10QSB 1 ececnovq.txt ECOM ECOM.COM, INC. NOVEMBER 30, 2004 FORM 10Q 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, 2004 Commission File Number 000-23617 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.) 100 Village Square Crossing, Suite 202 Palm Beach Gardens, Florida 33410 ----------------------------------------------------------------------------- (Address of principal executive offices) (561) 207-6395 ----------------------------------------------------------------------------- (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, 2004 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, 2004 INDEX PAGE NO. PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS Independent Accountant's Report 3 Balance Sheet: November 30, 2004 (Unaudited) 4 Statements of Operations: Six Months Ended November 30, 2004 and 2003 (Unaudited) 5 Statements of Operations: Three Months Ended November 30, 2004 and 2003 (Unaudited) 6 Statements of Shareholders' Deficit: From May 31, 2002 through November 30, 2004 (Unaudited) 7 Statements of Cash Flows: Six Months Ended November 30, 2004 and 2003 (Unaudited) 8 Notes to Financial Statements 10 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 26 ITEM 3 CONTROLS AND PROCEDURES 33 PART II OTHER INFORMATION ITEMS 1-6 34 SIGNATURES AND CERTIFICATIONS 43 Exhibit 31.1 Certification required under Section 302 of 43 the Sarbanes-Oxley Act of 2002 by the CEO Exhibit 31.2 Certification required under Section 302 of 44 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 46 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 Sheet of eCom eCom.com, Inc. as of November 30, 2004, and the related statements of operations, for the six-month and three month periods ended November 30, 2004 and 2003, the statement of stockholders' deficit from May 31, 2002 through November 30, 2004, and the statement of cash flows for the six-month periods ended November 30, 2004 and 2003. These financial statements are the responsibility of the company's management. We conducted our review in accordance with the standards of the Public Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), 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 accounting principles generally accepted in the United States of America. 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 $462,732 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. /s/ Wieseneck, Andres & Company, P.A. North Palm Beach, Florida June 3, 2005 3 eCOM eCOM.COM, INC BALANCE SHEET (Unaudited) November 30, 2004 --------------- ASSETS Current Assets Cash and cash equivalents $ 60 Accounts receivable other 0 Due from affiliated companies 227,377 Inventories 0 Prepaid expenses 36,958 ------------ Total Current Assets 264,395 ------------ Property and Equipment, net 439 ------------ Other Assets Intangible assets, net 0 Other assets 2,250 ------------ Total Other Assets 2,250 ------------ Total Assets $ 267,084 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 120,435 Accrued expenses 44,000 Other current liabilities 0 Current portion of long-term debt 534,883 Interest accrued on current portion 27,809 ------------ Total Current Liabilities 727,127 Notes Payable, Net of Current Portion - ------------ Total Liabilities 727,127 ------------ Stockholders' Equity Common stock, $.0001 par value, 200 million shares authorized, 49,955,112 shares issued and outstanding 4,995 Paid-in capital 6,569,537 Accumulated deficit (7,034,575) ------------ Total Stockholders' Deficit (460,043) ------------ Total Liabilities and Stockholders' Equity $ 267,084 ============ See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 4 ECOM ECOM.COM, INC. STATEMENTS OF OPERATIONS (Unaudited) For the Six Months Ended November 30, 2004 November 30, 2003 ______________ _______________ Revenues Net Sales $ 439 $ 34,309 Cost of Sales (147) (33,561) ______________ _______________ Gross Profit 292 748 ______________ _______________ Other Operating Expenses Sales and marketing 88 2,848 Product development - 9,750 General and administrative 50,561 231,627 Amortization 333 10,792 ______________ _______________ Total Operating Expenses 50,982 255,017 ______________ _______________ Loss from Operations (50,690) (254,269) Other Income (Expense) Interest expense (22,573) (17,999) Gain on disposal of asset - 411 ______________ _______________ Net Other Expenses (22,573) (17,588) ______________ _______________ Net Loss $ (73,263) (271,857) ============== =============== Basic Loss Per Common Share $ (.001) (.007) ============== =============== Weighted Average Shares Outstanding 49,955,112 38,821,407 ============== =============== See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 5 ECOM ECOM.COM, INC. STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended November 30, 2004 November 30, 2003 ______________ _______________ Revenues Net Sales $ 120 $ 21,500 Cost of Sales (67) (19,808) ______________ _______________ Gross Profit 53 1,692 ______________ _______________ Other Operating Expenses Sales and marketing 24 176,013 Product development - 1,440 General and administrative 25,392 5,250 Amortization - 5,560 ______________ _______________ Total Operating Expenses 25,416 188,263 ______________ _______________ Loss from Operations (25,363) (186,571) Other Income (Expense) Interest expense (12,049) (9,931) Loss on disposal of assets - 412 ______________ _______________ Net Other Expenses (12,049) (9,519) ______________ _______________ Net Loss $ (37,412) (196,090) ============== =============== Basic Loss Per Common Share $ (.001) (.005) ============== =============== Weighted Average Shares Outstanding 49,955,112 39,950,442 ============== =============== See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 6 ECOM ECOM.COM, INC. STATEMENTS OF SHAREHOLDERS' DEFICIT FROM MAY 31, 2002 THROUGH NOVEMBER 30, 2004 (Unaudited) Common Stock Number At Add'l Retained Total of Par Paid In Earnings Stockholder Shares Value Capital Deficit Deficit ---------- ------ ---------- ----------- ---------- 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 1,356 530,915 - 532,271 Net Loss - - - (408,406) (408,406) ---------- ------ ---------- ----------- ---------- Balance, May 31, 2004 49,955,112 4,995 6,579,537 (7,053,112) (468,580) Assets distributed as dividends to spin-offs on June 4, 2004 USAPP - - (10,000) 187,624 177,624 aSuperdeal - - - (32,000) (32,000) AAB National - - - (1,444) (1,444) ProCard Corp - - - (1,011) (1,011) aClassified - - - (1,412) (1,412) USAS Digital - - - (964) (964) Swap and Shop - - - (941) (941) eSecureSoft - - - (58,051) (58,051) Net Loss - - - (73,263) (73,263) ---------- ------ ---------- ----------- ---------- Balance, Nov 30, 2004 49,955,112 $4,995 $6,569,537 $(7,034,575) $(460,043) =========== ====== ========== ============ ========== See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 7 eCOM eCOM.COM, INC. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 (Unaudited) November 30, 2004 November 30, 2003 _______________ _______________ Cash Flows From Operating Activities Cash received from customers $ 439 $ 34,309 Cash paid to suppliers and employees (1,902) (39,541) Interest paid (22,573) (15,187) _______________ _______________ Net Cash Flows Used in Operating Activities (24,036) (20,419) _______________ _______________ Cash Flows From Investing Activities Purchase of equipment (0) (1,360) Purchase of intangible assets (3,076) Proceeds received from sale of assets 500 _______________ _______________ Net Cash Flows Provided By (Used In) Investing Activities (0) (3,936) _______________ _______________ Cash Flows From Financing Activities Proceeds from note receivable 0 0 Proceeds of loans from stockholders 26,194 83,490 Repayment of loans to stockholders (2,235) (50,188) _______________ _______________ Net Cash Flows Provided By (Used In) Financing Activities 23,959 33,302 _______________ _______________ Net Increase/(Decrease) in Cash (77) 8,947 Cash and Cash Equivalents at Beginning of Period 137 111 _______________ _______________ Cash and Cash Equivalents at End of Period $ 60 $ 9,057 =============== =============== Supplemental Disclosures ------------------------ Non-Cash transactions Stock issued for payment of services 0 $ 215,975 Stock issued for purchase of prepaid assets 0 $ 149,898 Stock issued for repayment of debt 0 $ 35,214 See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 8 eCOM eCOM.COM, INC. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 (Unaudited) Reconciliation of Net Loss to Net Cash Flows Used in Operating Activities: November 30, 2004 November 30, 2003 _______________ _______________ Net Loss $ (73,263) $ (271,857) Add items not requiring outlay of cash: Depreciation and amortization 443 26,123 Expenses paid by issuing stock 0 215,975 Gain on sale of asset 0 411 Cash was increased by: Decrease in accounts receivable 0 347 Decrease in inventory 33,444 0 Decrease in prepaid expenses 0 0 Decrease in deposits 0 0 Increase in accrued interest payable 10,265 9,207 Increase in accounts payable 5,075 49,865 Cash was decreased by: Increase in inventory 0 (47,646) Decrease in accounts payable 0 0 Decrease in accrued expenses 0 (2,668) Decrease in other current liabilities 0 (176) _______________ _______________ Net Cash Flows Used In Operating Activities $ (24,036) $ (20,419) =============== =============== See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 9 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE A - HISTORY & NATURE OF OPERATIONS eCom eCom.com, Inc. ("eCom" or "the Company") was incorporated in the State of Florida on June 14, 1994. In recent years, eCom concluded that it did not have the financial resources necessary to develop all ten (10) of its business units collectively. Pursuant to SEC Staff Legal Bulletin No. 4, eCom decided to spin off its subsidiaries into independent companies in the belief that independent companies, each with a distinct business, would be better able to obtain necessary funding and develop their business plans. This belief was based in part on eCom's experience with potential business partners which sought involvement with only one of eCom's subsidiaries, rather than involvement with the multi-faceted eCom. On December 1, 2003, the Board of Directors of eCom approved the spin-off of eCom's ten (10) operating subsidiary companies. On December 18, 2003, USA SportsNet, Inc. entered into a definitive Asset Acquisition Agreement with American Capital Holdings, Inc., ("American Capital") The Date of Record for the first spin-off, USA SportsNet, Inc. (later renamed American Capital Holdings, Inc., Cusip No. 02503V 10 9/SEC CIK No. 0001288010)was January 5, 2004. The Date of Record for the second spin-off, MyZipSoft, Inc. (Standard & Poor's Cusip No. 628703 10 0/SEC CIK No. 