783,280
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Net Increase in Cash 978,989
Beginning Cash Balance 0
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Ending Cash Balance $ 978,989
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Supplemental Cash Flow Information
Income Tax Paid $ 0
Interest Paid $ 1,095
The Accompanying Notes Are An Integral Part of These Financial Statements
iGain, Inc.
Statement of Stockholders' Equity
December 31, 2000
Additional
Preferred Stock Common Stock Paid In Retained
Shares Amount Shares Amount Capital Earnings
Formation of Corporation from
Partnership Net (Deficit) December 20, 2000 4,747,001 47,000 -232,970
Sale of Preferred Stock
December 20, 2000 Net of
Cost of $156,125 871,000 9,000 706,000
Conversion of Short Term Note
and Interest Due Thereon Into
Preferred Stock December 20, 2000 254,000 2,250 252,000
Common Stock Issued for Service 194,000 2,000 118,000
Net Loss December 20, through
December 31, 2000 -330,363
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Total 1,125,000 11,250 4,941,001 49,000 843,030 -330,363
The Accompanying Notes Are An Integral Part of These Financial Statements
iGain, Inc.
Notes to Financial Statements
December 31, 2000
Note A - The Company
iGain, Inc. was formed on December 20,2000 by incorporating a previous
partnership. The Company was incorporated in Delaware. The exchange has been
recorded on a historic cost basis similar to reorganization. The Company is a
provider and administrator of a cash based loyalty and customer retention
program for retailers, catalog-based merchants an e-commerce sites.
The Company and its predecessor have had no significant revenues to date. As
shown in the accompanying financial statements, the Company has incurred a
significant net loss for the period ended December 31, 2000 and has been
dependent upon equity financing to meet its obligations and sustain operations.
The Company is subject to those risks associated to emerging e-commerce
companies, which, by definition, seek to create new markets for their products
and services. These factors raise substantial doubt about the Company's ability
to continue as a going concern. In order to continue its operations, the Company
is seeking additional financing and exploring strategic alliances with other
companies. However, there is no assurance that the Company can obtain adequate
additional financing, or that profitable operations can be attained. The
financial statements do not include any adjustments relating to the
recoverability or classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary as a result of the above
uncertainty.
Note B - Significant Accounting Policies
Use of Estimates - The preparation of financial statements in accordance with
auditing standards generally accepted in the United States of America 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 revenue and
expenses during the reporting period. Actual results could differ from these
estimates.
Cash and Cash Equivalents - The Company considers all highly liquid investment
instruments purchased with maturity of three months or less to be cash
equivalents.
Furniture and Equipment - Furniture and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives of 3
to 7 years. Expenditures for maintenance and repairs are charged to expense as
incurred.
Note C - Series a Convertible Preferred Stock
In December 2000 the company issued 1,125,000 shares of its newly created Series
A Convertible Preferred Stock ("Series A"), par value $0.01, and warrants to
purchase an aggregate of 196,875 shares of common stock for $1.00 per share.
Included in the issuance were 254,000 shares to an investor who converted a
short-term note in the amount of $250,000 plus accrued and unpaid interest of
$4,000. Each share of Series A is initially convertible, at any time, into one
share of common stock of the Company and is subject to certain anti-dilution
adjustments. The shares will automatically convert into common stock upon the
consummation of an initial public offering for a minimum of $20 million at per
share price of $2.50. In addition, the Series A holder may require the Company
to purchase their shares of Series A at their earlier of (i) the fifth
anniversary of the purchase, (ii) the closing of any merger, acquisition or any
other transaction resulting in a change of control as defined, or (iii) any
event of default under the agreement, at a per share price equal to the greater
of (i) the initial cost per share, (ii) the fair value as determined by an
independent third party appraiser, or (iii) two times the company's gross
revenues for the twelve months prior to the transaction.
Series A has a liquidation preference of $1.00 per share plus any declared and
unpaid dividends, and vote on all matters along with the common stockholders'
based upon the number of common shares the Series A are then convertible into.
In connection with the issuance of the Series A, the Company issued 194,000
shares of common stock and paid $50,000 in cash to a company as a fee relating
to the private placement of Series A. In addition, the Company incurred
approximately $106,000 in professional fees relating to the issuance of Series
A.
Note D - Employee Benefits
The Company sponsors a defined contribution plan under Section 401(k) of the
Internal Revenue Code that covers substantially all employees. Participant
contributions to the plan are voluntary and are subject to certain limitations.
The Company is not required to make any matching contributions. During the year
ended December 31, 2000 the Company did not make any contributions.
Note E - Subsequent Events
In February 20001 the Company sold an additional 1,125,000 shares of Series A
convertible preferred stock and warrants to purchase an aggregate of 196,875
shares of common stock for $1.00 per share in a private placement offering for
gross proceeds aggregating $1,125,000.
