-----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, Oo6KQb03u/TGYNYneU8SRBZWjlZ5Y5uANaSAdi9xP7l66oT6ESM5cQMPUpBJxzms cTbAoKBb8cZjLPGvXR/TkQ== 0000948830-00-000155.txt : 20000414 0000948830-00-000155.hdr.sgml : 20000414 ACCESSION NUMBER: 0000948830-00-000155 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000413 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ECOM ECOM COM INC CENTRAL INDEX KEY: 0001000459 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 650538051 STATE OF INCORPORATION: FL FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-23617 FILM NUMBER: 600522 BUSINESS ADDRESS: STREET 1: 3801 PGA BOULEVARD STREET 2: SUITE 1000 CITY: PALM BEACH GARDENS STATE: FL ZIP: 33410 BUSINESS PHONE: 5616224395 FORMER COMPANY: FORMER CONFORMED NAME: US AMATEUR SPORTS INC DATE OF NAME CHANGE: 19950912 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended February 29, 2000 Commission File Number 33-96638-A ecom ecom.com, inc. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Florida 65-0538051 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3801 PGA Boulevard, Suite 1000 ----------------------------------------------------------- (Address of principal executive offices) (561) 622-4395 ---------------------------------------------------- (Registrant's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes -X- No__ As of February 29, 2000, the issuer had 13,877,165 shares of common stock, $.0001 Par Value, outstanding. Transitional Small Business Disclosure format: Yes __ No -X- eCom eCom.com, Inc. Form 10-QSB February 29, 2000 INDEX PAGE NO. PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Consolidated Balance Sheets: February 29, 2,000 and May 31, 1999 3 Consolidated Statements of Operations: Nine-Month Periods Ended February 29, 2000 and February 28, 1999 4 Three-Month Periods Ended February 29, 2000 and February 28, 1999 5 Consolidated Statements of Cash Flows: Nine-Month Periods Ended February 29, 2,000 and February 28, 1999 6 Notes to Consolidated Financial Statements 7 Proforma Consolidated Balance Sheet: February 29, 2000 8 Proforma Consolidated Statement of Operations: Nine Months Ended February 29, 2000 9 Proforma Consolidated Balance Sheet: May 31, 1999 10 Proforma Consolidated Statement of Operations: Year Ended May 31, 1999 11 Proforma Consolidated Balance Sheet: May 31, 1998 12 Proforma Consolidated Statement of Operations: Year Ended May 31, 1998 13 Proforma Consolidated Notes to Financial Statements 14 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 16 PART II OTHER INFORMATION ITEMS 1-6 20 2 ECOM ECOM.COM, INC. CONSOLIDATED BALANCE SHEETS FEBRUARY 29, 2000 AND MAY 31, 1999 February 29, 2000 May 31, 1999 ----------------- ------------ Assets (Unaudited) Current Assets Cash $ 45,082 $ 105,857 Accounts receivable 13,116 19,155 Inventories 360,107 155,893 Prepaid expense 75,503 15,749 ------------- ------------- Total current assets 493,808 296,654 Property and equipment 145,732 97,263 Intangible assets 51,335 67,135 Other assets 3,442 6,773 ------------- ------------- Total assets $ 694,317 $ 467,825 ============= ============= Liabilities Current liabilities Accounts payable and accrued expenses $ 730,280 $ 130,683 Current portion of notes payable 100,000 100,000 Current portion of accrued interest 16,730 5,937 ------------- ------------- Total current liabilities 847,010 236,620 Loan from stockholders 576,032 212,344 Notes payable, less current portion 7,295 7,295 ------------- ------------- Total liabilities 1,430,337 456,259 ------------- ------------- Stockholders' equity Common stock, $.0001 par value: Authorized - 50,000,000 shares; Issued - 13,877,165 shares at February 29, 2000 and 12,883,600 shares at May 31, 1999 1,388 1,288 Additional paid-in capital 1,763,113 935,284 Accumulated deficit (2,495,521) (920,006) Less treasury stock at cost, 2,000 shares (5,000) (5,000) ------------- ------------- Total stockholders' equity (736,020) 11,566 ------------- ------------- Total liabilities and stockholders' equity $ 694,317 $ 467,825 ============ ============= See notes to financial statements. 3 ECOM ECOM.