10QSB 1 ecec1103.txt FORM 10QSB 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 November 30, 2003 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.) 8125 Monetary Dr., Suite H5 Riviera Beach, Florida 33404 ----------------------------------------------------------------------------- (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 November 30, 2003 the issuer had 49,955,112 shares of common stock, $.0001 Par Value, outstanding. Transitional Small Business Disclosure format: Yes [ ] No [ X ] eCom eCom.com, Inc. Form 10-QSB November 30, 2003 INDEX PAGE NO. PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Independent Accountant's Report 3 Consolidated Balance Sheets: November 30, 2003 and May 31, 2003 (Unaudited) 4 Consolidated Statements of Operations: Six Months Ended November 30, 2003 and 2002 (Unaudited) 5 Consolidated Statements of Operations: Three Months Ended November 30, 2003 and 2002 (Unaudited) 6 Consolidated Statements of Shareholders' Deficit: Years Ended May 31, 2003 and 2002 and the Six Months Ended November 30, 2003 (Unaudited) 7 Consolidated Statements of Cash Flows: Six Months Ended November 30, 2003 and 2002 (Unaudited) 8 Notes to Consolidated Financial Statements 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 21 ITEM 3 CONTROLS AND PROCEDURES 24 PART II OTHER INFORMATION ITEMS 1-6 25 SIGNATURES AND CERTIFICATIONS 27 Exhibit 31.1 Certification required under Section 302 of 28 the Sarbanes-Oxley Act of 2002 by the CE0 Exhibit 31.2 Certification required under Section 302 of 29 the Sarbanes-Oxley Act of 2002 by the CFO Exhibit 32 Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act 30 2 Wieseneck, Andres & Company, P.A. Certified Public Accountants 772 U. S. Highway 1, Suite 100 North Palm Beach, Florida 33408 (561) 626-0400 Thomas B. Andres, C.P.A.*, C.V.A. FAX (561) 626-3453 Paul M. Wieseneck, C.P.A. *Regulated by the State of Florida Independent Accountant's Report To the Board of Directors and Stockholders eCom eCom.com, Inc. We have reviewed the accompanying Balance Sheets of eCom eCom.com, Inc. as of November 30, 2003 and May 31, 2003, and the related consolidated statements of operations, for the three-month periods and the six-month periods ended November 30, 2003 and 2002, the consolidated statement of stockholders' deficit from May 31, 2002 through November 30, 2003, and the consolidated statement of cash flows for the six-month periods ended November 30, 2003 and 2002. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with U.S. generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with U.S. generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the financial statements, the Company's current liabilities exceed the current assets by $629,638 and the Company has incurred net operating losses since inception. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in the notes. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Wieseneck, Andres & Company, P.A. January 21, 2004 3 eCOM eCOM.COM, INC CONSOLIDATED BALANCE SHEETS (Unaudited) November 30, 2003 May 31, 2003 ----------------- ------------ ASSETS Current Assets Cash and cash equivalents $ 9,057 $ 111 Accounts receivable other - 347 Inventories 195,035 147,389 Prepaid expenses 125,922 3,624 ------------ ------------ Total Current Assets 330,014 151,471 ------------ ------------ Property and Equipment, net 33,321 47,292 ------------ ------------ Other Assets Intangible assets, net 69,325 74,978 Other assets 9,273 9,383 ------------ ------------ Total Other Assets 78,598 84,361 ------------ ------------ Total Assets $ 441,933 $ 283,124 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 320,450 $ 270,585 Accrued expenses 26 2,694 Other Current Liabilities 1,578 1,402 Current portion of long-term debt 628,391 600,888 Interest accrued on current portion 9,207 - ------------ ------------ Total Current Liabilities 959,652 875,569 Notes Payable, Net of Current Portion - - ------------ ------------ Total Liabilities 959,652 875,569 ------------ ------------ Stockholders' Equity Common stock, $.0001 par value, 50 million shares authorized, 49,955,112 and 36,393,112 shares issued and outstanding 4,995 3,639 Paid-in capital 6,393,848 6,048,622 Accumulated deficit (6,916,562) (6,644,706) Treasury stock - - ------------ ------------ Total Stockholders' Deficit (517,719) (592,445) ------------ ------------ Total Liabilities and Stockholders' Equity $ 441,933 $ 283,124 ============ ============ See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 4 ECOM ECOM.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Six Months Ended November 30, 2003 November 30, 2002 ______________ _______________ Revenues Net Sales $ 34,309 $ 83,823 Cost of Sales (33,561) (66,417) ______________ _______________ Gross Profit 748 17,406 ______________ _______________ Other Operating Expenses Sales and marketing 2,848 21,764 Product development 9,750 14,668 General and administrative 231,627 312,142 Amortization 10,792 10,127 ______________ _______________ Total Operating Expenses 255,017 358,701 ______________ _______________ Loss from Operations (254,269) (341,295) Other Income (Expense) Interest income - - Interest expense (17,999) (4,937) Gain on disposal of asset 411 22,590 ______________ _______________ Net Other Expenses (17,588) 17,653 ______________ _______________ Net Loss $ (271,857) (323,642) ============== =============== Net Loss Per Common Share $ (.007) (.011) ============== =============== Weighted Average Shares Outstanding 38,821,407 29,255,638 ============== =============== See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 5 ECOM ECOM.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended November 30, 2003 November 30, 2002 _________________ __________________ Revenues Net Sales $ 21,500 $ 43,048 Cost of Sales (19,808) (31,174) ______________ _____________ Gross Profit 1,692 11,874 ______________ _____________ Operating Expenses General and administrative 176,013 137,744 Sales and marketing 1,440 13,644 Product development 5,250 333 Amortization 5,560 5,065 ______________ _____________ Total Operating Expenses 188,263 156,786 ______________ _____________ Loss from Operations (186,571) (144,912) Other Income (Expense) Interest income - - Interest expense (9,931) (2,450) Loss on disposal of asset 412 22,590 ______________ _____________ Net Other Expenses (9,519) 20,140 ______________ _____________ Net Loss $ (196,090) (124,772) ============= ============= Net Loss Per Common Share $ (.005) (.004) ============= ============= Weighted Average Shares Outstanding 39,950,442 30,664,245 ============= ============= See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 6 ECOM ECOM.COM, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED MAY 31, 2003 AND 2002 AND THE SIX MONTHS ENDED NOVEMBER 30, 2003 (Unaudited) Number At Add'l Total of Par Paid In Accum'd Treasury Stockholder Shares Value Capital Deficit Stock Deficit ---------- ------ ---------- ----------- -------- ----------- Balance, May 31, 2001 19,010,836 $1,901 $4,127,083 $(4,391,382)$ - $ (262,398) Issuance of Common Stock 7,728,686 773 1,628,684 - - 1,629,457 Net Loss - - - (1,482,533) - (1,482,533) ---------- ------ ---------- ----------- -------- ----------- Balance, May 31, 2002 26,739,512 $2,674 $5,755,767 $(5,873,915)$ - $ (115,474) Issuance of Common Stock 9,653,600 965 292,855 - - 293,820 Net Loss - - - (770,791) - (770,791) ---------- ------ ---------- ----------- -------- ----------- Balance, May 31, 2003 36,393,112 $3,639 $6,048,622 $(6,644,706)$ - $ (592,445) Issuance of Common Stock 13,562,000 1,356 345,226 - - 346,582 Net Loss - - - (271,856) - (271,856) ---------- ------ ---------- ----------- -------- ----------- Balance, Nov 30, 2003 49,955,112 $4,995 $6,393,848 $(6,916,562)$ - $ (517,719) ========== ====== ========== =========== ======== =========== See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 7 eCOM eCOM.