0001290785) was February 23, 2004, the shares of MyZipSoft were distributed to its shareholders on June 2, 2005. On March 2, 2004, the Board of Directors of eCom approved the spin off of the remaining eight (8) spin off companies in which the Board of Directors voted to issue to their shareholders one (1) share of the company for every one (1) share of eCom owned with a record date to be announced, pursuant to the advice of SEC Staff Legal Bulletin No. 4. On March 29, 2004, eCom Chairman and CEO David Panaia prepared and issued a Press Release announcing the appointment of Barney A. Richmond as President of eCom. A copy of this press release appended hereto as Exhibit No. 99.1, paragraph two (2) of this release stated the following: "The plan to spin-off eCom's ten wholly owned subsidiaries has been completed and the Company is now in the process of acquiring certain businesses for each spin-off. To date, the Company has accomplished two (2) acquisitions and has four (4) more under agreement. When announced, eCom shareholders as of the Date of Payment (distribution of stock) for each spin-off will receive new shares in that company." The shares of the remaining eight spin-off companies were mailed on June 2, 2005, the Date of Payment, to eCom shareholders with a record date of May 27, 2005. On April 14, 2004, eCom filed Form 10QSB, file number 000-23617, accession number 0001000459-04-000005. As stated in ITEM 2, Management's Discussion and Analysis, 'All ten (10) business subsidiaries have been spun off into independent operating public companies.' See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 10 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE A - HISTORY & NATURE OF OPERATIONS (CONTINUED) On May 24, 2004, American Capital Holdings, Inc., a spin-off of eCom formerly known as USA SportsNet, Inc., filed a Form 10SB, file number 000-50776, accession number 0001288012-04-000001,SEC CIK number 0001288012,with the United States Securities & Exchange Commission ("SEC"). On July 27, 2004 American Capital Holdings, Inc.'s Form 10SB was ruled effective by the SEC. On June 4, 2004, a corporate resolution was proposed, passed and signed by David Panaia, Chairman/Secretary/CEO, Richard C. Turner, Director and Treasurer and Barney A. Richmond, Director and President. Based on Mr. Richmond's past restructuring experience, the new Board of Directors re-adopted the December 1, 2003 spin-off plan, pursuant to SEC Staff Legal Bulletin No.4, for the remaining subsidiaries of eCom. The plan was to create individual public corporations, and take whatever actions necessary to complete the process of enhancing shareholder value, including acquisitions and/or mergers. The individual companies are listed below: USA Performance Products, Inc. FL Corp. No. P98000006586 Fed. ID. 65-0812050 eSecureSoft, Company FL Corp. No. P03000138385 Fed. ID. 20-1068608 USAS Digital, Inc. FL Corp. No. P03000147667 Fed. ID. 20-1069232 Pro Card Corporation FL Corp. No. P04000015631 Fed. ID. 20-1442373 AAB National Company FL Corp. No. P04000019818 Fed. ID. 20-1442771 A Classifed Ad, Inc. FL Corp. No. P04000038403 Fed. ID. 20-1447963 A Super Deal.com, Inc. FL Corp. No. P04000040174 Fed. ID. 20-1449410 Swap and Shop.Net Corp. FL Corp. No. P04000040176 Fed. ID. 20-1449332 The motion in the above described June 4, 2004 Board Resolution included the instructions for the distribution of stock by its Transfer Agent, Florida Atlantic Stock Transfer (FAST) to the proper entities when the share certificates were properly exercised and costs relating to the issuance of these shares were paid in full. Notwithstanding, contrary to what board members Richard Turner and Barney A. Richmond had been previously advised by Chairman Panaia, eCom was not able to pay FAST the amounts required to send out the stock certificates to the shareholders, and accordingly, the shares were not issued as stated. Since late June 2004, the management of American Capital Holdings, Inc. has been inundated with hundreds of telephone calls from eCom shareholders, requesting delivery of their promised spin-off shares. Numerous shareholders have made demands to be sent their promised shares, many of them threatening legal action against eCom and all of the above described spin-offs which possibly might have created contingent liabilities for all the shareholders of eCom. Because of the aforementioned financial difficulties, eCom's telephone lines were disconnected. eCom's shareholders contacted American Capital Holdings, Inc. in an effort to garner information on the status of their situation as American Capital was their only source for information. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 11 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE A - HISTORY & NATURE OF OPERATIONS (CONTINUED) In order to comply with General Accepted Accounting Principles ("GAAP") with respect to American Capital's audits, Mr. Panaia had previously agreed to sign promissory notes for the loans provided by American Capital as soon as all parties could determine the exact amounts of the then forthcoming invoices (whose amounts were unknown until received) by the SEC qualified accounting firm, Wieseneck & Andres, P.A. When these accounting invoices and other expense invoices were received in early August 2004, Mr. Panaia would not return telephone calls and would not sign accounting confirmation requests from American Capital accountants, nor would he sign the necessary promissory notes. Numerous attempts were made by American Capital (Letter Dated September 29, 2004, Certificate of Mailing No. 2004188) requesting to have the promissory notes signed by Mr. Panaia, which were not successful. On November 16, 2004, an additional letter was sent to David Panaia, (Certificate of Mailing No. 2004201) requesting the signature of the promissory notes and the additional information needed for the accountants to provide the necessary American Capital audits needed for its ongoing SEC filings. These confirmation letters and further information needed to complete the financial audits were continually ignored by Mr. Panaia. Additionally, certain press releases were made by the CEO of eCom making reference to American Capital without the consent of management or the Board of Directors of American Capital. It is believed Mr. Panaia also ignored his responsibilities to its shareholders by not filing appropriate 8-K's disclosing valid information concerning certain resignations as well as the status of eCom, including its de-listing from the OTCBB, as described below. Due to the above described dilemma caused as a direct result of Mr. Panaia's refusal to address the monies advanced by American Capital to eCom, on November 22, 2004, Barney A. Richmond resigned as an Officer and Director of eCom. Mr. Panaia also refused to file an 8-K statement regarding Mr. Richmond's resignation. Being there were no other options available, on November 29, 2004, an involuntary petition was filed against eCom eCom.com, Inc. in the United States Southern District Bankruptcy Court (In Re: Case No. 04-34535 BKC-SHF) under Title 11, Chapter 11 of the United States Bankruptcy Code by petitioning creditors, American Capital Holdings, Inc., Richard Turner, Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings were initiated in an effort to restore the shareholder value lost by approximately 6,000+ shareholders as well as implement a viable plan for reimbursement of costs incurred by American Capital Holdings, Inc., the petitioning creditors, and all other creditors/vendors who have not been paid. The aforementioned creditors are owed in excess of $1 million dollars. A copy of the June 2, 2005 Chapter 11, Title 11 Amended Involuntary Petition of eCom is posted on the Company's website. www.ecomecom.net under company news. In 1999, eCom reached record trading volume and a historical high share price of $21.50, with a resulting market capitalization of around $250 million. Since 1999, eCom has been in a state of steady decline. When eCom was unable to pay their auditors, they were de-listed from the OTCBB to the Pink Sheets, which is further detailed below. Currently eCom is thinly traded on the Pink Sheets, with a 52-week high of $0.23, and an ask price of $.06 cents per share. eCom's market capitalization has shrunk to less than $3.0 million, which, without a qualified reorganization plan, could easily shrink further, as eCom, has a negative net worth. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 12 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE A - HISTORY & NATURE OF OPERATIONS (CONTINUED) In order to protect it's $250,000+ equity investment in eCom, and in order to fulfill its fiduciary duty to American Capital shareholders, American Capital proceeded with a plan to recapture the lost shareholder value of eCom. All eCom shareholders are also a part of American Capital's shareholder base and are therefore owed a fiduciary duty in protecting not only their interests, but to all of American Capital's shareholders as well. As time went by, the management of American Capital and eCom Director's Barney A. Richmond and Richard Turner realized that the CEO of eCom, David Panaia, was not abiding by his publicly stated agreements to accomplish what was originally set forth in press releases regarding the previously announced spin-off plan. Also, it is estimated that over $13.5 million of eCom shares had been traded based on prior press releases concerning the spin-off announcement. It was then determined by many of the shareholders that eCom was more than in financial turmoil and that Mr. Panaia did not have the resources to complete which he had publicly stated. In late August and September of 2004, Chairman and CEO David Panaia quit taking calls from anyone, including the management of American Capital. Additionally, eCom was not taking calls from other creditors who were owed hundreds of thousands of dollars, including eCom's SEC accounting firm. Other outstanding eCom debts included over $110,000 in employee wages and unpaid expenses, including expenses which were placed on employee personal credit cards to cover expenses directly incurred by eCom, some of which included the previously announced spin-off process costs. As required by the Sarbanes-Oxley Act, auditors cannot remain independent and be a creditor at the same time. Subsequent to eCom's December 3, 2003 public press release regarding the spin-off of USA SportsNet, the management of American Capital discovered eCom owed past due balances with its accountants, Wieseneck & Andres, P.A. This liability cost American Capital's shareholders an additional $75,000 as American Capital was forced to pay the auditing firm in order to complete American Capital's audits, since