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Nine-Month Periods Ended February 29, 2000 and February 28, 1999 (Unaudited) Nine Months Nine Months Ended Ended February 29, 2000 February 28, 1999 ----------------- ----------------- Net sales $ 1,379,444 $ 135,078 Cost of sales 1,284,417 79,909 ------------- ------------- Gross profit 95,027 55,169 ------------- ------------- Other operating expenses Sales and marketing 651,595 66,340 Product development 421,154 0 General and administrative 538,068 113,446 Depreciation and amortization 48,931 26,841 ------------- ------------- Total operating expenses 1,659,748 206,627 ------------- ------------- Loss from operations (1,564,721) (151,458) Interest expense 10,793 11,896 ------------- ------------- Net loss $ (1,575,514) $ (163,354) ============= ============= Net loss per common share (primary and diluted) $ (.119) $ (.013) ------------- ------------- Weighted average shares outstanding 13,242,500 12,253,100 ------------- ------------- See notes to financial statements. 4 ECOM ECOM.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three-Month Periods Ended February 29, 2000 and February 28, 1999 (Unaudited) Three Months Three Months Ended Ended February 29, 2000 February 28, 1999 ----------------- ----------------- Net sales $ 927,873 $ 81,092 Cost of sales 873,480 50,748 ------------- ------------- Gross profit 54,393 30,344 ------------- ------------- Other operating expenses Sales and marketing 369,265 23,785 Product development 156,205 0 General and administrative 263,474 34,361 Depreciation and amortization 16,671 9,149 ------------- ------------- Total operating expenses 805,615 67,295 ------------- ------------- Loss from operations (751,222) (36,951) Interest expense 3,615 3,921 ------------- ------------- Net loss $ (754,837) $ (40,872) ============= ============= Net loss per common share (primary and diluted) $ (.055) $ (.003) ------------- ------------- Weighted average shares outstanding 13,672,802 12,288,600 ------------- ------------- See notes to financial statements. 5 ECOM ECOM.COM, INC. CONSOLIDATED STATEMENT OF CASH FLOWS Nine-Month Periods Ended February 29, 2000 and February 28, 1999 (Unaudited) Nine Months Nine Months Ended Ended February 29, 2000 February 28, 1999 ----------------- ----------------- Cash flows from operating activities Net loss $ (1,575,514) $ (163,354) Reconciling adjustments: Depreciation and amortization 48,931 26,841 (Increase) Decrease in: Accounts receivable 6,039 (14,258) Inventories (204,214) (68,472) Prepaid expense (59,754) 25,393 Other assets 3,331 (1,743) Increase (Decrease) in: Accounts payable and accrued expenses 599,597 6,554 Accrued interest 10,793 (6,955) ------------- ------------- Net cash used by operating activities (1,170,791) (195,994) ------------- ------------- Cash flows from investing activities Acquisition of property and equipment (81,602) (20,071) Acquisition of intangible assets 0 (17,879) ------------- ------------- Net cash used by investing activities (81,602) (37,950) ------------- ------------- Cash flows from financing activities Capital contributions 827,929 211,826 Notes payable 0 (4,317) Loans from stockholders 363,689 95,745 ------------- ------------- Net cash provided by financing activities 1,191,618 303,254 ------------- ------------- Net increase (decrease) in cash (60,775) 69,310 Cash balance, beginning of period 105,857 89,542 ------------- ------------- Cash balance, end of period $ 45,082 $ 158,852 ============= ============= See notes to financial statements. 6 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS February 29, 2000 and February 28, 1999 (Unaudited) NOTE 1 - UNAUDITED INTERIM INFORMATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended February 29, 2000 are not necessarily indicative of the results that may be expected for the year ending May 31, 2000. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-KSB for the year ended May 31, 1999. NOTE 2 - BUSINESS SEGMENTS The Company's reportable segments are strategic business units that offer different products and services. The Company currently has two reportable segments: paintball products and Internet commerce. The paintball segment produces a mid-priced paintball marker and distributes related accessories. The Internet segment develops and operates Internet web sites including the eCom eCom Super Hub. There have been no intersegment sales or transfers. Revenues from sales of the Company's paintball products over the Internet are reported within the paintball segment. Internet revenues consist of the sale of products through the auction web site and fees from eCom eCom B2B Plus services. Following