On March 15, 2001 the Company entered into three-year office space lease
totaling $243,000. The terms of the lese require the Company to deposit $6,500
as a security deposit into an interest bearing account of the lessor.
Note F - Capital Lease Obligations
The Company acquired certain equipment through the issuance of capital lease
obligation. Future payments required under these leases are summarized as
follows:
Year Ending
December 31
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2001 $125,498
Item 7b
800America . com, Inc.
ProForma Financial Information
Unaudited ProFroma Combined Condensed
Financial Information
On October 9, 2001, 800america.com, Inc. (800America) acquired all the
outstanding common and preferred stock of iGain.com Inc. (iGain), in exchange
for 1,050,000 shares of common stock of 800America. The acquisition was
accounted for as a purchase.
The following unaudited proforma combined balance sheet is presented to
give effect to the acquisition of certain assets of iGain by 800America. The
unaudited proforma combined condensed balance sheet has been prepared to reflect
the transaction as of September 30, 2001. The unaudited proforma combined
condensed statements of income combine the results of operations of iGain and
800America for the year ended December 31, 2000 and for the nine months ended
September 30, 2001, as if the acquisitions of iGain, which closed on October 9,
2001, had occurred on January 1, 2000 and January 1, 2001 respectively. The
proforma information was prepared based on historic financial statements and the
related notes of iGain and 800 America.
The unaudited proforma combined condensed financial statements and the
notes thereto should be read in conjunction with the historic financial
statements and related notes of iGain and 800America appearing elsewhere in this
report. The proforma information is not necessarily indicative of the result
that would have been obtained had such events actually occurred on the dates
specified nor is it necessarily indicative of the future results of the combined
company. Actual statements of income of the combined companies will be
consolidated commencing on the date of acquisition.
The purchase price was computed from the average trading price of the
stock over three (3) days either side of the trade date October 9, 2001. The
average trading price was $2.10, the purchase price then was based on 1,050,000
shares at $2.10 or $2,205,000. The purchase price was allocated as follows:
Goodwill $1,205,000
Software 786,000
Hardware 214,000
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$2,205,000
iGain is an Internet Shopping Portal that blends in well with
800America existing networking development. Customers shopping on the iGain site
can easily be transferred to other 800America sites, at the customer's request,
conversely shoppers on other 800America sites have easy access to the iGain
site.
On January 1, 2002 the Company plans to adopt Financial
Accounting Standards No 142, Goodwill and Intangible Assets. Upon the adoption
of this pronouncement the Company will no longer amortize goodwill but will
perform an impairment evaluation annually, or more frequently should
circumstances or conditions arise which merit such a review.
800America.com Inc.
Unaudited ProForma Combined
Condensed Income Statement
Year Ended December 31, 2000
Historical Historical ProForma ProForma
800America iGain, Inc. Adjustment Combined
Revenues $15,980,529 $170,319 $16,150,848
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Cost of Revenues
Cost of Goods Sold 13,993 13,993
Technology Development 233,938 140,925 374,863
Rebates 8,913,351 8,913,351
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Total Cost of Revenues 9,147,289 154,918 9,302,207
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Selling General and Administrative
Sales and Marketing 1,878,318 1,878,318
Depreciation and Amortization 486,480 3,515 385,133 875,128
General and Administrative 1,354,542 51,154 1,405,696
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Total Selling General and Administrative 3,719,340 54,669 385,133 4,159,142
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Operating Income (Loss) 3,113,900 -39,268 -385,133 2,689,499
Other Income (Expense) 26,243 -1,095 25,148
Income Tax (Expense) Benefit -1,067,649 131,000 -936,649
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Net Income Loss $2,072,494 ($40,363) ($254,133) $1,777,998
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Net Income Per Common Share Basic $0.16
Basic Weighted Average Common
Outstanding 12,721,356
Diluted Earnings Per Share Common
Stock $0.14
Diluted Weighted Average Common
Stock 14,371,359
See Accompanying Notes to Unaudited Combined Condensed Financial Statements
800America.com Inc.
