U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICABILIA.COM, INC.
(Exact Name of Registrant as specified in its charter)
Florida 65-0142472
- ---------------------------------------- ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
9155 Las Vegas Boulevard
Suite 242 89123
Las Vegas, Nevada ------------------------------------
- ---------------------------------------- (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 702-914-8411
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SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
None N/A
- ---------------------------------------- ------------------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.001 par value
------------------------------------------
(TITLE OF CLASS)
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
americaBILIA.com, Inc., (the "Company") is engaged in direct Internet
merchandising of American-themed collectibles, gifts and memorabilia. The
Company manufactures and assembles its own products and also purchases products
from a number of sources. All of these products are then marketed and sold over
its Internet shopping site, www.americabilia.com. The Company strives to offer
its customers a broad selection of products, a convenient shopping experience
and competitive pricing.
americaBILIA.com, a Nevada corporation ("americabilia.com Nevada") was
formed on March 2, 1999 to engage in the merchandising of American-themed
collectibles and gifts. On August 11, 1999, americaBILIA.com Nevada acquired the
outstanding capital stock of Veltre Enterprises, Inc., a Nevada corporation, dba
Unique Images. Unique Images is in the business of designing and manufacturing
Hollywood and sports memorabilia for fine art and memorabilia galleries. Unique
Images also provides high volume and custom picture framing services using
computerized joiner and mat cutting equipment. The purchase price paid for
Unique Images consisted of (i) $200,000 in cash, (ii) a Promissory Note in the
original principal amount of $200,000 and (iii) 100,000 shares of the Rule 506
common stock of americaBILIA.com Nevada. The Promissory Note was paid in full in
November 1999. As part of the purchase, americaBILIA.com Nevada agreed to lease
from Mr. Keith Veltre and his affiliates the premises that are used for Unique
Images' business operations as well as certain business equipment.
The Company was organized under the laws of the state of Florida on
August 22, 1989 under the name First Zurich Investments, Inc. On November 15,
1996, the Company changed its name to Terra International Pharmaceuticals, Inc.
On September 7, 1999, the Company changed its name to americaBILIA.com, Inc. On
September 17, 1999, the Company conducted a recapitalization through the merger
of americaBILIA.com Nevada with and into Worldwide Collectibles, Inc., a Nevada
corporation and a wholly owned subsidiary of the Company formed for the purpose
of the merger. Pursuant to an Agreement of Merger dated September 14, 1999, each
of the former stockholders of americaBILIA.com Nevada received one (1) share of
the Company's common stock, $.001 par value per share ("Common Stock"), in
exchange for their shares of americaBILIA.com Nevada. As a result of the
acquisition, a total of 6,115,000 shares of Rule 506 Common Stock were issued to
the former shareholders of americaBILIA.com Nevada. Prior to its acquisition of
americaBILIA.com Nevada, the Company did not have any operations.
Unless the context otherwise requires, all references to the Company
include its wholly-owned subsidiaries, Veltre Enterprises, Inc., a Nevada
corporation, and Worldwide Collectibles, Inc., a Nevada corporation. The
Company's executive offices are located at 9155 Las Vegas Boulevard, Suite 242,
Las Vegas, Nevada 89123; telephone number (702) 914-8411.
BUSINESS OF THE ISSUER
GENERAL DESCRIPTION OF BUSINESS
The Company engages in the direct merchandising of American-themed
collectibles, gifts, and memorabilia, primarily through its Internet shopping
site. The Company also offers products through its Las Vegas showroom and sells
its products through auctions on the eBay Web site. The Company intends to
continue offering products on eBay as a means of making potential customers
aware of the Company's Web site.
The Company was formed to capitalize on the opportunity for online
retailing of collectibles and memorabilia. The Company believes that the
collectibles and memorabilia industry is particularly suited to online
retailing. An online seller has virtually unlimited online shelf space and can
offer customers a vast selection through an efficient search and retrieval
interface. This is particularly valuable in the collectibles and
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memorabilia market because the extraordinary number of different items
precludes even the largest physical store from economically stocking more
than a small number of available products. Beyond the benefits of selection,
purchasing products online is more convenient than shopping in a physical
store because the products can be purchased 24 hours a day and shopping does
not require a trip to a store. Products can be shipped directly to the
customer's home or office. The Company believes that customers may buy more
products because they have more hours to shop, can act immediately on a
purchase impulse and can locate products that are hard to find. Because the
online store has a global reach, it can deliver an extremely broad selection
to customers in rural, international or other locations that cannot support
large-scale physical stores. The Company will strive to offer its customers
compelling value through the use of technology, broad product selection, a
high level of customer service and competitive pricing. As an online
retailer, the Company has virtually unlimited online shelf space and can
offer customers a large selection of products through an efficient search and
retrieval interface. The Company offers more than 2,000 products.
The Company's objective is to be the leading online retailer of
collectibles and memorabilia. To attain this objective, it will be necessary for
the Company to build strong brand recognition by promoting, advertising and
increasing its brand equity and visibility through a variety of marketing and
promotional techniques. As its business develops, the Company may advertise on
leading Web sites.
GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Internet is an increasingly significant global medium for
communications, content and online commerce. International Data Corporation
("IDC") estimates that the number of Web users will grow from approximately 150
million worldwide in 1998 to approximately 500 million worldwide by the end of
2003. The growing adoption of the Web represents an enormous opportunity for
businesses to conduct commerce over the Internet. IDC estimates that commerce
over the Internet will increase from approximately $40 billion worldwide in 1998
to approximately $900 billion worldwide in 2003. The Internet gives companies
the opportunity to develop one-to-one relationships with customers worldwide
from a central location without having the burdensome costs of managing and
maintaining a significant retail store infrastructure or the continuous printing
and mailing costs of catalog marketing. Growth in Internet usage has been fueled
by a number of factors, including the large and growing installed base of
personal computers in the workplace and home, advances in the performance and
speed of personal computers and modems, improvements in network infrastructure,
easier and cheaper access to the Internet and increased awareness of the
Internet among businesses and consumers. The increasing functionality,
accessibility and overall usage of the Internet and online services have made
them an attractive commercial medium. The Internet and other online services are
evolving into a unique sales and marketing channel, just as retail stores,
mail-order catalogs and television shopping have done. Online retailers can
interact directly with customers by frequently adjusting their featured
selections, editorial insights, shopping interfaces, pricing and visual
presentations. The minimal cost to publish on the Web, the ability to reach and
serve a large and global group of customers electronically from a central
location, and the potential for personalized low-cost customer interaction
provide additional economic benefits for online retailers. Because of these
advantages over traditional retailers, online retailers have the potential to
build large, global customer bases quickly and to achieve superior economic
returns over the long term. An increasingly broad base of products is being sold
successfully online, including computers, travel services, brokerage services,
automobiles, music and books.
PRODUCTS
The Company offers a broad range of collectibles, gifts, and
memorabilia, most of which are replicas, and some of which will be authentic
restored merchandise, including Coca-Cola bottle dispenser machines. The Company
offers more than 2,000 products ranging from original autographed photos and
collectibles of Hollywood Stars, Famous Sports Athletes, and Rock `n Roll
Legends to Jukeboxes and Coca-Cola Machines.
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Merchandise offered will have a broad price range, from a low end of
$15 to $20 for such items as coffee mugs and die-cast cars to a high end of up
to $6,500 for such items as love seats made from the rear end of a 1957
Chevrolet Bel Air, to a full-size floor model Wurlitzer Jukebox, to rare and
authenticated autographed photos and collectibles. The Company anticipates that
its average sale will range from $50 to $100.
Most products to be offered by the Company will be supplied by
authorized manufacturers of trademark registered companies, such as Coca-Cola,
Star Wars, Star Trek, Pepsi, Chevrolet, Harley-Davidson, NASCAR, Disney, Warner
Bros., and various Hollywood and entertainment personalities such as Elvis
Presley, Marilyn Monroe, James Dean, and John Wayne, as well as a number of
famous sports figures. The Company's acquisition of Unique Images will allow it
to also design and manufacture its own Hollywood and sports memorabilia and to
offer these products on its Web site.
The Company believes that the market for collectibles and memorabilia
is well suited to online retailing. An online retailer has virtually unlimited
online shelf space and can offer customers a vast selection through an efficient
search and retrieval interface. This is particularly valuable in the
collectibles and memorabilia market because the extraordinary number of
different items precludes even the largest physical store from economically
stocking more than a small minority of available products. Furthermore, unlike
with clothing or other personal products, consumers can make educated purchase
decisions using online information. Collectibles and memorabilia can be selected
effectively through online descriptions.
INTERNET SHOPPING SITE
The Company's Web site uses Shopsite Web hosting software. The
Company's Web site is physically located on a server owned and maintained by
InterLand Incorporated in Atlanta, Georgia.
The Company's Web site features a "secure server" shopping cart for
online ordering and tracking of product shipment. A primary feature of the Web
site is its interactive, searchable catalog of more than 2,000 products. The
Company provides search tools to find products primarily based on categories
such as sports, television stars, movie stars, music artists, political and
historical, game room and home theater, beverage collectibles, Coca-Cola
collectibles, hot collectibles, cartoons, science fiction, neon and electric
art, transportation and metal signs. The Company also plans to offer free e-mail
notification services which will be designed to automatically notify customers
when a new product that matches their criteria becomes available.
Through the Company's Web site, customers are able to order products,
conduct targeted searches, browse from among highlighted product offerings,
participate in promotions and check order status. Clicking with the mouse on any
of the products pulls up more information about the product, as well as a button
which, if clicked, adds the product to the customer's order. Customers can add
and remove products from their shopping baskets as they browse prior to making a
final purchase decision, just as in a physical store. To execute orders,
customers click on the buy button and are prompted to supply shipping and credit
card details, either by e-mail or by telephone.
Customers are offered a variety of delivery services, including
overnight and various international shipping options. The Company's system
automatically confirms each order by e-mail to the customer within minutes after
the order is placed and advises customers by e-mail shortly after orders are
shipped.
The Company ships products from its Las Vegas, Nevada facilities via
the U.S. Postal Service and UPS. In some instances, the Company has made
arrangements for larger products to be drop-shipped by the manufacturer or
supplier directly to the Company's customer.
The Company sources product from a network of distributors. The Company
has implemented the necessary shipping and inventory control capacity to enable
it to provide a rapid response to customer requests. Most of the Company's
products are available for shipment within 24 hours for delivery within two to
four business days. Items too large for conventional shipping may be shipped via
freight. If an item is backordered, the customer is notified immediately via
e-mail.
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All products are shipped with a customer satisfaction guarantee, which
includes credit, refund or exchange of product which is damaged, defective, or
unsatisfactory to the customer in any way, provided the product is returned in
"like-new" condition in its original packaging box with the customer's receipt
within 30 days.
The Company intends to participate in The Council of Better Business
Bureau's BBBONLINE-Registered Trademark- Privacy Program and to comply with
its privacy standards. This will allow the Company to display the
BBBONLINE-Registered Trademark- compliance seal on its Web site. The
BBBONLINE-Registered Trademark- Privacy Program provides verification,
monitoring and review of Web sites and customer dispute resolution services.
Through the BBBONLINE-Registered Trademark- Privacy Program, customers can
check the Company's history and obtain contact information and assurance that
the Company stands behind its advertising claims.
The Company has obtained a Thawte Digital Certificate to register its
right to use the domain name "americaBILIA.com." This certificate authenticates
the Company for purposes of secure online transactions.
MARKETING AND PROMOTION
The Company's marketing strategy is designed to strengthen the
americaBILIA.com brandname, increase customer traffic to its Web site, build
strong customer loyalty and maximize repeat purchases. The Company intends to
build customer loyalty by both creatively applying technology to deliver planned
personalized programs and services, as well as through creative and flexible
merchandising. The Company will be able to provide increasingly targeted and
customized services by using the extensive customer preference and behavioral
data obtained as a result of its online experience and market share. The
Internet allows rapid and effective experimentation and analysis and instant
user feedback, which the Company intends to incorporate in its merchandising. In
contrast to traditional direct-marketing efforts, the Company's planned
personalized notification services will be designed to send customers customized
notices at their request. The Company hopes that these customized notices will
increase the number of visitors that make purchases at its site, will encourage
repeat visits and purchases and will assist customer retention. Loyal, satisfied
customers also generate word-of-mouth advertising and awareness and are able to
reach thousands of other customers and potential customers because of the reach
of online communication.
The Company intends to employ a variety of media, program and product
development, business development and promotional activities to achieve these
goals. The Company's Web site has been registered with key search engine/online
web sites, including Yahoo, HotBot, Lycos, WebCrawler, Excite, Infoseek,
AltaVista, Northern Light, Whatyouseek, GoTo, Snap and AOL Netfind. In the
future, the Company may place advertisements on various high-profile and
high-traffic conduit Web sites. The Company is investigating the use of link
exchanges and paid banner advertising and in the future, the Company may
advertise through the use of banners that encourage readers to click through
directly to the Company's Web site. The Company will also engage in a program of
print advertising in specialized newspapers and magazines.
