SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K/A1
CURRENT REPORT
Pursuant to Section 10 or 15(d) of the
Securities Exchange Act of 1934
March 28, 2002
--------------
Date of Report (date of earliest event reported)
HOST AMERICA CORPORATION
(Exact Name of Registrant as Specified in its Charter)
COLORADO 0-16196 06-1168423
-------- ------- ----------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation File Number) Identification Number)
TWO BROADWAY
HAMDEN, CONNECTICUT 06518
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(Address of Principal Executive Offices
Including Zip Code)
(203) 248-4100
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(Registrant's telephone number,
including area code)
NOT APPLICABLE
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(Former name or former address, if changed since last report)
Item 1. Changes in Control of Registrant
--------------------------------
N/A
Item 2. Acquisition or Disposition of Assets
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On October 26, 2001, Host America Corporation (the "Registrant"
or "Host") entered into a Merger Agreement (the "Agreement")
with SelectForce, Inc. ("Select" or "Seller"), an Oklahoma
corporation, and Roger Lockhart, a major shareholder of Select,
pursuant to which Select would merge with Host Merger Corp.
("HMC"), a Colorado corporation and wholly-owned subsidiary of
Host organized for the purposes of the merger. HMC, as the
surviving entity, remains a wholly-owned subsidiary of Host and
changed its name to Select. Select shareholders received, in
the aggregate, 700,000 shares of Host's "restricted" common
stock. On March 28, 2002, the Shareholders of Host approved
the Agreement. The Agreement and the merger were effective as
of that date.
The Agreement contained numerous representations, warranties
and covenants by both parties. A complete description of all
warranties, representations and covenants are set forth in the
Agreement included as an Exhibit to this Report. Pursuant to
the Agreement, a Voting Agreement was entered into among the
principal shareholders of the Registrant to cause Tammi Didlot
to be elected to serve as a Class II Director of Registrant
until the next annual meeting of shareholders.
In connection with the Agreement, Webster Bank agreed to modify
the amount of the revolving line of credit, change the
borrowing base definition, extend the expiration date, change
the variable interest rate and modify the term note agreement.
The bank also approved the Agreement and the assets of
Select were pledged to the bank in connection with the merger.
Concurrent with the execution of the Agreement and the closing,
the Registrant and Tammi Didlot entered into a non-competition
and employment agreement ("Non-Competition and Employment
Agreement"). Pursuant to the Non-Competition and Employment
Agreement with Tammi Didlot, Ms. Didlot will be employed for a
term of four (4) years as the President of the Registrant's
SelectForce operations. According to the terms of the
agreement, Ms. Didlot will not compete with the Registrant's
business for one (1) year from the termination of her
employment agreement, whichever is longer.
In addition, the Registrant and Roger Lockhart entered into a
non-competition, confidentiality and non-solicitation agreement
("Non-Competition, Confidentiality and Non-Solicitation
Agreement"). Pursuant to the Non-Competition, Confidentiality
and Non-Solicitation Agreement, Roger Lockhart will not
compete, will keep confidential and not solicit clients that
would involve the Registrant's business for a period of one (1)
year from and after the date of this Agreement.
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Item 3. Bankruptcy or Receivership
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N/A
Item 4. Changes in Registrant's Certifying Accountants
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N/A
Item 5. Material Events
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N/A
Item 6. Resignations of Registrant's Directors
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N/A
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Business Acquired.
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SELECTFORCE, INC.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001 AND 2000
TOGETHER WITH
INDEPENDENT AUDITORS' REPORT
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Selectforce, Inc.
We have audited the accompanying balance sheets of Selectforce, Inc. (the
"Company") as of December 31, 2001 and 2000, and the related statements
of operations, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted
auditing standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Selectforce,
Inc. as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended in conformity with U.S.
generally accepted accounting principles.
/s/ DiSanto Bertoline & Company, P.C.
Glastonbury, Connecticut
May 6, 2002
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SELECTFORCE, INC.
BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
ASSETS
2001 2000
---------------- ----------------
CURRENT ASSETS
Cash $ 464,942 $ 241,048
Accounts receivable, net of allowance for doubtful
accounts of $2,800 and $7,000 at December 31,
2001 and 2000, respectively 135,851 155,434
Notes receivable 155,966 140,000
Prepaid expenses and other 3,083 5,499
------------ ------------
Total current assets 759,842 541,981
PROPERTY AND EQUIPMENT, net 25,501 26,709
OTHER ASSETS
Deferred merger costs 132,466 -
Other 1,234 1,234
------------ ------------
133,700 1,234
------------ ------------
$ 919,043 $ 569,924
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 58,039 $ 5,549
Accrued expenses and other 102,073 13,612
------------ ------------
Total current liabilities 160,112 19,161
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 1,000,000
shares authorized 7,487 7,487
Additional paid-in capital 696,907 696,907
Retained earnings (deficit) 54,537 (153,631)
------------ ------------
Total stockholders' equity 758,931 550,763
------------ ------------
$ 919,043 $ 569,924
============ ============
The accompanying notes are an integral part of these financial statements.