is a summary of segment information: Nine Months Ended February 29, 2000 Total Paintball Internet All Other (a) Revenues 1,379,444 1,376,083 3,361 Interest 10,793 10,793 Depreciation and Amortization 48,931 25,192 19,724 4,015 Profit (Loss) (1,575,514) (115,000) (1,170,847) (289,667) Assets 694,317 495,151 149,222 49,944 Nine Months Ended February 28, 1999 Total Paintball Internet All Other (a) Revenues 135,078 135,078 Interest 11,896 10,540 1,355 Depreciation and Amortization 26,841 19,411 7,430 Profit (Loss) (163,354) (56,295) (10,000) (97,059) Assets 463,060 148,992 11,700 302,368 _________________ (a) Includes amounts not allocated to operating segments. 7 eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC. PROFORMA CONSOLIDATED BALANCE SHEET February 29, 2000
eCom eCom SDMI Eliminations ------------ ----------- ------------ ----------- C> ASSETS Cash $ 45,082 $ 5,637 $ - $ 50,719 Accounts receivable 13,116 34,792 - 47,908 Inventories 360,107 216,710 - 576,817 Prepaid expense and other current assets 75,503 7,216 - 82,719 Property and equipment 145,732 4,068 - 149,800 Intangible assets 51,335 - - 51,335 Other assets 3,442 7,000 - 10,442 ------------ ----------- ----------- ----------- Total Assets $ 694,317 $ 275,423 $ - $ 969,740 ============ =========== =========== =========== LIABILITIES Accounts payable and accrued expenses $ 730,280 $ 52,470 $ - $ 782,750 Current portion of accrued interest 16,730 - - 16,730 Current portion of loans from stockholders - 100,000 - 100,000 Current portion of notes payable 100,000 - - 100,000 Loans from stockholders, less current portion 576,032 - - 576,032 Notes payable, less current portion 7,295 - - 7,295 ------------ ----------- ----------- ----------- Total Liabilities 1,430,337 152,470 - 1,582,807 ------------ ----------- ----------- ----------- STOCKHOLDERS' EQUITY Common stock 1,388 1,659,927 1,659,859 1,456 Additional paid-in capital 1,763,113 40,000 (1,564,928) 3,368,041 Accumulated deficit (2,495,521) (1,576,974) (94,931) (3,977,564) Treasury stock (5,000) - - (5,000) ------------ ----------- ----------- ----------- Total Stockholders' Equity (736,020) 122,953 - (613,067) ------------ ----------- ----------- ----------- Total Liabilities and Stockholders' Equity $ 694,317 $ 275,423 $ - $ 969,740 ============ =========== =========== ===========
8 eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC. PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Nine Months Ended February 29, 2000
eCom eCom SDMI Eliminations ------------ ----------- ------------ ----------- C> Net Sales $ 1,379,444 $ 304,480 $ - $ 1,683,924 Cost of Sales 1,284,417 124,382 - 1,408,799 ------------ ----------- ----------- ----------- Gross Profit 95,027 180,098 - 275,125 ------------ ----------- ----------- ----------- Operating Expenses Sales and marketing 651,595 68,190 - 719,785 Product development 421,154 - - 421,154 General and administrative 538,068 311,092 - 849,160 Depreciation and amortization 48,931 5,071 - 54,002 ------------ ----------- ----------- ----------- Total Operating Expenses 1,659,748 384,353 - 2,044,101 ------------ ----------- ----------- ----------- Loss From Operations (1,564,721) (204,255) - (1,768,976) Interest Expense 10,793 - - 10,793 ------------ ----------- ----------- ----------- Loss Before Taxes (1,575,514) (204,255) - (1,779,769) State Income Taxes - - - - ------------ ----------- ----------- ----------- Net Loss $ (1,575,514) $ (204,255) $ - $(1,779,769) ============ =========== =========== =========== Net Loss Per Common Share (0.12) (0.13) Weighted Average Shares outstanding 13,242,500 13,917,500
9 eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC. PROFORMA CONSOLIDATED BALANCE SHEET May 31, 1999
eCom eCom SDMI Eliminations ----------- ----------- ------------ ----------- ASSETS Cash and cash equivalents $ 105,857 $ 3,345 $ - $ 109,202 Accounts receivable 19,155 64,194 - 83,349 Inventories 155,893 215,031 - 370,924 Prepaid expense and other current assets 15,749 11,219 - 26,968 Property and equipment 97,263 8,343 - 105,606 Intangible assets 67,135 - - 67,135 Deferred charges - - - - Other assets 6,773 - - 6,773 ----------- ----------- ----------- ----------- Total Assets $ 467,825 $ 302,132 $ - $ 769,957 =========== =========== =========== =========== LIABILITIES Accounts payable and accrued expenses $ 130,683 $ 63,427 $ - $ 194,110 Current portion of accrued