The Company believes that its ability to establish and maintain
long-term relationships with its customers and encourage repeat visits and
purchases depends, in part, on the strength of its customer support and service
operations and staff. Furthermore, the Company values frequent communication
with and feedback from its customers in order to continually improve the store
and its services. The Company offers e-mail addresses to enable customers to
request information and to encourage feedback and suggestions. The Company's
customer support and service personnel will be responsible for handling general
customer inquiries, answering customer questions about the ordering process, and
investigating the status of orders, shipments and payments.
MARKET AND COMPETITION
The market for collectibles and memorabilia is large and relatively
fragmented. Although the market for collectibles and antiques is worldwide, the
Company anticipates that the majority of customers will be from the United
States (with more than 80 million households currently connected to the
Internet), as well as Japan, Western Europe and the United Kingdom. The Company
believes that collectible and memorabilia Web sites
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currently doing business on the Internet generally lack product selection and
customer appeal. The Company has attempted to select a product line which
will not only fill a niche in Internet marketing, but will also have a broad
appeal for collectors of all types of American-themed collectibles and
memorabilia.
The online commerce market, particularly over the Internet, is new,
rapidly evolving and intensely competitive. The Company expects this competition
to intensify in the future. Barriers to entry are minimal, and current and new
competitors can launch new sites at a relatively low cost. The Company believes
that the principal competitive factors in its market are brand recognition,
selection, personalized services, convenience, price, accessibility, customer
service, quality of search tools, reliability and speed of fulfillment. Many of
the Company's current and potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than the Company. In addition, online
retailers may be acquired by, receive investments from or enter into other
commercial relationships with larger, well-established and well-financed
companies as use of the Internet and other online services increases.
Certain of the Company's competitors may be able to secure merchandise
from vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to Web site and systems
development than the Company. Increased competition over time may result in
reduced operating margins, loss of market share and a diminished brand
franchise. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, and competitive pressures
faced by the Company may have a material adverse effect on the Company's
business, prospects, financial condition and results of operations. Further, as
a strategic response to changes in the competitive environment, the Company may
from time to time make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on its business,
prospects, financial condition and results of operations.
New technologies and the expansion of existing technologies may
increase the competitive pressures on the Company. For example, client-agent
applications that select specific products from a variety of Web sites may
channel customers to companies that compete with the Company. In addition,
companies that control access to transactions through network access or Web
browsers could promote the Company's competitors or charge the Company a
substantial fee for inclusion.
SEASONALITY
The Company anticipates that its business will be seasonal with higher
than average sales occurring in the fourth calendar quarter as a result of
holiday gift purchases. Some companies marketing products over the Internet may
experience in excess of a majority of their sales in the fourth calendar quarter
each year.
EMPLOYEES AND CONSULTANTS
The Company currently employs eighteen (18) full time employees and
five (5) part time employees at its Las Vegas, Nevada locations to handle
product production, administration and shipping. In addition, seven (7) of the
Company's shareholders currently work for the Company without compensation. It
is anticipated that the Company's management will continue to conduct all
aspects of the Company's business until sales generate cash flow sufficient to
permit the payment of salaries. The Company believes that its relations with its
employees are good. The Company anticipates that within the next twelve months,
the Company will need to hire additional personnel for shipping and sales. The
Company also may hire additional management personnel.
The Company intends to start paying compensation to existing management
and increase compensation for other employees at such time and in such amounts
as determined by the Company's officers and directors in their sole discretion.
TRADENAME
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In April, 1999, the Company filed a federal trademark application for
"americaBILIA."
INVESTMENT RISKS
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED LOSSES. The
Company has only a limited operating history on which to base an evaluation of
its business and prospects. The Company's prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as online commerce. Such risks for the Company include,
but are not limited to, an evolving and unpredictable business model and the
management of growth. To address these risks, the Company must, among other
things, continually update its Web site and product offerings, establish and
increase its customer base, implement and successfully execute its business and
marketing strategy, continue to develop and upgrade its technology and
transaction-processing systems, provide superior customer service and order
fulfillment, respond to competitive developments, and attract, retain and
motivate qualified personnel. There can be no assurance that the Company will be
successful in addressing such risks, and the failure to do so could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. It is anticipated that the Company may
initially incur substantial losses. The Company believes that its success will
depend in large part on its ability to (i) establish its brand position, (ii)
provide its customers with outstanding value and a superior shopping experience,
and (iii) achieve sufficient sales volume to realize economies of scale.
Accordingly, the Company intends to invest heavily in marketing and promotion,
site development and technology and operating infrastructure development.
POSSIBLE NEED FOR ADDITIONAL FINANCING. The Company recently commenced
a private placement of Units of its securities, pursuant to which the Company
seeks to raise up to $3,000,000 in gross proceeds. The Company is dependent on
and intends to use a substantial portion of the proceeds of that offering to
acquire inventory, for advertising, to upgrade its Web site and server and for
working capital. The Company anticipates, based on currently proposed plans and
assumptions relating to its operations, that the proceeds of its private
placement, together with projected cash flow from operations and available cash
resources, will be sufficient to satisfy its anticipated cash requirements for
the next twelve months. If the gross proceeds from the private placement are
less than $3,000,000, however, the Company's ability to implement its plan of
operations will be hindered and the planned expenditures towards acquiring
inventory and advertising may not be made. In the event that the Company's plans
change, its assumptions change or prove to be inaccurate or the proceeds of the
offering and cash flow prove to be insufficient to fund operations (due to
smaller than anticipated revenues, unanticipated expenses, delays, problems,
difficulties or otherwise), the Company would be required to seek additional
financing sooner than anticipated or to curtail its business activities. The
Company may determine, depending upon the opportunities available to it, to seek
additional debt or equity financing to fund the cost of its operations. To the
extent that the Company finances its operations with a combination of internally
generated funds and the sale of equity securities, such issuance of equity
securities could result in dilution to the interests of the Company's
shareholders. Additionally, to the extent that the Company incurs indebtedness
or issues debt securities in connection with any acquisition, the Company will
be subject to risks associated with incurring indebtedness, including the risks
that interest rates may fluctuate and cash flow may be insufficient to pay
principal and interest on any such indebtedness. The Company has no current
arrangements with respect to, or sources of, additional financing, and it is not
anticipated that existing shareholders will provide any additional financing to
the Company. There can be no assurance that additional financing will be
available to the Company on commercially reasonable terms, or at all.
UNPREDICTABILITY OF FUTURE REVENUES. As a result of the Company's lack
of operating history and the emerging nature of the market in which it competes,
the Company is unable to accurately forecast its revenues. The Company's current
and future expense levels are based largely on its existing commitments and
plans to acquire inventory and engage in acquisitions. Sales and operating
results generally depend on the volume of, timing of and ability to fulfill
orders received, which are difficult to forecast. The Company may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Accordingly, any significant shortfall in revenues in relation to the
Company's planned expenditures would have an immediate adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain
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pricing or marketing decisions that could have a material adverse effect on
its business, prospects, financial condition and results of operations.
POTENTIAL FLUCTUATION IN OPERATING RESULTS; SEASONALITY. The Company
expects to experience significant fluctuations in its future quarterly operating
results due to a variety of factors, many of which are outside the Company's
control. Factors that may adversely affect the Company's quarterly operating
results include (i) the Company's ability to retain existing customers, attract
new customers at a steady rate and maintain customer satisfaction, (ii) the
Company's ability to manage inventory and fulfillment operations and maintain
gross margins, (iii) the announcement or introduction of new sites, services and
products by the Company and its competitors, (iv) price competition or higher
wholesale prices in the industry, (v) the level of use of the Internet and
online services and increasing consumer acceptance of the Internet and other
online services for the purchase of consumer products such as those offered by
the Company, (vi) consumer confidence in the security of transactions on the
Company's Web site, (vii) the Company's ability to develop and upgrade its
systems and infrastructure and attract new personnel in a timely and effective
manner, (viii) the level of traffic on the Company's Web site, (ix) technical
difficulties, system downtime or Internet brownouts, (x) the amount and timing
of operating costs and capital expenditures relating to expansion of the
Company's business, operations and infrastructure, (xi) the number of products
introduced during the period, (xii) the level of merchandise returns experienced
by the Company, (xiii) governmental regulation, and (xiv) general economic
conditions and economic conditions specific to the Internet, online commerce and
the collectibles and memorabilia industry including consumer trends and
popularity of some categories of collectible items. The Company expects that it
will experience seasonality in its business, reflecting a combination of
seasonal fluctuations in Internet usage and traditional retail seasonality
patterns. Internet usage and the rate of Internet growth may be expected to
decline during the summer. Further, sales in the collectibles and memorabilia
industry are expected to be significantly higher in the fourth calendar quarter
of each year than in the preceding three quarters.
COMPETITION. The online commerce market is new, rapidly evolving and
intensely competitive, which competition the Company expects to intensify in the
future. Barriers to entry are minimal, and current and new competitors can
launch new sites at a relatively low cost. In addition, the collectibles and
memorabilia industry is intensely competitive. Most of the products that the
Company intends to sell are available from other retail sources including mail
order catalogs. The Company will compete with these other sources in the sale of
these products and will compete generally with other sellers of novelty items.
The Company believes that the principal competitive factors in its market will
be brand recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, and reliability and
speed of fulfillment. Many of the Company's current and potential competitors
have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing and other resources
than the Company. In addition, online retailers may be acquired by, receive
investments from or enter into other commercial relationships with larger,
well-established and well-financed companies as use of the Internet and other
online services increases. The financial resources and established arrangements
of such companies may provide them with competitive advantages over the Company.
Certain of the Company's competitors may be able to secure merchandise from
vendors on more favorable terms, devote greater resources to marketing and
promotional campaigns, adopt more aggressive pricing or inventory availability
policies and devote substantially more resources to Web site and systems
development than the Company. Increased competition may result in reduced
operating margins, inability to establish or loss of market share and a
diminished brand value. There can be no assurance that the Company will be able
to compete successfully against current and future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
New technologies and the expansion of existing technologies may increase the
competitive pressures on the Company. For example, client-agent applications
that select specific products from a variety of Web sites may channel customers
to competitors of the Company. In addition, companies that control access to
transactions through network access or Web browsers could promote the Company's
competitors or charge the Company a substantial fee for inclusion.
DEPENDENCE ON PRODUCT ACCEPTANCE. The Company's business is subject to
consumer trends. The popularity of certain categories of items among consumers
may vary from time to time due to subjective value among consumers and consumer
trends in general. The Company has not conducted any market studies or
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surveys to evaluate the potential market acceptance of the collectibles and
memorabilia that it plans to sell. Most of the items that are offered by the
Company are also offered in mail order catalogs. The Company has based its
product selection in part on verbal indications from individual product
suppliers as to the relative demand for the various products manufactured or
distributed by that product supplier. The Company did not independently
verify any demand information provided by these product suppliers. In the
event the Company experiences insufficient product acceptance, the Company
may be forced to cease business and the shareholders' may lose their entire
investment in the Company.
INTRODUCTION OF NEW PRODUCTS. The market for memorabilia is
characterized by the need to develop and introduce new products. There is always
the potential threat of new entrants offering competitive products. Accordingly,
the Company believes its future prospects depend on its ability not only to
successfully market its existing products, but also to introduce new products
that achieve market acceptance. There can be no assurance that the Company will
be able to identify or market such additional products successfully or that the
Company will be able to respond effectively to new product offerings by
competitors. In particular, if the Company fails to successfully anticipate
customer demand for new products or otherwise makes incorrect decisions
pertaining to new products, the Company could be adversely affected both by the
loss of anticipated revenue and, possibly, its competitors' increase in their
established bases of customers. The Company may also experience delays in the
introduction of new products, resulting in delay or loss of revenues. There can
be no assurance that announcements of new product offerings will not cause
customers to defer purchasing existing Company products.
POSSIBLE CHANGE IN PRODUCT LINES. It is anticipated that changes in the
acceptance of the Company's product line may require the Company to change its
product focus and business plan to respond to the market. The Company
anticipates expanding its product focus to include additional product lines in
the future. The Company may develop or acquire additional product lines or may
acquire existing companies which market products. In the event the Company is
not successful in marketing collectibles and memorabilia, the Company may cease
doing business or may attempt to replace its product line. The Company
anticipates that it would take at least six (6) months to develop a new product
line and there can be no assurance that the Company would decide to do so.
Investors in the Company must rely solely on the Company's management in making
these decisions.
RISK OF CAPACITY CONSTRAINTS. A key element of the Company's strategy
is to generate a high volume of traffic on, and use of, its Web site.