American Capital was a spin- off company of eCom. Additionally, American Capital has been forced to continue this financial assistance to bring all of the spinoff companies current with their SEC qualified accountants and other creditors so that eCom could continue with it's daily operations. During the period from late December 2004 thru mid-March 2005, American Capital and the petitioning creditors sympathized with the declining health of eCom's CEO, David Panaia. These petitioning creditors have also incurred considerable additional costs by providing continued financial assistance to honor what was promised to eCom's shareholders. These costs included expenses to bring all of the spin-off companies current with their SEC filings, Federal Tax Returns, State Income Tax Returns, State Filing Fees, Accounting Expenses, SEC Auditing Expenses, Legal, Administrative and other business-related expenses. This process included utilizing American Capital employees, as well as hiring outside assistance, i.e. additional accountants, tax assistance, and outside attorneys to expedite the process. On January 24, 2005, eCom was de-listed from trading on the OTC Bulletin Board and began trading on the Pink Sheets for failure to file the Company's November Form 10QSB. This de-listing was due to the fact the Company's See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 13 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE A - HISTORY & NATURE OF OPERATIONS (CONTINUED) auditors had not been paid. Therefore, in accordance with the Sarbanes-Oxley Act, the auditors could not be determined to be "independent". Accordingly, eCom lost additional market value, thereby further injuring creditors and shareholders of the company. Due to Mr. Panaia's health-related issues, during the period of January thru mid-March 2005, eCom requested three (3) extensions to reply to the above described Involuntary Chapter 11, Title 11 United States Southern District Bankruptcy Petition In Re: eComeCom.com, Inc. Case No. 04-34535 BKC-SHF. With consideration to Mr. Panaia's declining health, all of the petitioning creditors voluntarily consented to these extensions. Notwithstanding these voluntary extensions, and due to the extensive ongoing telephone inquiries from eCom shareholders who had bought shares in the public marketplace based on the past public press release representations of Mr. Panaia, the management of American Capital and the petitioning creditors had no choice but to try to make past promises good beginning with getting the spin-off companies in full regulatory compliance. This endeavor included the preparation of (a) thirty (30) 10QSB's; (b); ten (10) 10K's; (c) ten (10) Form 10SB's SEC Registration Statements; (d) twenty six (26) total State and Federal Tax Returns; (e) ten (10) applications for the required SEC EDGAR CIK Numbers; (f) and ten (10) of the Transfer Agent - required Standard & Poor's Cusip Numbers. Additionally, there has been a tremendous administrative effort in bringing all the spin-off companies current with respect to other public company reporting requirements, including the Sarbanes-Oxley Act. American Capital's management and the petitioning creditors accomplished these tasks to eliminate any further liabilities to eCom shareholders. On March 20, 2005, the Chairman/CEO and majority shareholder of eCom, David J. Panaia, died from health complications. The former President and Director of eCom, Richard C. Turner, is acting as interim CEO for eCom, without compensation. The Company is making application to the United States Bankruptcy Court to appoint Barney A. Richmond, who has agreed to do so without compensation, as its new Chief Executive Officer, whose official appointment is subject to bankruptcy court approval. Although the process of restoring shareholder value is well underway, both Mr. Richmond and Mr. Turner plan to stay with the company without compensation until the proposed reorganization plans of all the companies are totally complete. On March 23, 2005, the aforementioned spin-off companies received their respective SEC CIK Acceptance Filings, which are outlined below: Name of SEC/EDGAR Standard & Poor's Spin-off Company CIK No. Cusip No. USA Performance Products, Inc. CIK 0001321509 90341L 10 2 eSecureSoft, Company CIK 0001321511 296423 10 6 USAS Digital, Inc. CIK 0001321508 90341K 10 4 Pro Card Corporation CIK 0001321500 74270Q 10 0 AAB National Company CIK 0001321506 000303 10 7 A Classified Ad, Inc. CIK 0001321499 00089Y 10 9 A Super Deal.com, Inc. CIK 0001321507 00210R 10 6 Swap and Shop.Net Corp. CIK 0001321510 869894 10 5 See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 14 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE A - HISTORY & NATURE OF OPERATIONS (CONTINUED) In order to facilitate a more reasonable share structure based on the company's existing financial assets, on May 26, 2005 the Board approved a resolution authorizing a 100-to-1 Reverse Split of the outstanding 49,955,112 shares of the spin-off companies. Each company will purchase all fractional shares at market price, thereby resulting in total outstanding shares of 499,503 as of May 27, 2005. The Record Date for the remaining spin-offs was set as May 27, 2005, and all share certificates due to the shareholders of the above referenced companies were mailed on June 2, 2005. A group of several of American Capital Holdings, Inc.'s and other outside shareholders have designated resources to capitalize and complete viable business plans for the all of the above referenced spin-off companies. To get the process started for paying expenses relating to the initial funding of these companies to achieve their respective business purposes, on May 31, 2005 several new shareholders invested $400,000 in eight (8) of the above referenced companies, which will be reflected in each company's forthcoming respective Form 10SB audits and filings, which is planned to be filed within the next week. This initial funding is to cover legal, accounting and other expenses, including due diligence costs related to proposed forthcoming acquisitions. More funding is planned for each company through out the June 1, 2005 thru August 30, 2005 Quarter in accordance with 506 Reg. D Private Placement procedures, which will become available only to accredited investors. Additionally, a plan is being formulated, subject to bankruptcy court approval, which will provide a 100% payout to all of eCom's outstanding creditors. The new management is committed and believes these efforts combined with execution of the new business plans, not only will recapture the lost shareholder value of eCom, but will also enhance the viability of future long term shareholder value as well. Acquisitions negotiations are underway and will be separately announced upon completion and management is confident in their ability to execute these forthcoming plans. On May 16, 2005, eCom and its creditors attended the first status conference in the United States Bankruptcy Court - Southern District of Florida (In Re: Case No. 04-34535 BKC-SHF) in front of the Honorable Judge Steven Friedman. An order was granted to the petitioning creditors adjudicating eCom as a debtor under Chapter 11, Title 11 of the United States Bankruptcy Code. The Order included specific instructions for eCom to retain bankruptcy counsel by June 4, 2005. Pursuant to SEC Staff Legal Bulletin No.4, the issuance of the all the share certificates of the above referenced spin-off companies were sent via certified mail on June 2, 2005 to the shareholders of record as of May 31, 2005. The shareholder list and Certified Mail numbers are appended hereto as exhibit 99.3. eCom eCom.com, Inc. filed an 8-K on May 31, 2005 (Accession Number: 0001000459- 05-000001, File Number:000-23617) and an 8-K on June 2, 2005 (Accession Number: 0001000459-05-000002, File Number:000-23617). See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 15 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE A - HISTORY & NATURE OF OPERATIONS (CONTINUED) On June 3, 2005, eCom, through a $100,000 Debtor In Possession Financing Agreement with American Capital Holdings, Inc., entered into an engagement agreement to retain the legal services of Kluger, Peretz, Kaplan & Berlin to represent the Company in its aforementioned reorganization plans. Both of the financing and legal representation agreements are subject to Bankruptcy Court approval, which hearing is scheduled for June 6, 2005. The Company does not have any off-balance sheet arrangements. 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 financial statements of the Company at November 30, 2003 and May 31, 2004 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. As of November 30, 2004 the following companies have been distributed and are no longer consolidated in the financial statements: 1. USA Performance Products, Inc. 2. eSecureSoft Company 3. USA SportsNet Company 4. MyZipSoft, Inc. 5. USAS Digital, Inc. 6. Pro Card Corporation 7. AAB National Company 8. A Classified Ad, Inc. 9. Swap and Shop.net Corp 10. A Super Deal.com, Inc. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 16 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 17 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 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. Maintenance, operating and office supplied are not inventoried. At November 30, 2004 inventory consisted of the following: November 30, 2004 Finished goods $ 0 Work in process 0 Raw materials 0 ----------- Total inventory $ 0 =========== All inventory was distributed to the spin-offs on June 4, 2004. NOTE D - PREPAID EXPENSES Prepaid expenses consist principally of amounts paid for rent, subscriptions and domain name registrations. The Company issued one million five hundred thousand shares of common stock as a retainer for future consulting fees during November 2003. The consulting contract was valued at $37,500 and is being expensed over three years. The remaining value of the consulting contract is $15,625 as of November 30, 2004. 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, 2004: November 30, 2004 -------------- Computer hardware $ 85,074 Computer software 13,633 Furniture, fixtures and equipment 4,330 Tools, dies and fixtures 0 Leasehold improvements 0 --------- Total cost 103,037 Accumulated depreciation 102,598 --------- Net Property and Equipment $ 439 ========= Depreciation expense included in the cost of sales for the periods ended are: $ 110 ========= See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 18 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE E - PROPERTY AND EQUIPMENT (CONTINUED) Reductions in Computer hardware, computer software, furniture, and Tools and dies was due to the distribution to the spin-off companies on June 4, 2004. 