8-K/A 1 e8-ka.txt AMENDMENT NO. 1 TO FORM 8-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934 ---------- Date of Report (Date of earliest event reported) March 9, 2000 HOUSEHOLD DIRECT.com, INC. (Exact name of registrant as specified in its charter) ---------- DELAWARE 000-28667 51-0388634 (State or other (Commission (I.R.S. Employer jurisdiction of File Number) Identification No.) incorporation ---------- HOUSEHOLD DIRECT.com, INC. 900 MAIN STREET SOUTH SOUTHBURY, CONNECTICUT 06488 (Address of principal executive offices) (Zip Code) ---------- (203) 267-1400 (Registrant's telephone number, including area code) ---------- (Former name or former address, if changed since last report) ================================================================================ 2 This Amendment to Current Report on Form 8-K amends the Company's Current Report on Form 8-K filed on or about March 22, 2000. Item 2. ACQUISITION OR DISPOSITION OF ASSETS HouseHold Direct.com, Inc. (the "Company") had previously stated in its Current Report on Form 8-K filed with the Securities and Exchange Commission on or about March 22, 2000, that it had identified and agreed to acquire Preferred Consumer Services, Inc. ("PCS"). While in the process of attempting to complete the acquisition, the Company determined that certain material representations made to the Company about the financial status, accounting records, and operations of PCS were inaccurate. Consequently, the Company has ceased its efforts to acquire PCS and has agreed to enter into a management agreement with PCS whereby the Company will assist PCS in the collection of certain accounts receivable and provide buying and other services for the members of PCS'S Buyer's Club. Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT Prior to the completion of the Company's initial audit, the Company's independent accountants, King Griffin and Adamson, P.C., resigned effective April 17, 2000. The Company engaged Wallace Sanders & Company, 8131 LBJ Freeway, Suite 875, Dallas, Texas 75251, to complete the audit upon resolution of its Board of Directors on April 24, 2000. As this is the Company's first audit there has been no prior adverse opinion, disclaimer of opinion, modification or qualification by the Company's former independent accountants. While the Company knows of no specific reason or difference of opinion why its former accountants resigned, to issuer's knowledge there were no disagreements as to the Company's audit report as there had been no draft report given to issuer for review. Issuer believes that the resignation of its former independent accountants occurred as a result of a conflict of personalities between the Company's president and the former accountants' partner in charge. As a result of said resignation there has not been any change in the scope of the audit nor has the Company's new accountants initiated any investigation or enquiry. Item 7. CONSOLIDATED FINANCIAL STATEMENTS AND EXHIBITS The following consolidated financial statements of the Company and Subsidiary including any affiliates and reflecting its merger with Cross Check Corp. are filed herewith: Report of Independent Certified Public Accountants Consolidated Balance Sheets as of December 31,1999 and 1998 and including as of March 31, 2000(unaudited). Consolidated Statements of Operations for each of the two periods ended December 31, 1999 and for the quarter ended March 31, 2000(unaudited). Consolidated Statements of Changes in Shareholders' Deficit for each of the two periods ended December 31, 1999 and for the quarter ended March 31, 2000(unaudited). 3 Consolidated Statements of Cash Flows for each of the two periods ended December 31, 1999 and for the quarter ended March 31, 2000(unaudited). Item 8. CHANGE IN FISCAL YEAR The Company, as the surviving entity in its merger with Cross Check Corp., has a fiscal year end of December 31 and consequently all future records will reflect said date. The consolidated financial statements filed as part of this amended Form 8-K reflect the Company's December 31 year end. 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. DATE: June 28, 2000 HouseHold Direct.com, Inc. By: /s/ JOHN D. FOLGER ------------------------- John D. Folger 4 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998 5 TABLE OF CONTENTS Report of Independent Certified Public Accountants ........................................................... F-2 Financial Statements Consolidated Balance Sheets ......................................................................... F-3 Consolidated Statements of Operations ............................................................... F-4 Consolidated Statement of Changes in Shareholders' Deficit .......................................... F-5 Consolidated Statements of Cash Flows ............................................................... F-7 Notes to Consolidated Financial Statements .......................................................... F-9