Accordingly, the satisfactory performance, reliability and availability of the
Company's Web site, transaction-processing systems and network infrastructure
are critical to the Company's reputation and its ability to attract and retain
customers and maintain adequate customer service levels. The Company's revenues
depend on the number of visitors who shop on its Web site and the volume of
orders it fulfills. Any system interruptions that result in the unavailability
of the Company's Web site or reduced order fulfillment performance would reduce
the volume of goods sold and the attractiveness of the Company's product
offerings. The Company expects that it will experience periodic system
interruptions. Based on the volume of traffic on the Company's Web site or the
number of orders placed by customers, the Company may need to expand and upgrade
its technology, transaction-processing systems and network infrastructure. There
can be no assurance that the Company will be able to accurately project the rate
or timing of increases, if any, in the use of its Web site or timely expand and
upgrade its systems and infrastructure to accommodate such increases. Any
inability to do so would have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
RISK OF SYSTEM FAILURE; SINGLE SITE AND ORDER INTERFACE. The Company's
success, in particular its ability to successfully receive and fulfill orders
and provide high-quality customer service, largely depends on the efficient and
uninterrupted operation of its computer and communications hardware systems. The
Company's domain host, InterLand, Incorporated, has servers located in Atlanta,
Georgia. These systems and operations are vulnerable to damage or interruption
from fire, flood, power loss, telecommunications failure, break-ins, earthquake
and similar events. The Company does not presently maintain redundant systems or
a formal disaster recovery plan and does not carry business interruption
insurance to compensate it for losses that may occur. Despite the implementation
of security measures, the server on which the Company's Web site is located is
-9-
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions, delays, loss of data or the
inability to accept and fulfill customer orders. The occurrence of any of the
foregoing risks could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
MANAGEMENT OF POTENTIAL GROWTH; LIMITED SENIOR MANAGEMENT RESOURCES.
The Company may be required to rapidly and significantly expand its operations
to address potential growth in its customer base and market opportunities. This
expansion would place a significant strain on the Company's management,
operational and financial resources. To manage the expected growth of its
operations and personnel, the Company will be required to improve existing and
implement new transaction-processing, operational and financial systems,
procedures and controls, and to expand, train and manage a growing employee
base. The Company also will be required to expand its finance, administrative
and operations staff. Further, the Company's management will be required to
maintain and expand its relationships with various distributors and suppliers,
freight companies, other Web sites and other Web service providers, Internet and
other online service providers and other third parties necessary to the
Company's business. There can be no assurance that the Company's current and
planned personnel, systems, procedures and controls will be adequate to support
the Company's future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that Company management will
be able to successfully identify, manage and exploit existing and potential
market opportunities. If the Company is unable to manage growth effectively, its
business, prospects, financial condition and results of operations will be
materially adversely affected.
DEPENDENCE OF CONTINUED GROWTH OF ONLINE COMMERCE. The Company's future
revenues and any future profits are substantially dependent upon the widespread
acceptance and use of the Internet and other online services as an effective
medium of commerce by consumers. Rapid growth in the use of and interest in the
Web, the Internet and other online services is a recent phenomenon, and there
can be no assurance that acceptance and use will continue to develop or that a
sufficiently broad base of consumers will adopt, and continue to use, the
Internet and other online services as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty and there exist few proven services and
products. The Company relies on consumers who have historically used traditional
means of commerce to purchase merchandise. For the Company to be successful,
these consumers must accept and utilize novel ways of conducting business and
exchanging information. In addition, the Internet and other online services may
not be accepted as a viable commercial marketplace for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies and performance
improvements. To the extent that the Internet and other online services continue
to experience significant growth in the number of users, their frequency of use
or an increase in their bandwidth requirements, there can be no assurance that
the infrastructure for the Internet and other online services will be able to
support the demands placed upon them. In addition, the Internet or other online
services could lose their viability due to delays in the development or adoption
of new standards and protocols required to handle increased levels of Internet
or other online service activity, or due to increased governmental regulation.
Changes in or insufficient availability of telecommunications services to
support the Internet or other online services also could result in slower
response times and adversely affect usage of the Internet and other online
services generally. If use of the Internet and other online services does not
continue to grow or grows more slowly than expected, if the infrastructure for
the Internet and other online services does not effectively support the growth
that may occur, or if the Internet and other online services do not become a
viable commercial marketplace, the Company's business, prospects, financial
condition and results of operations would be materially adversely affected.
RAPID TECHNOLOGICAL CHANGE. To become and remain competitive, the
Company must continually enhance and improve the responsiveness, functionality
and features of its Web site. The Internet and the online commerce industry are
characterized by rapid technological change, changes in user and customer
requirements and preferences, frequent new product and service introductions
embodying new technologies and the emergence of new industry standards and
practices that could render the Company's existing Web site obsolete. The
Company's success will depend, in part, on its ability to license leading
technologies useful in its business, enhance its existing services, develop new
services that address the increasingly sophisticated and varied needs of its
prospective customers, and respond to technological advances and emerging
industry standards and practices
-10-
on a cost-effective and timely basis. The development of the Web site entails
significant technical and business risks. There can be no assurance that the
Company will successfully adapt its Web site, technology and
transaction-processing systems to customer requirements or emerging industry
standards. If the Company is unable, for technical, legal, financial or other
reasons, to adapt in a timely manner in response to changing market
conditions or customer requirements, its business, prospects, financial
condition and results of operations would be materially adversely affected.
ONLINE COMMERCE SECURITY RISKS. A significant barrier to online
commerce and communications is the secure transmission of confidential
information over public networks. The Company will rely on encryption and
authentication technology licensed from third parties to provide the security
and authentication necessary to effect secure transmission of confidential
information, such as customer credit card numbers. There can be no assurance
that advances in computer capabilities, new discoveries in the field of
cryptography, or other events or developments will not result in a compromise or
breach of the algorithms used by the Company to protect customer transaction
data. If any such compromise of the Company's security were to occur, it could
have a material adverse effect on the Company's reputation, business, prospects,
financial condition and results of operations. A party who is able to circumvent
the Company's security measures could misappropriate proprietary information or
cause interruptions in the Company's operations. The Company may be required to
expend significant capital and other resources to protect against such security
breaches or to alleviate problems caused by such breaches. Concerns over the
security of transactions conducted on the Internet and other online services and
the privacy of users may also inhibit the growth of the Internet and other
online services generally, and the Web in particular, especially as a means of
conducting commercial transactions. To the extent that activities of the Company
or third-party contractors involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage the
Company's reputation and expose the Company to a risk of loss or litigation and
possible liability. There can be no assurance that the Company's security
measures will prevent security breaches or that failure to prevent such security
breaches will not have a material adverse effect on the Company's business,
prospects, financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL. The
Company's performance will be substantially dependent on the continued services
and on the performance of its senior management and other key personnel,
particularly Henry E. Cartwright, its Chairman of the Board, Gary Moore, its
President, and Keith Veltre, the President of the Company's subsidiary, Unique
Images. The Company's performance also depends on the Company's ability to
retain and motivate its other officers and key employees. The loss of the
services of any of its executive officers or other key employees could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. The Company does not have long-term
employment agreements with any of its key personnel other than Keith Veltre and
maintains no "key person" life insurance policies. The Company's future success
also depends on its ability to identify, attract, hire, train, retain and
motivate other highly skilled technical, managerial, merchandising, marketing
and customer service personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to successfully attract,
assimilate or retain sufficiently qualified personnel. The failure to retain and
attract the necessary technical, managerial, merchandising, marketing and
customer service personnel could have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
RELIANCE ON SUPPLIERS. The Company will purchase a majority of its
products from in excess of 70 vendors. The Company intends to carry minimal
inventory and to rely to a large extent on rapid fulfillment from its vendors.
The Company has no long-term contracts or arrangements with any of its vendors
that guarantee the availability of merchandise, the continuation of particular
payment terms or the extension of credit limits. There can be no assurance that
the Company's current vendors will continue to sell merchandise to the Company
on current terms or that the Company will be able to establish new or extend
current vendor relationships to ensure acquisition of merchandise in a timely
and efficient manner and on acceptable commercial terms. If the Company were
unable to develop and maintain relationships with vendors that would allow it to
obtain sufficient quantities of merchandise on acceptable commercial terms, its
business, prospects, financial condition and results of operations would be
materially adversely affected.
-11-
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES. The Company is not
currently subject to direct regulation by any domestic or foreign governmental
agency, other than regulations applicable to businesses generally, and laws or
regulations directly applicable to access to online commerce. However, due to
the increasing popularity and use of the Internet and other online services, it
is possible that a number of laws and regulations may be adopted with respect to
the Internet or other online services covering issues such as user privacy,
pricing, content, copyrights, distribution and characteristics and quality of
products and services. Furthermore, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may decrease the
growth of the Internet or other online services, which could, in turn, decrease
the demand for the Company's products and services and increase the Company's
cost of doing business, or otherwise have an adverse effect on the Company's
business, prospects, financial condition and results of operations. Moreover,
the applicability to the Internet and other online services of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Any such new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to the
Company's business, or the application of existing laws and regulations to the
Internet and other online services could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
SALES AND OTHER TAXES. The Company does not intend to collect sales or
other similar taxes in respect of shipments of goods into states other than
Nevada. Any new operation in states outside Nevada could subject shipments into
such states to state sales taxes under current or future laws. In October 1998,
the U.S. federal government enacted legislation prohibiting states or other
local authorities from imposing new taxes on Internet commerce for a period of
three years. This tax moratorium will last only for a limited period and does
not prohibit states or the Internal Revenue Service from collecting taxes on the
Company's income, if any, or from collecting taxes that are due under existing
tax rules. A successful assertion by one or more states or any foreign country
that the Company should collect sales or other taxes on the sale of products
could harm the Company's business.
CONTROL BY MANAGEMENT. The Company's officers and directors will
beneficially own approximately 26% of the Company's outstanding Common Stock.
Such persons together with their adult children who also own Common Stock of the
Company, acting together, will be in a position to control the Company, elect a
majority of the Company's directors, increase the authorized capital, dissolve,
merge, or sell the assets of the Company and generally direct the affairs of the
Company.
NO ASSURANCE OF PUBLIC MARKET. There is currently only a limited public
trading market for the Common Stock. There can be no assurance that a regular
trading market for the Common Stock will develop or that, if developed, it will
be sustained. Factors such as the financial results or acquisition of additional
businesses may have a significant impact on the ability of the Company to
operate profitably. This may in turn have a significant impact on the market
price of the Common Stock. Additionally, in recent years, the stock market has
experienced a high level of price and volume volatility and market prices for
the stock of many companies, particularly Internet and technology companies,
with common stock that trades in the over-the-counter market, have experienced
wide fluctuations which have not necessarily been related to the operating
performance of such companies.
NO DIVIDENDS. The Company has not paid any cash dividends to date and
does not expect to pay dividends for the foreseeable future. The Company intends
to retain earnings, if any, as necessary to finance the operation and expansion
of its business.
-12-
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL INFORMATION
The summary financial information set forth below has been derived from
the Company's financial statements and should be read in conjunction with the
financial statements and notes thereto, included elsewhere in this Registration
Statement. The operations amounts do not cover a full year since the Company was
formed in 1999. The operations amounts do not include a full year of the results
for the acquired companies as the acquisitions occurred during the fiscal year.
OPERATIONS DATA:
PERIOD FROM MARCH 2, 1999
THROUGH
DECEMBER 31, 1999
---------------------------------------
Revenues...................................................... $ 662,231
Total expenses................................................ 1,055,188
Net loss...................................................... (349,551)
Loss per share................................................ (0.08)
Weighted average shares outstanding........................... 4,172,576
BALANCE SHEET DATA
---------------------------------------
DECEMBER 31, 1999
---------------------------------------
Working capital............................................... $ 746,261
Total assets.................................................. 1,473,908
Total liabilities............................................. 283,693
Stockholders' equity.......................................... 1,190,215
- ---------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes
thereto, and the other financial information included elsewhere in this
prospectus. The period from March 2, 1999 through December 31, 1999 is referred
to as "fiscal 1999". Because this is the first year of operations for the
Company, there are no comparative amounts for prior periods.
REVENUES
Company revenues reached $662,231 in fiscal 1999 due to $294,009 in
revenues from sales by World Wide Collectibles and external sales of $368,223
from Unique Images whose operations were acquired on August 11, 1999.
EXPENSES
Cost of sales in fiscal 1999 increased to $415,330 as a result of
product costs of World Wide Collectibles and of $272,778 from Unique Images
whose operations were acquired on August 11, 1999. General and administrative
expenses increased to $557,310 in fiscal 1999. These expenses increased to
reflect the Company's
-13-
recognition opening expenses and ordinary costs. Several officers of the Company
are currently not receiving salaries from the Company. However contribution
expense has been recognized in the form of contributed capital.
OTHER INCOME (EXPENSE)
Interest expense in fiscal 1999 increased to $13,648 as a result of
loans of World Wide Collectibles and of Unique Images whose operations were
acquired on August 11, 1999. Interest income and other income in fiscal 1999
increased to $12,405 as a result of interest on cash in interest bearing bank
accounts of World Wide Collectibles and of Unique Images whose operations were
acquired on August 11, 1999
NET INCOME (LOSS)
The Net Loss in fiscal 1999 increased to $349,551 as a result of
corporate operations and due to the results of operations for World Wide
Collectibles and from Unique Images whose operations were acquired on August 11,
1999 due to matters discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had cash and cash equivalents of
$323,127. The Company had working capital of $792,861 and shareholders equity of
$1,190,215. The cash increased during fiscal 1999 as a result of the issuance of
stock and as a result of two loans from officers of the Company.