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, A Classified Ad and Swap and Shop, for a total cost of $11,200. These assets are amortized over five years. Accumulated amortization related to these assets was $11,200 as of May 31, 2004. 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 $22,500 as of May 31, 2004. This asset was distributed to eSecureSoft on June 4, 2004. 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 $13,500 as of May 31, 2004. This asset was distributed to eSecureSoft on June 4, 2004. On September 18, 2002, the Company issued 25,000 shares of stock as an initial payment towards the purchase of FotoCrazy software. This initial deposit was recorded as $1,125. This asset was distributed to eSecureSoft on June 4, 2004. NOTE G - OTHER ASSETS Other assets consist primarily of security deposits on the lease of office facilities, an employee advance and utility deposits. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 19 ECOM ECOM.COM, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE H - LONG-TERM DEBT Long-term debt at November 30, 2004 consisted of: November 30, 2004 ------------ Loans from stockholders and affiliated companies: The loans are due on demand. 534,883 ---------- Total Long-Term Debt 534,883 Less Current Portion (534,883) ---------- Net Long-term Debt $ 0 ========== The long-term loans payable mature as follows: May 31, 2005 534,883 ---------- $ 534,883 ========== NOTE I - COST OF SALES Included in the cost of sales are the following: November 30, 2004 November 30, 2003 ------------ ------------ Shipping and handling costs $ 0 $ 806 Packaging costs 0 124 ------------ ------------ Total $ 0 $ 930 ============ ============ Shipping income $ 0 $ 1,717 ============ ============ NOTE J - COMMITMENTS AND CONTINGENCIES The Company maintains office facilities leased by USA Performance products leases office and manufacturing facilities under an operating lease which expired June 30, 2001. Since July 1, 2003 the USA Performance products has been leasing facilities on a monthly basis. Future minimum lease payments including sales tax as of November 30, 2004 are: Fiscal Years ending: May 31, 2005 1,855 -------- Total Minimum Lease Payments $ 1,855 ======== Rent expense for the six month period ending November 30, 2004 and 2003 are $0 and $30,933. On March 31, 2005 USA Performance products vacated the leased premises and relocated to facilities in West Palm Beach, Florida. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 20 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED) 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. On November 29, 2004, an involuntary petition was filed against eCom eCom.com, Inc. in the United States Southern District Bankruptcy Court (In Re: Case No. 04-34535 BKC-SHF) under Title 11, Chapter 11 of the United States Bankruptcy Code by petitioning creditors, American Capital Holdings, Inc., Richard Turner, Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings were initiated in an effort to restore the shareholder value lost by approximately 6,000 shareholders as well as implement a viable plan for reimbursement of costs incurred by American Capital Holdings, Inc., the petitioning creditors, and all other creditors/vendors who have not been paid. The aforementioned creditors are owed in excess of $1 million dollars. NOTE K - RELATED PARTY TRANSACTIONS 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, CEO in return for cancellation of $437,362 of the debt owed to him. The amount of stockholder loans that were reduced was based on the quoted market price ($.68) on the date the common shares were issued and adjusted by a discount of 50% due to the restrictions placed on the stock. The balance owed to Mr. Panaia at November 30, 2004 and May 31, 2004 is $377,851 and $373,413. 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, 2004 and May 31, 2004 is $35,000. NOTE L - BUSINESS SEGMENTS The Company's reportable segments are strategic business units that offer different products and services. The Company has 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. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 21 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE L - BUSINESS SEGMENTS (CONTINUED) 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: As of November 30, 2004 the company no longer had consolidated business segments. The Paintball segment has been distributed to USA Performance Products, Inc., the software segment has been distributed to eSecureSoft Company. 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 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 $629,000 at November 30, 2003 and by $462,000 at November 30, 2004 and that the Company has incurred net operating losses since inception. 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. The company continues to manufacture and sell the Viper paintball gun. The Company is currently focusing its efforts on the design and resale of MyPhotoZip (tm) software that compresses, stores, protects and transmits large data files. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 22 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 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, 2004 -------------- Loss carry forward for tax purposes $ 6,746,631 ============== Deferred tax asset (34%) 2,293,854 Valuation allowance (2,293,854) -------------- Net deferred tax asset - ============== Through November 30, 2004, the Company had a federal income tax net operating loss carry forward of approximately $6,740,000 which will expire through the year 2023. NOTE O - INCOME TAXES 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, 2004 was approximately $6,740,000. 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 P - EFFECTS OF INFLATION To date, inflation has not had a material impact on the Company's consolidated financial results. NOTE Q - 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 See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 23 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE Q - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED) 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. 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 $20,927. 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 summary of accounting policies, notes to financial statements and independent accountants' review report. 24 ECOM ECOM.COM, INC. NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED NOVEMBER 30, 2004 AND 2003 NOTE Q - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED) 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. See accompanying summary of accounting policies, notes to financial statements and independent accountants' review report. 25 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, 2004 and 2003 and the Form 10-KSB for the fiscal year ended May 31, 2004. Overview In recent years, eCom concluded that it did not have the financial resources necessary to develop all ten (10) of its business units collectively. Pursuant to SEC Staff Legal Bulletin No. 4, eCom decided to spin off its subsidiaries into independent companies in the belief that independent companies, each with a distinct business, would be better able to obtain necessary funding and develop their business plans. This belief was based in part on eCom's experience with potential business partners which sought involvement with only one of eCom's subsidiaries, rather than involvement with the multi-faceted eCom. On December 1, 2003, the Board of Directors of eCom approved the spin-off of eCom's ten (10) operating subsidiary companies. On December 18, 2003, USA SportsNet, Inc. entered into a definitive Asset Acquisition Agreement with American Capital Holdings, Inc., ("American Capital") The Date of Record for the first spin-off, USA SportsNet, Inc. (later renamed American Capital Holdings, Inc., Cusip No. 02503V 10 9/SEC CIK No. 0001288010) was January 5, 2004. The Date of Record for the second spin-off, MyZipSoft, Inc. (Standard & Poor's Cusip No. 628703 10 0/SEC CIK No. 0001290785) was February 23, 2004, the shares of MyZipSoft were distributed to its shareholders on June 2, 2005. On March 2, 2004, the Board of Directors of eCom approved the spin off of the remaining eight (8) spin off companies in which the Board of Directors voted to issue to their shareholders one (1) share of the company for every one (1) share of eCom owned with a record date to be announced, pursuant to the advice of SEC Staff Legal Bulletin No. 4. On March 29, 2004, eCom Chairman and CEO David Panaia prepared and issued a Press Release announcing the appointment of Barney A. Richmond as President of eCom. A copy of this press release appended hereto as Exhibit No. 99.1, paragraph two (2) of this release stated the following: "The plan to spin-off eCom's ten wholly owned subsidiaries has been completed and the Company is now in the process of acquiring certain businesses for each spin-off. To date, the Company has accomplished two (2) acquisitions and has four (4) more under agreement. When announced, eCom shareholders as of the Date of Payment (distribution of stock) for each spin-off will receive new shares in that company." The shares of the remaining eight spin-off companies were mailed on June 2, 2005, the Date of Payment, to eCom shareholders with a record date of May 27, 2005. On April 14, 2004, eCom filed Form 10QSB, file number 000-23617, accession number 0001000459-04-000005. As stated in ITEM 2, Management's Discussion and Analysis, 'All ten (10) business subsidiaries have been spun off into independent operating public companies.' 