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SELECTFORCE, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2000
---------------------------------------------------------
Data Information
Services Selectforce, Inc.
-------- -----------------
For The Period
January 1, 2000 For The Period
Through July 11, 2000 Total For The
August 14, 2000 (Inception) Through Year Ended
2001 (Date of Acquisition) December 31, 2000 December 31, 2000
----------------- ------------------- ----------------- -----------------
NET REVENUES $ 1,897,672 $ 1,092,930 $ 655,463 $ 1,748,393
OPERATING EXPENSES 1,602,504 941,871 795,093 1,736,964
------------ ------------ ------------ ------------
Income (loss) from operations 295,168 151,059 (139,630) 11,429
OTHER INCOME
Interest income 17,000 - 1,999 1,999
------------ ------------ ------------ ------------
Income (loss) before provision
for income taxes 312,168 151,059 (137,631) 13,428
PROVISION FOR INCOME TAXES 104,000 38,000 16,000 54,000
------------ ------------ ------------ ------------
Net income (loss) $ 208,168 $ 113,059 $ (153,631) $ (40,572)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
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SELECTFORCE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Common Stock
------------ Additional Total DIS
Shares Paid-In Shareholders' Division
Outstanding Amount Capital Deficit Equity Equity Total
----------- ------ ------- ------- ------ ------ -----
Balance, December 31, 1999 - $ - $ - $ - $ - $ 210,392 $ 210,392
Contributions, net - - - - - 210,632 210,632
Net income through
August 14, 2000 - - - - - 113,059 113,059
-------- -------- -------- -------- -------- --------- ---------
Balance, August 14, 2000 - - - - - 534,083 534,083
Issuance of stock in
connection with
acquisition of Data
Information Services
division of Eureka Holding
Company, Inc. 647,500 6,475 527,608 - 534,083 (534,083) -
Issuance of stock as
compensation in
connection with
incorporation
(July 11, 2000) 101,200 1,012 169,299 - 170,311 - 170,311
Net loss August 15, 2000
through
December 31, 2000 - - - (153,631) (153,631) - (153,631)
-------- -------- -------- -------- -------- --------- ---------
Balance, December 31, 2000 748,700 7,487 696,907 (153,631) 550,763 $ - 550,763
Net income - - - 208,168 208,168 208,168
-------- -------- -------- -------- -------- ---------
Balance, December 31, 2001 748,700 $ 7,487 $696,907 $ 54,537 $758,931 $ 758,931
======== ======== ======== ======== ======== =========
The accompanying notes are an integral part of these financial statements.
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SELECTFORCE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2000
--------------------------------------------------------
Data Information
Services Selectforce, Inc.
For The Period
January 1, 2000 For The Period
Through July 11, 2000 Total For The
August 14, 2000 (Inception) Through Year Ended
2001 (Date of Acquisition) December 31, 2000 December 31, 2000
----------------- ------------------- ----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 208,168 $ 113,059 $ (153,631) $ (40,572)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities
Depreciation and amortization 3,076 51,146 5,739 56,885
Compensation expense pursuant
to stock issuance - - 170,311 170,311
Interest accrued on notes
receivable (5,966) - - -
Changes in operating assets
and liabilities:
(Increase) decrease in accounts
payable and accrued expenses 140,951 (23,666) 19,161 (4,505)
Decrease (increase) in accounts
receivable 19,583 (88,664) 83,443 (5,221)
Decrease in prepaid expenses
and other 2,416 - - -
Decrease (increase) in other
assets - 1,576 (5,626) (4,050)
------------ ------------ ------------ ------------
Net cash provided by operating
activities 368,228 53,451 119,397 172,848
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayments of notes receivable 140,000 - - -
Cash received from business acquired - - 264,083 264,083
Purchases of property and equipment (1,868) - (2,432) (2,432)
Cash paid for merger related costs (132,466) - - -
Advances made in connection with
notes receivable (150,000) - (140,000) (140,000)
------------ ------------ ------------ ------------
Net cash (used in) provided by
investing activities (144,334) - 121,651 121,651
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash (paid to)/received from Eureka
Holding Company, Inc., net - (53,451) - (53,451)
NET INCREASE IN CASH 223,894 - 241,048 241,048
CASH, beginning of year 241,048 - - -
------------ ------------ ------------ ------------
CASH, end of year $ 464,942 $ - $ 241,048 $ 241,048
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 6,864 $ - $ - $ -
Cash paid (received) for business
acquired is comprised of:
Assets acquired $ - $ - $ 270,000 $ 270,000
Liabilities assumed - - - -
------------ ------------ ------------ ------------
Purchase price, net of cash received - - 270,000 270,000
Common stock issued for acquired
business - - 534,083 534,083
------------ ------------ ------------ ------------
Net cash received from business
acquired $ - $ - $ (264,083) $ (264,083)
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
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SELECTFORCE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Selectforce, Inc. (the "Company") provides pre-employment
screening services of prospective employees to employers. The
Company's customers are primarily located in Oklahoma.