Cash flow from operations is expected to be sufficient to pay operating
costs of the Company during fiscal 2000. However the Company expects to raise
additional funds through a combination of private placements, public offerings
of its stock or bank loans in order to expand operations and increase its
technical infrastructure and inventory. However, there can be no assurance that
any additional financing, if needed to meet liquidity needs, will be available
to us on favorable terms or at all. There can be no assurance that our estimate
of foreseeable liquidity needs is accurate or that no new business developments
or other unforeseen events will not occur, any of which could result in the need
to raise additional funds. We expect that the adequacy of our operating cash
flow will depend upon:
- customer acceptance of our products;
- the continued development of the Internet market as a source for
our products;
- the intensity of our competition;
- the efficiency of operations;
- the depth of customer demand, and the effectiveness of our marketing
and promotional efforts:
RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board recently issued FAS No. 137,
`Deferral of FAS 133 Accounting for Derivatives' which delays the implementation
of that pronouncement to June 15, 2000. The Company has not determined what
effect, if any, that FAS 133 may have on our results of operations.
YEAR 2000
In the past, many computer software programs were written using two
digits rather than four to define the applicable year. As a result,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This situation is generally referred to as the "Year 2000
Problem". If such situation occurs, the potential exists for computer system
failures or miscalculations by computer programs, which could disrupt
operations.
-14-
The Company has conducted a comprehensive review of its computer
systems and other systems for the purpose of assessing its potential Year 2000
Problem. Based upon this review, the Company's management believes such systems
are compliant.
All costs related to the Year 2000 Problem were expensed as incurred,
while the cost of new hardware and software is capitalized and amortized over
its expected useful life. The costs associated with Year 2000 compliance have
not been and are not anticipated to be material to the Company's financial
position or results of operations. As of December 31, 1999, the Company incurred
costs of approximately $2,000, primarily for analysis by internal labor, related
to the system applications. The Company does not anticipate spending any
additional amounts on Year 2000 compliance matters since all of its software and
hardware was Year 2000 compliant when purchased in fiscal 1999.
In addition, the Company has communicated with its major suppliers and
vendors to determine their state of readiness relative to the Year 2000 Problem
and its possible exposure to Year 2000 issues with any such party. The suppliers
have responded indicating that they have reached operational sustainability in
all areas. However, there can be no guarantee that the systems of other
companies, which the Company's systems may rely upon, have been converted or
representations made to the Company by these parties are accurate. As a result
the failure of a major vendor or supplier to adequately address their Year 2000
Problem could have a significant adverse impact on the Company's operations.
As a result of various external risk factors, the Company could be
adversely impacted and the effect could be material regardless of the readiness
of its own systems. The most reasonable worst case scenario - if one or more of
the Company's suppliers, or its web site provider, experiences Year 2000
problems that impact their ability to provide their services, the Company's
operations could be adversely impacted. The Company has developed, and continues
to update and revise, contingency plans to address the identified risks. As of
the date of this Registration Statement, nothing has come to the Company's
attention that would indicate that any of its computer systems are unable to
operate accurately after January 1, 2000. However, the Company has been advised
that the consequences of a Year 2000 failure may not become apparent for several
weeks following January 1, 2000. Should the Company experience any problems, its
response will include seeking other suppliers who have demonstrated fully
compliant systems and the impact on its results of operations could be material.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company invests its cash and cash equivalents in FDIC insured
savings accounts which, by their nature, are not subject to interest rate
fluctuation.
As of December 31, 1999, the Company had $55,700 in borrowings. The
borrowings are primarily related to capitalized leases which, by their nature,
are not subject to interest rate fluctuations.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1997 provides a "safe harbor"
for certain forward-looking statements. Certain matters discussed in this filing
could be characterized as forward-looking statements such as statements relating
to plans for future expansion, as well as other capital spending, financing
sources and effects of regulation and competition. Such forward-looking
statements involve important risks and uncertainties that could cause actual
results to differ materially from those expressed in such forward-looking
statements.
ITEM 3. DESCRIPTION OF PROPERTY
PROPERTY
The Company currently occupies approximately 6,500 square feet of
office/retail/warehouse space at a cost of $3,250 per month pursuant to a lease
that expires on June 1, 2000 with an option to extend for an additional three
(3) year term. The Company has leased an additional 4,500 square feet of space
at a cost of
-15-
$2,250 per month for a term which commences on August 1, 1999 and expires on
June 1, 2000, with an option to extend the lease for an additional three (3)
year term.
Unique Images occupies approximately 7,616 square feet of office/
production space which it leases for $5,000 per month pursuant to a lease
which expires on September 1, 2009 with an option to extend for two five year
periods. The building is owned by the wife of the president of Unique Images.
-16-
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the shares of Common Stock as of February 29, 2000 by
(i) each person who is known by the Company to be the beneficial owner of more
than five percent (5%) of the issued and outstanding shares of Common Stock,
(ii) each of the Company's directors and executive officers and (iii) all
directors and executive officers as a group. Each stockholder listed below has
sole voting power and investment power with respect to the shares beneficially
owned by such person.
NUMBER OF PERCENTAGE
NAME AND ADDRESS SHARES OWNED
- --------------------------------------------------------- ---------------------- ---------------------
Gary Moore(1) 559,000 8.4%
Henry E. Cartwright(1) 500,000 7.5%
Keith Veltre(2) 500,000 7.5%
Paul Heroy(1) 345,000 5.2%
Tom Pitch(1) 335,000 5.0%
Dixie Cartwright(1) 125,000 1.9%
Joseph P. Flynn(3) 50,000 (4)
Dalton L. Conners(5) 46,900 (4)
All Directors and Officers
as a group (6 persons) 1,780,900 26.8%
- ---------------
(1) Address is 9155 Las Vegas Boulevard South, Suite 242, Las Vegas, Nevada
89123.
(2) Address is 6080 East Burnham Avenue, Suite 28, Las Vegas, Nevada 89119.
(3) Address is 8236 E. Sands Drive, Scottsdale, AZ 85255.
(4) Less than one percent.
(5) Address is 32 Paladin Court, Henderson, NV 89014.
-17-
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
- -------------------------------------- ---------- -------------------------------------------------------
Henry E. Cartwright 60 Chairman of the Board of Directors
Gary Moore 54 President and Director
Joseph Flynn 60 Director
Keith Veltre 28 Director
Dalton L. Conners 54 Director
Dixie Cartwright 60 Secretary and Treasurer
Mr. Cartwright has served as Chairman of the Board of the Company since
September 1999. Mr. Cartwright is a private investor in numerous real estate,
lending transactions and other ventures. Mr. Cartwright served as Chairman of
the Board of Major Video Corp. from December 1982 until its merger with
Blockbuster Entertainment Corporation in January 1989. In September 1993, Mr.
Cartwright founded Back to the 50's, Inc., a company that sold 50's and 60's
memorabilia through a mail order catalog and showroom. Back to the 50's, Inc.
was acquired by Crowne Ventures, Inc. in November 1995. Mr. Cartwright served as
director of Crowne Ventures, Inc. from 1995 until he resigned in April 1998.
Mr. Moore has served as the President of the Company and as director
since September 1999. Mr. Moore is a private investor. Mr. Moore was the
President and Chief Operations Officer of Major Video Corp. from 1984 until its
merger with Blockbuster Entertainment Corp. in 1989. Mr. Moore continues to be a
Blockbuster Video franchisee.
Mr. Flynn has served as a director of the Company since September
1999. From 1987 through the present, Mr. Flynn has been the legal counsel for
Gaelic Management, Inc., which provides legal, management, franchise, merger
and acquisitions and operations consulting to restaurant, real estate
development, communications, aircraft maintenance and athletic supply chains
for affiliated and unrelated domestic and international companies.
Mr. Veltre has served as a director of the Company since September
1999 and President of Veltre Enterprises, Inc. dba Unique Images, a subsidiary
of the Company. Unique Images is a supplier of novelty and autographed
collectibles that was founded by Mr. Veltre in 1996.
Mr. Conners has served as a director of the Company since September
1999. Since 1998, Mr. Conners has been a private investor and financial
consultant. For thirty years prior thereto, Mr. Conners was employed in the
commercial banking business and served in the positions of Vice President and
Branch Manager, Area Sale Manager, Manager Automobile Lending Center and Senior
Commercial Real Estate Officer.
Mrs. Cartwright has served as the Secretary and Treasurer of the
Company since September 1999. Mrs. Cartwright is a private investor. From 1983
until 1989, Mrs. Cartwright managed all aspects of the office operations of
Major Video Corp. From 1993 to 1995, Mrs. Cartwright managed all aspects of the
office and financial operations of Back to the 50's, Inc.
Each director serves for a term of one year or until his or her
successor has been elected and qualified. Each executive officer serves at the
pleasure of the Board of Directors. Henry E. Cartwright and Dixie Cartwright
are husband and wife. Gary Moore and Dixie Cartwright are brother and sister.
-18-
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION OF OFFICERS AND DIRECTORS. The following table sets forth
the cash compensation the Company paid to its executive officers for services
rendered from its inception in March 1999 through December 31, 1999.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- ----------------------------
COMMON
OTHER RESTRICTED SHARES ALL OTHER
ANNUAL STOCK UNDERLYING COMPENSATION
NAME AND YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS n (1)
POSITION ($) GRANTED
(# SHARES)
- --------------------- ------- ----------- -------- --------------- -------------- --------------- ----------------
Gary Moore, 1999 -0- -0- -0- -0- -0- -0-
President
Keith Veltre, 1999 26,000(1)
President of Unique
Images
- --------------------
(1) Represents salary paid to Mr. Veltre since September 1999 following the
Company's acquisition of Unique Images.
Since its inception in March 1999, the Company has paid no salaries
to any of its executive officers other than Keith Veltre, the President of
Unique Images. No salaries have been accrued although amounts have been
included in the income statement and as contributed capital for the value of
such services. It is anticipated that payment of salaries will commence at such
time as the Company's operations have generated sufficient cash flow to enable
the payment of salaries. The Company has not yet determined the amount or
timing of the payment of salaries to its executive and management personnel and
will do so in the discretion of its officers and directors. Directors do not
receive compensation for their services.
EMPLOYMENT CONTRACTS. The Company has an employment contract with
Keith Veltre, the President of the Company's wholly-owned subsidiary, Veltre
Enterprises, Inc. The employment contract with Mr. Veltre is for a period of
five years commencing in September 1999 and provides for compensation of $6,500
per month.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
LOANS FROM RELATED PARTIES
As of September 30, 1999, Henry E. Cartwright, the Company's Chairman
of the Board and Gary Moore, the Company's President, have each loaned the
Company $50,000. Each of these loans bear interest at the rate of eight percent
(8%) per annum and are all due and payable on July 1, 2000. In addition, Mr.
Cartwright sold the Company inventory owned by him for a promissory note in the
amount of $31,943 payable on the same terms as the loans mentioned above.
During July 1999, the Company issued notes totaling $200,000 to six
shareholders in connection with the issuance of shares of the Company's Common
Stock. The notes bear interest at a rate of 8% per annum with all principal and
interest due July 31, 2004. During 1999, Mr. Cartwright, the Company's
Chairman, exchanged $67,778 of his note payable for the same amount of the
notes receivable of two of the above-mentioned shareholders. In addition, Mr.
Moore, the Company's President, exchanged $33,889 of his note payable for the
note payable of one of the remaining shareholder mentioned above.
-19-
ACQUISITION
On August 11, 1999, americaBILIA.com Nevada acquired all of the
outstanding common stock of Veltre Enterprises, Inc. dba Unique Images. Unique
Images was wholly owned by Keith Veltre who at the time of the transaction owned
8% of the common stock of americaBILIA.com Nevada. The purchase price paid for
Unique Images consisted of (i) $200,000 in cash, (ii) a Promissory Note in the
original principal amount of $200,000 and (iii) 100,000 shares of common stock
of americaBILIA.com Nevada. The Promissory Note was paid in full in November
1999. As part of the purchase, the Company agreed to lease from Mr. Keith Veltre
and his affiliates the premises that are used for Unique Images' business
operations as well as certain business equipment.
ITEM 8. LEGAL PROCEEDINGS.
There are no pending legal proceedings to which the Company or the
property of the Company is subject. In addition, no other such proceedings are
known to be contemplated against the Company.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS.
The Company's Common Stock has been listed on the OTC Bulletin Board
under the symbol "ABIL" since September 16, 1999. Set forth in the following
table are the high and low bid quotations for the Company's Common Stock for
each of the quarters of the fiscal year ended December 31, 1999 during which
the Common Stock was listed. The Company considers its Common stock to be
thinly traded and that any reported bid or sale prices may not be a true
market-based valuation of the Common Stock. The quotations represent
inter-dealer quotations without retail markups, markdowns or commissions and
may not represent actual transactions.