26 ECOM ECOM.COM, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) On May 24, 2004, American Capital Holdings, Inc., a spin-off of eCom formerly known as USA SportsNet, Inc., filed a Form 10SB, file number 000-50776, accession number 0001288012-04-000001,SEC CIK number 0001288012,with the United States Securities & Exchange Commission ("SEC"). On July 27, 2004 American Capital Holdings, Inc.'s Form 10SB was ruled effective by the SEC. On June 4, 2004, a corporate resolution was proposed, passed and signed by David Panaia, Chairman/Secretary/CEO, Richard C. Turner, Director and Treasurer and Barney A. Richmond, Director and President. Based on Mr. Richmond's past restructuring experience, the new Board of Directors re-adopted the December 1, 2003 spin-off plan, pursuant to SEC Staff Legal Bulletin No.4, for the remaining subsidiaries of eCom. The plan was to create individual public corporations, and take whatever actions necessary to complete the process of enhancing shareholder value, including acquisitions and/or mergers. The individual companies are listed below: USA Performance Products, Inc. FL Corp. No. P98000006586 Fed. ID. 65-0812050 eSecureSoft, Company FL Corp. No. P03000138385 Fed. ID. 20-1068608 USAS Digital, Inc. FL Corp. No. P03000147667 Fed. ID. 20-1069232 Pro Card Corporation FL Corp. No. P04000015631 Fed. ID. 20-1442373 AAB National Company FL Corp. No. P04000019818 Fed. ID. 20-1442771 A Classifed Ad, Inc. FL Corp. No. P04000038403 Fed. ID. 20-1447963 A Super Deal.com, Inc. FL Corp. No. P04000040174 Fed. ID. 20-1449410 Swap and Shop.Net Corp. FL Corp. No. P04000040176 Fed. ID. 20-1449332 The motion in the above described June 4, 2004 Board Resolution included the instructions for the distribution of stock by its Transfer Agent, Florida Atlantic Stock Transfer (FAST) to the proper entities when the share certificates were properly exercised and costs relating to the issuance of these shares were paid in full. Notwithstanding, contrary to what board members Richard Turner and Barney A. Richmond had been previously advised by Chairman Panaia, eCom was not able to pay FAST the amounts required to send out the stock certificates to the shareholders, and accordingly, the shares were not issued as stated. Since late June 2004, the management of American Capital Holdings, Inc. has been inundated with hundreds of telephone calls from eCom shareholders, requesting delivery of their promised spin-off shares. Numerous shareholders have made demands to be sent their promised shares, many of them threatening legal action against eCom and all of the above described spin-offs which possibly might have created contingent liabilities for all the shareholders of eCom. Because of the aforementioned financial difficulties, eCom's telephone lines were disconnected. eCom's shareholders contacted American Capital Holdings, Inc. in an effort to garner information on the status of their situation as American Capital was their only source for information. In order to comply with General Accepted Accounting Principles ("GAAP") with respect to American Capital's audits, Mr. Panaia had previously agreed to sign promissory notes for the loans provided by American Capital as soon as all parties could determine the exact amounts of the then forthcoming invoices (whose amounts were unknown until received) by the SEC qualified accounting firm, Wieseneck & Andres, P.A. When these accounting invoices and other expense 27 ECOM ECOM.COM, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) invoices were received in early August 2004, Mr. Panaia would not return telephone calls and would not sign accounting confirmation requests from American Capital accountants, nor would he sign the necessary promissory notes. Numerous attempts were made by American Capital (Letter Dated September 29, 2004, Certificate of Mailing No. 2004188) requesting to have the promissory notes signed by Mr. Panaia, which were not successful. On November 16, 2004, an additional letter was sent to David Panaia, (Certificate of Mailing No. 2004201) requesting the signature of the promissory notes and the additional information needed for the accountants to provide the necessary American Capital audits needed for its ongoing SEC filings. These confirmation letters and further information needed to complete the financial audits were continually ignored by Mr. Panaia. Additionally, certain press releases were made by the CEO of eCom making reference to American Capital without the consent of management or the Board of Directors of American Capital. It is believed Mr. Panaia also ignored his responsibilities to its shareholders by not filing appropriate 8-K's disclosing valid information concerning certain resignations as well as the status of eCom, including its de-listing from the OTCBB, as described below. Due to the above described dilemma caused as a direct result of Mr. Panaia's refusal to address the monies advanced by American Capital to eCom, on November 22, 2004, Barney A. Richmond resigned as an Officer and Director of eCom. Mr. Panaia also refused to file an 8-K statement regarding Mr. Richmond's resignation. Being there were no other options available, on November 29, 2004, an involuntary petition was filed against eCom eCom.com, Inc. in the United States Southern District Bankruptcy Court (In Re: Case No. 04-34535 BKC-SHF) under Title 11, Chapter 11 of the United States Bankruptcy Code by petitioning creditors, American Capital Holdings, Inc., Richard Turner, Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings were initiated in an effort to restore the shareholder value lost by approximately 6,000+ shareholders as well as implement a viable plan for reimbursement of costs incurred by American Capital Holdings, Inc., the petitioning creditors, and all other creditors/vendors who have not been paid. The aforementioned creditors are owed in excess of $1 million dollars. A copy of the June 2, 2005 Chapter 11, Title 11 Amended Involuntary Petition of eCom is posted on the Company's website. www.ecomecom.net In 1999, eCom reached record trading volume and a historical high share price of $21.50, with a resulting market capitalization of around $250 million. Since 1999, eCom has been in a state of steady decline. When eCom was unable to pay their auditors, they were de-listed from the OTCBB to the Pink Sheets, which is further detailed below. Currently eCom is thinly traded on the Pink Sheets, with a 52-week high of $0.23, and an ask price of $.06 cents per share. eCom's market capitalization has shrunk to less than $3.0 million, which, without a qualified reorganization plan, could easily shrink further, as eCom, has a negative net worth. In order to protect it's $250,000+ equity investment in eCom, and in order to fulfill its fiduciary duty to American Capital shareholders, American Capital proceeded with a plan to recapture the lost shareholder value of eCom. All eCom shareholders are also a part of American Capital's shareholder base and are therefore owed a fiduciary duty in protecting not only their interests, but to all of American Capital's shareholders as well. As time went by, the management of American Capital and eCom Director's Barney A. Richmond and Richard Turner 28 ECOM ECOM.COM, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) realized that the CEO of eCom, David Panaia, was not abiding by his publicly stated agreements to accomplish what was originally set forth in press releases regarding the previously announced spin-off plan. Also, it is estimated that over $13.5 million of eCom shares had been traded based on prior press releases concerning the spin-off announcement. It was then determined by many of the shareholders that eCom was more than in financial turmoil and that Mr. Panaia did not have the resources to complete which he had publicly stated. In late August and September of 2004, Chairman and CEO David Panaia quit taking calls from anyone, including the management of American Capital. Additionally, eCom was not taking calls from other creditors who were owed hundreds of thousands of dollars, including eCom's SEC accounting firm. Other outstanding eCom debts included over $110,000 in employee wages and unpaid expenses, including expenses which were placed on employee personal credit cards to cover expenses directly incurred by eCom, some of which included the previously announced spin-off process costs. As required by the Sarbanes-Oxley Act, auditors cannot remain independent and be a creditor at the same time. Subsequent to eCom's December 3, 2003 public press release regarding the spin-off of USA SportsNet, the management of American Capital discovered eCom owed past due balances with its accountants, Wieseneck & Andres, P.A. This liability cost American Capital's shareholders an additional $75,000 as American Capital was forced to pay the auditing firm in order to complete American Capital's audits, since American Capital was a spin- off company of eCom. Additionally, American Capital has been forced to continue this financial assistance to bring all of the spinoff companies current with their SEC qualified accountants and other creditors so that eCom could continue with it's daily operations. During the period from late December 2004 thru mid-March 2005, American Capital and the petitioning creditors sympathized with the declining health of eCom's CEO, David Panaia. These petitioning creditors have also incurred considerable additional costs by providing continued financial assistance to honor what was promised to eCom's shareholders. These costs included expenses to bring all of the spin-off companies current with their SEC filings, Federal Tax Returns, State Income Tax Returns, State Filing Fees, Accounting Expenses, SEC Auditing Expenses, Legal, Administrative and other business-related expenses. This process included utilizing American Capital employees, as well as hiring outside assistance, i.e. additional accountants, tax assistance, and outside attorneys to expedite the process. On January 24, 2005, eCom was de-listed from trading on the OTC Bulletin Board and began trading on the Pink Sheets for failure to file the Company's November Form 10QSB. This de-listing was due to the fact the Company's auditors had not been paid. Therefore, in accordance with the Sarbanes-Oxley Act, the auditors could not be determined to be "independent". Accordingly, eCom lost additional market value, thereby further injuring creditors and shareholders of the company. Due to Mr. Panaia's health-related issues, during the period of January thru mid-March 2005, eCom requested three (3) extensions to reply to the above described Involuntary Chapter 11, Title 11 United States Southern District Bankruptcy Petition In Re: eComeCom.com, Inc. Case No. 04-34535 BKC-SHF. With consideration to Mr. Panaia's declining health, all of the petitioning creditors 29 ECOM ECOM.COM, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) voluntarily consented to these extensions. Notwithstanding these voluntary extensions, and due to the extensive ongoing telephone inquiries from eCom shareholders who had bought shares in the public marketplace based on the past public press release representations of Mr. Panaia, the management of American Capital and the petitioning creditors had no choice but to try to make past promises good beginning with getting the spin-off companies in full regulatory compliance. This endeavor included the preparation of (a) thirty (30) 10QSB's; (b); ten (10) 10K's; (c) ten (10) Form 10SB's SEC Registration Statements; (d) twenty six (26) total State and Federal Tax Returns; (e) ten (10) applications for the required SEC EDGAR CIK Numbers; (f) and ten (10) of the Transfer Agent - required Standard & Poor's Cusip Numbers. Additionally, there has been a tremendous administrative effort in bringing all the spin-off companies current