interest 5,937 94,931 94,931 5,937 Current portion of loans from stockholders - 248,496 248,496 - Current portion of notes payable 100,000 - - 100,000 Accrued interest, less current portion - - - - Loans from stockholders, less current portion 212,344 - - 212,344 Notes payable, less current portion 7,295 - - 7,295 ----------- ----------- ---------- ----------- Total Liabilities 456,259 406,854 343,427 519,686 ----------- ----------- ---------- ----------- STOCKHOLDERS' EQUITY Common stock 1,288 1,230,000 1,229,932 1,356 Additional paid-in capital 935,284 40,000 (1,478,428) 2,453,712 Accumulated deficit (920,006) (1,374,722) (94,931) (2,199,797) Treasury stock (5,000) - - (5,000) ----------- ----------- ---------- ----------- Total Stockholders' Equity 11,566 (104,722) (343,427) 250,271 ----------- ----------- ---------- ----------- Total Liabilities and Stockholders' Equity $ 467,825 $ 302,132 $ - $ 769,957 =========== =========== ========== ===========
10 eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC. PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended May 31, 1999
eCom eCom SDMI Eliminations ----------- ----------- ------------ ----------- Net Sales $ 228,613 $ 542,003 $ - $ 770,616 Cost of Sales 148,344 233,682 - 382,026 ----------- ----------- ----------- ----------- Gross Profit 80,269 308,321 - 388,590 ----------- ----------- ----------- ----------- Operating Expenses Sales and marketing 176,376 114,409 - 290,785 Product development 34,347 - - 34,347 General and administrative 187,166 356,716 - 543,882 Depreciation and amortization 43,591 14,713 - 58,304 ----------- ----------- ----------- ----------- Total Operating Expenses 441,480 485,838 - 927,318 ----------- ----------- ----------- ----------- Loss From Operations (361,211) (177,517) - (538,728) Interest Expense 12,874 67,204 67,204 12,874 ----------- ----------- ----------- ----------- Loss Before Taxes (374,085) (244,721) (67,204) (551,602) State Income Taxes - 800 - 800 ----------- ----------- ----------- ----------- Net Loss $ (374,085) $ (245,521) $ (67,204) $ (552,402) =========== =========== =========== =========== Net Loss Per Common Share (0.03) (0.04) Weighted Average Shares outstanding 12,233,142 12,908,142
11 eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC. PROFORMA CONSOLIDATED BALANCE SHEET May 31, 1998
eCom eCom SDMI Eliminations ----------- ----------- ------------ ----------- ASSETS Cash and cash equivalents $ 89,542 $ 9,850 $ - $ 99,392 Accounts receivable 7,315 89,878 - 97,193 Inventories 85,155 266,678 - 351,833 Prepaid expense and other current assets 34,580 13,333 - 47,913 Property and equipment 70,980 21,749 - 92,729 Intangible assets 25,309 - - 25,309 Deferred charges 2,818 - - 2,818 Other assets 7,862 - - 7,862 ----------- ----------- ----------- ----------- Total Assets $ 323,561 $ 401,488 $ - $ 725,049 =========== =========== =========== =========== LIABILITIES Accounts payable and accrued expenses $ 131,704 $ 70,993 $ - $ 202,697 Current portion of accrued interest 10,600 27,727 27,727 10,600 Current portion of loans from stockholders - 1,181,969 1,181,969 - Current portion of notes payable 130,214 - - 130,214 Accrued interest, less current portion 1,314 - - 1,314 Loans from stockholders, less current portion 101,600 - - 101,600 Notes payable, less current portion 13,500 - - 13,500 ----------- ----------- ----------- ----------- Total Liabilities 388,932 1,280,689 1,209,696 459,925 ----------- ----------- ----------- ----------- STOCKHOLDERS' EQUITY Common stock 1,189 210,000 209,932 1,257 Additional paid-in capital 484,361 40,000 (1,391,901) 1 ,916,262 Accumulated deficit (545,921) (1,129,201) (27,727) (1,647,395) Treasury stock (5,000) - - (5,000) ----------- ----------- ----------- ----------- Total Stockholders' Equity (65,371) (879,201) (1,209,696) 265,124 ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity $ 323,561 $ 401,488 $ - $ 725,049 =========== =========== =========== ===========
12 eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC. PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended May 31, 1998
