--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
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): December 5, 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 December 5, 2001, 800America.com, Inc. (the
"Company") through its wholly-owned subsidiary 800America.com Acquisition Corp.,
a Delaware corporation, acquired all of the outstanding capital stock of
WizardWorld, Inc., in a stock-for-stock merger (such transaction being referred
to as a "Merger") pursuant to a certain Merger Agreement and Plan of
Reorganization dated as of December 3, 2001. WizardWorld, Inc., headquartered in
Congers New York is a online marketplace where dealers and consumers can value,
trade, buy and sell collectibles. Each WizardWorld, Inc. preferred share was
converted into .08121 shares of the Company's Common Stock. In connection with
the closing of the Merger the Company issued a total of 660,000 shares of its
Common Stock which had a value of approximately $2,178,000 based on the closing
bid price of $3.30 per share for the Company's Common Stock on December 5, 2001.
The consideration paid by the Company was determined by the parties through a
privately negotiated arm's length transaction. Holders of the shares of Common
Stock received in the transaction have the right to put the shares back to the
Company in one year at a repurchase price of $2.60 per share. Certain of the
holders of the preferred stock of WizardWorld, Inc. who exchanged their shares
for the Common Stock of the Company in the transaction also purchased a total of
340,000 shares of the Company's Common Stock in a private placement in which the
Company received a total of $850,000 in proceeds. Such purchasers also have the
right to put the shares acquired in the private placement back to the Company in
one year at a repurchase price of $2.60 per share.
The Company is filing the following information relating to this 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, WizardWorld, Inc.,
800America.com, Acquisition Corp. and The Preferred
Stockholders of WizardWorld, Inc. (previously filed).
ITEM 7(a)
PRICEWATERHOUSECOOPERS
--------------------------------------------------------------------------------
Pricewaterhouse Coopers LLP
1301 Avenue of the Americas
New York, NY 10019-6013
Telephone: (646) 471-4000
Facsimile: (646) 394-1301
Report of Independent Accountants
To the Board of Directors and Stockholders of WizardWorld, Inc.
In our opinion, the accompanying balance sheet and the related
statements of operations, of changes in stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of WizardWorld,
Inc. (a development stage enterprise) (the "Company") at 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. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
The accompanying financial statements have been prepared assuming that
the Company will, continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is a development stage company and has
incurred net losses and negative operating cash flows since inception. These
circumstances raise substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
March 9, 2001, except as to note 11 Pricewaterhouse Cooper, LLP
which is as of November 30, 2001
1
WizardWorld, Inc.
(A Development Stage Enterprise)
Balance Sheet
December 31,
2002
------------
Assets
Current assets:
Cash and cash equivalents $481,529
Inventories 20,305
Due from affiliates 9,737
Prepaid expenses and other current assets 213,040
----------
Total current assets 724,611
----------
Property and equipment, net 735,429
Other assets 28,558
----------
Total assets $1,488,598
==========
Liabilities and Stockholders' Equity
Current liabilities:
Payable to related party $325,234
Accounts payable 147,477
Accrued expenses 317,643
Deferred revenue 2,954
----------
Total current liabilities 793,308
----------
Mandatorily redeemable convertible preferred stock and Stockholders' equity:
Series A Preferred Stock ($.001 par value; 8,126,334 shares
authorize
Common stock ($.001 par value; 35,000,000 shares authorized,
11,300,000 shares issued and outstanding) 4,108,664
Additional paid-in-capital
Accumulated 11,300
(227,599)
(3,197,075)
----------
Total mandatorily redeemable convertible preferred stock and stockholders'
equity 695,290
----------
Total liabilities, mandatorily redeemable convertible preferred stock and
stockholders' equity $1,488,598
==========
2
WizardWorld, Inc.
(A Development Stage Enterprise)
Statement of Operations
Year ended
December 31,
2002
------------
Total revenues $ 66,542
-----------
Costs and expenses
Cost of sales 15,222
Hosting fees 371,678
Technology and development 761,215
Selling and marketing 564,754
General and administrative 1,639,816
-----------
3,352,685
-----------
Loss from operations (3,286,143)
-----------
Interest income 89,068
-----------
Net loss (3,197,075)
Accretion of mandatorily redeemable preferred stock (243,695)
-----------
Net loss applicable to common stockholders $(3,440,770)
===========
3
WizardWorld, Inc.