QUARTER ENDED HIGH LOW
- ------------- ---- ---
September 30, 1999 $ 20.60 $10.75
December 31, 1999 $ 14.31 $9.50
As of February 29, 2000, there were approximately 560 record holders
of the Company's Common Stock.
The Company has not paid any cash dividends since its inception and
does not contemplate paying dividends in the foreseeable future. It is
anticipated that earnings, if any, will be retained for the operation of the
Company's business.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years the Company sold unregistered shares of
its Common Stock in only one transaction. In August 1999, pursuant to an
Agreement and Plan of Reorganization dated August 31, 1999, the holders of all
of the issued and outstanding capital shares of americaBILIA.com Nevada
transferred those shares to the Company in exchange for the Company's issuance
of 6,115,000 shares of Common Stock. There was no underwriter involved in this
issuance. The issuance was conducted pursuant to Rule 506 under the 1933 Act.
ITEM 11. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value, of which, as of the date hereof, 6,652,692 shares are issued
and outstanding and held of record by approximately 550 persons. Holders of
shares of Common Stock are entitled to one vote per share on all matters to be
voted upon by the shareholders generally. The approval of proposals submitted
to shareholders at a meeting other than for the election of directors requires
the favorable vote of a majority of the shares voting, except in the case of
certain
-20-
fundamental matters (such as certain amendments to the Articles of
Incorporation, and certain mergers and reorganizations), in which cases Florida
law and the Company's Bylaws require the favorable vote of at least a majority
of all outstanding shares. Stockholders are entitled to receive such dividends
as may be declared from time to time by the Board of Directors out of funds
legally available therefor, and in the event of liquidation, dissolution or
winding up of the Company to share ratably in all assets remaining after
payment of liabilities. The holders of shares of Common Stock have no
preemptive, conversion or subscription rights.
STOCK OPTION PLAN
The Company has adopted a 1999 Stock Option Plan ("Plan"), which
permits the Company to grant options to its employees, officers, directors,
consultants and independent contractors. The Company may issue an aggregate of
600,000 shares of Common Stock pursuant to the Plan. The Plan is governed by
the board of directors, which has the power to determine the terms of any
options granted, including the exercise price, the number of shares subject to
the option, and the exercisability thereof. Options under the Plan generally
are not transferable, and each option is exercisable during the lifetime of the
optionee only by such optionee. Stock options can be exercised at any time
before expiration after they are vested. As of the date of this Registration
Statement, the Company has granted options under the Plan to purchase an
aggregate of 25,000 shares of Common Stock at an exercise price of $1.00 to
certain employees of its subsidiary, Unique Images.
DIVIDENDS
The Company has never paid dividends and does not anticipate the
payment of cash dividends on its common stock in the foreseeable future.
-21-
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
FLORIDA STATUTES
Section 607.0850 of the General Corporation law of the State of Florida
provides as follows:
"Section 607.0850 --Indemnification of officers, directors, employees,
and agents.--
(1) A corporation shall have power to indemnify any person who was or
is a party to any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he or she is or was a director,
officer, employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
liability incurred in connection with such proceeding, including any appeal
thereof, if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in, or not opposed to, the best interests of the corporation or, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(2) A corporation shall have power to indemnify any person, who was or
is a party to any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made under
this subsection in respect of any claim, issue, or matter as to which such
person shall have been adjudged to be liable unless, and only to the extent
that, the court in which such proceeding was brought, or any other court of
competent jurisdiction, shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
(3) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (1) or subsection (2), or in defense of any
claim, issue, or matter therein, he or she shall be indemnified against expenses
actually and reasonably incurred by him or her in connection therewith.
(4) Any indemnification under subsection (1) or subsection (2), unless
pursuant to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in subsection (1) or
subsection (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable,
by majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two or
more directors not at the time parties to the proceeding;
(c) By independent legal counsel:
-22-
1. Selected by the board of directors prescribed in
paragraph (a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained
for paragraph (a) and the committee cannot be designated under paragraph (b),
selected by majority vote of the full board of directors (in which directors who
are parties may participate); or
(d) By the shareholders by a majority vote of a quorum
consisting of shareholders who were not parties to such proceeding or, if no
such quorum is obtainable, by a majority vote of shareholders who were not
parties to such proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (4)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he or she is ultimately found
not to be entitled to indemnification by the corporation pursuant to this
section. Expenses incurred by other employees and agents may be paid in advance
upon such terms or conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and a corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not be made to
or on behalf of any director, officer, employee, or agent if a judgment or other
final adjudication establishes that his or her actions, or omissions to act,
were material to the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director,
officer, employee, or agent had reasonable cause to believe his or her conduct
was lawful or had no reasonable cause to believe his or her conduct was
unlawful;
(b) A transaction from which the director, officer, employee,
or agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(9) Unless the corporation's articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting the
proceeding, to the circuit court, or to another court of competent jurisdiction.
On receipt of an application, the
-23-
court, after giving any notice that it considers necessary, may order
indemnification and advancement of expenses, including expenses incurred in
seeking court-ordered indemnification or advancement of expenses, if it
determines that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (3), in which case the court shall
also order the corporation to pay the director reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both,
in view of all the relevant circumstances, regardless of whether such person
met the standard of conduct set forth in subsection (1), subsection (2), or
subsection (7).
(10) For purposes of this section, the term "corporation" includes,
in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger, so that any person who is or was a director, officer, employee, or
agent of a constituent corporation, or is or was serving at the request of a
constituent corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, is in
the same position under this section with respect to the resulting or
surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit
plans;
(b) The term "expenses" includes counsel fees, including those
for appeal;
(c) The term "liability" includes obligations to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and reasonably
incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation"
includes any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties relating to an
employee benefit plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the
corporation" describes the actions of a person who acts in good faith and in a
manner he or she reasonably believes to be in the best interests of the
participants and beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against the
person and incurred by him or her in any such capacity or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify the person against such liability under the provisions of this
section."
-24-
BYLAWS
The Company's Amended and Restated Bylaws provide for the
indemnification of the Company's directors, officers, employees, or agents under
certain circumstances as follows:
"ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
Section 1. ACTIONS OTHER THAN BY THE CORPORATION. The
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY THE CORPORATION. The corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and attorneys'
fees, actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 3. SUCCESSFUL DEFENSE. To the extent that a director,
officer, employee or agent of the corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2, or in defense of any claim, issue or matter therein, he must
be indemnified by the corporation against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense.
Section 4. REQUIRED APPROVAL. Any indemnification under
Sections 1 and 2, unless ordered by a court or advanced pursuant to Section 5,
must be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a
quorum consisting of directors who were not parties to the act, suit or
proceeding;
-25-
(c) If a majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 5. ADVANCE OF EXPENSES. The articles of incorporation,
the bylaws or an agreement made by the corporation may provide that the expenses
of officers and directors incurred in defending a civil or criminal action, suit
or proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. The provisions of this
section do not affect any rights to advancement of expenses to which corporate
personnel other than directors or officers may be entitled under any contract or
otherwise by law.
Section 6. OTHER RIGHTS. The indemnification and advancement
of expenses authorized in or ordered by a court pursuant to this Article VI:
(a) Does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
the articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to Section 2 or for the
advancement of expenses made pursuant to Section 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a
director, officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
Section 7. INSURANCE. The corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of this Article VI.
Section 8. RELIANCE ON PROVISIONS. Each person who shall act
as an authorized representative of the corporation shall be deemed to be doing
so in reliance upon the rights of indemnification provided by this Article.
Section 9. SEVERABILITY. If any of the provisions of this
Article are held to be invalid or unenforceable, this Article shall be construed
as if it did not contain such invalid or unenforceable provision and the
remaining provisions of this Article shall remain in full force and effect.
Section 10. RETROACTIVE EFFECT. To the extent permitted by
applicable law, the rights and powers granted pursuant to this Article VI shall
apply to acts and actions occurring or in progress prior to its adoption by the
board of directors."
ITEM 13. FINANCIAL STATEMENTS.
See pages F-1 through F-32.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
-26-
Deloitte & Touche, LLP, Las Vegas, Nevada, was engaged as the Company's
independent accountants. During the Company's fiscal years ended December 31,
1999, the Company did not consult Deloitte & Touche LLP regarding (i) either the
application of accounting principles to a specified transaction or the type of
audit opinion that might be rendered on the Company's financial statements, or
(ii) any matter that was the subject of a disagreement or was a reportable
event.
ITEM 15. INDEX TO EXHIBITS
EXHIBIT NO.
2.1 Agreement and Plan of Reorganization dated August 31, 1999
3.1 Certificate of Incorporation of the Company
3.2 Amended and Restated Bylaws of the Company
3.3 Amendment to Articles of Incorporation filed June 20, 1996
3.4 Amendment to Articles of Incorporation filed November 15, 1996
3.5 Amendment to Articles of Incorporation filed September 7, 1999
4.1 Specimen of Common Stock Certificate
10.1 The Company's 1999 Stock Option Plan
10.2 Stock Purchase Agreement between the Company and Keith Veltre dated July 23, 1999
10.3 Employment Agreement between the Company and Keith Veltre, dated August 11, 1999
10.4 Promissory Note of the Company in favor of Henry E. Cartwright dated November 30, 1999
10.5 Promissory Note of the Company in favor of Gary Moore dated November 30, 1999
10.6 Lease Agreement between the Company and KPT REMIC Loan LLC dated May 7, 1999
10.7 Commercial Lease Agreement between the Company and Tricia Veltre dated as of September 1, 1999
21.1 Subsidiaries
27.1 Financial Data Schedule
- -----------------------------
-27-
INDEX TO FINANCIAL STATEMENTS
AMERICABILIA.COM, INC.
Independent Auditors' Reports..........................................................................F-1
Consolidated Balance Sheet dated December 31, 1999.....................................................F-2
Consolidated Statement of Income for the period from March 2, 1999 (date of inception)
through December 31, 1999............................................................................F-4
Consolidated Statement of Stockholders' Equity for the period from March 2, 1999
(date of inception) through December 31, 1999........................................................F-5
Consolidated Statement of Cash Flows for the period from March 2, 1999
(date of inception) through December 31, 1999........................................................F-6
Notes to Consolidated Financial Statements ............................................................F-7
UNIQUE IMAGES, INC.
Independent Auditors' Reports.........................................................................F-22
Balance Sheets dated August 10, 1999 and December 31, 1998 and 1997...................................F-23
Statements of Income for the period from January 1, 1999 to August 10, 1999 and
the years ended December 31, 1998, 1997 and 1996....................................................F-24
Statements of Stockholders' Equity from January 1, 1999 to August 10, 1999 and
the years ended December 31, 1998, 1997 and 1996....................................................F-25
Statements of Cash Flows from January 1, 1999 to August 10, 1999 and
the years ended December 31, 1998, 1997 and 1996....................................................F-26
Notes to Consolidated Financial Statements ...........................................................F-27
-28-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
americabilia.com, Inc.
We have audited the accompanying consolidated balance sheet of americabilia.com,
Inc. (the "Company") as of December 31, 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the period
from March 2, 1999 (date of inception) through December 31, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements, present fairly, in all
material respects, the consolidated financial position of the Company as of
December 31, 1999, and the consolidated results of its operations and its cash
flows for the period from March 2, 1999 (date of inception) through December 31,
1999, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 5, 2000
F-1
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
- -------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 323,127
Accounts receivable, net 236,583
Inventories 446,448
Prepaid expenses and deposits 23,796
-----------
Total current assets 1,029,954
-----------
PROPERTY AND EQUIPMENT, Net 154,399
GOODWILL, Net 282,061
OTHER ASSETS 7,494
-----------
TOTAL $1,473,908
-----------
-----------
See accompanying notes to consolidated financial statements.
(Continued)
F-2
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 224,422
Current portion of long-term debt 9,122
Income taxes payable 3,549
-----------
Total current liabilities 237,093
-----------
LOANS FROM SHAREHOLDERS 34,508
LONG-TERM DEBT, Less current portion 12,092
-----------
Total liabilities 283,693
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; authorized 50,000,000 shares; 6,652,690 shares
issued and outstanding 6,653
Additional paid-in capital 1,637,525
Notes receivable from shareholders for stock (104,412)
Accumulated deficit (349,551)
-----------
Total stockholders' equity 1,190,215
-----------
TOTAL $1,473,908
-----------
-----------
See accompanying notes to consolidated financial statements.
