-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CM8L7uEndK542YItKZi4c2NoB+g+ECtAxpTr9VWjEoHu6XQ7qC6UfBW2e/wsL0tx 3PkJFoBa4IDZdJ61WwsXmw== 0001014100-99-000133.txt : 19990817 0001014100-99-000133.hdr.sgml : 19990817 ACCESSION NUMBER: 0001014100-99-000133 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990225 ITEM INFORMATION: FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SALES ONLINE DIRECT INC CENTRAL INDEX KEY: 0001017655 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 731479833 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-28720 FILM NUMBER: 99691677 BUSINESS ADDRESS: STREET 1: 4 BRUSSELS STREET STREET 2: SUITE 220 CITY: WORCESTER STATE: MA ZIP: 01610 BUSINESS PHONE: 5166254040 MAIL ADDRESS: STREET 1: 7633 EAST 63RD PL STREET 2: SUITE 220 CITY: TULSA STATE: OK ZIP: 74133 FORMER COMPANY: FORMER CONFORMED NAME: SECURITIES RESOLUTION ADVISORS INC DATE OF NAME CHANGE: 19980814 FORMER COMPANY: FORMER CONFORMED NAME: ROSE INTERNATIONAL LTD DATE OF NAME CHANGE: 19960627 8-K/A 1 CURRENT REPORT =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) February 25, 1999 SALES ONLINE DIRECT INC. (Exact name of Registrant as specified in charter) Delaware 0-28720 73-1479833 (State or other jurisdiction (Commission File Number) (I.R.S. Employer incorporation or organization) Identification Number) 4 Brussels Street Worcester, Massachusetts 01610 (508) 753-0945 (Address, including zip code and telephone number, including area code, of Registrant's principal executive offices) Not Applicable (Former name or former address of Registrant, if changed since last report) This Form 8-K/A is being filed to amend Item 7 of the Current Report on Form 8K of the Registrant, which was filed with the Securities and Exchange Commission on March 10, 1999, to include the necessary financial statements and pro forma financial information. =============================================================================== INFORMATION TO BE INCLUDED IN THE REPORT Item 7 Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of Businesses Acquired INTERNET AUCTION, INC. Independent Auditors' Report F-1 Balance Sheet as of December 31, 1998 F-2 Statement of Income F-3 Statement of Cash Flows F-4 Notes to Financial Statements F-5 ROTMAN AUCTION, INC. Independent Auditors' Report F-8 Balance Sheet as of December 31, 1998 and 1997 F-9 Statements of Operations and Retained Earnings (Deficit) F-10 Statement of Cash Flows F-11 Notes to Financial Statements F-12 (b) Pro Forma Financial Information Pro Forma Financial Information F-15 Pro Forma Balance Sheet as of December 31, 1998 F-16 Pro Forma Statement of Income as of December 31, 1998 F-17 (c) Exhibits * 2.1 Agreement and Plan of Reorganization dated January 31, 1999 among the Registrant and Gregory Rotman, Richard Rotman, Marc Stengel and Hannah Kramer. - ------------------ * Previously filed on Form 8-K on March 10, 1999, dated February 25, 1999 and incorporated by reference herein. -1- 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. SALES ONLINE DIRECT INC. Date: August 16, 1999 By: /s/ Marc Stengel ----------------------------------------- Marc Stengel, Vice President C78921.634 -2- FINANCIAL STATEMENTS As of December 31, 1998 INDEPENDENT AUDITORS' REPORT The Board of Directors Internet Auction, Inc. Worcester, Massachusetts We have audited the accompanying balance sheet of Internet Auction, Inc. as of December 31, 1998, and the related statements of income and cash flows for the year 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 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, the financial statements referred to above present fairly, in all material respects, the financial position of Internet Auction, Inc. as of December 31, 1998, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Wolf & Company, P.C. Boston, Massachusetts July 7, 1999 F-1 INTERNET AUCTION, INC. BALANCE SHEET December 31, 1998 ASSETS Current asset: Due from affiliate $ 7,164 Property and equipment: Computer equipment and software $22,755 Accumulated depreciation (2,276) ------ Net property and equipment 20,479 ------ Total assets $27,643 ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accrued liabilities $ 5,000 Income taxes payable 2,160 Due to affiliates 8,245 ----- Total current