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity
Series A Convertible
Preferred Stock Common Stock Stock Additional
------------------------- ----------------------- Subscription Paid-in
Shares Amount Shares Par value Receivable Capital
------------------------- ----------------------- ------------ ----------
Issuance of Founder's common stock 11,300,000 $11,300 $(11,300)
Net loss --
---------- ---------- ---------- ------- -------- --------
Balance at December 31, 1999 11,300,000 11,300 (11,300)
Issuance of Series A redeemable
convertible preferred stock, net
of issuance costs of $135,031 4,063,167 $3,864,969
Settlement of subscription 11,300
receivable
Compensatory stock options granted
to non-employees $10,500
Stock compensation charges related
to the issuance of the warrants
to a service provider 5,596
Accrual of cumulative dividends on
mandatorily redeemable preferred
stock 224,700 (224,700)
Accretion of issuance costs on
mandatorily redeemable preferred
stock 18,995 (18,995)
Net loss
---------- ---------- ---------- ------- --------- ---------
Balance at December 31, 2000 4,063,167 $4,108,664 11,300,000 $11,300 -- $(227,599)
========== ========== ========== ======= ========= =========
[RESTUBBED]
WizardWorld, Inc.
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity
Accumulated
Deficit Total
----------- ----------
Issuance of Founder's common stock --
Net loss
----------- ----------
Balance at December 31, 1999 --
Issuance of Series A redeemable
convertible preferred stock, net
of issuance costs of $135,031 $3,864,969
Settlement of subscription 11,300
receivable
Compensatory stock options granted
to non-employees 10,500
Stock compensation charges related
to the issuance of the warrants
to a service provider 5,596
Accrual of cumulative dividends on
mandatorily redeemable preferred
stock
Accretion of issuance costs on
mandatorily redeemable preferred
stock
Net loss $(3,197,075) (3,197,075)
----------- -----------
Balance at December 31, 2000 $(3,197,075) $695,290
=========== ===========
4
Year ended
December 31,
2000
------------
Cash flows from operating activities: $(3,197,075)
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Compensatory warrants issued to a service provider 5,596
Compensatory stock options granted non-employees 10,500
Depreciation and amortization 141,892
Increase in inventories (20,305)
Increase in other assets (28,558)
Increase in prepaid expenses and other current assets (222,777)
Increase in due to related party 325,234
Increase in accounts payable 147,477
Increase in accrued expenses 317,643
Increase in deferred revenue 2,954
-----------
Net cash used in operating activities (2,517,419)
-----------
Cash flow from investing activities:
Purchases of property and equipment (877,321)
-----------
Net cash used in investing activities (877,321)
-----------
Cash flows from financing activities:
Proceeds from issuance of convertible preferred stock, net of issuance costs
3,864,969
Settlement of subscription receivable 11,300
-----------
Net cash provided by financing activities 3,876,269
-----------
Net increase in cash and cash equivalents 481,529
Cash and cash equivalents, beginning of period --
-----------
Cash and cash equivalents, end of period $ 481,529
===========
Supplemental disclosure of cash flow information:
Cash paid for income taxes 410
Cash paid for interest --
-----------
5
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
1. Nature of the Business
WizardWorld, Inc. (the "Company") is a New York-based company,
incorporated in Delaware in December 1999 under the name of Gareb.com.
The Company changed its name from Gareb.com to WizardWorld, Inc. in May
2000.
The Company's online service, launched in September 2000, is an online
marketplace where dealers and consumers can value, track, buy and sell
their collectibles.
Since its inception, the Company has devoted substantially all of its
efforts to business planning, web site development, recruiting
management and technical staff, acquiring operating assets and raising
capital. Accordingly, the Company is considered to be in the
development stage as defined in Statement of Financial Accounting
Standards ("SFAS") No. 7. Prior to April 19, 2000, the Company had no
operating activities.
From inception to December 31, 1999, the Company issued 11,300,000
shares of common stock to its founders. All operating activities of the
Company commenced in 2000.