F-1 6 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Shareholders of HouseHold Direct.com, Inc. and Subsidiary We have audited the accompanying consolidated balance sheets of HouseHold Direct.com, Inc. and Subsidiary (a development stage company) (the "Company"), as of December 31, 1999 and 1998, and the related consolidated statements of operations, changes in shareholders' deficit, and cash flows for the year ended December 31, 1999 and for the period from May 18, 1998 (inception) to December 31, 1998. 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 audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of HouseHold Direct.com, Inc. and Subsidiary as of December 31, 1999 and 1998, and the results of their operations and their cash flows for the year ended December 31, 1999 and for the period from May 18, 1998 (inception) to December 31, 1998 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the consolidated financial statements, the Company has incurred net losses since its inception and has experienced severe liquidity problems. Those conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to those matters also are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. WALLACE SANDERS & COMPANY Dallas, Texas June 9, 2000 F-2 7 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS ASSETS

The accompanying notes are an integral part of these consolidated financial statements. F-3 8 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements. F-4 9 HOUSEHOLDDIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT

The accompanying notes are an integral part of these consolidated financial statements. F-5 10 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT (CONTINUED)

The accompanying notes are an integral part of these consolidated financial statements. F-6 11 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements. F-7 12 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

The accompanying notes are an integral part of these consolidated financial statements. F-8 13 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 (1) ORGANIZATION On January 2, 1992, RDI Marketing, Inc. ("RDI") was formed as a Florida corporation. Upon formation, RDI issued 1,000 shares of common stock. On May 18, 1998, RDI adopted a plan of recapitalization whereby the 1,000 shares of common stock were converted into 1,000,000 shares of .001 par value common stock. RDI essentially remained dormant with no direct or indirect business activity until reinstatement on May 18, 1998. In addition to the recapitalization on May 18, 1998, RDI filed a disclosure statement under Rule 15C2-11 of the Securities and Exchange Act of 1934 (hereafter the "Exchange Act") with the National Association of Securities Dealers ("NASD"). As a result, commencing on June 11, 1998, RDI's common stock was quoted on the OTC Bulletin Board. On July 10, 1998, RDI exchanged 10,000,000 shares of common stock for all of the outstanding stock of Preferred Consumer Network International, Inc. ("PCNI") (see Note 3). PCNI, incorporated on June 13, 1997, was engaged in the business of developing and operating a wholesale buying club which provided buying, marketing and financial services to third party owned wholesale buying clubs. The traditional buying club business model (the "Traditional Model") being utilized by PCNI was predicated on the sale of memberships to the general public, which memberships entitled the holders to purchase goods and services through the wholesale buying club at wholesale prices (exclusive of separately charged taxes, handling and shipping charges and a processing fee of up to 10%). During the fourth quarter of 1998, RDI elected to abandon the Traditional Model in preference to a new business model (the "New Model") predicated on the mass marketing (through telemarketing and the internet) of memberships. Additionally, the operations of PCNI based on the Old Model were suspended and PCNI became inactive. Subsequently, RDI sold all of the issued and outstanding capital stock of PCNI to Mr. John Folger (the President, a member of the Board of Directors and a principle shareholder of RDI) for nominal consideration (see Note 3). RDI, in furtherance of the development of the New Model, entered into several acquisitions during 1999. On May 14, 1999, RDI entered into an acquisition agreement whereby RDI agreed to acquire all of the issued and outstanding capital stock of Thunderstick, Inc. ("Thunderstick") in exchange for 1,000,000 shares of common stock. Thunderstick, through its wholly-owned affiliate Thunderstick Software, LLC, is engaged in the business of developing and marketing internet software which will be utilized to support RDI's website and e-commerce operations (see Note 3). F-9 14 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (1) ORGANIZATION (CONTINUED) On or about July 12, 1999, RDI, among other things, changed its corporate domicile from Florida to Delaware, and its name to HouseHold Direct.com, Inc. (the "Company"). These changes were effectuated by merging the Company into its wholly-owned Delaware subsidiary, and such merger had no impact on the shareholders or the capital accounts of the Company. On or about September 14, 1999, the Company entered into an acquisition agreement with Megappliance, Inc. ("Mega") pursuant to which the Company agreed to acquire a website (including software, technology and related commercial relationships) in exchange for shares of the Company's common stock (see Note 3). On March 9, 2000, the Company executed an Agreement and Plan of Merger with Cross Check Corp., a Colorado corporation ("Cross") and a Letter Agreement with the shareholders of Cross. Pursuant to such agreements, the Company merged Cross (which had no business operations but was registered, and fully reporting, under the Exchange Act) into the Company so that the Company could achieve "successor issuer" status under the Exchange Act. In connection with such merger which was consummated on March 20, 2000, the Company paid $150,000 in cash and issued 100,000 shares of common stock of the Company to the former shareholders of Cross. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which contemplate the continuation of the Company as a going concern. However, the Company is in the development stage, and since inception has been engaged primarily in raising capital and developing its website, product, and market strategy. The Company has not generated significant revenues from operations, and in the course of funding product and website development and other start-up activities, has experienced cumulative net losses of $2,863,950 for the period from May 18, 1998 (inception) to December 31, 1999, and has used cash in operations of $1,021,992 for the period from May 18, 1998 (inception) to December 31, 1999. The Company expects that it will continue to incur net operating losses as it expends substantial resources on product development and sales and marketing in an attempt to capture market share and develop market recognition. Management is in the process of raising additional capital through continued issuance of stock. Management of the Company believes that its additional capital that is expected to be raised in the future will be sufficient to cover its working capital needs until the Company's revenue volume reaches a sufficient level to cover operating expenses. Without the assurances F-10 15 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) of additional capital, these factors raise a substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany transactions and balances have been eliminated in consolidation. At December 31, 1998, there were no wholly-owned subsidiaries. At December 31, 1999, the wholly-owned subsidiary is Thunderstick. Revenue Recognition Revenue for services is recognized when the service is rendered, while product revenue is recognized when the product is shipped to the customer. 1998 revenue Revenue consisted of products sold and shipped from the PCNI subsidiary. 1999 revenue Revenue relates to consulting services performed by Thunderstick. First quarter of 2000 revenue (unaudited) Revenue of approximately $12,000 consists of membership fee income earned related to the contract entered into with Personal Consumer Services, Inc. (see Note 10). Revenue of approximately $32,500 consists of consulting services performed by Thunderstick. Deferred revenue as presented on the balance sheet relates to uncollected revenue related to Personal Consumer Services, Inc. (see Note 10). Due to the uncertainty of collection history of this company, only cash received subsequent to the first quarter was recorded as revenue ($12,000) and all outstanding receivable amounts as of March 31, 2000 were recorded as deferred revenue. F-11 16 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives, ranging from three to five years. Maintenance and repair costs are expensed as incurred. Fair Value of Financial Instruments Statement of Financial Accounting Standards No. 107 "Disclosure About Fair Value of Financial Instruments," requires disclosure about the fair value of all financial assets and liabilities for which it is practicable to estimate. At December 31, 1998 and 1999, the carrying value of all of the Company's accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short term nature. The note payable carrying value approximates fair value based on the borrowing rate currently available to the Company for loans with similar terms. Research and Development Costs Research and development costs are expensed as incurred. Goodwill Goodwill reflects the excess of purchase price over the fair value of net assets purchased and is amortized on a straight-line basis over 3 years. As of December 31, 1999, accumulated amortization was $2,080. Cash and Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with initial maturities of three months or less to be cash equivalents. Use of Estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of the revenues and expenses during the reporting period. Actual results could differ from those estimates. F-12 17 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Loss per Share Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period (17,902,094 shares in 1999 and 8,620,563 shares in 1998). Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period. Common stock equivalents, representing options totaling 4,300,000 shares for 1999 and 380,000 for 1998, are not included in the diluted loss per share as they are antidilutive. Net loss per share has been stated for all periods presented in accordance with SFAS No. 128. (3) ACQUISITIONS AND SALES Preferred Consumer Network International, Inc. On July 10, 1998, the Company purchased PCNI in exchange for 10,000,000 shares of common stock at $0.001 par value per share. This acquisition was accounted for by using the purchase method of accounting, and accordingly the deficit assumed was initially recorded by the Company based on estimated fair values at the date of acquisition: Deficit $ (693,716) Goodwill 703,716 --------------- Purchase consideration $ 10,000 ===============