Unaudited ProForma Combined
Condensed Balance Sheet
September 30, 2001
Historical Historical Proforma Proforma
800America iGain, Inc. Adjustment Combined
Assets
Current Assets
Cash $9,107,264 $962,507 $10,069,771
Accounts Receivable Net 58,907 39,969 98,876
Deferred Tax Asset 47,260 47,260
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Total Current Assets 9,213,431 1,002,476 10,215,907
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Property and Equipment (Net)
Computer Software 1,772,456 147,598 -147,598 2,558,456
Computer Hardware 332,960 139,964 786,000 546,960
-139,964
214,000
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Total Property and Equipment 2,105,416 287,562 712,438 3,105,416
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Other Assets
Goodwill - Net 176,666 1,205,000 1,381,666
Investment 439,714 439,714
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616,380 1,205,000 1,821,380
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Total Assets 11,935,227 1,290,038 1,917,438 15,142,703
==============================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 134,379 62,557 -52,214 144,722
Lease Obligations 84,841 84,841
Member deposits 907,292 907,292
Income Tax Payable 866,567 866,567
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Total Current Liabilities 1,000,946 1,054,690 -52,214 2,003,422
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Stockholders' equity
Common Stock 16,162 1,050 17,212
Deferred Stock 22,500 -22,500
Additional Paid in Capital 2,756,147 1,987,684 -1,774,836 4,960,097
-212,848
2,203,950
Retained Earnings (Deficit) 8,161,972 -1,774,836 1,774,836 8,161,972
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Total Stockholders' Equity 10,934,281 235,348 1,969,652 13,139,281
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Total Liabilities and Stockholders' Equity $11,935,227 $1,290,038 $1,917,438 $15,142,703
==============================================================
See Accompanying Notes to Unaudited combined Condensed financial Statements
ITEM 7b
800America.com Inc.
Unaudited ProForma Combined
Condensed Income Statement
Nine Months Ended September 30, 2001
Historical Historical ProForma ProForma
800America iGain, Inc. Adjustment Combined
Revenues $15,244,673 $270,889 $15,515,562
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Cost of Revenues
Cost of Goods Sold 111,657 111,657
Technology Development 421,587 369,114 790,701
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Total Cost of Revenues 421,587 480,771 902,358
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Selling General and Administrative
Sales and Marketing 3,133,605 91,310 3,224,915
Depreciation and Amortization 593,869 47,770 288,850 930,489
Salaries and Wages 615,946 884,952 1,500,898
General and Administrative 1,834,870 535,053 2,369,923
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Total Selling General and Administrative 6,178,290 1,559,085 288,850 8,026,225
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Operating Income (Loss) 8,644,796 -1,768,967 -288,850 6,586,979
Other Income (Expense) 108,600 34,493 143,093
Income Tax (Expense) -3,030,000 0 589,721 -2,440,279
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Net Income (Loss) From Continuing
Operations 5,723,396 -1,734,474 300,871 4,289,793
Gain on disposal of Discontinued
Operations Net of Tax 330,000 330,000
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Net Income (Expense) $6,053,396 ($1,734,474) $300,871 $4,619,793
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Net Income Per Common Share Basic
Continuing Operations $0.36
Disposal of Discontinued Operations $0.02
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Net Income $0.38
Basic Weighted Average Common
Stock Outstanding 15,929,989
Net Income Per Common Stock
Diluted Continuing Operations $0.31
Disposal of Discontinued Operations $0.02
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Net Income $0.33
Diluted Weighted Average Shares
Outstanding 18,343,624
See Accompanying Notes to Unaudited Combined Condensed Financial Statements
800America.com, Inc.
Notes to Unaudited Pro Forma
Combined Condensed Financial Information
Note 1 - Significant Accounting Policies and Basis of Presentation
The accompanying historical financial statements of 800America.com,
Inc. (800America) and iGain.com, Inc. (iGain) have been derived from financial
statements prepared in accordance with U. S. generally accepted accounting
principles.
800America and iGain's historic financial statements for the year ended
December 31, 2000, used in the pro forma financial statements, were for
800america based on their audited financial statements of and for the period
ended December 31, 2000 and for iGain on their unaudited financial statements
for the same period.
800America and iGain's financial statements as of and for the nine
months ended September 30, 2000, used in the pro forma financial statements are
derived from each company's unaudited financial statements for that period.
Note 2 - Pro Forma Adjustments Balance Sheet
a. Balance sheet adjustments - to record the consideration paid for the
net assets acquired at their fair market value.
Computer Hardware $ 214,000
Software 786,000
Goodwill 1,205,000
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Stock issued $2,205,000
b. The above consideration was in the form of 1,050,000 shares of
800America common stock issued for all the outstanding common and
preferred stock of iGain.
c. The fair market value of the stock determined above was the average
price traded for the month of the merger (October 2001) reduced by
one-third for its restricted status and volatility.
Note 3 - Pro Forma Adjustment Income Statement
a. Goodwill resulting from the purchase will not be amortized. On
January 2, 2002 Financial Accounting Standards Board Opinion No. 142
was adopted dispensing with the amortization for Goodwill and
requiring, at a minimum, annual test for impairment and recognition
of impairment losses in the future. Depreciation is recorded for
Computer Hardware and Software for periods indicated.
b. To record income tax effects of the merger and pro forma
adjustments. The net operating loss created during the year of
merger would be used during the year of the merger and the
subsequent year.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
800AMERICA.COM, INC.
Date: May 9, 2002 By: /s/ David E. Rabi
--------------------------
David E. Rabi
Chief Executive Officer