Basis of Presentation
The accompanying financial statements have been prepared on a
going-concern basis, which contemplates the realization of assets and
the satisfaction of liabilities and commitments in the normal course of
business. The Company has a limited operating history, has incurred
substantial losses from operations since its inception and has financed
its operations to date by capital contributions raised in private
financing. As of December 31, 2000 the Company has an accumulated
deficit of $3,197,075, In addition, the Company expects to incur
substantial costs and expenses during the year ending December 31,
2001; accordingly the Company raised additional funds in January 2001
to meet planned obligations over the next twelve months. These
circumstances raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans with regard to these
matters include continued development, marketing of its products as
well as seeking additional financing, arrangements. Continuation of the
Company as a going concern is dependent on, among other things, the
Company's ability to obtain adequate long-term financing and achieve
profitable operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Subsequent to December 31, 2000 and as discussed in Note 11, the
Company received gross proceeds of $4,000,000 from the issuance and
sale of 4,063,167 shares of redeemable preferred stock. Management's
plans contemplate that cash generated from operations and the financing
discussed in Note 11 will be sufficient to meet its obligations as they
become due for the foreseeable future. If such available sources of
cash are not sufficient, management has the intent and ability to
reduce expenses so that it can continue to meet its obligations.
6
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the date of purchase to
be cash equivalents, Cash equivalents are stated at cost plus accrued
interest, which approximates fair value.
Fair Value of Financial Instruments
The carrying amounts of the Company's financial instruments, which
include cash equivalents, accounts receivable, accounts payable and
other accrued expenses approximate their fair values due to their short
maturities.
Revenue Recognition
The Company's revenue is derived from primarily two sources; (i)
product sales, and (ii) banner advertising. Revenue from product sales
is recognized when the products are shipped to the customer. Outbound
shipping and handling charges are included in revenues. Revenue from
banner advertising is recognized ratably during the period in which the
advertising is displayed, provided that no significant Company
obligations remain and collection of the related receivable is
probable.
Risks and Uncertainties
The Company has a limited operating history and its prospects are
subject to the risks, expenses and uncertainties frequently encountered
by companies in the new and rapidly evolving markets for Internet
products and services. These risks included failure to develop and
extend the Company's online service brands, the rejection of the
Company's services by Web customers, vendors and/or advertisers, the
ability of the company to maintain and increase the levels of traffic
on its online services, as well as other risks and uncertainties.
Management believes that sufficient funding will be available to meet
its planned business objectives for a reasonable period of time;
however, there can be no assurance that the Company will be successful
in its efforts to raise additional capital.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method. Inventories
consist primarily of action figures and other collectibles held for
sale. New product introductions and enhancements could result in excess
or obsolete inventory. To minimize this risk, the Company evaluates
inventory levels and expected usage on a periodic basis and records
valuation allowances as required.
7
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
Income Taxes
Deferred taxes are determined based on the difference between the
financial statement and tax basis of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse. Valuation allowances are provided if, based upon
the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
3. Property and Equipment
Estimated
Useful life December 31,
(years) 2000
----------- ------------
Website development costs 2 $640,905
Computer and office equipment 3 193,250
Software 3 40,860
Furniture and fixtures 3 2,306
--------
877,321
Less - accumulated depreciation and amortization 141,892
--------
Net property and equipment $735,429
========
4. Mandatorily Redeemable Convertible Preferred Stock
Series A convertible participating preferred stock
In April 2000, the Company entered into an agreement for the issuance
and sale of 4,063,167 shares of Series A Preferred Stock resulting in
gross proceeds to the Company of $4,000,000 and proceeds after issuance
costs of $3,864,969.
The stockholders of Series A preferred stock have preferential
treatment and liquidation rights to all other authorized or issued
securities and are entitled to: (i) vote with the common stockholders
on an as converted basis; (ii) receive a cumulative cash dividend at
the annual rate of 8%; (iii) a mandatory redemption of their stock in
the event of a merger or sale of the Company and the stockholder elects
not to convert its shares or after five years from the date of
issuance, in each cast at the initial purchase price per share plus all
accrued but unpaid dividends; (iv) in the event of liquidation,
dissolution, a merger or consolidation, receive an amount equal to the
initial purchase price per share and all accrued and unpaid dividends;
and share prorata, on an as-converted basis, in the distribution of the
remaining assets resulting in such events, and (v) at the option of the
stockholder at any time, unless previously redeemed, convert each share
of preferred stock into one share of common stock, subject to certain
adjustments.