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 (Unaudited) November 30, 2003 November 30, 2002 _______________ _______________ Cash Flows From Operating Activities Cash received from customers $ 34,309 $ 83,823 Interest income 0 0 Cash paid to suppliers and employee (39,541) (167,325) Interest paid (15,187) (4,519) _______________ _______________ Net Cash Flows Used in Operating Activities (20,419) (88,021) _______________ _______________ Cash Flows From Investing Activities Purchase of equipment (1,360) 0 Purchase of intangible assets (3,076) 0 Proceeds received from sale of asse 500 0 _______________ _______________ Net Cash Flows Provided By (Used In) Investing Activities (3,936) 0 _______________ _______________ Cash Flows From Financing Activities Proceeds from note receivable 0 15,000 Proceeds of loans from stockholders 83,490 94,801 Repayment of loans to stockholders (50,188) (33,534) _______________ _______________ Net Cash Flows Provided By Financing Activities 33,302 76,268 _______________ _______________ Net Increase/(Decrease) in Cash 8,947 (11,753) Cash and Cash Equivalents at Beginning of Period 111 12,803 _______________ _______________ Cash and Cash Equivalents at End of Period 9,057 1,050 =============== =============== Supplemental Disclosures ------------------------ Non-Cash transactions Stock issued for payment of services 215,975 130,125 Stock issued for purchase of intangibles 0 90,000 Stock issued for purchase of prepaid assets 149,898 0 Stock issued for repayment of debt 35,214 0 See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 8 eCOM eCOM.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 (Unaudited) Reconciliation of Net Loss to Net Cash Flows Used in Operating Activities: November 30, 2003 November 30, 2002 _______________ _______________ Net Loss $ (271,857) $ (323,642) Add items not requiring outlay of cash: Depreciation and amortization 26,123 32,650 Bad Debts 0 0 Expenses paid by issuing stock 215,975 130,125 Gain on sale of assets 411 0 Cash was increased by: Decrease in accounts receivable 347 0 Decrease in inventory 0 10,640 Decrease in prepaid expenses 0 14,797 Decrease in other current asset 0 1,500 Decrease in deposits 0 0 Decrease in other assets 0 0 Increase in accrued interest payable 9,207 4,443 Increase in accounts payable 49,865 64,854 Cash was decreased by: Increase in accounts receivable 0 (22,612) Increase in other assets 0 0 Increase in inventory (47,646) 0 Decrease in accounts payable 0 0 Decrease in accrued expenses (2,668) (776) Decrease in other current liabilities (176) 0 Decrease in accrued interest payable (9,207) 0 _______________ _______________ Net Cash Flows Used In Operating Activities (20,419) (88,021) =============== =============== See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 9 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE A - NATURE OF OPERATIONS eCom eCom.com, Inc. ("eCom" or "the Company") was incorporated in the State of Florida on June 14, 1994. eCom changed its direction to focus on separating its business segments. The goal is to identify at least one target company for each of the Company's subsidiaries. This plan was undertaken for the purposes of allowing the management and employees the opportunity to operate each segment independently. Also, to have the ability for each segment, to raise its own funding for growth and expansion. The Company is in the process of finalizing spin off's for USA SportsNet Company and MyZipSoft, Inc. At the time this report was being prepared neither transaction was completed. For more information please refer to "Subsequent Events" within this report. eCom's subsidiaries are listed below indicating either if agreements have been made or pending, along with the prospective target company. 1. USA Performance Products, Inc. 2. eSecureSoft Corp. 3. USA SportsNet Company* American Capital Holding, Inc. 4. MyZipSoft, Inc. * Freedom 4 Wireless, Inc. 5. USAS Digital, Inc.** Smart Pill Diagnostics, Inc. 6. Pro Card Corp. ** Cornerstone Energy Partners 7. AAB Company ** 21st Century Exploration Corp. 8. A Classified Ad, Inc. 9. Swap and Shop Corp 10. A Super Deal, Inc. * Agreement ** Pending It is the Company's intention to eventually make available for partnership or spin off most of its subsidiaries for the purposes of attracting management and operational staff. The mission is to make each company profitable and to grow on their own, thus returning value to all shareholders. The business segments listed below are in the process of being spun off indicating the target company that they plan to acquire. 1. USA SportsNet Company, Palm Beach Gardens, Florida Product Line: e-Commerce business. Target Company: American Capital Holdings, Inc. 2. MyZipSoft, Inc., Palm Beach Gardens, Florida Product Line: Development and distribution of software. Target Company: Freedom 4 Wireless, Inc. See accompanying independent accountants' review report. 10 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE A - NATURE OF OPERATIONS (CONTINUED) On April 9, 2002 we announced that we had signed a new agreement for use of high power compression encoding technology developed by MeVis Technology of Germany. The first product released using the new technology is MyPhotoZip (tm). MyPhotoZip(tm) provides a better quality image than JPEG and other compression products now on the market. We are moving ahead as quickly as possible to develop and market an array of compression products using this new technology while it is still the state of the art. Software Development Kits (SDK's) are also available. This will be assigned to our eSecureSoft division. The company continues to renegotiate a teaming agreement that was entered into on June 18, 2002 with World Data Group LLC, of Boca Raton, Florida. The original agreement provided revenue sharing in the amount of 10% of all World Data Group's income derived from MeVis Technology integrations. In addition, any of the integrated products to be offered for commercial sale will be made available to eCom eCom to resell. On July 15, 2002 we announced the availability of MyPhotoZip(tm) for download from our new website, www.myphotozip.com. In