liabilities $15,405 Shareholders' equity: Common stock, no par value; 200,000 shares authorized; 40,000 shares issued and outstanding 1,000 Retained earnings 12,238 ------ 13,238 Less stock subscriptions receivable (1,000) ------ Total shareholders' equity 12,238 ------ Total liabilities and shareholders' equity $27,643 ======= See notes to financial statements. F-2 INTERNET AUCTION, INC. STATEMENT OF INCOME Year Ended December 31, 1998 Revenues $24,755 Operating expenses: Professional fees $ 6,145 Credit card service charges 406 Office expenses 330 Organization costs 1,200 Depreciation 2,276 ----- Total operating expenses 10,357 Income from operations before provision for income taxes 14,398 Provision for income taxes 2,160 ----- Net income $12,238 ======= See notes to financial statements. F-3 INTERNET AUCTION, INC. STATEMENT OF CASH FLOWS Year Ended December 31, 1998 Operating activities: Net income $12,238 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,276 Changes in assets and liabilities: Accrued liabilities 5,000 Income taxes payable 2,160 Net advances from affiliates 1,081 ----- Net cash provided by operating activities $22,755 Investing activities: Property and equipment acquisitions (22,755) ------- Net change in cash - Cash - beginning - ------- Cash - ending $ - ======= See notes to financial statements. F-4 INTERNET AUCTION, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Internet Auction, Inc. (the "Company") provides an online public person to person trading community that offers sellers a vehicle for listing items for sale and buyers an opportunity to browse and bid for items included in the Company's Internet Website. The Company commenced operations on January 1, 1998. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful life of 5 years. Expenditures for additions, improvements and major renewals are capitalized while those for repairs and maintenance are charged to expense as incurred. Revenue Recognition Commissions earned from public person to person trading are recognized as income when the related buyer and seller close the transaction. The Company never takes possession of, or title to, the merchandise and assumes no risk of collection with respect to the underlying sales. 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 financial statements and accompanying notes. Actual results could differ from those estimates. F-5 INTERNET AUCTION, INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. RELATED PARTY TRANSACTIONS Due from Affiliate Due from affiliate consists of non-interest bearing cash advances to an entity owned by one of the Company's shareholders. Due to Affiliates Due to affiliates consists of non-interest bearing advances to entities owned by two of the Company's shareholders as follows: Timeline Editions, Limited $4,745 Rotman Auction, Inc. 3,500 ----- $8,245 ====== 3. SUBSEQUENT EVENTS Inventory Purchase Agreement (Unaudited) On February 12, 1999, the Company acquired collectibles, collectors items and memorabilia from Rotman Production, a related party, with an estimated value of approximately $629,000 in exchange for 236 shares of the Company's common stock. In addition, the seller was assigned the right to acquire 700,000 option shares of Securities Resolution Advisors, Inc. (SRAD) at $.50 per share. See Agreement and Plan of Reorganization with SRAD described below. On February 25, 1999, the Company acquired collectibles, collectors items and memorabilia from Kim Stengel, a related party, with an estimated value of approximately $140,000 in exchange for 236 shares of the Company's common stock. Purchase of Assets of WorldWide Collectors Digest, Inc. (WWCD) (Unaudited) On February 25, 1999, the Company purchased the assets of WWCD, a related party, with an estimated value of approximately $34,000 in exchange for 3,835 shares of the Company's common stock. Merger with Rotman Auction, Inc. Effective on February 25, 1999, the Company merged with Rotman Auction, Inc. (Rotman), a related party. Under the terms of the merger agreement, the shareholder of Rotman received 870 shares of the Company's common stock in exchange for the Rotman shares owned by the shareholder. The Company is the surviving corporation in the merger. As of December 31, 1998, Rotman had a shareholder's