On December 31, 1998, the Company sold PCNI to a major shareholder of the Company for $1. Thunderstick, Inc. On May 7, 1999, a related party exchanged 500,000 shares of .001 par value per share personally held common stock (par value of $5,000) of the Company for 50% of the purchase consideration for all of the stock of Thunderstick. The Company agreed to pay the liability of $5,000 and therefore, this amount is included in amounts payable to related parties. The outstanding portion, 500,000 shares of common stock (par value of $5,000), is included in accounts payable and was subsequently issued in May 2000. F-13 18 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (3) ACQUISITIONS AND SALES (CONTINUED) This acquisition was accounted for by using the purchase method of accounting, and accordingly the equity assumed was initially recorded by the Company based on estimated fair values at the date of acquisition: Equity $ 28,580 Negative goodwill (18,580) --------------- Purchase consideration $ 10,000 ===============

The market value of the Company's shares on May 7, 1999 was $0.346 per share, equating to a value of $346,000. Based on the substance of the purchase agreement, as well as the underlying net assets of the acquired company, the transaction was recorded at fair value and subsequently written down to the par value of the Company's shares. The non-current assets of the purchased company were reduced by the negative goodwill. Megappliance, Inc. On September 9, 1999, a related party exchanged personally held stock of the Company valued at $34,720 for the assets of Mega. This acquisition was accounted for by using the purchase method of accounting, and accordingly the assets assumed were initially recorded by the Company based on estimated fair values at the date of acquisition: Computer equipment $ 16,000 Goodwill 18,720 --------------- Purchase consideration $ 34,720 ===============

F-14 19 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (3) ACQUISITIONS AND SALES (CONTINUED) Pro-forma Information Unaudited pro-forma information for the year ended December 31, 1999 has been prepared to reflect the results of the consolidated operations as if the acquisition of Thunderstick and Mega had occurred on January 1, 1999. The results are not necessarily indicative of the results which would have occurred had these transactions been consummated at the beginning of 1999 or of future results of operations of the Company.

The pro-forma adjustments represent revenue from services rendered by Thunderstick to outside parties for the period January 1, 1999 to May 7, 1999, as well as the net effect of operating results of Thunderstick, for the same period, on the net loss of the Company. (4) RELATED PARTY TRANSACTIONS Directors and major shareholders of the Company, John Folger and Ann Jameson (the "Shareholders"), entered into the following transactions with the Company:

F-15 20 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (4) RELATED PARTY TRANSACTIONS (CONTINUED) As of December 31, 1998, PCNI is wholly owned by John Folger. During 1999, the Company made payments totaling $190,622 on behalf of PCNI. It was determined that this amount would not be collected by the Company and therefore written off against the amounts payable to related parties balance. (5) PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31, 1998 and 1999:

F-16 21 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (6) INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes" which requires the use of the "liability method" of accounting for income taxes. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for consolidated financial reporting purposes and the amount used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31 are as follows:

The reconciliation of the income tax provision at the statutory United States federal income tax rates to income tax provision is:

At December 31, 1999, the Company has net operating loss carryforwards for federal income tax purposes of approximately $2.3 million which begin to expire in 2018. Utilization of net operating losses may be subject to annual limitations due to the F-17 22 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (6) INCOME TAXES (CONTINUED) ownership change limitation provided by the Internal Revenue Code of 1986. The annual limitation may result in the expiration of net operating losses before utilization. The Company has not filed any federal, state, or local income tax returns since inception. (7) NOTE PAYABLE On April 7, 1999, the Company entered into a note payable agreement with a third party for $13,500. A $2,500 payment was made by the Company. The note payable bears interest at 12.00% per annum and requires monthly principal and interest payments of $518 beginning May 1, 1999. The note matures on May 1, 2001. Scheduled maturities of the note payable under existing terms are as follows at December 31, 1999: 2000 $ 5,601 2001 2,020 ------- $ 7,621 =======

(8) COMMITMENTS AND CONTINGENCIES Operating Lease The Company leases certain office space under an operating lease that requires monthly rental payments of approximately $2,522 and expires April 30, 2002. Total rent expense related to this lease totaled $22,698 for the year ended December 31, 1999 and is included in general and administrative expenses in the accompanying consolidated statement of operations. Future minimum lease payments are as follows:

Internal Revenue Service Contingent Liability PCNI, a temporary wholly owned subsidiary of the Company during five months in 1998, was subsequently purchased and is currently owned by a major shareholder of the F-18 23 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (8) COMMITMENTS AND CONTINGENCIES (CONTINUED) Company (see Note 3). PCNI has been assessed a tax liability by the Internal Revenue Service ("IRS") for taxes, related to wages paid to employees, for an approximate total amount of $83,000. It is of the opinion of the Company's legal counsel that this liability will not significantly impact the Company. However, there is currently no legal determination as to whether the Company may be liable at some point for the entire amount. As of December 31, 1999, the Company recorded approximately $11,000 of this liability which was incurred during the time of temporary ownership. This amount is included in accounts payable in the accompanying consolidated balance sheets. The Company may be subject to other various legal proceedings and claims that arise in the ordinary course of business. Management currently believes that resolving these matter(s) will not have a material adverse impairment on the Company's financial position or its results of operations. (9) CAPITAL STOCK Common Stock Shares Issued During 1998, the Company issued an aggregate of 12,917,000 shares of Common Stock at $.001 par value (the "Common Stock"). The aggregate consideration received by the Company in connection with the issuance of such shares consisted of (a) $175,961 in the form of cash payments, received in connection with the issuance of 1,627,095 shares, (b) $100,540 in the form of services performed for or on behalf of the Company received in connection with the issuance of 914,000 shares, (c) 175,905 shares issued in lieu of interest of $20,500; and (d) on December 28, 1998, the Company issued 200,000 shares at $0.25 per share to an unrelated third party under the terms of a stock subscription agreement; the amount is payable on demand. The outstanding stock subscriptions are classified in the accompanying consolidated balance sheets and statement of changes in shareholders' deficit as a contra account to shareholders' deficit. No payments for stock subscriptions were received as of December 31, 1998. The Company also received all of the outstanding shares of the capital stock of PCNI in connection with the issuance of (e) 10,000,000 shares of the Company's common stock. These 10,000 shares were recorded as common stock subscriptions receivable since it was deemed that the purchase of PCNI resulted in little to no value to the Company. During calendar year 1999, the Company issued an additional 6,323,304 shares of Common Stock (the "Additional Shares"); and in connection with such issuance received (f) $902,179 in the form of cash in connection with issuance of 4,784,504 Additional Shares, (g) $369,372 in the form of services in connection with the issuance of 1,488,800 Additional Shares; and (h) on April 6, 1999, the Company issued 50,000 shares at $0.46 per share to an unrelated third party under F-19 24 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (9) CAPITAL STOCK (CONTINUED) the terms of a stock subscription agreement; the amount is payable on demand. The outstanding amounts are classified in the accompanying consolidated balance sheets and statement of changes in shareholders' deficit as a contra account to shareholders' deficit. A total amount of $38,645 was received as of December 31, 1999 in respect of all stock issued for subscriptions receivable. The $9,999 stock subscriptions receivable related to the PCNI transaction was reclassed against the amounts payable to related parties balance at December 31, 1999. All stock for services were valued at the average stock for cash value ($.19 in 1999 and $.11 in 1998). However, where specific values of services could be determined, those values were used to record the transactions. Detail Stock Transactions Stock issued in 1998 for cash:

Stock issued in 1998 in lieu of interest:

F-20 25 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (9) CAPITAL STOCK (CONTINUED) Stock issued in 1998 for acquisition of PCNI:

Stock issued in 1998 for subscriptions receivable:

Stock issued in 1998 for services:

F-21 26 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (9) CAPITAL STOCK (CONTINUED) Stock issued in 1999 for cash:

Stock issued in 1999 for subscriptions receivable:

F-22 27 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (9) CAPITAL STOCK (CONTINUED) Stock issued in 1999 for services:

Stock Grants, Options and Warrants The Company has a nonqualified stock option plan that provides for the granting of the options to employees and consultants. The option price, number of shares, and grant date are determined at the discretion of the Company's Board of Directors. Grantees vest in the options at various intervals as determined by the Board of Directors. Options granted under the plan are exercisable for a period of up to five years from the grant date. Options were also granted to third parties to obtain capital. F-23 28 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (9) CAPITAL STOCK (CONTINUED) A summary of activity involving options and warrants of the Company's common stock follows:

F-24 29 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (9) CAPITAL STOCK (CONTINUED) The Company accounts for its stock based awards to employees using the intrinsic value method in accordance with APB 25, "Accounting for Stock Issued to Employees," and its related interpretations. Deferred compensation of $15,000 was recorded in accordance with APB 25. The fair value of each option grant was estimated in accordance with SFAS 123 using the Black-Scholes option-pricing model with the following weighted-average assumptions:

Compensation costs for stock options determined at the grant date in accordance with the fair value method consistent with SFAS 123 requires no additional amounts in compensation costs to be recognized for the years ended December 31, 1999 and 1998 as fair market value calculated using the Black-Scholes model, was lower than the option prices in all cases. Where options were issued to third parties for services rendered, the value of the consideration received is used to record the transactions, as allowed by SFAS 123. A total amount of $110,131 was recorded in 1999 on this basis. This amount is included in consulting fees in the accompanying consolidated statements of operations. (10) SUBSEQUENT EVENTS Formation of Additional Subsidiaries During the first quarter of 2000, the Company formed additional wholly owned subsidiaries for the purpose of expanding and pursuing other related business opportunities. Agreement with Personal Consumer Services, Inc. In January 2000, the Company entered into a service agreement (the "Agreement") with a third party wholesale buying club, Personal Consumer Services, Inc. ("PCS"). The Company is to provide services for PCS members in exchange for a base fee and F-25 30 HOUSEHOLD DIRECT.com, INC. AND SUBSIDIARY (DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 (10) SUBSEQUENT EVENTS (CONTINUED) monthly retainer as defined in the Agreement. The Agreement expires in December 2005 with an option to extend the term for an additional five years. As of March 31, 2000, the Company is owed $652,872 from PCS, of which $612,688 has been recorded as deferred revenue. Purchase of Cross Check Corp. On March 9, 2000, the Company executed an Agreement and Plan of Merger with Cross and a Letter of Agreement with the shareholders of Cross. Pursuant to such agreements, the Company merged Cross (which had no business operations but was registered, and fully reporting, under the Exchange Act) into the Company so that the Company could achieve "successor issuer" status under the Exchange Act. In connection with such merger which was consummated on March 20, 2000, the Company paid $150,000 in cash and issued 100,000 shares of common stock of the Company to the former shareholders of Cross. Pro-forma information is not presented for this acquisition since Cross was an inactive company with no significant assets and liabilities. (11) UNAUDITED INTERIM FINANCIAL INFORMATION The unaudited interim consolidated financial information as of March 31, 2000 and for the three months ended March 31, 2000 has been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, such unaudited information includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of this interim information. Operating results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2000. F-26

HOUSEHOLD DIRECT COM INC 8-K/A