addition, we provided details of the primary marketing strategy for all of our company's compression products which is based on an agreement signed with Plugin Technologies of the United Kingdom. Using Plugin's network of thousands of sales affiliates, ECOM's product lines will be promoted globally to a variety of market segments. While broadening the target audience to international markets, this approach takes advantage of the Internet without incurring the heavy cost of traditional Internet-based advertising programs. On December 12, 2002 we signed a contract to purchase the software rights to FotoCrazy from Interveloce.net. FotoCrazy is an on-line subscription based photo-album system, which will allow users to post and organize digital images on their own web pages. This product will be renamed MyAlbumZip and is scheduled to be released in 2004. In February 2003, the company signed a Master Distributor Agreement with Artera Group, Inc., of Westport CT, a subsidiary of NCT Group, Inc. (OTCBB:NTCI). The agreement covers the distribution of Artera Turbo Web Accelerator for Internet access. The company will market the product as MyNetZip for a monthly subscription fee. MyNetZip will have the MyPhotoZip technology imbedded to provide DSL speed over dial-up internet connections. MyNetZip can be used with all Internet connections and especially Internet access which is normally enhanced to the DSL level of service. On November 30, 2003, the Company acquired the Internet URL, PhotoZip.com, for a total cost of $3,076. This asset will be amortized over five years . Amortization related to this assets will begin December 1, 2003. See accompanying independent accountants' review report. 11 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE A - NATURE OF OPERATIONS (CONTINUED) On July 1, 2002, the Company acquired the licensing rights to Pandora and Virtual Protect from Internet Security Solutions, for a total cost of $56,250. This asset is being amortized over five years. Accumulated amortization related to this asset is $16,875 as of November 30, 2003. On July 1, 2002, the Company paid Peter Tamayo, Jr. to work with MeVis Technologies to complete the development of MyPhotoZip, for a total cost of $33,750. This asset is being amortized over five years. Accumulated amortization related to this asset is $10,125 as of November 30, 2003. On September 18, 2002, the Company issued 25,000 shares of stock as payment towards the purchase of FotoCrazy software. This deposit was recorded as $1,125. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation, Use of Estimates The Company maintains its accounts on the accrual basis of accounting. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Consolidation The consolidated financial statements of the Company include the accounts of USA Performance Products, Inc. The Company formed USA Performance Products, Inc. as a separate wholly owned subsidiary on January 20, 1998 and transferred all assets related to the manufacture and sale of the Viper M1 paintball marker and accessories to this new corporation. We expanded the activities of USA Performance Products in 1999 by selling other paintball products through use of the 800-PAINTBALL toll-free telephone number and related website acquired by USASC. Revenue Recognition Revenue from the sale of paintball markers and accessories is recognized at the time title is transferred which is normally on shipment of the goods. Revenue from the sale of compression products is also recognized at the time the products are shipped or downloaded. Revenue received from contracts for web site development services is recorded as unearned revenue until development of the related web site is complete and accepted by the client. See accompanying independent accountants' review report. 12 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash Cash consists of deposits in banks and other financial institutions having original maturities of less than ninety days. Allowance for Doubtful Accounts It is the policy of management to review the outstanding accounts receivable at year end, as well as the bad debt write-offs experienced in the past, and establish an allowance for doubtful accounts for uncollectible amounts. Depreciation Property and equipment is recorded at cost and is depreciated over the estimated useful lives of the related assets. Depreciation is computed using the straight-line method. Amortization Intangible assets consisting of rights to technology and associated trademarks are amortized using the straight-line method over five years. Inventories Inventories are stated at the lower of cost or market using the first in first out method. NOTE C - INVENTORIES Inventories consist principally of paintball markers and paintball accessories and sports-related memorabilia. Inventories are carried at cost, which is considered to be less than market value. On November 30, 2003, inventory consisted of the following: Finished goods $ 36,697 Work in process 158,337 Raw materials 0 ---------- Total inventory $ 195,035 ========== NOTE D - PREPAID EXPENSES Prepaid expenses consist principally of amounts paid for rent, subscriptions and domain name registrations. See accompanying independent accountants' review report. 13 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE E - PROPERTY AND EQUIPMENT The following is a summary of property and equipment recorded in the financial statements at cost less depreciation as of November 30, 2003 and May 31, 2003: November 30, 2003 May 31, 2003 ----------------- ------------ Computer hardware $ 151,471 $ 150,111 Computer software 56,308 56,308 Furniture, fixtures and equipment 47,760 47,760 Tools, dies and fixtures 57,401 57,401 ---------------- ------------ Total Cost 312,940 311,580 Accumulated Depreciation 279,619 264,288 ------------ ------------ Total Net Property and Equipment $ 33,321 $ 47,292 ============ ============ Depreciation expense included in the cost of sales for the periods ended are: $ 15,331 $ 45,053 The useful lives assigned to property and equipment to compute depreciation are: Computer Hardware 5 years Computer Software 5 years Furniture, fixtures and equipment 7 years Tools, dies and fixtures 5 years NOTE F - INTANGIBLE ASSETS In February 1999, the Company acquired two Internet websites, AclassifiedAd and Swapandshop, for a total cost of $11,200. These assets are amortized over five years. Accumulated amortization related to these assets was $10,550 and $9,430 as of November 30, 2003 and May 31, 2003, respectively. On July 1, 2002, the Company acquired the licensing rights to Pandora and Virtual Protect from Internet Security Solutions, for a total cost of $56,250. This asset is being amortized over five years. Accumulated amortization related to this asset is $16,875 as of November 30, 2003. On July 1, 2002, the Company paid Peter Tamayo, Jr. to work with MeVis Technologies to complete the development of MyPhotoZip, for a total cost of $33,750. This asset is being amortized over five years. Accumulated amortization related to this asset is $10,125 as of November 30, 2003. See accompanying independent accountants' review report. 