deficit of approximately $33,000. F-6 INTERNET AUCTION, INC. NOTES TO FINANCIAL STATEMENTS (Concluded) SUBSEQUENT EVENTS (concluded) Agreement and Plan of Reorganization with SRAD On February 25, 1999, SRAD acquired 100% of the common stock of the Company under an Agreement and Plan of Reorganization entered into on January 31, 1999. The shareholders of the Company received 37,368,912 shares of the common stock of SRAD in exchange for their shares of the Company. As a result, the shareholders obtained approximately an eighty percent (80%) controlling interest in SRAD. The officers and directors of SRAD resigned their positions and certain members of the Company's former shareholders were elected officers and directors of SRAD. On February 25, 1999, SRAD entered into a Call Option Agreement (the Agreement) with Universal Funding, Inc. (Universal), a shareholder of SRAD, that is the beneficial owner of 3,000,000 shares of SRAD's common stock. Under the Agreement, Universal agreed to grant options to SRAD to acquire 2,000,000 shares of SRAD's common stock owned by Universal at $.50 per share over a two year period. F-7 INDEPENDENT AUDITORS' REPORT The Board of Directors Rotman Auction, Inc. Worcester, Massachusetts We have audited the accompanying balance sheets of Rotman Auction, Inc. as of December 31, 1998 and 1997, and the related statements of operations, changes in retained earnings (deficit) 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 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, the financial statements referred to above present fairly, in all material respects, the financial position of Rotman Auction, Inc. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Wolf & Company, P.C. Boston, Massachusetts July 7, 1999 F-8 ROTMAN AUCTION, INC. BALANCE SHEETS ASSETS December 31, ---------------- 1998 1997 ---- ---- Current assets: Cash $18,216 $42,398 Accounts receivable 4,040 104 Inventory 34,153 600 Due from affiliates 14,099 13,041 ------ ------ Total current assets 70,508 56,143 ------ ------ Property and equipment: Computer equipment and software 1,848 - Accumulated depreciation (92) - ------ ------ Net property and equipment 1,756 - ------ ------ Total assets $72,264 $56,143 ======= ======= LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) Current liabilities: Accounts payable $ 79,544 $43,179 Accrued liabities 13,061 6,541 Sales tax payable 925 1,818 Due to officer 12,000 20,000 ------- ------ Total current liabilities 105,530 71,538 ------- ------ Shareholder's equity (deficit): Common stock, no par value, authorized 200,000 shares; issued and outstanding 1,000 shares 10,000 10,000 Retained earnings (deficit) (43,266) (25,395) ------- ------- Total shareholder's equity (deficit) (33,266) (15,395) ------- ------- Total liabilities and shareholder's equity (deficit)$72,264 $56,143 ======= ======= See notes to financial statements. F-9 ROTMAN AUCTION, INC. STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) Years Ended December 31, 1998 and 1997 1998 1997 ---- ---- Revenues $668,543 $520,761 Cost of revenues 93,988 15,700 ------ ------ Gross profit 574,555 505,061 ------- ------- Operating expenses: Payroll and payroll taxes 259,147 213,285 Sorting 866 1,219 Advertising 124,282 143,847 Shipping 94,178 39,144 Telephone 6,763 8,089 Motor vehicle 2,968 2,898 Travel and entertainment 1,756 4,360 Credit card service charges 18,212 11,019 Bank service fees 6,044 3,998 Insurance 40,362 31,630 Professional fees 5,237 19,776 Computer and data processing 14,707 25,252 Repairs and maintenance 4,978 8,866 Office supplies and expense 8,887 13,616 Donations 300 - Taxes - other 85 541 Depreciation 92 - Miscellaneous expenses 3,562 2,916 -------- -------- Total operating expenses 592,426 530,456 -------- -------- Net loss (17,871) (25,395) Retained earnings (deficit) - beginning (25,395) - -------- -------- Retained earnings (deficit) - ending $ (43,266) $ (25,395) ======== ======== See notes to financial statements. F-10 ROTMAN AUCTION, INC. STATEMENTS OF CASH FLOWS Years Ended December 31, 1998 and 1997