The Company was incorporated in the State of Oklahoma on July
11, 2000, to acquire the business assets and operations of Data
Information Services (DIS), a division of Eureka Holding
Company, Inc. (Eureka).
BASIS OF PRESENTATION
On August 14, 2000, the Company acquired all of the business
assets and operations of Data Information Services (DIS), a
division of Eureka Holding Company, Inc. (Eureka), in exchange
for 647,500 shares of common stock, which represented
approximately 86% of the total outstanding shares of the
Company on that date. The business combination was accounted
for as a recapitalization transaction and, accordingly, the net
assets acquired were recorded at DIS's historical cost basis.
The 2000 audited financial statements present the accounts of
the Company as of December 31, 2000 and the results of its
operations for the period from July 11, 2000 (date of
inception) through December 31, 2000, and the results of the
operations of DIS for the period from January 1, 2000 through
August 14, 2000 (date of acquisition). The operating results
for these periods have been presented separately with a total
presented for 2000 to facilitate the comparison of the
Company's results of operations on an annual basis to the 2001
financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results
could differ from those estimates.
CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company
defines cash equivalents as highly liquid instruments with an
original maturity of three months or less. The Company had no
cash equivalents at December 31, 2001 and 2000.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over
the estimated useful lives of the related assets. Expenditures
which substantially increase the useful lives of the related
assets are capitalized. Maintenance, repairs and minor
renewals on property and equipment are charged to operations as
incurred.
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SELECTFORCE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
DEFERRED MERGER COSTS
Deferred merger costs were capitalized pending the consummation
of the transaction with Host America Corporation (SEE NOTES 5
AND 10).
REVENUE RECOGNITION
Revenue from pre-employment screening services of prospective
employees is recognized when the services are rendered.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for
the expected future tax consequences of events that have been
included in the financial statements or tax returns. Deferred
tax liabilities and assets are determined based on the
differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse.
NOTE 2 - FINANCIAL INSTRUMENTS
CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash, trade
accounts receivable and notes receivable.
* Cash - The Company places its cash and temporary cash
investments with high credit quality institutions. At
times, such investments may be in excess of the FDIC
insurance limit. The Company had cash balances on deposit
with banks at December 31, 2001 and 2000 that exceeded
federal depository insurance limits by $255,921 and
$72,293, respectively.
* Accounts receivable - The Company grants credit to its
customers, substantially all of whom are provided
pre-employment screening services of prospective
employees. No single customer accounted for a significant
amount of the Company's accounts receivable or sales as of
and for the years ended December 31, 2001 and 2000. The
Company reviews a customer's credit history before
extending credit and establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of
specific customers, historical trends, and other
information. Such losses have been within management's
expectations.
* Notes receivable - The 2001 balance is due from Host
America Corporation ("Host"), an entity that subsequently
acquired the Company on March 28, 2002 (SEE NOTE 10). The
2000 balance was due from the Chairman of the Board of
Directors and was repaid on May 9, 2001.
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SELECTFORCE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2001 AND 2000
NOTE 2 - FINANCIAL INSTRUMENTS (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107,
FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of the
fair value of financial instruments for which the determination
of fair value is practicable. SFAS No. 107 defines the fair
value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between
willing parties.
The carrying amount of the Company's financial instruments
approximates their fair value as outlined below:
* Cash, trade accounts receivable, notes receivable, trade
accounts payable and accrued expenses - The carrying
amounts approximate their fair value because of the short
maturity of those instruments.
The Company's financial instruments are held for other than
trading purposes.