8
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
In the event of a public offering of the Company's common stock where
the amount of the offering exceeds $20 million and the total
capitalization of the Company at the time of the offering exceeds 3100
million, the shares of Series A preferred stock will automatically
convert into shares of the Company's common stock.
Property and Equipment
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. Upon retirement
or sale, the cost of assets disposed of and the related accumulated
depreciation are removed from the accounts and any resulting gain or
loss is credited or charged to income. Repairs and maintenance costs
are expensed as incurred.
Website Development Costs
Costs associated with development of the Company's interact website are
included within property and equipment. All costs incurred during the
planning stage of the website development, as well as maintenance and
training, are expensed as incurred. All costs incurred during the web
application and infrastructure development stage are capitalized.
Capitalized costs are amortized over their estimated useful lives,
which is 2 years.
Accounting for Stock-Based Compensation
The accompanying financial position and results of operations of the
Company has been prepared in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"). Under APB
No. 25, generally, no compensation expense is recognized in the
financial statements in connection with the awarding of stock option
grants to employees provided that, as of the grant date, all terms
associated with the award are fixed and the fair value of the Company's
stock is equal or less than the amount an employee must pay to acquire
the stock. The Company will recognize compensation expense in
situations where the terms of an option grant are not fixed or where
the fair value of the Company's common stock on the grant date is
greater than the amount an employee must pay to acquire the stock.
Disclosures required by Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), including
pro forma operating results had the Company prepared its financial
statements in accordance with the fair-value-based method of
accounting, for stock-based compensation, have been included in Note 7.
Equity securities granted to non-employees
The fair value of options and warrants granted to non-employees for
services rendered is recognized in accordance with EITF 96-18,
"Accounting for Equity Instruments; That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or
Services."
9
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
Advertising Costs
Advertising costs are charged to operations as incurred. Advertising
costs were approximately, $345,000 for the year ended December 31,
2000.
Mandatorily Redeemable Convertible Preferred Stock
The carrying value of mandatorily redeemable convertible preferred
stock is increased by periodic accretions so that the carrying amount
will equal the redemption amount at the redemption date. These
increases are effected through charges against additional paid-in
capital in the absence of retained earnings.
The cumulative dividends are accrued quarterly in arrears and totaled
$224,700 at December 31, 2000.
On January 2001, the Company entered into an agreement for the issuance
and sale of 4,063,167 shares of Series A Preferred Stock with gross
proceeds to the Company of $4,000,000. The rights and preferences of
these shares are as disclosed in Note 4.
5. Common Stock
At December 31, 2000, the Company has 11,300,000 outstanding shares of
Common Stock, $0.001 par value per share
Each share of common stock is entitled to one vote. The holders of
common stock are also entitled to receive dividends whenever funds are
legally available and when declared by the Board of Directors, subject
to the prior rights of holders of all classes of stock outstanding. The
Company issued shares of its common stock to certain employees under
stock purchase agreements, some of which contain repurchase provisions
in the event of termination of employment.
6. Warrants
In March 2000, the Company issued warrants to purchase 180,000 shares
of the Company's common stock at a price of $1.00 per share as
consideration for legal services provided. The warrants are immediately
exercisable and expire upon the earlier of (i) March 2003, (ii) the
effective date of a merger or consolidation of the Company with another
entity, or (iii) the sale of all or substantially all of its assets.
For the year ended December 31, 2000 the Company recorded a non-cash
charge of $18,787 as a legal expense, representing the fair value of
the warrants granted. The fair value of the warrants was estimated by
applying the Black-Scholes pricing model. The weighted average
assumptions used were as follows. risk free interest rate of 6.53%,
expected warrant life of three years, dividend yield 0.0% and
volatility of 75%.
10
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
7. Stock-Options
Stock Option Plan
In 2000, the Company's Board of Directors and stockholders adopted the
Company's 2000 Stock Option Plan (the "Plan"). The Plan provides for
the granting of Stock options at the discretion of the Board of
Directors. The total number of shares of Common Stock for which options
may be granted under the plan is 2,742,912.
The Board of Directors determines the exercise price of all stock
options granted under the Plan at the time of grant. The maximum term
of each option granted under the Plan is ten years from the date of
grant. Options shall become exercisable as such times and in such
installments as the Board of Directors shall provide in the terms of
each individual award.