14 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE F - INTANGIBLE ASSETS (CONTINUED) On September 18, 2002, the Company issued 25,000 shares of stock as payment towards the purchase of FotoCrazy software. This deposit was recorded as $1,125. On August 1, 2003, the Company agreed to pay Digital River $2,000 to develop a distribution system for the MyPhotoZip compression software. On November 30, 2003, the Company acquired the Internet URL PhotoZip.com for a total cost of $3,706.04. NOTE G - OTHER ASSETS Other assets consist primarily of security deposits on the lease of office facilities, an employee advance and utility deposits. NOTE H - LONG-TERM DEBT Long-term debt as of November 30, 2003 and May 31, 2003 consisted of: November 30, 2003 May 31, 2003 --------------- ------------ A non-interest bearing, non-collateralized loan from an offshore corporation that is due on demand. 184,220 184,220 Three non-interest bearing, non-collateralized loans from stockholders. The loans are due on demand. 444,171 416,668 ---------- ---------- Total Long-Term Debt 628,391 600,888 Less Current Portion (628,391) (600,888) ---------- ---------- Net Long-term Debt $ 0 $ 0 ========== ========== The long-term loans payable mature as follows: May 31, 2004 628,391 600,888 ---------- ---------- $ 628,391 $ 600,888 ========== ========== See accompanying independent accountants' review report. 15 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE I - COST OF SALES Included in the cost of sales are the following: November 30, 2003 May 31, 2003 ------------ ------------ Shipping and handling costs $ 806 $ 0 Packaging costs 124 460 ------------ ------------ Total $ 930 $ 460 ============ ============ Shipping income $ 1,717 $ 8,946 ============ ============ NOTE J - COMMITMENTS AND CONTINGENCIES The Company leases office facilities under an operating lease one which expires on March 31, 2004. The Company leases its manufacturing facility under an operating lease which expires June 30, 2004. Future minimum lease payments including sales tax as of November 30, 2003 are: Fiscal Years ending: May 31, 2004 $ 22,610 May 31, 2005 1,855 May 31, 2005 0 ------- Total Minimum Lease Payments $ 24,465 Rent expense for the six-month period ending November 30, 2003 and 2002 are $30,933 and $40,726 respectively. We are party to lawsuits in the normal course of our business. Litigation can be expensive and disruptive to normal business operations; the results of legal proceedings are difficult to predict. Our dispute with four companies had similar suits of non-payment against either eCom eCom.com or it's subsidiary USA Performance Products. Each of these suits were initially settled during the fiscal year ending May 31, 2002. However two matters have recently come to light. The first matter concerning National Paintball which has notified us through their attorney that the issuance of stock agreed upon in the settlement was insufficient to cover the settlement. The company is currently trying to determine the circumstances which led to the shortfall. The second matter is the attorney for Renick Enterprises Inc. has notified us of his contention that the company failed to complete its agreement by the appropriate date. Management feels that the claim is unfounded and that the company met its obligation timely. See accompanying independent accountants' review report. 16 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED) At the time of this filing the court ruled in favor of the Company. Please refer to Subsequent Events for more information on this matter. On May 15, 2002 a settlement was reached with Renick Enterprises, Inc. As part of the settlement USAPP received cash, notes receivable, inventory, and cancellation of accounts payable. USA Performance products gave up raw material located at Renick. National Paintball Supply, Inc. filed a complaint against USA Performance Products and eCom eCom.com, Inc. in the State of South Carolina, Greenville County Court of Common Pleas on May 14, 2001. The complaint alleged that an amount of $85,743.35 is owed to the complainant. The Company disputes this claim. National Paintball Supply handled paintball fulfillment requests for USA Performance products. USA Performance Products contended that many requests for fulfillment were not completed while some requests were shipped twice. USA Performance Products has recorded a balance due of $69,373.36 as of May 31, 2001. As part of the SB-2 dated August 8, 2002, stock was registered to pay-off this debt. As of February 28, 2003 all stock that had previously been held in an Attorney escrow account, had been sold and transferred to National Paintball. The balance reportedly owed National Paintball as of November 30, 2003 is $59,475.83. NOTE K - RELATED PARTY TRANSACTIONS On January 10, 1998, the Company's Board of Directors approved an agreement with Axis Enterprises, Ltd., a Bahamian corporation of Nassau, Bahamas, to retain Axis for a period of three years to provide certain financing, marketing and management services in support of the Company's subsidiary, USA Performance Products, Inc. In exchange for performance of these services, Axis was granted 1,500,000 shares of common stock. The final marketing and management agreement was executed on April 8, 1998. Derek D. Panaia, son of David J. Panaia, CEO of the Company, was retained as a consultant to provide management oversight of USAPP in connection with this agreement. In 1999, Axis loaned the Company $296,000, and this indebtedness was reduced by $111,780 through the issuance of 150,000 shares of the Company's common stock. The Company is currently indebted to Axis for $184,220. The Company has received cash advances from David J. Panaia, Chairman and CEO of the Company, in varying amounts and at various times subsequent to the inception of the Company. These shareholder loans were non-interest bearing, non-collateralized and due on demand. On May 10, 2001, 1,286,359 shares of restricted stock were issued to Mr. Panaia in return for cancellation of $437,362 ($.34 per share) of the debt owed to him. The balance owed to Mr. Panaia at November 30, 2003 was $330,791. See accompanying independent accountants' review report. 17 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE K - RELATED PARTY TRANSACTIONS (CONTINUED) The Company has received cash advances from Bonnie Crum, daughter of David J. Panaia, CEO of the Company, in varying amounts and at various times subsequent to May 31, 2001. These related party loans were non-interest bearing, non- collateralized and due on demand. The balance owed to Ms. Crum as of November 30, 2003 is $40,000. NOTE L - BUSINESS SEGMENTS Prior to the Board of Directors decision to spin of its subsidiaries the Company's reportable segments were business units that offer different products and services. The Company had two reportable segments: electronic commerce and software. The electronic commerce segment has provided an e-commerce infrastructure to enable small businesses to expand to the Internet. The e-commerce segment focuses on classifieds, auctions and its paintball gun company. The software segment focuses on the design and resale of secure software applications for compression and transmission of large data files. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. 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. The following is a summary of segment activity: Electronic Paintball Commerce Totals Six Months Ended: ---------- ---------- ---------- November 30, 2003 ------------------ Revenues $ 32,355 $ 1,954 34,309 Interest expense 338 17,661 17,999 Depreciation 7,687 7,664 15,331 Amortization - 10,792 10,792 Segment loss (30,550) (241,307) (271,857) Segment assets 186,270 279,980 291,547 Electronic Paintball Commerce Totals Six Months Ended: ---------- -------- ----------- November 30, 2002 ----------------- Revenues $ 76,706 $ 7,118 83,824 Interest expense 270 4,668 4,938 Depreciation 11,573 10,954 22,527 Amortization - 10,127 10,127 Segment loss (28,240) (295,401) (323,642) Segment assets 392,979 285,969 678,948 See accompanying independent accountants' review report. 18 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE M - RECOVERABILITY OF ASSETS AND GOING CONCERN These financial statements are presented on the basis that the Company is a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The accompanying financial statements show that current liabilities exceed current assets by $629,638 at November 30, 2003 and by $724,098 at May 31, 2003 and that the Company has incurred net operating losses since inception. eCom has been funding operations and software development through product sales, asset sales, shareholder loans and private sales of company stock. eCom contracted with Digital River Inc to market and distribute MyPhotoZip. USA Performance Products completed its approval with the United States General Services Administration. The Viper M-1 paintball gun can now be purchased through GSA Advantage, the Federal Government's online purchasing system. eCom is continuing to look for partners or buyers for the USA Performance Products division. In accordance with the May 2001 agreement to sell the 1-800-PAINTBALL number, the Company agreed not to sell paintball accessories for a period of three years which will end in May 2004. The company continues to manufacture and sell the Viper paintball gun. The Company is currently focusing its efforts on locating a business partner for its USA Performance Products, Inc. to engage in the manufacturing, sales and distribution of a complete line of paintball products. NOTE N - INCOME TAXES Deferred income taxes are provided for temporary differences between the financial reporting and income tax basis of the Company's assets and liabilities. Temporary differences, net operating loss carry forwards and valuation allowances comprising the net deferred taxes on the balance sheets is as follows: November 30, 2003 -------------- Loss carry forward for tax purposes $ 6,906,165 ============== Deferred tax asset (34%) 2,348,096 Valuation allowance (2,348,096) -------------- Net deferred tax asset - ============== See accompanying independent accountants' review report. 19 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE N - INCOME TAXES (CONTINUED) No provision for federal and state income taxes has been recorded because the Company has incurred net operating losses since inception. The Company's net operating loss carry-forward as of November 30, 2003 was approximately $6,906,000. These carry-forwards, which will be available to offset future taxable income, will expire through the year 2023. The Company does not believe that the realization of the related net deferred tax asset meets the criteria required by generally accepted accounting principles and, accordingly, the deferred income tax asset arising from such loss carry forward has been fully reserved. NOTE O - EFFECTS OF INFLATION To date, inflation has not had a material impact on the Company's consolidated financial results. NOTE P - RECENT ACCOUNTING PRONOUNCEMENTS The FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations with an effective date for financial statements issued for fiscal years beginning after June 15, 2002. The statement addresses financial accounting and reporting for obligations related with the retirement of tangible long-lived assets and the costs associated with asset retirement. The statement requires the recognition of retirement obligations which will, therefore, generally increase liabilities; retirement costs will be added to the carrying value of long-lived assets, therefore, assets will be increased; and depreciation and accretion expense will be higher in the later years of an assets life than in earlier years. The Company adopted SFAS No. 143 at January 1, 2002. The adoption of SFAS No. 143 had no impact on the Company's operating results or financial positions. The FASB also issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets and is effective for financial statements issued for fiscal years beginning January 1, 2002. This statement addresses financial accounting and reporting for the impairment or the disposal of long-lived asset. An impairment loss is recognized if the carrying amount of a long- lived group exceeds the sum of the undiscounted cash flow expected to result from the use and eventual disposition of the asset group. Long-lived assets should be tested at least annually or whenever changes in circumstances indicate that its carrying amount may not be recoverable. This statement does not apply to goodwill and intangible assets that are not amortized. The Company adapted SFAS No. 144 in the first quarter of 2002. The adoption of SFAS No. 144 had no impact on the Company's operating results or financial position. See accompanying independent accountants' review report. 20 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002 NOTE P - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED) In April 2002, the FASB issued SFAS No. 145, "Rescission of the FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS No. 145"). SFAS No. 145 eliminates the requirement to classify gains and losses from the extinguishment of indebtedness as extraordinary, requires certain lease modifications to be treated the same as a sale-leaseback transaction, and makes other non-substantive technical corrections to existing pronouncements. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. SFAS No. 145 was adopted on June 1, 2003 and did not have a material effect on the Company's financial position or results of operations. Goodwill and intangible assets acquired prior to July 1, 2001 will continue to be amortized and tested for impairment in accordance with pre- SFAS No. 142 requirements until adoption of SFAS No. 142. Under the provision of SFAS No. 142, intangible assets with definite useful lives will be amortized to their estimated residual values over those estimated useful lives in proportion to the economic benefits consumed. Such intangible assets remain subject to the impairment provisions of SFAS No. 121. Intangible assets with indefinite useful lives will be tested for impairment annually in lieu of being amortized. The Company's current yearly amortization of intangible assets is approximately $21,911. The impact of adopting SFAS Nos. 141 and 142 will not cause a material change in the Company's consolidated financial statements as of the date of this report. See accompanying independent accountants' review report. 21 ECOM ECOM.COM, INC. 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 six-month periods ended November 30, 2003 and 2002 and the Form 10-KSB for the fiscal year ended May 31, 2003. 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 or 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. Overview The results of its operations during the six months ended November 30, 2003 were a reflection of the continued evolution of its new business model. Management is also developing a debt reduction plan with the goal of reducing current debt by at least 50% within the next reporting period. eCom recently changed its direction to focus on locating target companies to partner, merge with or acquire for three of its current business segments, USA SportsNet, Inc., USA Performance Products, Inc., and MyZipSoft, Inc. This plan was undertaken to allow management and employees the opportunity to operate each segment independently. Also, to have the ability for each segment, to raise its own funding for growth and expansion. The Company previously developed an e-commerce infrastructure that provided an affordable, user-friendly technological platform and professional resources to facilitate web business development. It also operated an on-line business as a test model, using Company developed e-commerce concepts to sell paintball products. However, the current business model was revised with the intention of eventually separating all ten (10) business segments into independent operating public companies. The first three are described above, the remaining seven (7) are listed within this section. 22 ECOM ECOM.COM, INC. As previously stated, the company realized that it did not have the proper resources to develop all ten (10) of its business segments in a timely manner. Thus decided to look towards a spin-off or partnership so that it may obtain the necessary outside resources. Also, there were indications that potential business partners desired to be involved with only one of eCom's many business segments. The Company's new mission is to find prospective companies which will allow all business segments to grow, expand and become profitable through an affiliation or partnership with other successful companies and become of more value to shareholders. There are two firm and three pending prospects to report at this time. However, if and when these spin offs are accomplished, it is the company's intention to make them independent public companies and to use a pro- rata basis to distribute any new shares to current eCOM shareholders. The two business segments that have firm prospects are described below. 1. USA SportsNet Company, Palm Beach Gardens, Florida Product Line: e-Commerce business through Internet auction, sale and swapping of sports memorabilia. Articles are both company owned as well as those listed by private parties. 2. MyZipSoft, Inc., Palm Beach Gardens, Florida Product Line: Development and distribution of software. Its first product is a high-compression software called MyPhotoZip (TM). The Company considers this product "the ultimate image compression tool", that enables compression of still images up to 2500 to 1 with very little loss of quality. eCom eCom's subsidiaries are listed below indicating agreements either completed or pending, along with the prospective target company. 1. USA Performance Products, Inc. 2. eSecureSoft Corp. 3. USA SportsNet Company* American Capital Holding, Inc. 4. MyZipSoft, Inc. * Freedom 4 Wireless, Inc. 5. USAS Digital, Inc.** Smart Pill Diagnostics, Inc. 6. Pro Card Corp. ** Cornerstone Energy Partners 7. AAB Company ** 21st Century Exploration Corp. 8. A Classified Ad, Inc. 9. Swap and Shop Corp 10. A Super Deal, Inc. * Agreement ** Pending Shareholders who maintain their shares in ECEC will be entitled to a prorata share of each spin off as it occurs. Meaning you must own ECEC stock on the Date of Record. The Company wishes to stress that each spin off will have a different Date of Record. It urges all shareholders to be patient as this type of transaction has many steps and takes time. These spin offs will bring additional value to all ECEC shareholders when completed. Not only will each new spin off company be an additional holding for 23 ECOM ECOM.COM, INC. every shareholder but as an additional benefit the Company is applying to the IRS for it to be treated as a tax free distribution. The Company plans to apply for listing on the AMEX as soon as it can qualify which incidentally requires a minimum stock price of $3.00 per share. As you can see there are many steps that the Company must take, so again, all investors are asked to be patient as the spin off plan was undertaken for your benefit. Fractional shares, if any, will be paid to you in cash. Over the past several years, two realities have been made clear: 1) investor appetite for technology stocks diminished; and 2) e-commerce spending declined. eCom restructured its business operations to preserve the Company's future in these difficult markets. This transformation continues today. As a result of this focused execution, we believe we have set the stage to propel eCom's future business. The restructuring consists of creating business segments by seeking management and operational partners for each either through a merger or spin-off. The Company cancelled almost all of its existing partnerships and teaming agreements. It has settled all but two legal actions. Both the Renick and National Paintball cases were settled but were reopened by the plaintiffs. The Company feels that neither case will have a major adverse effect and will be settled soon. Our company's reengineering dictated that time be directed towards implementing the new business strategy. As discussed below, our current operating results reflect this temporary cessation of revenues. However, we believe that the potential revenue and profit to be realized from our focus on the spin off plan will confirm that the current lull in revenue generation is a minor inconvenience. Results of Operations Comparison of the six months ended November 30 2003 with the six months ended November 30, 2002. Revenue for the six-month period ended November 30, 2003 was $34,309 compared to $83,823 of revenue recorded during the same period of the prior year. Current year revenues were recorded from sales of the Viper M1 paintball marker and accessories and sales of MyPhotoZip (TM). Our USA Performance Products subsidiary had entered into a