with respect to other public company reporting requirements, including the Sarbanes-Oxley Act. American Capital's management and the petitioning creditors accomplished these tasks to eliminate any further liabilities to eCom shareholders. On March 20, 2005, the Chairman/CEO and majority shareholder of eCom, David J. Panaia, died from health complications. The former President and Director of eCom, Richard C. Turner, is acting as interim CEO for eCom, without compensation. The Company is making application to the United States Bankruptcy Court to appoint Barney A. Richmond, who has agreed to do so without compensation, as its new Chief Executive Officer, whose official appointment is subject to bankruptcy court approval. Although the process of restoring shareholder value is well underway, both Mr. Richmond and Mr. Turner plan to stay with the company without compensation until the proposed reorganization plans of all the companies are totally complete. On March 23, 2005, the aforementioned spin-off companies received their respective SEC CIK Acceptance Filings, which are outlined below: Name of SEC/EDGAR Standard & Poor's Spin-off Company CIK No. Cusip No. USA Performance Products, Inc. CIK 0001321509 90341L 10 2 eSecureSoft, Company CIK 0001321511 296423 10 6 USAS Digital, Inc. CIK 0001321508 90341K 10 4 Pro Card Corporation CIK 0001321500 74270Q 10 0 AAB National Company CIK 0001321506 000303 10 7 A Classified Ad, Inc. CIK 0001321499 00089Y 10 9 A Super Deal.com, Inc. CIK 0001321507 00210R 10 6 Swap and Shop.Net Corp. CIK 0001321510 869894 10 5 In order to facilitate a more reasonable share structure based on the company's existing financial assets, on May 26, 2005 the Board approved a resolution authorizing a 100-to-1 Reverse Split of the outstanding 49,955,112 shares of the spin-off companies. Each company will purchase all fractional shares at market price, thereby resulting in total outstanding shares of 499,503 as of May 27, 2005. The Record Date for the remaining spin-offs was set as May 27, 2005, and all share certificates due to the shareholders of the above referenced companies were mailed on June 2, 2005. A group of several of American Capital Holdings, Inc.'s and other outside shareholders have designated resources to capitalize and complete viable business plans for the all of the above referenced spin-off companies. To get the process started for paying expenses relating to the initial funding of these 30 ECOM ECOM.COM, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) companies to achieve their respective business purposes, on May 31, 2005 several new shareholders invested $400,000 in eight (8) of the above referenced companies, which will be reflected in each company's forthcoming respective Form 10SB audits and filings, which is planned to be filed within the next week. This initial funding is to cover legal, accounting and other expenses, including due diligence costs related to proposed forthcoming acquisitions. More funding is planned for each company through out the June 1, 2005 thru August 30, 2005 Quarter in accordance with 506 Reg. D Private Placement procedures, which will become available only to accredited investors. Additionally, a plan is being formulated, subject to bankruptcy court approval, which will provide a 100% payout to all of eCom's outstanding creditors. The new management is committed and believes these efforts combined with execution of the new business plans, not only will recapture the lost shareholder value of eCom, but will also enhance the viability of future long term shareholder value as well. Acquisitions negotiations are underway and will be separately announced upon completion and management is confident in their ability to execute these forthcoming plans. On May 16, 2005, eCom and its creditors attended the first status conference in the United States Bankruptcy Court - Southern District of Florida (In Re: Case No. 04-34535 BKC-SHF) in front of the Honorable Judge Steven Friedman. An order was granted to the petitioning creditors adjudicating eCom as a debtor under Chapter 11, Title 11 of the United States Bankruptcy Code. The Order included specific instructions for eCom to retain bankruptcy counsel by June 4, 2005. Pursuant to SEC Staff Legal Bulletin No.4, the issuance of the all the share certificates of the above referenced spin-off companies were sent via certified mail on June 2, 2005 to the shareholders of record as of May 31, 2005. The shareholder list and Certified Mail numbers are appended hereto as exhibit 99.3. eCom eCom.com, Inc. filed an 8-K on May 31, 2005 (Accession Number: 0001000459- 05-000001, File Number:000-23617) and an 8-K on June 2, 2005 (Accession Number: 0001000459-05-000002, File Number: 000-23617). On June 3, 2005, eCom, through a $100,000 Debtor In Possession Financing Agreement with American Capital Holdings, Inc., entered into an engagement agreement to retain the legal services of Kluger, Peretz, Kaplan & Berlin to represent the Company in its aforementioned reorganization plans. Both of the financing and legal representation agreements are subject to Bankruptcy Court approval, which hearing is scheduled for June 6, 2005. The Company does not have any off-balance sheet arrangements. 31 ECOM ECOM.COM, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED) Results of Operations Comparison of the six months ended November 30, 2004 with the six months ended November 30, 2003. Revenue for the six month period ended November 30, 2004 was $439 compared to $34,309 of revenue recorded during the same period of the prior year. Prior year revenues were recorded from sales of the Viper M1 paintball marker and accessories and sales of MyPhotoZip (TM). Our USA Performance Products subsidiary was distributed on June 4, 2004 therefore sales for the six months ending November 30, 2004 are not included in the current year financial results. Gross profit decreased from $748 in the prior year period to $292 in the current six month period. Depreciation expense contributed $15,331 to the prior years deficit in gross profit. Due to the distribution of the Company's paintball segment, sales and marketing expense dropped from $2,848 in the six months ended November 30, 2004 to $88 in the current six month period. General and administrative costs dropped from $231,626 in the prior year to $50560 in the current six month period. Our operations for the six months ended November 30, 2004 resulted in a net loss of $73,263, a $198,594 improvement over the net loss of $271,857 recorded during the six months ended November 30, 2003. Liquidity and Capital Resources As of November 30, 2004 current assets totaled $264,334 compared to $330,014 at the end of the prior fiscal year. Accounts Payable decreased from $320,450 to $120,434 during the current six months. This decrease in accounts payable was due to the distribution of USA Performance Products on June 4, 2004. Accounts payable distributed from USA Performance Products was $126,637 on June 4, 2004. 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. 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. 32 ECOM ECOM.COM, INC. 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. 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. 33 ECOM ECOM.COM, INC. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. On November 29, 2004, the company was served an involuntary bankruptcy petition from the Southern District United States Bankruptcy Court, Southern District of Florida. 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 ITEM 5. Other Events. Subsequent Events In recent years, eCom concluded that it did not have the financial resources necessary to develop all ten (10) of its business units collectively. Pursuant to SEC Staff Legal Bulletin No. 4, eCom decided to spin off its subsidiaries into independent companies in the belief that independent companies, each with a distinct business, would be better able to obtain necessary funding and develop their business plans. This belief was based in part on eCom's experience with potential business partners which sought involvement with only one of eCom's subsidiaries, rather than involvement with the multi-faceted eCom. On December 1, 2003, the Board of Directors of eCom approved the spin-off of eCom's ten (10) operating subsidiary companies. On December 18, 2003, USA SportsNet, Inc. entered into a definitive Asset Acquisition Agreement with American Capital Holdings, Inc., ("American Capital") The Date of Record for the first spin-off, USA SportsNet, Inc. (later renamed American Capital Holdings, Inc., Cusip No. 02503V 10 9/SEC CIK No. 0001288010)was January 5, 2004. The Date of Record for the second spin-off, MyZipSoft, Inc. (Standard & Poor's Cusip No. 628703 10 0/SEC CIK No. 0001290785) was February 23, 2004, the shares of MyZipSoft were distributed to its shareholders on June 2, 2005. On March 2, 2004, the Board of Directors of eCom approved the spin off of the remaining eight (8) spin off companies in which the Board of Directors voted to issue to their shareholders one (1) share of the company for every one (1) share of eCom owned with a record date to be announced, pursuant to the advice of SEC Staff Legal Bulletin No. 4. On March 29, 2004, eCom Chairman and CEO David Panaia prepared and issued a Press Release announcing the appointment of Barney A. Richmond as President of eCom. A copy of this press release appended hereto as Exhibit No. 99.1, paragraph two (2) of this release stated the following: 34 ECOM ECOM.COM, INC. ITEM 5. OTHER EVENTS (CONTINUED) "The plan to spin-off eCom's ten wholly owned subsidiaries has been completed and the Company is now in the process of acquiring certain businesses for each spin-off. To date, the Company has accomplished two (2) acquisitions and has four (4) more under agreement. When announced, eCom shareholders as of the Date of Payment (distribution of stock) for each spin-off will receive new shares in that company." The shares of the remaining eight spin-off companies were mailed on June 2, 2005, the Date of Payment, to eCom shareholders with a record date of May 27, 2005. On April 14, 2004, eCom filed Form 10QSB, file number 000-23617, accession number 0001000459-04-000005. As stated in ITEM 2, Management's Discussion and Analysis, 'All ten (10) business subsidiaries have been spun off into independent operating public companies.' On May 24, 2004, American Capital Holdings, Inc., a spin-off of eCom formerly known as USA SportsNet, Inc., filed a Form 10SB, file number 000-50776, accession number 0001288012-04-000001,SEC CIK number 0001288012,with the United States Securities & Exchange Commission ("SEC"). On July 27, 2004 American Capital Holdings, Inc.'s Form 10SB was ruled effective by the SEC. On June 4, 2004, a