1998 1997 -------------- ------------- Operating activities: Net loss $(17,871) $(25,395) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 92 - Changes in assets and liabilities: Accounts receivable (3,936) (104) Inventory (33,553) (600) Accounts payable 36,365 43,179 Accrued liabilities 6,520 6,541 Sales tax payable (893) 1,818 -------------- ------------- Net cash provided by (used in) operating activities (13,276) 25,439 -------------- ------------- Investing activities: Net advances to affiliates (1,058) (13,041) Property and equipment acquisitions (1,848) - -------------- ------------- Net cash used in investing activities (2,906) (13,041) -------------- ------------- Financing activities: Advances from (repayments to) officer (8,000) 20,000 Proceeds from sale of common stock 10,000 - -------------- ------------- Net cash provided by (used in) financing activities (8,000) 30,000 -------------- ------------- Net increase (decrease) in cash (24,182) 42,398 Cash - beginning 42,398 - -------------- ------------- Cash - ending $18,216 $42,398 ============== =============
See notes to financial statements. F-11 ROTMAN AUCTION, INC. NOTES TO FINANCIAL STATEMENTS December 31, 1998 and 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Rotman Auction, Inc. (the "Company") is a full-service consignment auction house located in Worcester, Massachusetts. The Company provides a full range of services to sellers and buyers including live online bidding, consignment services, authentication of merchandise, digital photography as well as purchases and sales of authentic memorabilia. Inventory Inventory is stated at the lower of cost, using the first-in, first-out (FIFO) method, or market. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the double declining balance method over the estimated useful life of 5 years. Expenditures for additions, improvements and major renewals are capitalized while those for repairs and maintenance are charged to expense as incurred. Revenue Recognition The Company sells merchandise from vendors under one of two types of sales transactions. The Company either purchases merchandise and sells it to customers or sells merchandise to customers under consignment-type revenue sharing agreements with vendors. For sales of merchandise owned and warehoused by the Company, the Company is responsible for conducting the auction, billing the customer, shipping the merchandise to the customer, processing merchandise returns and collecting accounts receivable. The Company recognizes the gross sales amount as revenue upon shipment of the merchandise. For sales of merchandise under consignment-type revenue sharing agreements, the Company takes physical possession of the merchandise, but is not obligated to and does not take title to or ownership of the merchandise. When an auction is completed, consigned merchandise which has been sold is shipped upon receipt of payment. The Company recognizes the net commission and service revenues relating to the consigned merchandise upon receipt of the gross sales proceeds. The Company then releases the net sales proceeds to the Consignor. Consignors realized approximately $680,000 and $563,000 in net sales proceeds from the Company's auctions for years ended December 31, 1998 and 1997, respectively. F-12 ROTMAN AUCTION, INC. NOTES TO FINANCIAL STATEMENTS (Continued) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded) Advertising Costs Advertising costs are charged to operations when incurred. Income Taxes The shareholder has elected to have the corporation taxed as an S Corporation. Consequently, the Company does not pay corporate income taxes. Instead, the shareholder is liable for individual income taxes on the Company's taxable income. Accordingly, there is no provision for income taxes in the financial statements. 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 financial statements and accompanying notes. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. 