NOTE 3 - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
2001 2000
---------- ----------
Office equipment $ 37,691 $ 50,153
Office furniture 8,689 8,689
-------- --------
46,380 58,842
Less: accumulated depreciation 20,879 32,133
-------- --------
$ 25,501 $ 26,709
======== ========
Depreciation expense for the years ended December 31, 2001 and
2000 totaled $3,076 and $8,160, respectively.
NOTE 4 - NOTES RECEIVABLE
HOST AMERICA CORPORATION
On July 11, 2001, the Company loaned $150,000 to Host pursuant
to the terms of a promissory demand note executed by the
parties. The promissory note bears interest at the rate of
9.25% per annum and the principal and accrued interest is
payable in full by Host on December 28, 2001. On December 28,
2001 an option to extend the due date until June 28, 2002 was
exercised. The balance due Host together with unpaid interest
totaled $155,966 at December 31, 2001.
DIRECTOR/SHAREHOLDER
The note receivable balance at December 31, 2000 totaling
$140,000 represented an obligation between the Company and its
Chairman of the Board of Directors (Director) with interest at
7.5%. The note was secured by the Director's shares in the
Company and was repaid during 2001.
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SELECTFORCE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2001 AND 2000
NOTE 5 - DEFERRED MERGER COSTS
Deferred merger costs totaling $132,466 at December 31, 2001
consist of professional fees and other related costs in
connection with the merger of the Company with Host (See Note
10).
NOTE 6 - OPERATING LEASE
The Company has a noncancelable operating lease for office
space which expires in January 2003. Future minimum lease
payments under this operating lease are as follows:
Year ending December 31:
2002 $ 19,258
2003 1,610
--------
$ 20,868
========
Rent expense for the operating lease totaled $18,514 and
$16,346 for the years ended December 31, 2001 and 2000,
respectively.
NOTE 7 - INCOME TAXES
The provision for income taxes consists of the following for
the years ended December 31, 2001 and 2000:
2001 2000
---------- ----------
Current
Federal $ 86,000 $ 44,000
State 18,000 10,000
Deferred - -
-------- --------
$104,000 $ 54,000
======== ========
The components of the net deferred tax accounts as of
December 31, 2001 and 2000 are as follows:
2001 2000
---------- ----------
Deferred tax asset:
Restricted stock issued to
employees $ 54,000 $ 54,000
Allowance for doubtful accounts 1,000 2,400
Valuation allowance (55,000) (56,400)
-------- --------
$ - $ -
======== ========
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SELECTFORCE, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2001 AND 2000
NOTE 8 - RETIREMENT PLAN
The Company maintains a SIMPLE IRA plan (the "Plan") covering
substantially all of its employees. The Company contributes 3%
of each participating employees gross wages into the Plan. The
Company contributed $5,996 and $1,269 for the years ended
December 31, 2001 and 2000, respectively.
NOTE 9 - STOCK BASED COMPENSATION
In connection with the incorporation of the Company, 101,200
shares of common stock were issued to employees of DIS (31,200
shares) and beneficially to an officer/major shareholder of
Eureka (70,000 shares). These shares were valued at their
estimated fair value including a discount from the Host letter
of intent offer price dated March 2001, reflecting present
value and restrictions regarding lack of marketability
considerations. Such amount totaled $170,311 and is included
in operating expenses in the accompanying statement of
operations for the year ended December 31, 2000.
NOTE 10 - SUBSEQUENT EVENT
On March 28, 2002, all of the issued and outstanding shares of
the Company were acquired by Host in exchange for 700,000
shares of "restricted" common stock valued at $1,960,000.
Host is a contract food management organization, which
specializes in providing full service restaurant and employee
dining, special event catering, vending and office coffee
service to business and industry accounts located in the
Northeast United States.
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(b) Pro Forma Financial Information. The required pro forma
information as of December 28, 2001 is incorporated by reference from
the Registrant's Definitive Proxy materials on Schedule 14a dated
March 28, 2002. The Balance Sheet of the consolidated entities as of
March 29, 2002 is contained within the Form 10-QSB as of March 29, 2002
and is likewise incorporated by this reference.
(c) Exhibits:
10.34 Merger Agreement between Host America
Corporation and SelectForce, Inc., dated
October 26, 2001.*
10.41 Non-Competition and Employment Agreement between
Host America Corporation and Tammi Didlot dated
March 28, 2002.*
10.42 Non-Competition, Confidentiality and
Non-Solicitation Agreement between Host America
Corporation and Roger Lockhart dated
March 28, 2002.*
_______________
* previously filed
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
HOST AMERICA CORPORATION
Dated: June 11, 2002 By: /s/ David J. Murphy
---------------------------------
David J. Murphy
Chief Financial Officer
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