-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LJ1C5mzo/0lHityMEnQs8g8O3oCQ6Jf38mge4tvMKkfuFliDxPapJ8KKN7nVkP3w 2RUfZ8bOhThgM8cvYrAq7g== 0001019056-00-000098.txt : 20000215 0001019056-00-000098.hdr.sgml : 20000215 ACCESSION NUMBER: 0001019056-00-000098 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMARKETPLACE INC CENTRAL INDEX KEY: 0000900475 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 330558415 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22014 FILM NUMBER: 543770 BUSINESS ADDRESS: STREET 1: 255 W JULIAN ST STREET 2: STE 100 CITY: SAN JOSE STATE: CA ZIP: 95110 BUSINESS PHONE: 4082956500 MAIL ADDRESS: STREET 1: 255 W JULIAN ST STREET 2: STE 100 CITY: SAN JOSE STATE: CA ZIP: 95110 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTER MARKETPLACE INC DATE OF NAME CHANGE: 19930413 10QSB 1 FORM 10-QSB ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number 0-14731 ------------------ EMARKETPLACE, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 33-0558415 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 255 WEST JULIAN STREET, SUITE 100 SAN JOSE, CALIFORNIA 95110 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (408) 295-6500 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ------------------ Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 January 31, 2000, there were 14,987,696 shares of the Registrant's Common Stock outstanding. ================================================================================
- ----------------------------------------------------------------------------------------- EMARKETPLACE, INC. QUARTERLY REPORT ON FORM 10-QSB/A FOR THE THREE MONTH PERIOD ENDED DECEMBER 31,1999 INDEX - ----------------------------------------------------------------------------------------- PAGE PART I FINANCIAL INFORMATION NUMBER ------ ITEM 1. Financial Statements: Condensed Consolidated Balance Sheet as of December 31, 1999.............. 3 Condensed Consolidated Statements of Operations for the three and six months ended December 31, 1999 and 1998............................... 4 Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 1999 and 1998............................................ 5 Notes to Condensed Consolidated Financial Statements...................... 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................................... 15 PART II OTHER INFORMATION ITEM 1. Legal Proceedings......................................................... 22 ITEM 2. Changes in Securities and Use of Proceeds................................. 22 ITEM 3. Defaults Upon Senior Securities........................................... 22 ITEM 4. Submission of Matters to a Vote of Security Holders....................... 22 ITEM 5. Other Information......................................................... 22 ITEM 6. Exhibits and Reports on Form 8-K.......................................... 23 Signatures................................................................ 24 2
- -------------------------------------------------------------------------------- PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- EMARKETPLACE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,1999 (Unaudited) ASSETS: CURRENT ASSETS: Cash and Cash Equivalents $ 4,533,513 Accounts Receivable 3,535,498 Prepaids and Other Current Assets 367,549 ------------ TOTAL CURRENT ASSETS 8,436,560 ------------ PROPERTY AND EQUIPMENT (NET) 3,682,269 OTHER ASSETS: Notes Receivable 787,751 Intangible Assets 14,737,447 Deposits & Other Assets 199,900 Investments 80,000 ------------ TOTAL OTHER ASSETS 15,805,098 ------------ TOTAL ASSETS $ 27,923,927 ============ LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Notes Payable to Related Parties $ 288,054 Lines of Credit 169,035 Current Portion of Debt 197,905 Accounts Payable 2,212,825 Other Accrued Liabilities 1,836,052 ------------ TOTAL CURRENT LIABILITIES 4,703,871 ------------ DEBT: Long-term Note Payable 1,000,000 Long-term Portion of Capital Lease 2,884,917 ------------ TOTAL DEBT 3,884,917 ------------ TOTAL LIABILITIES 8,588,788 ------------ Minority Interest in TopTeam, Inc. 2,843,154 ------------ STOCKHOLDERS' EQUITY: Preferred Stock - $0.0001 Par Value, 1,000,000 Shares Authorized, No Shares Issued and Outstanding -- Common Stock - $0.0001 Par Value, 50,000,000 Shares Authorized, 14,862,685 Shares Issued and Outstanding 1,486 Capital in Excess of Par Value 20,523,706 Deferred Compensation (398,931) Accumulated Deficit (3,634,276) ------------ TOTAL STOCKHOLDERS' EQUITY 16,491,985 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,923,927 ============ See Notes to Condensed Consolidated Financial Statements. 3
EMARKETPLACE, INC. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ---------------------------- ---------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ REVENUE $ 2,702,452 $ -- $ 5,584,701 $ -- ------------ ------------ ------------ ------------ OPERATING COSTS AND EXPENSES: Cost of Revenue 2,541,161 -- 5,218,790 -- Selling, General and Administrative 1,024,589 5,200 1,938,870 5,612 Product Development 53,606 -- 152,773 -- Amortization of Goodwill and Other Acquired Intangibles 623,311 -- 1,203,643 -- ------------ ------------ ------------ ------------ TOTAL OPERATING COSTS AND EXPENSES 4,242,667 5,200 8,514,076 5,612 ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS (1,540,215) (5,200) (2,929,375) (5,612) INTEREST INCOME 24,529 1,130 27,317 2,260 INTEREST EXPENSE (4,882) -- (16,790) -- ------------ ------------ ------------ ------------ NET INCOME (LOSS) BEFORE MINORITY INTEREST $ (1,520,568) $ (4,070) $ (2,918,848) $ (3,352) ------------ ------------ ------------ ------------ Minority Interest in Consolidated Subsidiary 1,819 -- 20,000 -- ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (1,518,749) $ (4,070) $ (2,898,848) $ (3,352) ============ ============ ============ ============ NET LOSS PER SHARE: Basic and Diluted $ (0.11) $ (0.00) $ (0.22) $ (0.00) ============ ============ ============ ============ Weighted Average Common Shares Outstanding 13,474,549 6,460,000 13,083,005 6,460,000 ============ ============ ============ ============
See Notes to Consolidated Financial Statements. 4