The exercise price of all options under the Plan, which range from
$0.50 to $0.63, were determined based upon the fair market value of the
Company's Common Stock on the date of grant as determined by the
Company's Board of Directors.
Stock option activity under the Plan can be summarized as follows-
Year ended
December 31, 2000
-------------------------
Weighted
Average
Number of Exercise
options Price
--------- --------
Granted 1,639,290 $.55
Exercised --
Cancelled (315,000) (.50)
--------- ----
Outstanding at December 31, 2000 1,324,290 $.57
========= ====
Options available for future grant 1,418,622
Options exercisable 150,000 $50
At December 31, 2000 the weighted-average remaining contractual life of
the outstanding options approximately 9.75 years.
Stock-Based Compensation
The Company applies APB 25 and related interpretations in accounting
for employee and director options granted under the Plan. No
compensation cost has been recognized for employee stock-based
compensation in 2000. No stock-based awards were granted prior to 2000.
Had compensation cost been determined based on the fair value at the
grant
11
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
dates for awards in 2000, consistent with the provisions of SFAS No.
123, the Company's net loss would have been $3,211,711. Because options
vest over several years and additional option grants are expected to be
made in future years, the above pro forma results are not
representative of the pro forma results for future years.
For purposes of pro forma disclosure, the fair value of each option
grant to employees was estimated using the minimum-value method of the
Black-Scholes option-pricing model, which assumes no volatility. The
values were derived using assumptions established by the management of
the Company. Changes in the information would effect the assumptions
and the option prices derived from those assumptions, The weighted
average assumptions used for the grants made in 2000 were as follows:
risk free interest rate of 6.16%, expected option life of five years
and dividend yield 0.0%.
During 2000, the Company issued options to purchase 50,000 shares of
the Company's Common Stock to a consultant. The options vest over a 6
months period. The fair value of these options has been estimated using
the Black-Scholes option-pricing model based on the following weighted
average assumptions: risk-free interest rate 5,04%, expected option
life of two ` years, dividend yield 0.0% and volatility of 75%. In
2000, the Company recorded non-employee compensation of approximately
$10,500 related to this award.
8. Income Taxes
At December 31, 2000, the Company had federal net operating loss
carryforwards of approximately $2,647,000. These carryforwards are
available to offset future taxable income and expire in 2020.
The net operating loss carryforwards and temporary differences
(primarily capitalized software costs) between the carrying amounts of
assets and liabilities for financials reporting and income tax purposes
resulted in a net deferred tax asset of $934,000 at December 31, 2000.
The Company's operating plans anticipate ramble income in future
periods; however, such plans make significant assumptions which cannot
be reasonably assured. Therefore, in consideration of the Company's
accumulated losses and the uncertainty of its ability to utilize the
deferred tax benefit in the future, the Company recorded a valuation
allowance in the amount of $934,000 at December 31, 2000, to fully
offset the deferred tax benefit amount.
9. Related Party Transactions
On April 19, 2000, the Company entered into an Assignment and License
of Rights Agreement ("the Agreement") with Wizard Entertainment, Inc.
which is majority-owned by a stockholder of the Company. In
consideration of $10 and other mutual rights and obligations between
the two entities, the affiliate assigned ownership rights to its price
guides and collectible databases comprising various images to the
Company. In return,
12
WizardWorld, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
the Company granted the affiliate an exclusive license to use and
exploit the database for any non-internet distributed print media.
During 2000, the Company received. ongoing consulting and website
development services from a 20% stockholder of the Company. Services
rendered for tie year ended December 31, 2000 amounted to $1,201,397,
of which $325,234 is included in accounts payable at December 31, 2000.
10. Commitments
The Company leases its office space under non-cancelable operating
leases expiring in 2002. The following is a schedule of future minimum
lease payments under non-cancelable operating leases as of December 31,
2000:
Year ending December 31,
------------------------
2000 $101,562
2001 210,462
2002 83,100
--------
$395,124
========
Total rent expense under these operating leases was approximately
$100,500 for the year ended December 31, 2000.
11. Subsequent Events (Unaudited)
As of November 30, 2001, the shareholders of the Company are
negotiating the sale of the Company. No adjustments have been made to
the financial statements to anticipate or consider the effects, if any,
of such transaction.