(Concluded)
F-3
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM MARCH 2, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------
REVENUES:
Retail/wholesale $ 662,231
Cost of sales 415,330
-----------
Gross profit 246,901
OPERATING EXPENSES:
General and administrative expenses 431,301
Marketing expenses 126,009
Depreciation and amortization 34,368
Organization costs 34,532
-----------
Total operating expenses 626,210
-----------
LOSS FROM OPERATIONS BEFORE INTEREST AND TAXES (379,309)
OTHER INCOME (EXPENSE):
Interest expense (13,648)
Other 12,405
-----------
Total other (1,243)
-----------
LOSS FROM OPERATIONS BEFORE INCOME TAXES (380,552)
PROVISION (BENEFIT) FOR INCOME TAXES -
Deferred tax benefit (31,001)
-----------
NET LOSS $(349,551)
-----------
-----------
EARNINGS PER SHARE:
Basic:
Net loss $(349,551)
-----------
-----------
Weighted average common shares outstanding 4,172,576
-----------
-----------
Loss per share $0.08
-----------
-----------
See accompanying notes to consolidated financial statements.
F-4
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM MARCH 2, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 1999
- ------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL RECEIVABLE NOTES
------------------- PAID-IN FROM ACCUMULATED
SHARES AMOUNT CAPITAL SHAREHOLDERS DEFICIT TOTALS
BALANCE, MARCH 2, 1999
(Date on inception) - $ - $ - $ - $ - $ -
Proceeds from issuance
to original investors 5,000,000 5,000 495,000 (200,000) 300,000
Proceeds from private placement 1,000,000 1,000 989,178 990,178
Stock issued in connection with
acquisition 100,000 100 99,900 100,000
Stock options exercised 15,000 15 14,985 15,000
Effect of a reverse merger accounted
for as a recapitalization 537,690 538 (538)
Interest income from notes
receivable from shareholders (3,412) (3,412)
Contributed services of officers
and employees 39,000 39,000
Loans payable to officers exchanged
for shareholder loans 99,000 99,000
Net loss (349,551) (349,551)
--------- ------ ---------- --------- ---------- ----------
BALANCE,
DECEMBER 31, 1999 6,652,690 $6,653 $1,637,525 $(104,412) $(349,551) $1,190,215
--------- ------ ---------- --------- ---------- ----------
--------- ------ ---------- --------- ---------- ----------
See accompanying notes to consolidated financial statements.
F-5
AMERICABILIA.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM MARCH 2, 1999 TO DECEMBER 31, 1999
- -------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net loss $(349,551)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 34,368
Provision for bad debts (150)
Contributed services of officers and employees 39,000
Deferred income taxes (7,600)
Changes in operating assets and liabilities, net of effects from acquisition
of businesses:
Increase in trade accounts receivable (10,511)
Increase in inventories (410,768)
Increase in prepaid assets and deposits (8,447)
Decrease in other assets 24,875
Increase in trade accounts payable and accrued expenses 152,244
Decrease in income taxes payable (20,100)
---------
Net cash used in operating activities (556,640)
---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment (103,998)
Acquisition of business, net of cash acquired (394,434)
---------
Net cash used in investing activities (498,432)
---------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Net payments on long-term borrowings (26,979)
Loans from shareholders 100,000
Common stock issued 1,305,178
---------
Net cash provided by financing activities 1,378,199
---------
INCREASE IN CASH AND CASH EQUIVALENTS 323,127
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD -
---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $323,127
---------
---------
See accompanying notes to consolidated financial statements.
(Continued)
F-6
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Stock issued for notes receivable $ 104,412
Inventory acquired through loan to shareholder 34,506
The Company purchased all of the capital stock of Unique Images for $500,000.
In conjunction with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired through purchase of Unique Images, Inc. 586,128
Cash paid for capital stock (400,000)
---------
Liabilities assumed through purchase of Unique Images, Inc. $ 186,128
---------
---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
Cash paid during the year for:
Interest $ 12,842
Taxes -
See accompanying notes to consolidated financial statements.
F-7
(Concluded)
AMERICABILIA.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - americabilia.com, Inc., a Florida corporation
(the "Company"), is engaged in direct internet merchandising of
American-themed collectibles, gifts, and memorabilia. The Company
manufactures and assembles its own products and also purchases products
from a number of sources. The Company's products are marketed on an
internet shopping site, www.americabilia.com. The Company strives to offer
its customers a broad selection of products, a convenient shopping
experience, and competitive pricing. The Company commenced with
organizational and operational activities on March 2, 1999 in Nevada as
americabilia.com. On August 11, 1999, the Company acquired the outstanding
capital stock of Veltre Enterprises, Inc. dba Unique Images. Unique Images
designs and manufactures Hollywood and sports memorabilia for fine art and
memorabilia galleries. Unique Images also provides high volume and custom
picture framing services. Unique Images uses computerized joiner and mat
cutting equipment.
On September 17, 1999, the Company merged into Terra Pharmaceuticals
International, Inc. ("Terra") a shell corporation with approximately 300
shareholders of record (the "Shell Reorganization"). The Shell
Reorganization was accomplished pursuant to Rule 506 of Regulation D of
the Securities Act of 1933. Terra issued one share of common stock in
exchange for each of the issued and outstanding shares of the Company. The
issued stock cannot be traded for one year. Following the Shell
Reorganization, the shareholders of the Company prior to the merger, owned
approximately ninety-one percent (91 percent) of the outstanding common
stock of Terra. Terra changed its name to americabilia.com, Inc. For
accounting purposes, the acquisition has been treated as a
recapitalization of americabilia.com with americabilia.com as the acquirer
(reverse merger). As a result of this transaction the Company became a
publicly traded company.
During the period ended December 31, 1999, certain shareholders provided
services for the Company. The accompanying financial statements for the
period ended December 31, 1999 include contributions to capital
representing estimates of compensation costs for services rendered to the
Company by the executive officers of the Company upon commencement of
sales. These contributions, which amounted to $60,000 for the period ended
December 31, 1999, were based on management's estimate of time expended on
the Company's behalf by the executive officers. Such contributions have
been accounted for with charges to operations and with credits net of tax
effects in like amounts to paid-in capital.
It is anticipated that payment of salaries will commence at such a time as
the Company's operations have generated sufficient cash flow to enable the
payment of salaries. The Company has not yet determined the amount or
timing of the payment of salaries to certain of its executive personnel
and will do so at the discretion of its officers and directors. The
Company will continue to estimate and record compensation costs for
services rendered by executive officers as charges to operations and
credits in like amounts to paid-in capital.
BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries. All material
intercompany transactions and accounts have been eliminated in
consolidation. Results of operations of the acquisition of Unique Images,
Inc., as described in Note 3, accounted for using the purchase method, are
included from its date of acquisition. The period from March 2, 1999
through December 31, 1999, is herein referred to as "fiscal 1999."
F-8
CASH AND CASH EQUIVALENTS - Cash and cash equivalents are defined as
highly liquid investments with original maturities of three months or less
and at December 31, 1999 consist of amounts held as bank deposits.
ACCOUNTS RECEIVABLE - The Company's accounts receivable principally result
from credit sales to third-party customers. Allowances for doubtful
accounts are made when management believes that accounts are
uncollectible.
INVENTORIES - Inventories, consisting primarily of framed
celebrity-autographed memorabilia pictures and collectibles, are valued at
the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method for both raw materials and finished goods.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Equipment under capital leases is stated at the present value of future
minimum lease payments. Depreciation and amortization is provided in
amounts sufficient to allocate the cost of depreciable or amortizable
assets to operations over their estimated service lives or the lease term,
using the straight-line method. The estimated service lives are generally
as follows:
Machinery and equipment 5-10 years
Vehicles 5-7 years
Office furniture and equipment 3-7 years
Leasehold improvements 5-10 years
GOODWILL - The excess of cost over the fair value of net assets of
purchased companies (goodwill) is being amortized by the straight-line
method over 5 years. As of December 31, 1999, unamortized goodwill was
$282,061, net of accumulated amortization of $20,147. Goodwill and other
intangibles are reassessed annually to determine whether any potential
impairment exists.
RETAIL AND WHOLESALE REVENUES - Retail and wholesale revenues are
recognized as the products are sold and shipped to customers. Revenues are
shown net of returns.
ADVERTISING AND PROMOTIONAL COSTS - All advertising and promotional costs
associated with advertising and promoting the Company's lines of business
are expensed in the period incurred.
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and
circumstances indicate that the carrying value of long-lived assets,
including associated intangibles, may be impaired, an evaluation of
recoverability is performed by comparing the estimated future undiscounted
cash flows associated with the asset to the asset's carrying amount to
determine if a write-down to market value or discounted cash flow is
required. As of December 31, 1999, no adjustments or write-downs were
required.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
approximated their fair values because of the short maturity of these
instruments. The fair value of the Company's notes payable and long-term
debt is estimated based on quoted market prices for the same or similar
issues or on current rates offered to the Company for debt of the same
remaining maturities. At December 31, 1999, the aggregate fair value of
the Company's notes payable and long-term debt approximated its carrying
value.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting
for Income Taxes." Under the asset and liability method with SFAS No. 109,
deferred income taxes are required for the tax consequences of
F-9
temporary differences by applying enacted statutory rates applicable to
future years to the difference between the financial statement carrying
amounts and the tax bases of existing assets and liabilities. Under
SFAS No. 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
NET INCOME PER SHARE - Basic earnings per share ("EPS") is computed by
dividing the net income available to common stockholders by the weighted
average of common shares outstanding during the period. Dilutive earnings
per share was not presented, as its effect was not material to the
financial statements for fiscal years presented. When applicable, the
Company's diluted EPS will include the dilutive effect of potential stock
options and certain warrant exercises, calculated using the treasury stock
method.
STOCK-BASED COMPENSATION - SFAS No. 123 provides companies with a choice
to follow the provisions of SFAS No. 123 in determination of stock-based
compensation expense or to continue with the provisions of the Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees." The Company continues to follow APB No. 25 and will provide
pro forma disclosure as required by SFAS No. 123 in the notes to the
consolidated financial statements.
RECENTLY ISSUED ACCOUNTING STANDARDS - The Financial Accounting Standards
Board ("FASB") issued SFAS No. 133, "Accounting for Derivatives," which is
effective for fiscal years beginning after June 15, 2000. This statement
defines derivatives and requires qualitative disclosure of certain
financial and descriptive information about a company's derivatives. The
Company will adopt SFAS No. 133 in the year ending December 31, 2001.
Management has not finalized its analysis of this SFAS or the impact on
the Company.
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 amounts reported in the
consolidated financial statements and related notes to the consolidated
financial statements. Estimates are used when accounting for uncollectible
accounts receivable, inventory obsolescence, depreciation, taxes,
contingencies, and sales returns. Actual results could differ from those
estimated by management and changes in such estimates may affect amounts
reported in future periods.
2. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk are cash and cash equivalents and accounts
receivable arising from its normal business activities.
Regarding retail accounts receivable, the Company believes that credit
risk is limited due to the large number of entities comprising the
Company's customer base. The Company performs certain credit evaluation
procedures and does not require collateral. The Company believes that
credit risk is limited because the Company routinely assesses the
financial strength of its customers, and based upon factors surrounding
the credit risk of customers, establishes an allowance for uncollectible
accounts and, as a consequence, believes that its accounts receivable
credit risk exposure beyond such allowances is limited. The Company
believes that credit risk beyond this amount, if any, would be negligible.
Changes in the allowance for doubtful accounts for fiscal 1999 consist of
the following:
F-10
Beginning balance (acquired from Unique Images) $6,914
Recoveries of allowances 150
------
Ending balance $6,764
------
------
3. BUSINESS COMBINATIONS
On August 11, 1999, the Company acquired the outstanding capital stock of
Veltre Enterprises, Inc. dba Unique Images. The purchase price paid for
Unique Images consisted of (i) $200,000 in cash and $200,000 by delivery
of a Promissory Note and (ii) 100,000 shares of common stock of the
Company. The Promissory Note was paid in full in November 1999. As part of
the purchase, the Company entered into leases with Mr. Keith Veltre and
his affiliates for the premises being used in Unique Images' business
operations and certain business equipment.
The fair value of Unique Images' assets and liabilities at the date of
acquisition are presented below.
Cash and cash equivalents $ 5,566
Accounts receivable, net 225,922
Inventories 35,680
Prepaid expenses and deposits 15,349
Other assets 36,784
Property and equipment, net 64,622
Accounts payable and accrued expenses (72,178)
Income taxes payable (23,649)
Deferred taxes (7,600)
Debt (82,701)
--------
Net assets acquired $ 197,795
--------
--------
The transaction was recorded as a purchase. The resulting goodwill of
$302,208 is being amortized over five years.
On September 21, 1999, the Company merged with Terra. The shareholders of
americabilia.com exchanged 100 percent of their stock for approximately 91
percent of the stock of Terra. The transaction was accounted for as a
recapitalization of the Company. Terra had no assets or liabilities. At
the date of the merger, the financial position of Terra reflected $397,000
of accumulated deficit and an equal amount of additional paid-in capital
and common stock. Its net equity was equal to $0. Terra had no operations
for the years ended 1999, 1998, or 1997.