EMARKETPLACE, INC. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) SIX MONTHS ENDED DECEMBER 31, ----------------------------- 1999 1998 ----------- ----------- OPERATING ACTIVITIES: Net Income (Loss) $(2,898,848) $ (3,352) Adjustments to Reconcile Net Loss to Net Cash Provided (Used) by Operating Activities: Consulting Services Paid for by Issuance of Common Stock 197,114 -- Amortization of Deferred Compensation Associated with Issuance of Stock Options and Warrants 247,564 -- Depreciation 12,164 -- Amortization 1,203,643 -- Interest Accrued on Stockholder Notes 15,722 (2,260) Minority Interest in Consolidated Subsidiary (20,000) Changes in Assets and Liabilities: Accounts Receivable (4,384) -- Other Assets (80,141) -- Accounts Payable 273,820 5,612 Accrued Liabilities 108,821 -- ----------- ----------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (944,525) -- ----------- ----------- INVESTING ACTIVITIES: Procurement of Note Receivable (500,000) -- Cash paid for acquisition, net of cash received (15,763) -- Purchase of Fixed Assets (19,009) -- ----------- ----------- NET CASH USED BY INVESTING ACTIVITIES (534,772) -- ----------- ----------- FINANCING ACTIVITIES: Proceeds from issuance of Common Stock in Private Placement 3,021,309 -- Proceeds from issuance of Common Stock for Warrant Exercises 680,000 -- Proceeds from repayment of Stockholder Notes Receivable 70,020 -- Proceeds from issuance of Notes Payable 1,000,000 -- Proceeds from issuance of Subsidiary Stock 859,980 -- Payment of Acquired Entities' Debt (862,298) Repayment of Loans Assumed in Acquisitions (12,167) -- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 4,756,844 -- ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,277,547 -- CASH AND CASH EQUIVALENTS - BEGINNING OF PERIODS 1,255,966 -- ----------- ----------- CASH AND CASH EQUIVALENTS - END OF PERIODS $ 4,533,513 $ -- =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for the periods: Interest $ 1,066 $ -- Income Taxes -- -- SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of Common Stock of Consolidated Subsidiary in exchange for services $ 20,000 $ -- Fixed Assets acquired under Capital Lease 5,150 -- Issuance of Common Stock for acquisition of Interactive Architects 4,154,000 -- Issuance of Subsidiary's Common Stock for Acquisition of Interactive Architects 4,785,500 --
See Notes to Consolidated Financial Statements. 5 EMARKETPLACE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Organization and Basis of Presentation ORGANIZATION: eMarketplace, Inc. (formerly Computer Marketplace, Inc.) (the "Company") was a California corporation that was incorporated on July 19, 1983, as Quality Associates, Inc. and changed its name to Computer Marketplace in June 1987. In March 1993, Computer Marketplace changed its name to Computer Marketplace, Inc. ("Computer Marketplace") and its state of incorporation from California to Delaware. In September 1999, the name of the Company was again changed to eMarketplace, Inc. ("eMarketplace"). Until April 1999, the Company was primarily engaged in the wholesale distribution of new and used computer equipment to dealers, computer maintenance companies, leasing companies, equipment brokers, and end users, despite the fact that the Company was in the process of winding down its business because it failed to operate profitably since the fiscal year ended June 1994. Computer Marketplace's wholly owned subsidiary, Medical Marketplace, which was engaged in the distribution of used medical equipment to health care providers, was reflected as disposed of at the time of the merger between Computer Marketplace and E-Taxi, Inc. ("E-Taxi"). The disposal of this subsidiary was completed during the quarter ended September 30, 1999 (see Note 12). On April 23, 1999, the Company acquired E-Taxi, Inc. ("E-Taxi") in a business combination accounted for as a "reverse acquisition." As consideration for 9,074,000 shares of E-Taxi's common stock and 400,000 shares of E-Taxi's Series A Preferred Stock, the Company issued an aggregate of 9,074,000 shares of common stock, par value $.0001 per share, and 400,000 shares of Series A Preferred Stock, par value $.0001 per share. For accounting purposes, E-Taxi is deemed to be the acquirer, and the Company is deemed to be acquired, under the purchase method of accounting. Therefore, the financial information presented herein represents the historical results of E-Taxi and the results of the Company from April 23, 1999 (date of acquisition) only. E-Taxi was incorporated in the State of Delaware on April 14, 1998 to develop a vertical Internet portal for the small office, home office ("SOHO") market. The acquisition of E-Taxi by the Company signified the adoption by the Company of a new corporate strategy to develop, operate and acquire Internet businesses that provide content, commerce and online services to demographically-targeted audiences. In April 1999, immediately prior to the Company's acquisition of E-Taxi, E-Taxi acquired TechStore, L.L.C. ("TechStore"), an online retailer of computer hardware and software, in a business combination accounted for as a purchase. The results of operations include the results of TechStore from the date of acquisition. On November 23, 1999, the Company and its newly formed subsidiary, TopTeam, Inc. closed on the acquisition of six Internet consulting companies - Full Moon Interactive Group, Inc., Orrell Communications, Inc., Devries Data Systems, Inc. Muccino Design Group, Inc., Image Network, Inc., and OnCourse Network, Inc. (collectively, the "Interactive Architect Firms"). As a result of the acquisitions, i) TopTeam owns all of the outstanding capital stock of the Internet Architect Firms; and ii) eMarketplace owns approximately 44.9% of the total TopTeam shares outstanding, exclusive of eMarketplace's rights to purchase 3.6 million shares of common stock of TopTeam at $7.50 per share, expiring upon the earlier of May 23, 2000, or the effective date of a TopTeam registration statement. 6 BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring accruals necessary for a fair presentation of the consolidated financial position of the company as of December 31, 1999, and 1998, the consolidated results of its operations for the three months and six months ending December 31, 1999 and 1998 and its cash flows for the six months ending December 31, 1999 and 1998. Although the Company believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote information normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Results of operations for the period ended December 31, 1999 are not necessarily indicative of results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-KSB for the year ended June 30, 1999. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SALE OF STOCK BY A SUBSIDIARY - Changes in the Company's proportionate share of subsidiary equity are accounted for as equity transactions. BASIS OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of eMarketplace, its wholly owned, direct and indirect, subsidiaries which include E-Taxi, Inc. and TechStore, Inc. and its majority owned subsidiary OfficeExpress, Inc. In addition, the Company is consolidating certain financial statements of TopTeam as a consequence of its operational control over the entity, notwithstanding the fact that the Company's ownership consists of 44.9% of the common stock, exclusive of rights to purchase 3.6 million shares of common stock at $7.50 per share. All material intercompany balances and transactions have been eliminated. The accompanying consolidated financials statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. All such adjustments are of a normal recurring nature. Certain information in footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-KSB and the Company's quarterly Report on Form 10-QSB. TopTeam's fiscal year ends July 31. The operating results of TopTeam's operating subsidiaries for the period November 23, 1999 (the date of acquisition), through December 31, 1999 will be included in eMarketplace's results of operations for the three-month period ended March 31, 2000. No operating results of TopTeam's operating subsidiaries have been included in the accompanying income statements. 