13
ITEM 7(b)
800America.com, Inc.
ProForma Financial Information
Unaudited ProFroma Combined Condensed
Financial Information
On December 4, 2001 800america.com, Inc. (800America) acquired all
the outstanding common and preferred stock of Wizard World, Inc. (Wizard World),
in exchange for 660,000 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 Wizard World 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
Wizard World and 800America for the year ended December 31, 2000 and for the
nine months ended September 30, 2001, as if the acquisitions of Wizard World,
which closed on December 4, 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 Wizard World 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 Wizard World 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 December 4, 2001,
reduced by one-third due to the restricted conditions and the volatility of the
stock. The average trading price was $3.90 less one-third or $2.60, the purchase
price then was based on 660,000 shares at $2.60 or $1,716,000. The purchase
price was allocated as follows:
Web Site Development $1,716,000
----------
Total $1,716,000
Wizard Worlds is an e-commerce site that has handled up to 75,000
visitors per week. The site is focused on providing information and
entertainment to a population of collectibles by providing forums for the
members to discuss issues in a focus group environment, delivering latest
information on the happening in the collectibles universe and creating an
electronic environment where members can sell and trade their collections. This
activity generates multiple revenue streams including being, a portal for
numerous on line stores, receiving commissions from the member C to C trading
activity, sell subscriptions to on and off line publications as well as
marketing communication opportunities.
The value for the existing web technology and development is being
valued at five (5) dollars for each of the two hundred fifty thousand (250,000)
clients now listed with Wizard World. Total value is one million two hundred
fifty thousand dollars ($1,250,000). The remaining purchase price was applied to
goodwill.
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 Pro Forma Combined
Condensed Income Statement
Year Ended December 31, 2000
Historical Historical ProForma ProForma
800America Wizard World Adjustment Combined
Revenues $15,980,529 $66,542 $16,047,071
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Cost of Revenue
Cost of Goods Sold 15,222 15,222
Internet Hosting 371,678 371,678
Web Site Operations 233,938 761,215 995,153
Rebates 8,913,351 8,913,351
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Total Cost of Revenue 9,147,289 1,148,115 10,295,404
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Selling, General and Administrative
Sales and Marketing 1,878,318 564,754 2,443,072
Depreciation and Amortization 486,480 343,200 731,623
General and Administrative 1,354,542 1,639,816 2,994,358
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Total Selling, General and Administrative 3,719,340 2,204,570 343,200 6,169,053
--------------------------------------------------------------------
Operating Income 3,113,900 -3,286,143 -343,000 -417,386
Other Income/Expense 26,243 89,068 115,311
Income Tax (Expense) Benefit -1,067,649 1,170,000 102,351
--------------------------------------------------------------------
Net Income (Loss) $2,072,494 ($3,197,075) $924,857 ($199,724)
--------------------------------------------------------------------
Net Income Per Common Share - Basic $0.16
Basic Weighted Average
Common Shares Outstanding 12,721,359
Diluted Earnings Per Share Common Stock $0.14
Diluted Weighted Average Commn Share 14,371,359
See Accompanying Notes to Combined Condensed Financial Statements
800America.com Inc.
Unaudited ProForma Combined
Condensed Income Statement
Nine Months Ended September 30, 2001
Historical Historical ProForma ProForma
800America Wizard World Adjustment Combined
Revenues $15,244,673 $240,616 $15,485,289
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Cost of Revenues
Cost of Goods Sold 586,307 586,307
Web Site Operations 421,587 1,123,261 1,544,848
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Total Cost of Revenues 421,587 1,709,568 2,131,155
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Selling General and Administrative
Sales and Marketing 3,133,605 287,061 3,420,666
Depreciation and Amortization 593,869 303,746 183,857 1,081,472
Salaries and Wages 615,946 1,470,950 2,086,896
General and Administrative 1,834,870 981,001 2,815,871
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Total Selling General and Administrative 6,178,290 3,042,758 183,857 9,404,905
--------------------------------------------------------------------------
Operating Income 8,644,796 -4,511,710 -183,857 3,949,229
Other Income (Expense) 108,600 61,238 169,838
Income Tax (Expense) -3,030,000 1,575,672 -1,454,328
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Net Income (Loss) From Continuing
Operations 5,723,396 -4,450,472 1,391,815 2,664,739
Gain on Disposal of Discontinued Operations
Net of Tax 330,000 330,000
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Net Income 6,053,396 -4,450,472 1,391,815 2,994,739
--------------------------------------------------------------------------
Net Income Per Common Share Basic
Continuing Operations $0.36
Disposal of Discontinued Operations $0.02
-----------------
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
-----------------
Net Income $0.33
Diluted Weighted Average Shares
Outstanding 18,343,624
See Accompanying Notes to Unaudited Combined Condensed Financial Statements
800America.com, Inc.