eCom eCom SDMI Eliminations ----------- ----------- ------------ ----------- Net Sales $ 149,582 $ 599,218 $ - $ 748,800 Cost of Sales 100,988 306,922 - 407,910 ----------- ----------- ----------- ----------- Gross Profit 48,594 292,296 - 340,890 ----------- ----------- ----------- ----------- Operating Expenses Sales and marketing 23,298 112,686 - 135,984 Product development - - - - General and administrative 122,455 450,043 - 572,498 Depreciation and amortization 28,378 13,964 - 42,342 ----------- ----------- ----------- ----------- Total Operating Expenses 174,131 576,693 - 750,824 ----------- ----------- ----------- ----------- Loss From Operations (125,537) (284,397) - (409,934) Interest Expense 17,514 27,727 27,727 17,514 ----------- ----------- ----------- ----------- Loss Before Taxes (143,051) (312,124) (27,727) (427,448) State Income Taxes - 800 - 800 ----------- ----------- ----------- ----------- Net Loss $ (143,051) $ (312,924) $ (27,727) $ (428,248) =========== =========== =========== =========== Net Loss Per Common Share (0.02) (0.05) Weighted Average Shares outstanding 7,430,045 8,105,045
13 eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC. PROFORMA CONSOLIDATED NOTES TO FINANCIAL STATEMENTS NOTE 1 - BUSINESS COMBINATION The Company is negotiating the purchase of Star Dot Marketing, Inc. (SDMI). The transaction is expected to be recorded as a pooling of interest. The Company will exchange 675,000 shares of its $.0001 par value common stock for all of the outstanding shares of SDMI. SDMI is a turn-key provider of a complete line of guaranteed authentic, hand- signed sports memorabilia and other related sports products. SDMI specializes in product design and creation, with a particular emphasis on presentation concepts, including unique layouts, customized display cases, personalized engraving and matting and framing. Products are marketed and sold domestically and internationally under the trademarks and trade names "Treasures of Sports" and "Treasures of the Diamond." SDMI's primary distribution and sales strategy to date has centered on the development of joint sales agreements with professional sports franchises. Key pro team clients include the San Francisco Giants, Los Angeles Dodgers, Detroit Tigers and Baltimore Orioles of Major League Baseball and the Golden State Warrior and Detroit Pistons of the National Basketball Association. SDMI has also forged a vital client relationship with ARAMARK, one of the nation's largest sports arena and stadium concessionaires, offering product for sale at Oriole Park at Camden Yards - home field of the Baltimore Orioles - - and at the Pittsburgh Civic Arena - home ice for the Pittsburgh Penguins. SDMI offers the same range of products through the national service organization, Les Concierges, and wholesales to a limited but growing number of local and regional retailers. Most recently, SDMI began creating specialty products for corporations and businesses to use as corporate gifts, awards, premiums and employee incentives. Products signed by the world's greatest athletes are merged into unique design and display concepts and can be made to incorporate company names, logos and slogans to create "branded impressions" that are treasured by recipients and proudly displayed in the home or office. SDMI works directly with professional athletes, their respective agents and select number of promoters to obtain only guaranteed authentic signatures and products. All products are backed by a money-back guarantee. SDMI has created a unique product marketing and tracking system to ensure the authenticity and integrity of each and every product it offers and is hopeful to introduce and process and the technology supporting it within the calendar year 2000. NOTE 2 - BASIS OF PRESENTATION The Company's unaudited proforma consolidated financial statements have been prepared in accordance with generally accepted accounting principles for proforma financial information and pursuant to the instructions to Form S-1 and Regulation S-X. Accordingly, they do not include all of the information and footnotes 14 required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accrual adjustments, considered necessary for a fair presentation have been included. Proforma operating results for the six month period ended November 30, 1999 and for the years ended May 31, 1999 and 1998 are not necessarily indicative of the results that may be expected for the year ended May 31, 2000. These financial statements and notes should be read in conjunction with the Company's audited financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended May 31, 1999. 