7 REVENUE RECOGNITION - The Company records product sales revenue when goods have been shipped. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. There are no cash equivalents at December 31, 1999. PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. INTANGIBLES AND AMORTIZATION - Intangible assets are stated at cost. Amortization is computed using the straight-line method over the estimated useful life of the related assets, which is generally four to five years. IMPAIRMENT - Long-lived assets of the Company are reviewed at least annually as to whether their carrying value has become impaired pursuant to Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires long-lived assets, if impaired, to be remeasured at fair value, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Management also reevaluates the periods of amortization of long-lived assets to determine whether events and circumstances warrant revised estimates of useful lives. NET LOSS PER SHARE OF COMMON STOCK - Net loss per share of common stock is computed reflecting the shares issued in the reverse acquisition as outstanding for all periods presented and on the basis of the weighted average shares of common stock outstanding. Potential common shares arising from the effect of dilutive stock options and warrants using the treasury stock method are included if dilutive. For fiscal years 2000 and 1999, the per share results were computed without consideration for contingently issuable shares underlying stock options and warrants as the effect on the per share results would be anti-dilutive. COMPREHENSIVE INCOME - The Company does not have any transactions included in comprehensive income. SEGMENTS - Effective July 1, 1998, the Company adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company identifies its operating segments based on business activities, management responsibility and geographical location. During the periods ended December 31, 1999 and 1998, the Company operated in a single business segment, primarily in the United States. Through December 31, 1999, foreign operations have not been significant in either revenue or investment in long-lived assets. USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the 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. (3) ACQUISITIONS E-TAXI, INC. - On April 23, 1999, the Company acquired E-Taxi, Inc. ("E-Taxi") in a business combination accounted for as a "reverse acquisition." As consideration for 9,074,000 shares of E-Taxi's common stock and 400,000 shares of E-Taxi's Series A Preferred Stock, the Company issued an aggregate of 9,074,000 shares of common stock, par value $.0001 per share, and 400,000 shares of Series A Preferred Stock, par value $.0001 per share. For accounting purposes, E-Taxi is deemed to be the acquirer, and the Company is deemed to be 8 acquired, under the purchase method of accounting. Therefore, the financial information presented herein represents the historical results of E-Taxi and the results of the Company from April 23, 1999 (date of acquisition) only. The total purchase price, including stock valued at approximately $9.5 million and acquisition related expenses of approximately $95,700 was allocated to net liabilities of the Company of $(472,972), and $9,972,630 of goodwill, which is being amortized using the straight-line method over its estimated useful life of five years. Effective July 1, 1999 the Company completed the sale of its wholly owned subsidiary, Medical Marketplace, Inc., on terms more favorable to the Company than originally anticipated at the time of the transaction between E-Taxi and the Company, resulting in a decrease to the amount of goodwill recorded as a result of the acquisition by $557,788 in the six month period ended December 31, 1999 (see Note 12). TECHSTORE, LLC - In April 1999, E-Taxi acquired TechStore, an online retailer of computer hardware and software, in a business combination accounted for using the purchase method of accounting. The results of operations include the results of TechStore from the date of acquisition. The purchase price, which consisted of stock valued at $1,492,000, cash of $66,667 and acquisition related expenses of approximately $38,300, was allocated $(170,300) to net tangible liabilities acquired, $140,000 to developed technology, $160,000 to established workforce, $280,000 to trademarks, and $1,187,300 to goodwill. The value and estimated lives of the identified intangible assets was determined by a third-party valuation. The intangible assets are being amortized over their estimated useful lives of four years. TOPTEAM ACQUISITIONS - On November 23, 1999, eMarketplace, Inc. and its wholly owned subsidiary, TopTeam, Inc. ("TopTeam"), closed on the acquisition of six Internet consulting companies (the "Interactive Architect Firms"). In connection with the acquisition of the Interactive Architect Firms, the Company issued a total of 1,045,000 shares of its common stock in exchange for shares of common stock of each of the Interactive Architects (including shares issuable pursuant to rights granted under the acquisition agreements). Concurrently therewith, (i) the Company contributed its newly purchased shares of the Interactive Architect Firms to TopTeam in exchange for TopTeam's issuance of 3,310,000 shares of its common stock, and (ii) the stockholders of the Interactive Architect Firms contributed all of the remaining outstanding shares of the Interactive Architect Firms (the shares not purchased by the Company) to TopTeam in exchange for the issuance of 3,810,000 shares of TopTeam common stock. In connection with the acquisition of the Interactive Architects and as consideration for a $1,000,000 loan, TopTeam executed a promissory note in favor of the Company in the aggregate amount of $1,000,000 bearing interest at a rate of seven percent (7%) per annum (the "Note"). Interest payments are due and payable monthly and the principal amount outstanding is due and payable on November 22, 2001. TopTeam is required to prepay the Note in full in the event that TopTeam consummates an initial public offering of its common stock which generates gross proceeds of not less than $25 million. In addition, as