proposed sale of the Viper product line during February 2001. In order to comply with the terms of the sales contract, all Viper inventory was taken out of production in preparation for shipment during April 2001. The sale subsequently was canceled. We intend to rebuild Viper sales volume in anticipation of the eventual sale of this product line. Gross profit decreased from $17,406 in the prior year period to $748 in the current six-month period. Depreciation expense contributed $15,331 to the current deficit in gross profit. Depreciation expense amounted to 45% of revenue in the current year and only 27% of revenue in the prior year. 24 ECOM ECOM.COM, INC. The company continues to make improvements in cutting its operating costs. Cost reduction was achieved in all major expense categories. Sales and marketing expense dropped from $21,764 in the six months ended November 30, 2003 to $2,848 in the current six-month period. Product development expenses were cut from $14,667 in the prior year period to $9,750 in the current six-month period. General and administrative costs dropped from $312,142 in prior year to $231,626 in the current six-month period. Most of this cost savings was generated from a reduction in personnel and overhead. Amortization expense increased from $10,127 to $10,792 as a result of increases in intangible assets. During the current six-month period, the company began amortizing the development costs associated with allowing Digital River to distribute MyPhotoZip (TM). The company incurred net interest expense of $17,999 in the current six month period compared to a net interest expense of $4,937 in the prior year six month period. This was primarily due to the increased need to borrow funds to finance current operations. Our operations for the six months ended November 30, 2003 resulted in a net loss of $271,857, a $51,785 improvement over the net loss of $323,642 recorded during the six months ended November 30, 2002. Liquidity and Capital Resources As of November 30, 2003, current assets totaled $330,014 compared to $151,471 at the end of the prior fiscal year. Of the $178,543 increase in total current assets, inventory accounted for $47,646 of the increase and prepaid assets accounted for $122,298. The investment in prepaid assets will be used for future consulting related to our evolving business model. Accounts Payable increased $49,865 to $320,450 during the current six months. This increase in accounts payable helped fund the operating loss of the company. Current liabilities increased from $875,569 at the end of the prior fiscal year to $959,652 at the end of the current quarter, an increase of $84,083. Net cash used in operating activities was $20,419 during the current six- month period compared to $88,021 during the same period of the prior year. The principal use of cash in both periods was to fund our net loss from operations. The issuance of stock contributed $251,189 towards our operating deficit during the current six-month period. Financing activities provided net cash of $33,302 during the first six months of the current year, consisting primarily of loans from stockholders. The Company continues to be reliant on the combination of revenues, loans from stockholders and capital contributions to fund operations. The equity line agreement that was established with Swartz Private Equity, LLC was scheduled to end on April 28, 2003. The agreement was terminated on October 15, 2001 with a final sale of stock to Swartz to cover the outstanding account payable due to Swartz of $77,000. 25 ECOM ECOM.COM, INC. To the extent that additional funds are required to support operations or to expand our business, we may sell additional equity, issue debt or obtain other credit facilities through financial institutions. Any sale of additional equity securities will result in dilution to our shareholders. 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 compression software and Viper M1 paintball products, will be substantially limited. Should the Company be unable to obtain continued funding, its operations may be adversely affected. ITEM 3. CONTROLS AND PROCEDURES Evaluation of the Company's Disclosure Controls and Internal Controls: Within the 90 days prior to the date of this Quarterly Report on Form 10-QSB, the Company evaluated the effectiveness of the design and operation of its 'disclosure controls and procedures'("Disclosure Controls"). This 'evaluation' ("Controls Evaluation") was done under the supervision and with the participation of management, including the Chief Executive Officer ("CEO")and Chief Financial Officer ("CFO"). As a result of this review, the Company adopted guidelines concerning disclosure controls and the establishment of a disclosure control committee made up of senior management. Limitations on the Effectiveness of Controls: The Company's management, including the CEO and CFO, does not expect that its Disclosure Controls or its 'internal controls and procedures for financial reporting' ("Internal Controls")will prevent all error and all fraud. A control system, no matter how well conceived and managed, can provide only reasonable assurance that the objectives of the control system are met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Conclusions: Based upon the Controls Evaluation, the CEO and CFO have concluded that, subject to the limitations noted above, the Disclosure Controls are effective to timely alert management to material information relating to the Company during the period when its periodic reports are being prepared. 26 ECOM ECOM.COM, INC. In accordance with SEC requirements, the CEO and CFO note that, since the date of the Controls Evaluation to the date of this Quarterly Report, there have been no significant changes in Internal Controls or in other factors that could significantly affect Internal Controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. Our dispute with four companies had similar suits of non-payment against either eCom eCom.com or it's subsidiary USA Performance Products. Each of these suits were initially settled during the fiscal year ending May 31, 2002. However two matters have recently come to light. The first matter concerning National Paintball which has notified us through their attorney that the issuance of stock agreed upon in the settlement was insufficient to cover the settlement. The company is currently trying to determine the circumstances which lead to the shortfall. The second matter is the attorney for Renick Enterprises Inc. has notified us of his contention that the company failed to complete its agreement by the appropriate date. Management feels that the claim is unfounded and that the company met its obligation timely. On May 15, 2002 a settlement was reached with Renick Enterprises, Inc. As part of the settlement USAPP received cash, notes receivable, inventory, and cancellation of accounts payable. USA Performance products gave up raw material located at Renick. At the time of this filing the court ruled in favor of the