Unaudited Pro Froma Combined
Condensed Balance Sheet
September 30, 2001
Historical Historical Combined
800 Wizard ProForma ProForma
America World, Inc. Adjustments 800America
Assets
Current Assets
Cash and Cash Equivalents $9,107,264 $31,765 ($31,765)b $9,107,264
Accounts Receivable (Net) 58,907 3,411 -3,411 b 58,907
Inventory 88,740 -88,740 b
Prepaid Assets 91,503 -91,503 b
Deferred Tax Asset 47,260 47,260
-----------------------------------------------------------------
Total Current Assets 9,213,431 215,419 -215,419 9,213,431
-----------------------------------------------------------------
Property and Equipment
Computer Equipment (Net) 312,222 134,555 -134,555 b 312,222
Furniture Fixtures (Net) 18,685 -18,685 b
Software (Net) 1,772,456 45,618 -45,618 b 1,772,456
Web Development (Net) 298,669 1,716,000 a 2,014,669
Other 20,738 20,738
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Total Property and Equipment 2,105,416 497,527 1,517,142 4,120,685
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Other Assets
Deposits 27,308 -27,308 b
Goodwill (Net) 176,666 a 176,666
Investments 439,714 439,714
-----------------------------------------------------------------
Total Other Assets 616,380 27,308 -27,308 616,380
-----------------------------------------------------------------
Total Assets 11,935,227 740,254 1,274,415 13,949,896
=================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable 93,673 374,216 -374,216 b 93,673
Income Tax Payable 866,567 866,567
Accrued Expenses 40,706 122,862 -122,862 b 40,706
-----------------------------------------------------------------
Total Current Liabilities 1,000,946 497,078 -497,078 1,000,946
-----------------------------------------------------------------
Stockholders' Equity
Common Stock 16,162 11,300 -11,300 b 16,822
660 a
Preferred Stock 7,863,326 -7,863,326 b
Additional Paid in Capital 2,756,147 16,096 1,715,340 a 4,786,252
298,669 b
Retained Earnings 8,161,972 -7,647,546 -16,096 b 8,145,876
7,647,546 b
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Total Stockholders' Equity 10,934,281 243,176 1,771,493 12,948,950
-----------------------------------------------------------------
Total Liabilities and Stockholders 'Equity $11,935,227 $740,254 $1,274,415 $13,949,896
=================================================================
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 Wizard World, Inc. (Wizard World) have been derived from
financial statements prepared in accordance with U. S. generally accepted
accounting principles.
800America and Wizard World's historic financial statements for the
year ended December 31, 2001, used in the pro forma financial statements., were
for each company based on their audited financial statements of and for the
period ended December 31, 2000.
800America and Wizard World'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.
Web Development $1,250,000
Goodwill 466,000
----------
Stock issued $1,716,000
----------
b. The above consideration was in the form of 660,000 shares of
800America common stock issued for all the outstanding common and
preferred stock of Wizard World.
c. The fair market value of the stock determined above was the
average price traded for the month of the merger (December 2001)
reduced by one-third for its restricted status and volatility.
The Web Site composition is contained in the opening information.
No other assets of Wizard World were considered of any value and
no liabilities of Wizard Word were assumed by 800America
Note 3 - Pro Forma Adjustment Income Statement
a. Intangibles resulting from the purchase will be amortized as
follows until January 2, 2002 when Financial Accounting Standards
Board Opinion No. 142 will be adopted dispensing with the
amortization for Goodwill and requiring, at a minimum, annual test
for impairment and recognition of impairment losses in the future.
Web Site Development 5 years
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. The tax benefit will be created during the year
of the merger.
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