consideration for this acquisition, the Company received 250,000 shares of TopTeam common stock. The Company also purchased 250,000 shares of TopTeam Series A Convertible preferred stock for the total amount of $1,000,000. In addition, the Company received rights for 3,600,000 shares of TopTeam common Stock. As of November 23, 1999, the Company agreed to sell and assign the following to Internet Asset Inc. Class D, an investment fund, for $2,000,000. (a) A $1,000,000 promissory note, dated November 23, 1999, issued by TopTeam, Inc.; (b) 250,000 shares of TopTeam's common stock; (c) 250,000 shares of the TopTeam's Series A preferred stock, and 9 (d) Subject to certain conditions, an option to exercise rights to purchase 500,000 shares of TopTeam's stock at $7.50 per share ("Option Rights"). The option rights expired January 20, 2000, although they were extended until the earlier of i) February 20, 2000, or ii) within five (5) days following notice of a firm commitment from certain qualified investment banks to underwrite the common stock of TopTeam. As a result of these transactions, (a) the Company presently owns (i) 3,310,100 (3,560,100 - 250,000) shares of TopTeam common stock or 44.9% of the total number of shares of TopTeam common stock outstanding, and (ii) rights to purchase 3,600,000 shares of TopTeam common stock at a purchase price of $7.50 per share expiring upon the earlier of May 23, 2000, or the effective date of a TopTeam registration statement, subject to the Option Rights, and (b) TopTeam owns all of the outstanding shares of capital stock of each of the Interactive Architects. The Company is consolidating with TopTeam as it has operational control over the entities. GOLD LABEL AGREEMENT - As of December 27, 1999, the Company entered into a Stock Purchase and Contribution Agreement, among the Company, Pat Boone's Gold Label, Inc., a Delaware corporation ("Gold Label"), and all of the shareholders of The Gold Label-Honest Entertainment, Inc., a Tennessee corporation ("Honest Entertainment") (the "Gold Label Agreement"). Under the terms of the Gold Label Agreement, i) the Company will issue 370,005 shares of common to the Honest Entertainment shareholders in exchange for 1,290,172 shares of common stock of Honest Entertainment; ii) the Company will contribute its newly purchased shares of Honest Entertainment to Gold Label in exchange for 1,290,172 shares of common stock of Gold Label; and iii) the shareholders of Honest Entertainment will contribute all of the remaining outstanding shares of Honest Entertainment (the shares not purchased by the Company) to Gold Label for 3,060,688 shares of common stock of Gold Label (See Note 5). The closing of the transactions contemplated by the Gold Label Agreement (the "Closing") is subject to the satisfaction of certain customary conditions. It is presently anticipated that the Closing will occur in the third quarter of fiscal 2000. (4) INTANGIBLE ASSETS Intangible assets consists of the following as of December 31, 1999: Goodwill $ 15,759,586 Acquired Technology 140,000 Established Workforce 160,000 Trademarks 280,000 Other Intangible Assets 5,678 ---------------- Total 16,345,264 Less: Accumulated Amortization (1,607,817) ---------------- TOTAL $ 14,737,447 ================ (5) NOTES RECEIVABLE On December 27, 1999, the Company entered into a Stock Purchase and Contribution Agreement, among the Company, Gold Label, and all of the shareholders of The Gold Label-Honest Entertainment, Inc., a Tennessee corporation (the "Gold Label Agreement"). In connection therewith, the Company loaned $500,000 to Gold Label under a promissory note, dated December 31, 1999, bearing interest at a rate of six (6) percent per annum (the "Note"). Interest payments are due and payable monthly and the principal amount outstanding is due and payable on December 31, 2001 (See Note 3). 10 (6) NOTES PAYABLE NOTES PAYABLE - RELATED PARTIES: $100,000 is payable to a former director of the Company, and consists of two secured promissory notes, each for $50,000 bearing interest at 10% and due in July and September of 1999, dated on January 26, 1999 and April 15, 1999, respectively. The Company has received an extension on these notes payable aggregating $100,000 until March 31, 2000. These notes are fully collateralized by all real and personal property of the Company. In conjunction with these notes, the Company granted the director fully vested options to purchase a total of 200,000 shares of common stock at $0.50 per share. Prior to it's reverse merger with E-Taxi, the Company recorded the difference between the market value of the options on the date of grant and the exercise price, totaling $125,000, as a non-cash financing expense associated with these options. $67,000 is payable to an officer and director of the Company and consists of the following: Secured Promissory Note $ 50,000 10% interest Promissory Note 10,000 12% interest Promissory Note 7,000 12% interest ------------- Total $ 67,000 ============= These notes are payable within three days of demand. The secured promissory note is fully collateralized by all real and personal property of the Company. In conjunction with these notes, the Company granted the officer fully vested options to purchase a total of 100,000 shares of common stock at $.60 per share. Prior to it's reverse acquisition with E-Taxi, the Company recorded the difference between the market value of the options on the date of grant and the exercise price, totaling $33,000, as a non-cash financing expense associated with these options. As of December 31, 1999 the Company has accrued $15,723 in interest payable on these five promissory notes. NOTES PAYABLE - LONG-TERM: In connection with the acquisition of the Interactive Architect Firms, the Company executed a promissory note in favor of TopTeam in the aggregate amount of $1,000,000 bearing interest at a rate of seven percent (7%) per annum (the "TopTeam Note"). Interest payments are due and payable monthly and the principal amount outstanding is due and payable on November 22, 2001. TopTeam is required to prepay the Note in full in the event that TopTeam consummates an initial public offering of its Common Stock which generates gross proceeds of not less than $25 million. On December 15, 1999, the Company agreed to assign its interest under the TopTeam Note to Internet Asset Inc. Class D as of November 23, 1999 (See Note 3 - Notes to Consolidated Financial Statements). (7) EMPLOYMENT CONTRACTS The Company has employment contracts with two officers of one of its wholly owned subsidiaries. These contracts are for a term of five years. Under the terms of the contracts, the two officers are each eligible for cash performance bonuses based on the subsidiary's revenue and earnings before interest, taxes and deprecation ("EBITD"), up to a maximum of 100% of their base salary. The base