The following unaudited pro forma information has been prepared assuming
Unique Images had been acquired as of the beginning of the period
presented. The pro forma information is presented for information purposes
only and is not necessarily indicative of what would have occurred if the
acquisition had been made as of those dates. In addition, the pro forma
information is not intended to be a projection of futures results and does
not reflect synergies expected to result from the integration of Unique
Images and the Company's operations. Terra had no operations for the
period, and, accordingly, no separate disclosure is presented.
Pro forma information (unaudited), for the period from March 2, 1999
through December 31, 1999, is as follows (dollars in thousands, except per
share amounts):
F-11
Sales and other income $ 1,350,578
-----------
-----------
Net loss from operations $ (171,031)
-----------
-----------
Loss per share from continuing operations $ 0.04
-----------
-----------
F-12
4. INVENTORIES
The components of inventories, for the period from March 2, 1999 through
December 31, 1999, are as follows:
Memorabilia and collectibles $344,886
Raw materials 101,562
--------
Total $446,448
--------
--------
5. PROPERTY AND EQUIPMENT
The components of property and equipment as of December 31, 1999, are as
follows:
Machinery and equipment $ 58,400
Vehicles 4,500
Office furniture and equipment 79,179
Leasehold improvements 26,541
--------
168,620
Less accumulated depreciation and amortization 14,221
--------
Total $154,399
--------
--------
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following at
December 31, 1999:
Accounts payable and accrued expenses $210,001
Accrued interest payable 225
Payroll and related costs (including commissions) 14,196
--------
Total $224,422
--------
--------
7. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1999:
F-13
Notes payable to related parties (company shareholders), interest at 8%, due
November 30, 2004, unsecured $34,508
Capitalized lease obligations with interest at 9.569% and 13.376% collateralized
by certain manufacturing equipment 20,764
Other debt 450
-------
Total debt 55,722
Less current portion 9,122
-------
Long-term debt $46,600
-------
-------
At December 31, 1999, annual maturities on long-term debt and capitalized
lease obligations were as follows:
2000 $ 9,122
2001 8,705
2002 3,387
2003 -
2004 34,508
Thereafter -
-------
$55,722
-------
-------
8. LEASES
The Company leases certain office space, warehouse, and equipment. The
Company paid $58,570 in rent expense for the period from March 2, 1999
through December 31, 1999. See Note 12 regarding the lease on the building
for Unique Images. The Company rents its corporate offices and retail
store in two adjoining spaces with monthly rentals of $3,250 and $2,250
whose leases expire in June of 2000. Commitments for minimum rentals under
noncancelable leases at the end of 1999 are as follows:
CAPITALIZED OPERATING
LEASE LEASE
----------- ----------
2000 $ 10,500 $ 114,982
2001 9,541 62,232
2002 3,936 62,232
2003 - 61,116
2004 - 60,000
Thereafter - 280,000
---------- ----------
Total minimum lease payments 23,977 $ 640,562
Less amount representing interest 3,213 ----------
---------- ----------
Present value of net minimum lease payments, including
current maturities of $8,672 $ 20,764
----------
----------
F-14
Property and equipment at year-end include the following amounts for
capitalized leases:
Machinery and equipment $25,251
Less allowance for depreciation 2,323
-------
$22,928
-------
-------
9. STOCKHOLDERS' EQUITY
COMMON STOCK - In June and July of 1999 through July 15, 1999, the Company
issued 5,000,000 common shares valued at $.10 per share or $500,000 to the
original investors of the Company. The stock was restricted from trading
for a period of one year after issuance.
F-15
During August and September of 1999, the Company issued 1,000,000 shares
at $1.00 per share of its authorized, but unissued common stock in a
private placement. The proceeds from the sale of stock, net of issuance
costs of $9,822, totaled $990,178. The stock was restricted from trading
for a period of one year after issuance.
NOTES RECEIVABLE FROM SHAREHOLDERS - In June of 1999, the Company issued
notes totaling $200,000 to six shareholders in connection with the
issuance of 2,000,000 shares of stock. The stock was restricted from
trading for a period of one year after issuance. The notes bear interest
at 8 percent per annum with principal and interest due December 31, 2000
(see Note 12).
EARNINGS PER SHARE - Basic Earnings Per Share ("EPS") is computed by
dividing net income by the weighted average number of common shares
outstanding for the period. Diluted EPS is computed by dividing net income
by common and common equivalent shares outstanding for the period. Options
to purchase common stock, whose exercise price was greater than the
average market price for the period, have been excluded from the
computation of diluted EPS. For fiscal 1999, there were no dilutive
options as the options would have been anti-dilutive due to the net loss
for the period.
STOCK OPTIONS - During fiscal 1999, the Company's Board of Directors
adopted a stock option plan for certain employees ("Optionees") whereby
Optionees are granted the right to purchase shares of the Company's common
stock at a price of $1.00. The options generally vest immediately and
expire one year after grant. The stock was restricted from trading for a
period of one year after issuance.
Transactions and other information relating to the plan for fiscal year
1999 are summarized as follows:
STOCK OPTIONS
--------------------------------------------
WEIGHTED
SHARES AVERAGE PRICE
Outstanding at March 2, 1999 - $ -
Granted 20,000 1.00
Exercised (15,000) 1.00
------- --------
Outstanding at December 31, 1999 5,000 $ 1.00
------- --------
------- --------
The exercise price of the stock options discussed below were at the fair
market value of the common stock on the date the options were granted:
On August 11, the Company issued options to purchase 15,000 shares at
$1.00 per share to three employees of the Company's subsidiary, Unique
Images. The options vested immediately and were exercised in August
1999 at the market value of $1.00 per share. The stock was restricted
from trading for a period of one year after issuance.
On August 12, the Company issued options to purchase 5,000 shares at
$1.00 per share to an employee of the Company. The options vested
immediately and expire after August 12, 2000. The stock was restricted
from trading for a period of one year after issuance.
For purposes of the following pro forma disclosures, the weighted average
fair value of each option has been estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted
average assumptions used for grants in fiscal 1999: no dividend yield;
volatility
F-16
of 20 percent; risk-free interest rate of three percent; and an expected
term of one year. The weighted average Black-Scholes value of options
granted during fiscal 1999 was $.12 per option. Had compensation cost for
the
F-17
Company's fixed stock-based compensation plan been determined based on the
fair value at the grant dates for awards under this plan consistent with
the method of SFAS No. 123, the Company's pro forma net income and pro
forma net income per share would have been as indicated below:
PERIOD FROM
MARCH 2, 1999
(INCEPTION)
THROUGH
DECEMBER 31,
1999
Net loss:
As reported $ (349,551)
-----------
-----------
Pro forma $ (350,771)
-----------
-----------
Basic loss per share:
As reported $ (0.08)
-----------
-----------
Pro forma $ (0.08)
-----------
-----------
Diluted loss per share:
As reported $ (0.08)
-----------
-----------
Pro forma $ (0.08)
-----------
-----------
10. INCOME TAXES
The effective tax rate varies from the U.S. Federal statutory tax rate for
the period ended December 31, 1999 principally due to the following:
U.S. federal statutory tax rate (34.0)%
Valuation allowance for deferred taxes 25.2 %
All other 0.8 %
---------
Efective tax rate (8.0)%
---------
---------
The differences between the benefit (provision) for income taxes at the
U.S. statutory rate and the Company's effective rate are summarized as
follows:
Expected benefit for income taxes $(100,662)
Valuation allowance for deferred taxes 90,156
Non-deductible items (20,495)
---------
Provision for income taxes $ (31,001)
---------
---------
F-18
The benefits for taxes for the period from March 2, 1999 through December
31, 1999 consist of:
Current benefit $31,001
Deferred benefit
-------
Benefit for income taxes $31,001
-------
-------
The tax effects of items comprising the Company's net deferred tax asset
consist of the following at December 31, 1999:
Deferred tax liabilities -
Difference between book and tax depreciable property $ (8,112)
Deferred tax assets:
Net operating loss carryforwards 98,268
Valuation allowance (90,156)
--------
Net deferred tax asset $ -
--------
--------
SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized. A valuation allowance has been established on the computed
deferred tax asset at December 31, 1999 due to the uncertainties
associated with realizing such assets in the future.
The accompanying financial statements do not include a provision for state
income tax as the Company's income is earned in Nevada, which does not
have a corporate income tax.
11. COMMITMENTS AND CONTINGENCIES
LEASES - The following is a schedule of future minimum lease payments
under operating leases, including those with related parties as more fully
described in Note 12, that have initial or remaining noncancelable lease
terms in excess of one year at December 31, 1999.
2000 $114,982
2001 62,232
2002 62,232
2003 61,116
2004 60,000
Thereafter 280,000
EMPLOYMENT CONTRACTS - The Company has no employment contracts with any of
its executive officers other than the President of Unique Images, Inc. The
contract is for five years beginning September 1999 and provides for
compensation of $6,500 per month.
F-19
12. RELATED PARTY TRANSACTIONS
The Company leases its office space, production facilities, and certain
equipment from a related party. These multiple lease agreements require
base monthly payments of $8,000 at December 31, 1999, and have been
classified as operating leases. These leases require the Company to
provide insurance, repairs and maintenance, and to pay real estate taxes
on the leased property. These leases expire at various dates through
September 1, 2009. Lease expense for the year ended December 31, 1999
incurred under these agreements was $32,000.
The Company's Chairman of the Board and the Company's President, each
loaned the Company $50,000, which bears interest at the rate of 8 percent
per annum and is all due and payable on November 30, 2004. In addition,
the Chairman sold to the Company inventory and vehicles owned by him for a
promissory note in the amount of $34,506 payable on the same terms.
During November 1999, the Company's chairman exchanged $67,778 of his
notes payable including accrued interest for the same amount of the note
receivable from shareholders arising from the issuance of stock in June
1999. During fiscal 1999, the Company's president exchanged $33,889 of his
note payable including accrued interest for the same amount of notes
receivable arising from the issuance of stock in June 1999 (see Note 9).
13. SEGMENT REPORTING
The Company has two reportable segments based upon products offered:
retail sales and corporate operations, and wholesale distribution and
manufacturing.
The Company evaluates each segment's performance based on segment
operating profit. The accounting policies of the operating segments are
the same as those described in the summary of significant accounting
policies.
F-20
Information pertaining to the operations of reportable segments are as
follows:
FOR THE PERIOD FROM MARCH 2, 1999 (INCEPTION)
FOR RETAIL AND CORPORATE AND FROM AUGUST 11, 1999 WHOLESALE
FOR WHOLESALE, DISTRIBUTION AND MANUFACTURING RETAIL AND DISTRIBUTION AND
TO DECEMBER 31, 1999 CORPORATE MANUFACTURING TOTAL
Revenues from external customers $ 294,009 $ 368,222 $ 662,231
Intersegment revenues 89,065 89,065
Depreciation and amortization 13,785 5,473 19,258
Interest income 13,491 1,363 14,854
Intersegment interest income 2,449 2,449
Interest expense 7,987 5,661 13,648
Intersegment interest expense 2,449 2,449
Segment (loss) income before interest and taxes (437,946) 58,637 (379,309)
Net (loss) income before taxes (434,891) 54,339 (380,552)
Income tax (benefit) provision (50,713) 19,712 (31,001)
Net property and equipment 59,902 94,497 154,399
RECONCILIATION OF SEGMENT REVENUES TO CONSOLIDATED
REVENUES
Total revenues for reportable segments $ 751,296
Elimination of intersegment revenues (89,065)
---------
Total consolidated revenues $ 662,231
---------
---------
Significantly all (over 95 percent) of the Company's sales are in the United
States.
******
F-21
INDEPENDENT AUDITORS' REPORT
Unique Images, Inc.
We have audited the accompanying balance sheets of Unique Images, Inc. (the
"Company") as of August 10, 1999 and December 31, 1998 and 1997, and the related
statements of income, stockholder's equity and cash flows for the period from
January 1, 1999 to August 10, 1999 and for each of the years ended December 31,
1998, 1997, and 1996. These 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at August 10, 1999 and December
31, 1998 and 1997, and the results of its operations and its cash flows for the
period ended August 10, 1999 and for each of the years ended December 31, 1998,
1997, and 1996, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 5, 2000
F-22
UNIQUE IMAGES, INC.
BALANCE SHEETS
AUGUST 10, 1999 AND DECEMBER 31, 1998 AND 1997
- ----------------------------------------------------------------------------------------------------------------
DECEMBER 31,
AUGUST 10, ----------------------------------
ASSETS 1999 1998 1997
CURRENT ASSETS:
Cash and cash equivalents $ 5,566 $ 34,260 $ 16,190
Accounts receivable, net 225,922 143,815 99,298
Inventory 35,680 25,500 14,720
Prepaid expenses and deposits 15,349 5,695 3,117
Other assets 36,784 15,584 -
-------- -------- --------
Total current assets 319,301 224,854 133,325
PROPERTY AND EQUIPMENT, Net 64,622 30,803 15,617
-------- -------- --------
TOTAL $383,923 $255,657 $148,942
-------- -------- --------
-------- -------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 72,178 $ 69,900 $ 63,368
Income taxes payable 23,649 9,789 5,394
Current portion of long-term debt 9,229
Notes payable 63,654 68,391 12,873
Notes payable to shareholders 2,562 18,199
Deferred taxes 7,600 3,665 793
-------- -------- --------
Total current liabilities 176,140 154,307 100,627
LONG-TERM DEBT, Less current portion 9,818 - -
-------- -------- --------
Total liabilities 186,128 154,307 100,627
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock $1.00 par value; 1,000 shares authorized,
issued and outstanding 1,000 1,000 1,000
Retained earnings 196,795 100,350 47,315
-------- -------- --------
Total stockholder's equity 197,795 101,350 48,315
-------- -------- --------
TOTAL $383,923 $255,657 $148,942
-------- -------- --------
-------- -------- --------
See notes to financial statements.