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion should be read in conjunction with the accompanying consolidated financial statements for the nine month periods ended February 29, 2000 and February 28, 1999 and the Form 10-KSB for the fiscal year ended May 31, 1999. Special Note Regarding Forward-Looking Statements - ------------------------------------------------- Certain statements in this report and elsewhere (such as in other filings by the Company with the Securities and Exchange Commission ("SEC"), press releases, presentations by the Company of its management and oral statements) may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and "should," and variations of these words and similar expressions, are intended to identify these forward-looking statements. The Company's actual results could differ materially from those anticipated in these forward-looking statements. Factors that might cause or contribute to such differences include, among others, competitive pressures, the growth rate of the paintball industry and electronic commerce, constantly changing technology and market acceptance of the Company's products and services. The Company undertakes no obligation to publicly release the result of any revisions to these forward- looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. eCom eCom SuperHUB and B2B Plus Services - ---------------------------------------- Prior to the end of the current quarter, we launched a redesigned website at www.ecomecom.com that presented the on-line services of the eCom eCom SuperHUB and B2B Plus programs. The SuperHUB is a marketplace with multiple venues designed for business to consumer, business to business and person to person Internet trading. B2B Plus is focused on business to business website design, maintenance and marketing services. Although the SuperHUB and B2B Plus are separate operating units, they provide complementary services designed to facilitate web business development. B2B Plus is a package of on-line tools and professional resources that enable the entrepreneur who is not necessarily web-savvy to establish and promote his business on the Internet. We have entered into a partnership with iTool.com that allows us to license iTool software to provide the infrastructure for B2B Plus. After our client's on-line business is established, the SuperHUB provides a portal to funnel traffic to the business within a marketplace that includes an on-line mall in addition to auction, barter and classified ad venues. The mall currently is an entrance to over seventy-five stores including prominent merchants such as Disney, Hallmark, eToys, The Sharper Image and Office Max. New web businesses receive equal billing with established retailers when the customer searches the mall. Star Dot Marketing - ------------------ On January 21, 2000 we entered into a Stock Exchange Agreement with the shareholders of Star Dot Marketing, Inc. ("SDMI") which provides for the transfer of all the outstanding common stock of SDMI to eCom eCom.com, Inc. ("ECOM") in exchange for 675,000 shares of our common stock. It is currently anticipated that the transaction will close before the end of April 2000. 16 SDMI uses the trade name "Treasures of Sports" to offer a complete line of guaranteed authentic, hand signed sports memorabilia and other sports products. These products are marketed through joint sales agreements with professional sports franchises including the San Francisco Giants, Los Angeles Dodgers, Detroit Tigers, Baltimore Orioles, Golden State Warriors, Detroit Pistons and Pittsburgh Penguins. SDMI also creates specialty products for businesses to use as gifts, awards, premiums and employee incentives. We intend to use the same marketing and sales program for SDMI products as we have developed for our paintball products. This program includes both a related website as well as a toll-free number. Subsequent Event - ---------------- On April 10, 2000 we filed a registration statement on Form S-1 with the Securities and Exchange Commission. The registration statement provides for the resale of up to 4,810,000 shares of ECOM's common stock by a selling shareholder. The offering will constitute new financing for ECOM as ECOM, while it will not directly receive any of the proceeds of the offering, will receive proceeds from the initial sale of the securities to the selling shareholder. Results of Operations - --------------------- Comparison of the nine