salary of $75,000 is subject to review and adjustment annually. In addition, each officer is entitled to a $500 per month automobile allowance. In connection with these employment agreements, the Company also granted each of the two officers a Restricted Stock Award for 500,000 shares each which vest 11 100% on March 31, 2000 subject to continued employment and attainment of certain revenue and EBITD targets. Because the likelihood of attainment of the targets is considered by management to be remote, these shares have not been issued as of December 31, 1999 and no expense has been recorded associated with these shares. (8) EQUITY TRANSACTIONS PRIVATE PLACEMENT - On July 16, 1999, the Company commenced, and completed on November 30, 1999, a private offering (the "Offering") of 826,225 shares of its Common Stock at $3.875 per share (each a "Share" and collectively the "Shares"). The Offering was conducted under the exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Act"), provided by Section 4(2) of the Act and the provisions of Rule 506 of Regulation D. Sales of the Shares were made only to "accredited investors," as such term is defined in Rule 501(a) under the Act. The Company received gross proceeds of approximately $3,202,000 before deducting commissions (placement agent) and expenses of the Offering (consisting of accounting and legal fees, "blue sky" fees and other related expenses) totaling approximately $180,000. The proceeds of the Offering are being used to fund working capital needs of the Company and its subsidiaries. EXERCISE OF WARRANTS - During December 1999, warrants issued to Gateway Advisors, Inc. (a company owned and controlled by Robert M. Wallace, the Company's Chairman of the Board) in April 1999 and sold to an investor in December 1999 to purchase 300,000 shares of common stock of the Company at an exercise price of $2.50 per share were exercised ("Warrant Exercise"). The Company received net proceeds of $680,000 as a result of the Warrant Exercise. (9) NEW AUTHORITATIVE PRONOUNCEMENTS The FASB has had on its agenda a project to address certain practice issues regarding Accounting Principles Board ["APB"] Opinion No. 25, "Accounting for Stock Issued to Employees." The FASB plans on issuing various interpretations of APB Opinion No. 25 to address these practice issues. The proposed effective date of these interpretations would be the issuance date of the final Interpretation, which is expected to be in early 2000. If adopted, the Interpretation would be applied prospectively but would be applied to plan modification and grants that occur after December 15, 1998. The FASB's tentative interpretations are as follows: * APB Opinion No. 25 has been applied in practice to include in its definition of employees, outside members of the board or directors and independent contractors. The FASB's interpretation of APB Opinion No. 25 will limit the definition of an employee to individuals who meet the common law definition of an employee [which also is the basis for the distinction between employees and nonemployees in the current U.S. tax code]. Outside members of the board of directors and independent contractors would be excluded from the scope of APB Opinion No. 25 unless they qualify as employees under common law. Accordingly, the cost of issuing stock options to board members and independent contractors not meeting the common law definition of an employee will have to be determined in accordance with FASB Statement No. 123, "Accounting for Stock-Based Compensation," and usually recorded as an expense in the period of the grant [the service period could be prospective, however, depending on the terms of the options]. * Options [or other equity instruments] of a parent company issued to employees of a subsidiary should be considered options, etc. issued by the employer corporation in the consolidated financial statements, and, accordingly, APB Opinion No. 25 should continue to be applied in such situations. This interpretation would apply to subsidiary companies only; it would not apply to equity method investees or joint ventures. 12 * If the terms of an option [originally accounted for as a fixed option] are modified during the option term to directly change the exercise price, the modified option should be accounted for as a variable option. Variable grant accounting should be applied to the modified option from the date of the modification until the date of exercise. Consequently, the final measurement of compensation expense would occur at the date of exercise. The cancellation of an option and the issuance of a new option with a lower exercise price shortly thereafter [for example, within six months] to the same individual should be considered in substance a modified [variable] option. * Additional interpretations will address how to measure compensation expense when a new measurement date is required. (10) TERMINATED ACQUISITION On January 24, 2000, the Company terminated its agreements to purchase SSPS, Inc., a California corporation ("SSPS"), and Impact Team International, LLC, a California limited liability company and an affiliate of SSPS ("Impact"). As of June 14, 1999, the Company and its wholly owned subsidiary entered into (i) a Stock Purchase Agreement (the "Stock Purchase Agreement") with all of the shareholders of SSPS, and (ii) a Membership Interest Purchase Agreement with all of the members of Impact. The Company anticipates reimbursing SSPS and Impact for some of their expenses associated with the proposed acquisition, such expenses are not expected to exceed $200,000. (11) NEW SUBSIDIARIES AND OTHER AGREEMENTS On November 23, 1999, the Company and its newly formed subsidiary, TopTeam, Inc. closed on the acquisition of six Internet consulting companies- Full Moon Interactive Group, Inc., Orrell Communications, Inc., Devries Data Systems, Inc. Muccino Design Group, Inc., Image Network, Inc., and OnCourse Network, Inc. (collectively, the "Interactive Architect Firms"). (See Note 3) In August 1999, OfficeExpress, Inc. a newly formed subsidiary of the Company, began its operations to sell office products and supplies through its Web site. (12) SALE OF SUBSIDIARY - MEDICAL MARKETPLACE - On October 12, 1999, the Company entered into a definitive agreement to sell 100% of its interest in Medical Marketplace to a third party effective July 1, 1999 for $65,000 in cash and notes. In connection with the sale of the capital stock of Medical Marketplace, the Company received $40,000 in cash and a promissory note in the aggregate principal amount of $25,000. The note is secured by the assets and stock of Medical Marketplace and bears interest at a rate of 8% per annum. Interest and principal shall be paid quarterly commencing on January 1, 2000 in eleven (11) payments of two thousand eighty five dollars ($2,085) (with the twelfth and final payment being in the amount of $2,065) plus interest on the outstanding balance. In addition, in the event that (i) the Company receives not less than $225,000 in proceeds from a specified account receivable (the "Specified Receivable") or (ii) all liabilities of Medical Marketplace have terminated to the satisfaction of Seller, the obligations to the Company under the Note shall be deemed satisfied in full. Further, the outstanding principal amount of the Note shall be reduced (i) proportionately based upon the proceeds received by the Company with respect to the Specified Receivable divided by $225,000 and (ii) to the extent that Medical Marketplace incurs any tax liabilities from the non-payment of taxes by Medical Marketplace prior to June 30, 1999, subject to certain limitations. Because of the uncertainties surrounding ultimate collection of the $25,000 note, the full amount of the note has been reserved for as of December 31, 1999. 