corporate resolution was proposed, passed and signed by David Panaia, Chairman/Secretary/CEO, Richard C. Turner, Director and Treasurer and Barney A. Richmond, Director and President. Based on Mr. Richmond's past restructuring experience, the new Board of Directors re-adopted the December 1, 2003 spin-off plan, pursuant to SEC Staff Legal Bulletin No.4, for the remaining subsidiaries of eCom. The plan was to create individual public corporations, and take whatever actions necessary to complete the process of enhancing shareholder value, including acquisitions and/or mergers. The individual companies are listed below: USA Performance Products, Inc. FL Corp. No. P98000006586 Fed. ID. 65-0812050 eSecureSoft, Company FL Corp. No. P03000138385 Fed. ID. 20-1068608 USAS Digital, Inc. FL Corp. No. P03000147667 Fed. ID. 20-1069232 Pro Card Corporation FL Corp. No. P04000015631 Fed. ID. 20-1442373 AAB National Company FL Corp. No. P04000019818 Fed. ID. 20-1442771 A Classifed Ad, Inc. FL Corp. No. P04000038403 Fed. ID. 20-1447963 A Super Deal.com, Inc. FL Corp. No. P04000040174 Fed. ID. 20-1449410 Swap and Shop.Net Corp. FL Corp. No. P04000040176 Fed. ID. 20-1449332 The motion in the above described June 4, 2004 Board Resolution included the instructions for the distribution of stock by its Transfer Agent, Florida Atlantic Stock Transfer (FAST) to the proper entities when the share certificates were properly exercised and costs relating to the issuance of these shares were paid in full. Notwithstanding, contrary to what board members Richard Turner and Barney A. Richmond had been previously advised by Chairman Panaia, eCom was not able to pay FAST the amounts required to send out the stock certificates to the shareholders, and accordingly, the shares were not issued as stated. 35 ECOM ECOM.COM, INC. ITEM 5. OTHER EVENTS (CONTINUED) Since late June 2004, the management of American Capital Holdings, Inc. has been inundated with hundreds of telephone calls from eCom shareholders, requesting delivery of their promised spin-off shares. Numerous shareholders have made demands to be sent their promised shares, many of them threatening legal action against eCom and all of the above described spin-offs which possibly might have created contingent liabilities for all the shareholders of eCom. Because of the aforementioned financial difficulties, eCom's telephone lines were disconnected. eCom's shareholders contacted American Capital Holdings, Inc. in an effort to garner information on the status of their situation as American Capital was their only source for information. In order to comply with General Accepted Accounting Principles ("GAAP") with respect to American Capital's audits, Mr. Panaia had previously agreed to sign promissory notes for the loans provided by American Capital as soon as all parties could determine the exact amounts of the then forthcoming invoices (whose amounts were unknown until received) by the SEC qualified accounting firm, Wieseneck & Andres, P.A. When these accounting invoices and other expense invoices were received in early August 2004, Mr. Panaia would not return telephone calls and would not sign accounting confirmation requests from American Capital accountants, nor would he sign the necessary promissory notes. Numerous attempts were made by American Capital (Letter Dated September 29, 2004, Certificate of Mailing No. 2004188) requesting to have the promissory notes signed by Mr. Panaia, which were not successful. On November 16, 2004, an additional letter was sent to David Panaia, (Certificate of Mailing No. 2004201) requesting the signature of the promissory notes and the additional information needed for the accountants to provide the necessary American Capital audits needed for its ongoing SEC filings. These confirmation letters and further information needed to complete the financial audits were continually ignored by Mr. Panaia. Additionally, certain press releases were made by the CEO of eCom making reference to American Capital without the consent of management or the Board of Directors of American Capital. It is believed Mr. Panaia also ignored his responsibilities to its shareholders by not filing appropriate 8-K's disclosing valid information concerning certain resignations as well as the status of eCom, including its de-listing from the OTCBB, as described below. Due to the above described dilemma caused as a direct result of Mr. Panaia's refusal to address the monies advanced by American Capital to eCom, on November 22, 2004, Barney A. Richmond resigned as an Officer and Director of eCom. Mr. Panaia also refused to file an 8-K statement regarding Mr. Richmond's resignation. Being there were no other options available, on November 29, 2004, an involuntary petition was filed against eCom eCom.com, Inc. in the United States Southern District Bankruptcy Court (In Re: Case No. 04-34535 BKC-SHF) under Title 11, Chapter 11 of the United States Bankruptcy Code by petitioning creditors, American Capital Holdings, Inc., Richard Turner, Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings were initiated in an effort to restore the shareholder value lost by approximately 6,000+ shareholders as well as implement a viable plan for reimbursement of costs incurred by American Capital Holdings, Inc., the petitioning creditors, and all other creditors/vendors who have not been paid. The aforementioned creditors are owed in excess of $1 million dollars. A copy of the June 2, 2005 Chapter 11, Title 11 Amended Involuntary Petition of eCom is posted on the Company's website. www.ecomecom.net 36 ECOM ECOM.COM, INC. ITEM 5. OTHER EVENTS (CONTINUED) In 1999, eCom reached record trading volume and a historical high share price of $21.50, with a resulting market capitalization of around $250 million. Since 1999, eCom has been in a state of steady decline. When eCom was unable to pay their auditors, they were de-listed from the OTCBB to the Pink Sheets, which is further detailed below. Currently eCom is thinly traded on the Pink Sheets, with a 52-week high of $0.23, and an ask price of $.06 cents per share. eCom's market capitalization has shrunk to less than $3.0 million, which, without a qualified reorganization plan, could easily shrink further, as eCom, has a negative net worth. In order to protect it's $250,000+ equity investment in eCom, and in order to fulfill its fiduciary duty to American Capital shareholders, American Capital proceeded with a plan to recapture the lost shareholder value of eCom. All eCom shareholders are also a part of American Capital's shareholder base and are therefore owed a fiduciary duty in protecting not only their interests, but to all of American Capital's shareholders as well. As time went by, the management of American Capital and eCom Director's Barney A. Richmond and Richard Turner realized that the CEO of eCom, David Panaia, was not abiding by his publicly stated agreements to accomplish what was originally set forth in press releases regarding the previously announced spin-off plan. Also, it is estimated that over $13.5 million of eCom shares had been traded based on prior press releases concerning the spin-off announcement. It was then determined by many of the shareholders that eCom was more than in financial turmoil and that Mr. Panaia did not have the resources to complete which he had publicly stated. In late August and September of 2004, Chairman and CEO David Panaia quit taking calls from anyone, including the management of American Capital. Additionally, eCom was not taking calls from other creditors who were owed hundreds of thousands of dollars, including eCom's SEC accounting firm. Other outstanding eCom debts included over $110,000 in employee wages and unpaid expenses, including expenses which were placed on employee personal credit cards to cover expenses directly incurred by eCom, some of which included the previously announced spin-off process costs. As required by the Sarbanes-Oxley Act, auditors cannot remain independent and be a creditor at the same time. Subsequent to eCom's December 3, 2003 public press release regarding the spin-off of USA SportsNet, the management of American Capital discovered eCom owed past due balances with its accountants, Wieseneck & Andres, P.A. This liability cost American Capital's shareholders an additional $75,000 as American Capital was forced to pay the auditing firm in order to complete American Capital's audits, since American Capital was a spin- off company of eCom. Additionally, American Capital has been forced to continue this financial assistance to bring all of the spinoff companies current with their SEC qualified accountants and other creditors so that eCom could continue with it's daily operations. During the period from late December 2004 thru mid-March 2005, American Capital and the petitioning creditors sympathized with the declining health of eCom's CEO, David Panaia. These petitioning creditors have also incurred considerable additional costs by providing continued financial assistance to 37 ECOM ECOM.COM, INC. ITEM 5. OTHER EVENTS (CONTINUED) honor what was promised to eCom's shareholders. These costs included expenses to bring all of the spin-off companies current with their SEC filings, Federal Tax Returns, State Income Tax Returns, State Filing Fees, Accounting Expenses, SEC Auditing Expenses, Legal, Administrative and other business-related expenses. This process included utilizing American Capital employees, as well as hiring outside assistance, i.e. additional accountants, tax assistance, and outside attorneys to expedite the process. On January 24, 2005, eCom was de-listed from trading on the OTC Bulletin Board and began trading on the Pink Sheets for failure to file the Company's November Form 10QSB. This de-listing was due to the fact the Company's auditors had not been paid. Therefore, in accordance with the Sarbanes-Oxley Act, the auditors could not be determined to be "independent". Accordingly, eCom lost additional market value, thereby further injuring creditors and shareholders of the company. Due to Mr. Panaia's health-related issues, during the period of January thru mid-March 2005, eCom requested three (3) extensions to reply to the above described Involuntary Chapter 11, Title 11 United States Southern District Bankruptcy Petition In Re: eComeCom.com, Inc. Case No. 04-34535 BKC-SHF. With consideration to Mr. Panaia's declining health, all of the petitioning creditors voluntarily consented to these extensions. Notwithstanding these voluntary extensions, and due to the extensive ongoing telephone inquiries from eCom shareholders who had bought shares in the public marketplace based on the past public press release representations of Mr. Panaia, the management of American Capital and the