months ended February 29, 2000 with the nine months ended February 28, 1999 ----------------------------------------------------- Revenue for the nine month period ended February 29, 2000 was $1,379,444 compared to $135,078 of revenue recorded during the same period of the prior year. This increase, equivalent to over 900%, was created by expansion of our paintball business. During the prior period, production of the Viper M1 paintball marker was stifled by the inability of our primary subcontractor to assemble the markers in sufficient quantities to satisfy demand. With production transferred to in-house facilities, this problem was solved, allowing us to meet a demand that is accelerating as a result of our advertising efforts. The success of our advertising program stems from use of the 1-800-paintball toll-free telephone number acquired early in 1999. Our advertising copy promotes use of the number in addition to use of our web site at www.800paintball.com. During this start-up period of the 800-paintball program, we have relied on other paintball distributors for procurement of paintball products other than the Viper. With the growth in volume, we have begun negotiations directly with manufacturers which will allow us to reduce our cost of sales and increase gross profit margins. Although our gross profit increased from $55,169 in the prior period to $95,027 in the current period, this represented a decline in gross profit margin from 41% of sales in the prior period to 7% in the current period. A portion of the decline in gross profit resulted from recording costs related to the electronic hosting of our web sites within current period cost of sales. Our e-commerce web sites began operating in late April 1999 with use of the sites available without charge. Significant revenues from these sites will develop only after the funds needed for promotion of our new e-commerce programs, the eCom eCom SuperHUB and eCom eCom B2B Plus, are received through our financing activities. 17 Sales and marketing expenses have increased by $585,255, or 882%, primarily as a result of the implementation of test marketing for our e-commerce programs plus the addition of personnel for customer service to support the sale of paintball products. Product development expense of $421,154 incurred in the current period ($0 in the prior period) results from our efforts to develop and refine our e-commerce properties. General and administrative expenses have risen $424,622, or 374%, as the result of additional salaries, consulting, and professional fees associated with our Company's overall growth. Depreciation and amortization expense increased $22,090, or 82%, primarily as the result of the addition of computers and related electronic hardware. Interest expense is down slightly as the result of less interest bearing debt outstanding. Our developmental activities and the related expenditures resulted in a net loss of $1,575,514 in the current year-to-date period compared to a loss of $163,354 in the same period of the prior year. Comparison of the three months ended February 29, 2000 with the three months ended February 28, 1999 ------------------------------------------------------ Revenue grew to $927,873 during the three-month period ended February 29, 2000 compared to $81,092 of revenue recorded during the same period of the prior year. This represented an increase of over 1000% compared to the prior year quarter. Increases in cost of sales and operating expenses, consistent with the description in the year-to-date comparison above, created a net loss of $754,837 in the current quarter compared to $40,872 in the prior year period. Liquidity and Capital Resources - ------------------------------- At February 29, 2000, current assets totaled $493,808 compared to $296,654 at the end of the prior fiscal year. Increases of $204,214 in inventories and $59,754 in prepaid license fees and insurance offset decreases in cash and accounts receivable. A $60,775 reduction in cash resulted from the Company's net loss year-to-date. Current liabilities grew from $236,620 at the prior year end to $847,010 at the end of the current period. This growth primarily resulted from an increase of $599,597 in accounts payable and accrued expenses, an increase created by the growth in inventories and operating expenses. Net cash used by investing activities increased $43,652 due to the