2. DUE FROM AFFILIATES Due from affiliates consists of non-interest bearing cash advances to entities in which the Company's shareholder has an equity interest. Amounts outstanding at December 31, 1998 and 1997 are as follows: 1998 1997 ---- ---- Timeline Editions, Limited $10,419 $13,041 Internet Auction, Inc. 3,500 - Gregory Rotman, Inc. 180 - ------- ------- $14,099 $13,041 ======= ======= 3. DUE TO OFFICER Due to officer consists of non-interest bearing advances from the Company's shareholder which are payable on demand. F-13 ROTMAN AUCTION, INC. NOTES TO FINANCIAL STATEMENTS (Concluded) 4. SUBSEQUENT EVENTS Merger with Internet Auction, Inc. Effective February 25, 1999, the Company merged with Internet Auction, Inc. (Internet), a related party. Under the terms of the merger agreement, the shareholder of the Company received 870 shares of Internet's common stock in exchange for the total shares outstanding (1,000 shares) owned by the shareholder. Internet is the surviving company in the merger. F-14 Proforma Financial Information Effective February 25, 1999, Securities Resolution Advisors, Inc. (SRAD) acquired all of the outstanding common stock of Internet Auction, Inc. (IA) in exchange for 37,368,912 shares of SRAD stock. The transaction will be accounted for as a reverse acquisition with IA being the acquirer. Concurrent with this transaction Rotman Auction, Inc. (RA) was merged into IA in a transaction accounted for was a purchase and the assets of WorldWide Collectors Digest, Inc. (WWCD) were contributed to IA. Finally, during February 1999 approximately $769,000 of inventory was contributed to IA. Subsequent to these transactions SRAD changed its name to Sales OnLine Direct, Inc. The proforma exhibits are based upon the audited financial statements of IA and RA as of, and for the year ended, December 31, 1998. The proforma exhibits include: 1) A combining proforma balance sheet as of December 31, 1998 that reflects: a) the merger of IA and RA and the recording of the fair value adjustment to RA and the related goodwill, giving effect to the purchase accounting, b) contribution of the assets of WWCD, c) contribution of the inventories by shareholders, d) the effect of the stock issued in the acquisition, giving effect to the reverse acquisiton and e) elimination of intercompany balances 2) A combining proforma statement of operations that presents income (loss) from continuing operations for the year ended December 31, 1998 as if the above transactions took place on January 1, 1998. The proforma adjustments relate to: a) Recording amortization of goodwill and b) Elimination of the income tax expense due to the proforma net loss. F-15 Sales OnLine Direct, Inc. Proforma Balance Sheet December 31, 1998
Securities Resolution Internet Rotman Proforma Advisors, Auction Auction Proforma Adjustments Inc. Inc. Inc. Current assets $835,055 c $769,000 $488 $ - $56,409 b 9,158 Related party Receivables 13,336 e (10,664) - 7,164 14,099 b 2,737 Property & Equipment 52,112 b 29,877 - 20,479 1,756 Other assets 33,266 a 33,266 - - - Total assets $933,769 $833,374 $488 $27,643 $72,264 Current liabilities $100,690 $ - $ - $7,160 $93,530 Related party Payables 18,124 e (10,664) - 8,245 12,000 b 8,543 Shareholders' Equity: Common stock 43,894 d (47,528) $90,422 1,000 10,000 a (10,000) Paid in Capital 759,823 c 769,000 811,308 - - b 33,229 d (853,714) Retained earnings (Accumulated deficit) 12,238 d 901,242 (901,242) 12,238 (43,266) a 43,266 subtotal 815,955 792,229 488 13,238 (33,266) Less stock sub- scriptions receivable (1,000) - - (1,000) - Total shareholders' equity 814,955 792,229 488 12,238 (33,266) Total liabilities and shareholders' equity $933,769 $833,374 $488 $27,643 $72,264
a Record merger of Rotman Auction, Inc. into Internet Auction, Inc. and related goodwill b Record contribution of WorldWide Collectors Digest assets c Record inventories contributed by shareholders d Record reverse merger on February 25, 1999 e Eliminate intercompany loans F-16 Sales OnLine Direct, Inc. Proforma Statement of Income For the year ended December 31, 1998
Securities Resolution Internet Rotman Proforma Advisors, Auction Auction Proforma Adjustments Inc. Inc. Inc. Sales $693,298 $ - $ - $ 24,755 $668,543 Cost of sales 93,988 - - - 93,988 Gross profit 599,310 - - 24,755 574,555 Operating expenses 613,783 f 11,000 - 10,357 592,426 Income (Loss) before provision for income taxes (14,473) (11,000) - 14,398 (17,871) Provision for income taxes - g (2,160) - 2,160 - Net income (loss) $(14,473) $(8,840) $ - $12,238 $(17,871) Weighted average number of shares outstanding 43,893,912 37,368,912 6,525,222 Basic and diluted earnigs (loss) per share $ - $ -
f Record amortization for goodwill g Eliminate income tax due to loss F-17 -----END PRIVACY-ENHANCED MESSAGE-----