Company. Please refer to Subsequent Events for more information on this matter. National Paintball Supply, Inc. filed a complaint against USA Performance Products and eCom eCom.com, Inc. in the State of South Carolina, Greenville County Court of Common Pleas on May 14, 2001. The complaint alleged that an amount of $85,743.35 is owed to the complainant. National Paintball Supply handled paintball fulfillment requests for USA Performance products. USA Performance Products contended that many requests for fulfillment were not completed while some requests were shipped twice. USA Performance Products has recorded a balance due of $69,373.36 as of May 31, 2001. As part of the SB-2 dated August 8, 2002, stock was registered to pay-off this debt. As of February 28, 2003 all stock that had previously been held in an Attorney escrow account, had been sold and transferred to National Paintball. The balance owed National Paintball as of February 28, 2003 is 59,475.83. ITEM 2. Changes in Securities. None ITEM 3. Defaults Upon Senior Securities. None ITEM 4. Submission of Matters to a Vote of Security Holders. None 27 ECOM ECOM.COM, INC. ITEM 5. Other Events. The company is in the process of replacing its attorney, Carol Anne Plowman who had notified the company that she will no longer be practicing in the securities field. Several attorneys are under consideration. The company was notified that its lead market maker, Equitrade Securities Inc. of Lake Forest CA was shutting down its operations. The company is presently looking for a replacement, however there are currently over 40 broker/dealers making markets in our stock. The company signed an agreement with Digital River to provide e-marketing services for on-line sales of all of its software products. Results thus far have been minimal. A software partner is being sought to assist in this portion of the Company. On December 24, 2003 the Board of Directors of eCom eCom.com amended the Articles of Incorporation. Article Four now was changed to increase the authorized shares of the corporation from fifty million shares to two hundred million shares. On January 12, 2004, the Board of Directors of USA SportsNet Company (USASN) approved the following resolutions: A motion was made and passed agreeing to the terms and conditions of the Asset Agreement between USASN and American Capital Holdings, Inc. (ACH) regarding the acquisition of certain assets of ACH. In addition the Board of Directors agrees to change the company name to American Capital Holdings, Inc. A motion was made and passed agreeing to a reverse split of 20 to 1 of the final outstanding shares of USA SportsNet, Inc. of 49,955,112. The Company will purchase all fractional shares at market price. It also agrees that the Date of Record for USASN shareholder ownership was January 5, 2004 for the spin off. A motion was made and passed to appoint Barney Richmond to the Board of Directors and President and Richard Turner to the Board of Directors and Treasurer. The Board of Directors of eCom has passed the following resolution: Pursuant to the Advisory Board's Report of October 4, 2003, eCom will spin-off its subsidiary MyZipSoft, Inc. The Board views this spin-off in the best interest of its shareholders and it complies with SEC Staff Legal Bulletin No. 4. Further, it voted to issue one share of the spin-off for every share of eCom owned as of the record date which will be announced. On May 15, 2002 a settlement was reached with Renick Enterprises, Inc. As part of the settlement USAPP received cash, notes receivable, inventory, and cancellation of accounts payable. USA Performance products gave up raw material located at Renick. At the time of this filing the court ruled in favor of the 28 ECOM ECOM.COM, INC. Company. The judge hearing the case verbally ruled that the grounds for the claim were insufficient and dismissed the action. The Company has not received the official court paperwork. The Company is also considering further legal action against the plaintiff to recover its legal costs to defend this case. The Company has decided to relocate its executive offices at 2700 PGA Blvd., Palm Beach Gardens, FL. Several locations are under consideration. If a site is not found by January 31, 2004, the Company will temporarily use its facility at 8125 Monetary Drive, Riviera Beach, FL. ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit 31.1 Certification required under Section 302 of the Sarbanes-Oxley Act of 2002 by the CE0 on page 30 Exhibit 31.2 Certification required under Section 302 of the Sarbanes-Oxley Act of 2002 by the CFO on page 31 Exhibit 32 Certification of CEO and CFO Pursuant to Section 906 of the Sarbanes-Oxley Act on page 32 (b) Reports on Form 8-K: None 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 hereunder duly authorized. eCom eCom.com, Inc. January 21, 2004 By: /s/ David J. Panaia David J. Panaia, Chief Executive Officer January 21, 2004 By: /s/ Richard C. Turner Richard C. Turner, Chief Financial Officer 29 Exhibit 31.1 CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, David J. Panaia, certify that: 1. I have reviewed this quarterly report on Form 10-Q of eCom eCom.com Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 21, 2004 /s/ David J. Panaia -------------------------- David J. Panaia Chief Executive Officer 30 Exhibit 31.2 CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard C. Turner, certify that: 1. I have reviewed this quarterly report on Form 10-Q of eCom eCom.com Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 21, 2004 /s/ Richard C. Turner --------------------------- Richard C. Turner Chief Financial Officer 31 Exhibit 32 CERTIFICATIONS OF CEO AND CFO PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) In connection with the Quarterly Report of eCom eCom.com Inc., a Florida corporation (the "Company"), on Form 10-QSB for the period ending Novemer 30, 2003, as filed with the Securities and Exchange Commission (the "Report"), David J. Panaia, Chief Executive Officer of the Company and Richard C. Turner, Chief Financial Officer of the Company, respectively, do each hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), that to his knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ David J. Panaia David J. Panaia Chief Executive Officer January 21, 2004 /s/ Richard c. Turner Richard C. Turner Chief Financial Officer January 21, 2004 [A signed original of this written statement required by Section 906 has been provided to eCom eCom.com Inc. and will be retained by eCom eCom.com Inc. and furnished to the Securities and Exchange Commission or its staff upon request.] Exhibits to Form 10-QSB will be provided to shareholders of the Registrant upon written request addressed to eCom eCom.com, Inc., Post Office Box 32044, Palm Beach Gardens, Florida 33420. Any exhibits furnished are subject to a reasonable photocopying charge. The Securities and Exchange Commission has not approved or disapproved of this Form 10-QSB and Annual Report to Shareholders nor has it passed upon its accuracy or adequacy.