13 (13) SALE OF MINORITY INTEREST IN SUBSIDIARY On December 15, 1999, the Company agreed to sell and assign the following to Internet Asset Inc. Class D, an investment fund, for $2,000,000 as of November 23, 1999. (a) A $1,000,000 promissory note, dated November 23, 1999, issued by TopTeam, Inc.; (b) 250,000 shares of TopTeam's common stock; (c) 250,000 shares of the TopTeam's Series A preferred stock, and (d) Subject to certain conditions, an option to exercise rights to purchase 500,000 shares of TopTeam's stock at $7.50 per share ("Option Rights"). The option rights expired January 20, 2000, although they were extended until the earlier of i) February 20, 2000, or ii) within five (5) days following notice of a firm commitment from certain qualified investment banks to underwrite the common stock of TopTeam. As a result of these transactions, (a) the Company presently owns (i) 3,310,100 (3,560,100 - 250,000) shares of TopTeam common stock 44.9% of the total number of shares of TopTeam common stock outstanding, and (ii) rights to purchase 3,600,000 shares of TopTeam common stock at a purchase price of $7.50 per share expiring upon the earlier of May 23, 2000, or the effective date of a TopTeam registration statement, subject to the Option Rights, and (b) TopTeam owns all of the outstanding shares of capital stock of each of the Interactive Architect Firms. See Note 6. (14) SUBSEQUENT EVENTS APPOINTMENT OF BOARD MEMBER. On February 7, 2000, the Board of Directors i) expanded the Board of Directors from three (3) members to four (4) members, and ii) appointed M. Mitchell Stevko to fill the newly created vacancy. Mr. Stevko currently serves as Managing Director of online financial services and business-to-business e-commerce for U.S. Bancorp Piper Jaffray. 14 - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- FORWARD LOOKING STATEMENTS Statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this document as well as statements made in press releases and oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company's behalf that are not statements of historical or current fact constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "believes", "belief", "expects", "intends", "anticipates" or "plans" to be uncertain forward-looking statements. The forward looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission. OVERVIEW eMarketplace, Inc. (the "Company") consists of eMarketplace, Inc. and its subsidiaries. Until April 1999, the Company was primarily in engaged in the purchase and sale of new and used computer equipment, and through its Medical Marketplace, Inc. subsidiary, the purchase and sale of used medical equipment. In April 1999, the Board of Directors, in connection with their shift in business strategy, announced its intention to divest of Medical Marketplace, resulting in the classification of the business as a discontinued operation, and was reflected as disposed of at the time of the merger with E-Taxi. In April 1999, the Company adopted a new corporate strategy focused on developing, acquiring and operating Internet businesses by acquiring E-Taxi, Inc. ("E-Taxi"). The Company is presently pursuing a business plan to become an Internet holding company engaged primarily in the development and operation of a network of Internet properties ("Portfolio Companies") that provide content, commerce and online services to demographically-targeted audiences. On April 23, 1999, the Company acquired E-Taxi, which is accounted for as a "reverse acquisition." As consideration for the 9,074,000 shares of E-Taxi's common stock and 400,000 shares of the E-Taxi's Series A Preferred Stock, the Company issued an aggregate of 9,074,000 shares of common stock, par value $.0001 per share, and 400,000 shares of Series A Preferred Stock, par value $.0001 per share. For accounting purposes, E-Taxi is deemed to be the acquirer, and the Company is deemed to be acquired, under the purchase method of accounting. Therefore, the financial information presented herein represents the historical results of E-Taxi and the results of the Company from April 23, 1999 (date of acquisition) only. E-Taxi was incorporated in the State of Delaware on April 14, 1998 to develop a vertical Internet portal for the small office, home office ("SOHO") market. The Company's acquisition and development of TopTeam, Inc., its interactive architect subsidiary, has forced the Company to channel its resources away from the development of a SOHO portal. As a result, it is unlikely that the Company will focus on the development of a SOHO portal in the near future. Immediately prior to the closing of the E-Taxi Acquisition, E-Taxi closed (i) a private offering of its shares of preferred stock and common stock raising an aggregate of approximately $1,400,000 and (ii) the acquisition of TechStore LLC, a California limited liability company ("TechStore"), is an 15 online retailer of computer hardware and software. The acquisition was accounted for as a purchase. The results of operations include the results of TechStore from the date of acquisition. In August 1999, the Company's newly formed subsidiary, OfficeExpress, Inc., launched its web site, WWW.OFFICEEXPRESS.COM. Offering over 20,000 brand name office products, the site enables online customers to purchase office products and supplies at competitive prices. Products are generally shipped for next day delivery for most domestic US destinations and the site features advanced online customer service features, including customer shopping lists, which allows users to manage lists of frequently purchased items. In May of 1999, the Company formed TopTeam, Inc. ("TopTeam") to undertake a strategic consolidation of the highly fragmented Internet professional services industry, commonly referred to as Interactive Architects. On November 23, 1999, the Company and its newly formed subsidiary, TopTeam, Inc. ("TopTeam") closed on the acquisition of six Internet