F-23
UNIQUE IMAGES, INC.
STATEMENTS OF INCOME
PERIOD FROM JANUARY 1, 1999 TO AUGUST 10, 1999 AND YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------
PERIOD FROM
JANUARY 1, YEAR ENDED
1999 TO DECEMBER 31,
AUGUST 10, ----------------------------------------------
1999 1998 1997 1996
REVENUES:
Retail sales $ 688,347 $ 966,032 $ 737,806 $ 521,807
Cost of sales 420,923 695,539 588,944 401,078
--------- --------- --------- ---------
Gross profit 267,424 270,493 148,862 120,729
--------- --------- --------- ---------
OPERATING EXPENSES:
General and administrative expenses 133,357 198,126 105,988 100,251
Depreciation and amortization 4,980 3,862 5,300 2,970
--------- --------- --------- ---------
Total operating expenses 138,337 201,988 111,288 103,221
--------- --------- --------- ---------
INCOME FROM OPERATIONS 129,087 68,505 37,574 17,508
OTHER, Net (158) (2,810) 1,554 (550)
--------- --------- --------- ---------
NET INCOME BEFORE INCOME
TAX PROVISION 128,929 65,695 39,128 16,958
PROVISION FOR INCOME TAXES 32,484 12,660 6,187 2,584
--------- --------- --------- ---------
NET INCOME $ 96,445 $ 53,035 $ 32,941 $ 14,374
========== ========= ========= =========
See notes to financial statements.
F-24
UNIQUE IMAGES, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
PERIOD FROM JANUARY 1, 1999 TO AUGUST 10, 1999 AND YEARS ENDED
DECEMBER 31, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------
COMMON STOCK
---------------------- RETAINED
SHARES AMOUNT EARNINGS TOTALS
BALANCE, JANUARY 1, 1996 - $ - $ - $ -
Proceeds from issuance of common stock 1,000 1,000 1,000
Net income 14,374
-------- ------- --------- --------
BALANCE, DECEMBER 31, 1996 1,000 1,000 14,374 15,374
Net income 32,941 32,941
-------- ------- --------- --------
BALANCE, DECEMBER 31, 1997 1,000 1,000 47,315 48,315
Net income 53,035 53,035
-------- ------- --------- --------
BALANCE, DECEMBER 31, 1998 1,000 1,000 100,350 101,350
Net income 96,445 96,445
-------- ------- --------- --------
BALANCE, AUGUST 10, 1999 1,000 $1,000 $196,795 $197,795
========= ======= ========= ==========
See notes to financial statements.
F-25
UNIQUE IMAGES, INC.
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1, 1999 TO AUGUST 10, 1999 AND
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------
PERIOD FROM
JANUARY 1, YEAR ENDED
1999 TO DECEMBER 31,
AUGUST 10, ---------------------------------
1999 1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 96,445 $ 53,035 $ 32,941 $ 14,374
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization 4,980 3,862 5,300 2,970
Deferred income taxes 3,935 3,665 260 533
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable (82,107) (44,517) (36,671) (62,627)
Prepaid expenses and deposits (9,654) (2,578) 2,042 (5,159)
Inventory (10,180) (10,780) (3,626) (11,094)
Other assets (21,242) (15,542)
Increase from changes in -
Accounts payable and other current liabilities 16,180 10,886 16,136 53,697
------- ------- ------- -------
Net cash (used in) provided by operating activities (1,643) (1,969) 16,382 (7,306)
------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (38,799) (22,224) (4,403) (20,555)
Proceeds from sale of assets, net 2,382
------- ------- ------- -------
Net cash used in investing activities (38,799) (19,842) (4,403) (20,555)
------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,000
Proceeds from (payments on) debt, net 11,748 39,881 (80) 31,152
------- ------- ------- -------
Net cash provided by (used in) financing activities 11,478 39,881 (80) 32,152
------- ------- ------- -------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (28,694) 18,070 11,899 4,291
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 34,260 16,190 4,291
------- ------- ------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,566 $ 34,260 $ 16,190 $ 4,291
======== ======== ========= ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -
Cash paid during the year for:
Federal income tax $ 18,624 $ 8,263 $ 2,051 $
Interest $ 3,248 $ 4,359 $ 6,814 $ 550
See notes to financial statements.
F-26
UNIQUE IMAGES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unique Images, Inc. (the "Company") was incorporated on December 29, 1995.
Operations commenced in January 1996. On August 11, 1999, the Company
entered into a stock exchange agreement with americabilia.com, Inc., a
Florida corporation. Under the stock exchange agreement, americabilia.com,
Inc. acquired all of the Company's stock. The Company's former stockholder
became an officer in americabilia.com, Inc.
Unique Images provides framing and matting services to retailers including
those in the memorabilia and collectibles markets. The Company has a
single segment for accounting purposes.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents are defined as
highly liquid investments with original maturities of three months or less
and consist of amounts held as bank deposits.
REVENUES - Revenues are recognized as the products are sold and shipped to
customers.
ADVERTISING AND PROMOTIONAL COSTS - All advertising and promotional costs
associated with advertising and promoting the Company are expensed in the
period incurred.
INVENTORIES - Inventories, consisting primarily of sports memorabilia
products and acrylic cases, are valued at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO) method for both
raw materials and finished goods.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided for using the straight-line method over the
estimated useful lives of the assets ranging from five to seven years.
Leasehold improvements are amortized over the lease period or the
estimated useful life of the improvements, whichever is less.
Maintenance and repairs are charged to expense as incurred and major
renewals and betterments are capitalized. Gains and losses are credited or
charged to earnings upon disposition.
IMPAIRMENT OF LONG-LIVED ASSETS - In the event that facts and
circumstances indicate that the carrying value of long-lived assets may be
impaired, an evaluation of recoverability is performed by comparing the
estimated future undiscounted cash flows associated with the asset to the
asset's carrying amount to determine if a write-down to market value or
discounted cash flow is required. At August 10, 1999, no write-downs were
deemed necessary.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying values of cash and cash
equivalents, accounts receivable, accounts payable, debt and accrued
liabilities approximated their fair values because of the short maturity
of these instruments.
INCOME TAXES - The Company accounts for income taxes under the asset and
liability method. Under this method, deferred income taxes are required
for the tax consequences of temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss carryforwards. Deferred tax assets
and liabilities are measured using
F-27
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The effect on deferred taxes of a change in tax rates is recognized in
income in the period that the change in the rate is enacted.
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 amounts reported in the
consolidated financial statements and related notes to the financial
statements. Estimates are used when accounting for uncollectible accounts
receivable, inventory obsolescence, depreciation, and taxes, among others.
Actual results could differ from those estimated by management and changes
in such estimates may affect amounts reported in future periods.
2. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk are cash and cash equivalents and accounts
receivable arising from its normal business activities.
Regarding accounts receivable, the Company believes that credit risk is
limited due to the large number of entities comprising the Company's
customer base. The Company performs certain credit evaluation procedures
and does not require collateral. The Company believes that credit risk is
limited because the Company routinely assesses the financial strength of
its customers, and based upon factors surrounding the credit risk of
customers, establishes an allowance for uncollectible accounts and, as a
consequence, believes that its accounts receivable credit risk exposure
beyond such allowances is limited. The Company had a consolidated
allowance for doubtful accounts at August 10, 1999 of approximately
$6,500. The Company believes any credit risk beyond this amount would be
negligible.
3. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt consists of the following at August 10, 1999 and December
31, 1998 and 1997:
F-28
DECEMBER 31,
AUGUST 10, -------------------
1999 1998 1997
>
Note payable to a bank, interest at 8%, due December 31,
1999, secured by factored accounts receivable $63,654 $63,413 $12,873
Capitalized lease obligations with interest at 9.569%
and 13.376% collateralized by certain manufacturing
equipment due in 2000 and through 2002 18,597 4,978
Loans from shareholders, no interest, balance payable
upon demand 2,562 18,199
Other debt 450
--------- ------- --------
Total debt 82,701 70,953 31,072
Less current portion (due within the next 12 months) 72,883 70,953 31,072
--------- ------- --------
Long-term debt $ 9,818 $ - $ -
========= ======== ==========
At August 10, 1999, annual maturities based upon a year ending December 31
on long-term debt and capitalized lease obligations were as follows:
1999 $67,447
2000 5,436
2001 5,979
2002 3,839
--------
$82,701
=========
4. LEASES
The Company leases certain equipment and office space. Commitments for
minimum rentals under noncancelable lease at August 10, 1999 are as
follows:
F-29
CAPITAL OPERATING
LEASE LEASE
1999 $3,550 $30,000
2000 6,661 84,000
2001 6,661 60,000
2002 3,936 60,000
2003 - 60,000
2004 - 60,000
Thereafter - 280,000
-------- ----------
Total minimum lease payments 20,808 $634,000
==========
Less amount representing interest 2,211
-------
Present value of net minimum lease payments, including current
maturities through December 31, 1999 and 2000 of $3,343 and
$5,436, respectively. $18,597
=========
Property, plant and equipment at August 10, 1999 include the following
amounts for capitalized leases:
Machinery and equipment $25,251
Less allowance for depreciation 1,936
---------
Net book value of equipment under capital lease $23,315
=========
See also Note 6 regarding rent expense with a related party.
F-30
5. INCOME TAXES
The effective tax rate varies from the U.S. Federal statutory tax rate for
the period ended August 10, 1999, and for the years ended December 31,
1998, 1997, and 1996 principally due to the following:
AUGUST 10, DECEMBER 31,
----------------------------------------
1999 1998 1997 1996
U.S. Federal statutory rate 24.90 % 17.40 % 15.00 % 15.00 %
Total deduct -
All other 0.30 % 1.90 % 0.80 % 0.20 %
------- ------- ------- -------
Effective tax rate 25.20 % 19.30 % 15.80 % 15.20 %
======= ======= ======= =======
The differences between the provision for income taxes at the U.S.
statutory rate and the Company's effective rate are summarized as follows:
AUGUST 10, DECEMBER 31,
----------------------------------------
1999 1998 1997 1996
Provision at U.S. statutory rate $32,086 $11,423 $ 5,869 $ 2,543
Non-deductible items and other 398 1,237 318 41
--------- --------- --------- ---------
Provision for income taxes $32,484 $12,660 $ 6,187 $ 2,584
========= ========= ========= =========
The benefits for taxes for the period ended August 10, 1999 and for the
years ended December 31, 1998, 1997, and 1996 consist of:
AUGUST 10, DECEMBER 31,
----------------------------------------
1999 1998 1997 1996
Current federal $ 36,419 $ 16,325 $ 5,927 $ 2,051
Deferred federal (3,935) (3,665) 260 533
--------- --------- --------- ---------
Provision for income tax $ 32,484 $ 12,660 $ 6,187 $ 2,584
========= ========= ========= =========
The tax effects of items comprising the Company's net deferred tax
liability consist of the following:
AUGUST 10, DECEMBER 31,
------------------------
1999 1998 1997
Deferred tax liability -
Difference between book and tax depreciable property $7,600 $3,665 $793
========= ========= =========
The accompanying financial statements do not include a provision for state
income tax as the Company's income is earned in Nevada, which does not
have a corporate income tax.
F-31
SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized. At August 10, 1999, no valuation allowance of the net deferred
tax asset was recorded.
6. COMMITMENTS AND CONTINGENCIES
SALE OF COMPANY - In connection with the purchase of Unique Images,
americabilia.com, Inc. assumed all assets, liabilities, and leases of the
Company.
RELATED PARTY TRANSACTIONS - The Company leases its office space,
production facilities and certain equipment from a related party. These
multiple lease agreements require base monthly payments of $8,000 at
August 10, 1999, and have been classified as operating leases. These
leases require the Company to provide insurance, repairs and maintenance,
and to pay real estate taxes on the leased property. These leases expire
at various dates through September 1, 2009. Lease expense for the period
from January 1 through August 10, 1999 under these lease agreements was
$57,800. For the years ended December 31, 1998, 1997, and 1996, the rent
expense was $96,000.
******
F-32
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
americaBILIA.com, Inc.,
a Florida corporation
Date: March 2, 2000 By: /s/ Gary Moore
------------------------------
Gary Moore, President
-33-