addition of computer hardware and related electronic equipment. Net cash provided by financing activities consists of loans from stockholders, which bear no interest, and capital contributions recorded from the private sale of restricted stock. The Company continues to be reliant upon the combination of revenues, loans from stockholders and capital contributions to fund operations. The Company has not generated any profits from its existing operations and continues to incur substantial costs related primarily to development and maintenance of its e-commerce web sites. The Company's continued existence is dependent upon its ability to secure financing or its ability to generate sufficient cash flows through operations to meet its operating costs and repay current obligations as they come due. In April of 1999, the Company entered into a financing agreement with a third party whereby the Company may sell to the third party and that third party must buy a number of the Company's shares of common stock, subject to restrictions (the "Put Option"). The more salient of the restrictions under the Put Option includes that the Company must first 18 register the shares which may be subject to the put, and the number of the shares which may be put to the third party in any 30 day period is dependent upon the Company's share price as determined on the OTC Bulletin Board and volume of trading activity. In regard to registration as discussed above under "Subsequent Event," the Company can make no assurances that it will be successful in registering the subject shares or that the market in the Company's stock will remain adequate to allow the Company to raise necessary funds through the use of the Put Option. Until the Company obtains sufficient funds necessary to capitalize the growth of its existing operations, expenditures required to increase revenues, including advertising and promotion of both its e-commerce web site and paintball products, will be substantially limited. Should the Company be unable to obtain continued funding from existing shareholders or under the terms of the Put Option agreement, its operations may be adversely affected. 19 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. The Company is not involved in any material legal proceedings or litigation, and the officers and directors are aware of no other pending litigation which would have a material, adverse effect on the Company. ITEM 2. Changes in Securities. None. ITEM 3. Defaults Upon Senior Securities. None ITEM 4. Submission of Matters to a Vote of Security Holders. At its annual shareholders' meeting held on February 17, 2000, the shareholders of the Company voted to appoint Wieseneck, Andres & CO., P.A. as the Company's independent accountants replacing the Company's prior independent accountants, Hafer & Gilmer, P.A. who were dismissed as of such date. The decision to elect a new accounting firm was recommended by the Company's Board of Directors in order to access the resources provided by an accounting firm with a more extensive practice servicing publicly held companies. The following directors were elected to serve one-year terms: David J. Panaia, Gerald V. Bergman, Gerald V. Bergman and Elling J. Myklebust. ITEM 5. Other Events. None ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits: EXHIBIT NUMBER DESCRIPTION LOCATION - ------- ----------- -------- 27 Financial Data Schedule Filed herewith electronically (b) Reports on Form 8-K: Form 8-K, dated January 21, 2000 reporting on Item 5 "Other Events" Form 8-K, dated February 17, 2000 reporting on Item 4 "Changes in Registrant's Certifying Accountant" 20 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. ecom ecom.com, inc. April 13, 1999 By: /s/ David J. Panaia David J. Panaia, Chief Executive Officer and Principal Financial Officer 21 EX-27 2
5 This schedule contains summary financial information extracted from the balance sheets and statements of operations found on pages 3 and 4 of the Company's Form 10-QSB for the quarter ended February 29, 2000, and is qualified in its entirety by reference to such financial statements. 9-MOS MAY-31-2000 FEB-29-2000 45,082 0 13,116 0 360,107 493,808 248,700 102,968 694,317 847,010 0 0 0 1,388 (737,408) 694,317 1,379,444 1,379,444 1,284,417 2,944,165 0 0 10,793 (1,575,514) 0 (1,575,514) 0 0 0 (1,575,514) (.12) (.12)
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