consulting companies-Full Moon Interactive Group, Inc., Orrell Communications, Inc., Devries Data Systems, Inc. Muccino Design Group, Inc., Image Network, Inc., and OnCourse Network, Inc. (collectively, the "Interactive Architect Firms"). TopTeam's strategy is to continue to develop and acquire Interactive Architects who, collectively, comprise all of the diverse skill sets necessary to design, develop, and deploy total e-business solution for its clients. RESULTS OF OPERATIONS Because the Company had no revenues and nominal expenses for the quarter ended December 31, 1998 (total operating expenses were $5,200) and for the six months ended December 31, 1998 (total operating expenses were $5,612), any comparison of fiscal 2000 results to fiscal 1999 would not be meaningful and have been excluded from the following discussion. The E-Taxi Acquisition was accounted for as a reverse acquisition. The historical financial statements reflect the operations of E-Taxi for all periods prior to April 1999. In addition, any forward-looking information does not include the impact, if any, of potential acquisitions discussed above. THREE AND SIX MONTHS ENDED DECEMBER 31, 1999 NET LOSS The Company recorded a net loss of $1,518,749 for the three months ended December 31, 1999 and a net loss of $2,898,848 for the six months ended December 31, 1999 because the revenue generated was not sufficient to cover cost of revenues and expenses generated. Management believes that (i) the discontinuation of its computer resale operations; (ii) the divestiture of Medical Marketplace; (iii) the operations of TechStore for a complete 12 month period; and (iv) interest income resulting from interest on financing proceeds could result in improved profitability. There can be no assurance that the Company will be successful in reducing net losses. REVENUE Total revenue for the three months ended December 31, 1999 was $2,702,452 and for the six months ended December 31, 1999 was $5,584,701, which consists almost exclusively of revenue from the sale of computer hardware and software and consumer electronics by the Company's wholly owned subsidiary, TechStore, through its web site. Revenue is expected to increase in fiscal 2000 with the continued growth of TechStore's business. However, the Company may not be successful in growing these businesses, in which case, its revenues and operations would be harmed. 16 COST OF REVENUE Total cost of revenue for the three months ended December 31, 1999 was $2,541,161 or 94.0% of revenue and for the six months ended December 31, 1999 was $5,218,790 or 93.4% of revenue. Cost of revenue includes the cost of product sold, credit card processing fees and freight costs. The Company utilizes vendor drop-shipments directly to customers, and therefore does not maintain inventory. The Company expects margins to remain low in the near future as it uses competitive pricing as a means to obtain increased economies of scale. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Total selling, general and administrative expenses for the three months ended December 31, 1999 were $1,024,589 or 37.9% of revenue and for the six months ended December 31, 1999 were $1,938,870 or 34.7% of revenue. Selling, general and administrative expenses consist of salaries and other personnel related expenses, facilities related expenses, legal and other professional fees, advertising costs and travel expenses. The fiscal quarter ended December 31, 1999 included $79,786 in non-cash expenses related to the amortization of deferred compensation and the six months ended December 31, 1999 included $444,678 in non-cash expenses associated with stock options issued to an accounting consultant, warrants issued to a business advisor and stock issued to minority investors in a Consolidated Subsidiary in exchange for services valued at $20,000. The Company expects to incur approximately $80,000 per quarter for five more quarters for the amortization of the deferred compensation associated with the warrant. Selling, general and administrative expenses over the next year will include the expenses of TechStore for a full year, advertising expenses to market the Company's expanded product offerings, administrative expenses associated with conforming to public reporting requirements of the Company, and expenses associated with the Company's acquisition and expansion strategy discussed in the "Business" section of the Company's annual report on Form 10-KSB as filed with the Securities and Exchange Commission. PRODUCT DEVELOPMENT EXPENSES Product development expenses were $53,606 for the three months ended December 31, 1999 and $152,773 for the six months ended December 31. Product development expenses consist of personnel and related expenses associated with the development of the Company's web sites, and are expected to increase over the remainder of the year. AMORTIZATION OF GOODWILL AND OTHER ACQUIRED INTANGIBLES Amortization expenses associated with the acquisition of TechStore and the reverse merger between the Company and E-Taxi were $623,311 for the three months ended December 31, 1999 and $1,203,643 for the six months ended December 31. The intangible assets associated with these acquisitions, consisting in total of $15,759,586 in goodwill, $140,000 in acquired technology $160,000 in established workforce and $280,000 in trademarks, are being amortized over their estimated useful lives of four to five years. In the event that the Company continues to acquire other companies, amortization of acquisitions will continue to have an impact on the Company's results of operations in the future. Based on acquisitions completed as of December 31, 1999, and assuming no impairment of the value resulting in an acceleration of the amortization, future amortization will reduce net income from operations by approximately $2.8 million in each fiscal year 2000 through 2003, $1.8 million in 2004, and $0.5 million in 2005 through 2010. If the Company completes additional acquisitions in the future, this will likely result in additional amortization charges of the resulting goodwill from the acquisition. 17 INTEREST INCOME AND EXPENSE Interest income, net of interest expense, was $19,647 for the three months ended December 31, 1999 and $10,527 for the six months ended December 31, 1999. Interest expense related primarily to interest on loans to the Company and interest income resulted primarily from interest earned on the proceeds from the private placement completed by the Company in November, 1999. On December 15, 1999, the Company agreed to assign its interest under the TopTeam Note to Internet Asset Inc. Class D as of November 23, 1999 (See Note 3 - Notes to Consolidated Financial Statements). In connection with the execution of the Gold Label Agreement, the Company loaned $500,000 to Gold Label under a promissory note, dated December 31, 1999, bearing interest at a rate of six (6) percent per annum (the "Gold Label Note"). Interest payments are due and payable monthly and the principal amount outstanding under the Gold Label Note is due and payable on December 31, 2001 (See Note 3 - Notes to Consolidated Financial Statements). VARIABILITY OF PERIODIC RESULTS AND SEASONALITY Results from any one period cannot be used to predict the results for other fiscal periods. Revenues fluctuate from period to period, however, management does not see any seasonality or predictability to these fluctuations. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1999, the Company had a cash balance of $4,533,513 and working capital of $3,732,689. The primary source of working capital to the Company during the six months ended December 31, 1999 was the net proceeds of approximately $3.0 million received in connection with the Private Placement of the Company's Common Stock, approximately $860,000 from the sale of stock by TopTeam to an investor (net of commissions), $1.0 million in proceeds from the issuance of a Note Payable, and $680,000 in net proceeds from the issuance of Common Stock for Warrant exercises. Of this amount, approximately $945,000 was used to fund current operations, approximately $19,000 was used to acquire fixed assets, approximately $16,000 was the net amount of cash paid for expenses associated with the acquisition of the Interactive Architect Firms, net of the cash received, and $500,000 was used in the procurement of a Note Receivable in exchange for cash. Additionally, approximately $860,000 was used to retire debt of the Interactive Architect Firms at the closing of the acquisition, and approximately $12,000 was used to repay loans assumed in previous acquisitions. The Company believes that its projected cash flow from operations and cash balances as of December 31, 1999 of approximately $4.5 million will be sufficient to meet the working capital needs of the Company through June 30, 2000. The Company's principle commitments at December 31, 1999 consist of monthly operating rental payments, compensation of employees and accounts and notes payable. The Company will rely upon its projected cash flow from operations and additional debt and equity financing for its long-term capital needs. YEAR 2000 COMPLIANCE AND UPDATE Through the first six weeks of the year 2000, the Company's operations are fully functioning and have not experienced any significant issues associated with the Year 2000 problem. Similarly, our customers have not reported any consequential Year 2000 incidents. While the Company is encouraged by the success of its Year 2000 efforts and that of its customers and partners, the Company will continue to monitor its own operations. ABSENCE OF DIVIDENDS The Company has never declared or paid, nor does it intend to pay in the foreseeable future, cash dividends on its Common Stock, but intends instead to retain any future earnings to finance expansion and operations. 18 - -------------------------------------------------------------------------------- PART II. OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On July 16, 1999, the Company commenced, and completed on November 30, 1999, a private offering (the "Offering") of 826,225 shares of its Common Stock at $3.875 per share (each a "Share" and collectively the "Shares"). The Offering was conducted under the exemptions from the registration requirements of the Securities Act of 1933, as amended (the "Act"), provided by Section 4(2) of the Act and the provisions of Rule 506 of Regulation D. Sales of the Shares were made only to "accredited investors," as such term is defined in Rule 501(a) under the Act. The Company received gross proceeds of approximately $3,202,000 before deducting commissions (placement agent) and expenses of the Offering (consisting of accounting and legal fees, "blue sky" fees and other related expenses) totaling approximately $180,000. The proceeds of the Offering are being used to fund working capital needs of the Company and its subsidiaries. During December 1999, warrants issued to Gateway Advisors, Inc. (a company owned and controlled by Robert M. Wallace, the Company's Chairman of the Board) in April 1999 and sold to an investor in December 1999 to purchase 300,000 shares of common stock of the Company at an exercise price of $2.50 per share were exercised ("Warrant Exercise"). The Company received net proceeds of $680,000 as a result of the Warrant Exercise. On December 15, 1999, the Company agreed to sell and assign the following to Internet Asset Inc. Class D, an investment fund, for $2,000,000 as of November 23, 1999. (a) A $1,000,000 promissory note, dated November 23, 1999, issued by TopTeam, Inc.; (b) 250,000 shares of TopTeam's common stock; (c) 250,000 shares of the TopTeam's Series A preferred stock, and (d) Subject to certain conditions, an option to exercise rights to purchase 500,000 shares of TopTeam's stock at $7.50 per share ("Option Rights"). The option rights expired January 20, 2000, although they were extended until the earlier of i) February 20, 2000, or ii) within five (5) days following notice of a firm commitment from certain qualified investment banks to underwrite the common stock of TopTeam. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.01 Financial data schedule (EDGAR only) (b) Reports on Form 8-K 1. The Company filed a Current Report on Form 8-K on December 8, 1999 regarding Company aquisitions and other material events (Items 2 and 5). 2. The Company filed a Current Report on Form 8-K/A on December 27, 1999, amending its report on Form 8-K dated July 9, 1999 (Item 7). 20 - -------------------------------------------------------------------------------- SIGNATURE - -------------------------------------------------------------------------------- In accordance with the requirements of the Securities Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EMARKETPLACE, INC. Date: February 14, 2000 By: /s/ L. WAYNE KILEY ------------------------------------------- L. Wayne Kiley President, Chief Executive Officer, (Chief Accounting Officer) and Director 21 EX-27 2 FDS
5 This schedule contains summary financial information extracted from eMarketplace's quarterly report on Form 10-QSB/A for the quarter ended December 31, 1999 and is qualified in its entirety by reference to such financial statements. 0000900475 EMARKETPLACE, INC. 1 USD 6-MOS 6-MOS JUN-30-2000 JUN-30-1999 JUL-01-1999 JUL-01-1998 DEC-31-1999 DEC-31-1998 1 1 4,533,513 0 0 0 3,535,498 0 (0) 0 0 0 8,436,560 0 4,722,830 0 (1,040,561) 0 27,923,927 0 4,703,871 13,583 0 0 0 0 0 0 1,486 646 16,490,499 (14,229) 27,923,927 0 5,584,701 0 5,584,701 0 5,218,790 0 8,514,076 5,612 0 0 0 0 16,790 0 (2,898,848) (3,352) 0 0 (2,898,848) (3,352) 0 0 0 0 0 0 (2,898,848) (3,352) (0.22) 0.00 (0.22) 0.00
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