petitioning creditors had no choice but to try to make past promises good beginning with getting the spin-off companies in full regulatory compliance. This endeavor included the preparation of (a) thirty (30) 10QSB's; (b); ten (10) 10K's; (c) ten (10) Form 10SB's SEC Registration Statements; (d) twenty six (26) total State and Federal Tax Returns; (e) ten (10) applications for the required SEC EDGAR CIK Numbers; (f) and ten (10) of the Transfer Agent - required Standard & Poor's Cusip Numbers. Additionally, there has been a tremendous administrative effort in bringing all the spin-off companies current with respect to other public company reporting requirements, including the Sarbanes-Oxley Act. American Capital's management and the petitioning creditors accomplished these tasks to eliminate any further liabilities to eCom shareholders. On March 20, 2005, the Chairman/CEO and majority shareholder of eCom, David J. Panaia, died from health complications. The former President and Director of eCom, Richard C. Turner, is acting as interim CEO for eCom, without compensation. The Company is making application to the United States Bankruptcy Court to appoint Barney A. Richmond, who has agreed to do so without compensation, as its new Chief Executive Officer, whose official appointment is subject to bankruptcy court approval. Although the process of restoring shareholder value is well underway, both Mr. Richmond and Mr. Turner plan to stay with the company without compensation until the proposed reorganization plans of all the companies are totally complete. On March 23, 2005, the aforementioned spin-off companies received their respective SEC CIK Acceptance Filings, which are outlined below: 38 ECOM ECOM.COM, INC. ITEM 5. OTHER EVENTS (CONTINUED) Name of SEC/EDGAR Standard & Poor's Spin-off Company CIK No. Cusip No. USA Performance Products, Inc. CIK 0001321509 90341L 10 2 eSecureSoft, Company CIK 0001321511 296423 10 6 USAS Digital, Inc. CIK 0001321508 90341K 10 4 Pro Card Corporation CIK 0001321500 74270Q 10 0 AAB National Company CIK 0001321506 000303 10 7 A Classified Ad, Inc. CIK 0001321499 00089Y 10 9 A Super Deal.com, Inc. CIK 0001321507 00210R 10 6 Swap and Shop.Net Corp. CIK 0001321510 869894 10 5 In order to facilitate a more reasonable share structure based on the company's existing financial assets, on May 26, 2005 the Board approved a resolution authorizing a 100-to-1 Reverse Split of the outstanding 49,955,112 shares of the spin-off companies. Each company will purchase all fractional shares at market price, thereby resulting in total outstanding shares of 499,503 as of May 27, 2005. The Record Date for the remaining spin-offs was set as May 27, 2005, and all share certificates due to the shareholders of the above referenced companies were mailed on June 2, 2005. A group of several of American Capital Holdings, Inc.'s and other outside shareholders have designated resources to capitalize and complete viable business plans for the all of the above referenced spin-off companies. To get the process started for paying expenses relating to the initial funding of these companies to achieve their respective business purposes, on May 31, 2005 several new shareholders invested $400,000 in eight (8) of the above referenced companies, which will be reflected in each company's forthcoming respective Form 10SB audits and filings, which is planned to be filed within the next week. This initial funding is to cover legal, accounting and other expenses, including due diligence costs related to proposed forthcoming acquisitions. More funding is planned for each company through out the June 1, 2005 thru August 30, 2005 Quarter in accordance with 506 Reg. D Private Placement procedures, which will become available only to accredited investors. Additionally, a plan is being formulated, subject to bankruptcy court approval, which will provide a 100% payout to all of eCom's outstanding creditors. The new management is committed and believes these efforts combined with execution of the new business plans, not only will recapture the lost shareholder value of eCom, but will also enhance the viability of future long term shareholder value as well. Acquisitions negotiations are underway and will be separately announced upon completion and management is confident in their ability to execute these forthcoming plans. On May 16, 2005, eCom and its creditors attended the first status conference in the United States Bankruptcy Court - Southern District of Florida (In Re: Case No. 04-34535 BKC-SHF) in front of the Honorable Judge Steven Friedman. An order was granted to the petitioning creditors adjudicating eCom as a debtor under Chapter 11, Title 11 of the United States Bankruptcy Code. The Order included specific instructions for eCom to retain bankruptcy counsel by June 4, 2005. 38 ECOM ECOM.COM, INC. ITEM 5. OTHER EVENTS (CONTINUED) Pursuant to SEC Staff Legal Bulletin No.4, the issuance of the all the share certificates of the above referenced spin-off companies were sent via certified mail on June 2, 2005 to the shareholders of record as of May 31, 2005. The shareholder list and Certified Mail numbers are appended hereto as exhibit 99.3. eCom eCom.com, Inc. filed an 8-K on May 31, 2005 (Accession Number: 0001000459- 05-000001, File Number:000-23617) and an 8-K on June 2, 2005 (Accession Number: 0001000459-05-000002, File Number:000-23617). On June 3, 2005, eCom, through a $100,000 Debtor In Possession Financing Agreement with American Capital Holdings, Inc., entered into an engagement agreement to retain the legal services of Kluger, Peretz, Kaplan & Berlin to represent the Company in its aforementioned reorganization plans. Both of the financing and legal representation agreements are subject to Bankruptcy Court approval, which hearing is scheduled for June 6, 2005. The Company does not have any off-balance sheet arrangements. 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 CEO Exhibit 31.2 Certification required under Section 302 of 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 Exhibit 99.1 eCom eCom.com Inc. Form 10QSB filed April 14, 2004 with the Securities and Exchange Commission, file number 000- 23617, accession number 0001000459-04-000005. (incorporated by reference to the Company=s Form 10 QSB) Exhibit 99.2 On March 29, 2004, David Panaia prepared and issued a Press Release announcing the appointment of Barney A. Richmond as President of eCom. Exhibit 99.3 List of Shareholders as of May 31, 2005 who received spinoff shares and corresponding Certified Mail numbers of Share Certificates mailed June 2, 2005 40 ECOM ECOM.COM, INC. (b) Reports on Form 8-K: eCom eCom.com, Inc. filed an 8-K on May 31, 2005 (Accession Number: 0001000459- 05-000001, File Number:000-23617) On May 31, 2005 eCom eCom.com, Inc. filed form 8-K, accession number 0001000459- 05-000001 stating the board of directors of each spin-off company authorized a 100 to 1 reverse split of the outstanding 49,955,112 shares of the following spin-off companies: Name of SEC/EDGAR Standard & Poor's Spin-off Company CIK No. Cusip No. ----------------------------- --------------- ----------------- USA Performance Products, Inc. CIK 0001321509 90341L 10 2 eSecureSoft, Company CIK 0001321511 296423 10 6 USAS Digital, Inc. CIK 0001321508 90341K 10 4 Pro Card Corporation CIK 0001321500 74270Q 10 0 AAB National Company CIK 0001321506 000303 10 7 A Classified Ad, Inc. CIK 0001321499 00089Y 10 9 A Super Deal.com, Inc. CIK 0001321507 00210R 10 6 Swap and Shop.net Corp. CIK 0001321510 869894 10 5 Each spinoff company will purchase its fractional shares at market price, thereby resulting in total outstanding shares of 499,503 as of May 27, 2005. The Record Date for each company is May 27, 2005, and each company's transfer agent has been instructed to issue and mail all share certificates to the shareholders of record as of May 27, 2005. --- end of May 31, 2005 8-K --- 41 ECOM ECOM.COM, INC. (b) Reports on Form 8-K: (CONTINUED) eCom eCom.com, Inc. filed an 8-K on June 2, 2005 (Accession Number: 0001000459- 05-000002, File Number:000-23617) stating: In accordance with the terms set forth in the May 27, 2005 eCom eCom.com, Inc. SEC 8K filing (SEC Accession No. 00010000459-05-000001) the common share certificates of the below listed spinoff companies were sent via United States Postal First Class Certified Mail (Return Receipt Requested) today, June 2, 2005, to each of the below listed former subsidiary companies of eCom to all of the shareholders as of the record date of May 27, 2005. Name of SEC/EDGAR Standard & Poor's Company CIK No. Cusip No. ------------------------------- -------------- ---------------- USA Performance Products, Inc. CIK 0001321509 90341L 10 2 eSecureSoft, Company CIK 0001321511 296423 10 6 USAS Digital, Inc. CIK 0001321508 90341K 10 4 Pro Card Corporation CIK 0001321500 74270Q 10 0 AAB National Company CIK 0001321506 000303 10 7 A Classified Ad, Inc. CIK 0001321499 00089Y 10 9 A Super Deal.com, Inc. CIK 0001321507 00210R 10 6 Swap and Shop.net Corp. CIK 0001321510 869894 10 5 For mail reference purposes, appended herewith, as Exhibit 99.3, is a schedule of each shareholder last name and the United States Postal Certified Mail Receipt Number of each shareholder for which one (1) certificate for each of the above referenced companies was mailed in one (1) United States Postal Certified Mail envelope. --- end of June 2, 2005 8-K --- 42 ECOM ECOM.COM, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized. eCom eCom.com, Inc. June 3, 2005 By: /s/ Richard C. Turner Richard C. Turner, Acting-President and Chief Financial Officer Exhibit 31.1 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): 43 ECOM ECOM.COM, INC. 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: June 3, 2005 /s/ Richard C. Turner -------------------------- Richard C. Turner Acting-President Acting-Chief Executive Officer 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 44 ECOM ECOM.COM, INC. 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: June 3, 2005 /s/ Richard C. Turner --------------------------- Richard C. Turner Chief Financial Officer 45 ECOM ECOM.COM, INC. 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 November 30, 2004, as filed with the Securities and Exchange Commission (the "Report"), Richard C. Turner, Acting - Chief Executive Officer and Chief Financial Officer of the Company, 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/ Richard C. Turner Richard C. Turner Acting-President June 3, 2005 /s/ Richard C. Turner Richard C. Turner Chief Financial Officer June 3, 2005 [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., 100 Village Square Crossing, Suite 202, Palm Beach Gardens, Florida 33410. 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. 46