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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 August 31, 1999
Commission File Number 33-96638-A
ecom ecom.com, inc.
(Exact name of small business issuer as specified in its charter)
Florida 65-0538051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3801 PGA Blvd, Ste. 1000, Palm Beach Gardens, Florida 33410
(Address of principal executive offices)
(561) 622-4395
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes x No_
As of August 31, 1999, the issuer had 12,883,600 shares of common stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes _ No x
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ECOM ECOM.COM, INC.
Form 10-QSB
August 31, 1999
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets:
August 31, 1999 and May 31, 1999 3
Consolidated Statements of Operations:
Three-Month Periods Ended
August 31, 1999 and 1998 4
Consolidated Statements of Cash Flows:
Three-Month Periods Ended
August 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS 8
PART II OTHER INFORMATION
ITEMS 1-6 10
2
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ECOM ECOM.COM, INC.
CONSOLIDATED BALANCE SHEETS
August 31, 1999 May 31, 1998
--------------- ------------
Assets
Current Assets
Cash and cash equivalents $ 23,530 $ 105,857
Accounts receivable 11,662 19,155
Inventories 275,903 155,893
Prepaid expenses 110,990 15,749
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Total current assets 422,085 296,654
Property and equipment 157,562 97,263
Intangible assets 61,869 67,135
Other assets 6,556 6,773
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Total assets 648,072 467,825
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Liabilities
Current liabilities
Accounts payable and accrued expenses $ 411,057 $ 130,683
Current portion of notes payable 100,000 100,000
Current portion of accrued interest 9,499 5,937
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Total current liabilities 520,556 236,620
Loans from stockholders 509,149 212,344
Notes payable, less current portion 7,295 7,295
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Total liabilities 1,037,000 456,259
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Stockholders' equity
Common stock, $.0001 par value"
Authorized - 50,000,000 shares;
Issued - 12,883,600 shares 1,288 1,288
Additional paid-in capital 935,284 935,284
Accumulated deficit (1,320,500) (920,006)
Less treasury stock at cost, 2,000 shares (5,000) (5,000)
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Total stockholders' equity (388,928) 11,566
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Total liabilities and stockholders' equity $ 648,072 $ 467,825
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See notes to financial statements.
3
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ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended
August 31, 1999 August 31, 1998
--------------- ---------------
Net Sales $ 191,898 $ 22,967
Cost of Sales 154,846 9,951
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Gross profit 37,052 13,016
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Other operating expenses
Sales and marketing 145,449 28,072
Product development 118,289 -
General and administrative 154,634 41,986
Depreciation and amortization 15,611 8,606
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Total operating expenses 433,983 78,664
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Loss from operations (396,931) (65,648)
Interest expense 3,563 4,072
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Net loss $ (400,494) $ (69,720)
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Net loss per common shares (Basic and
Diluted) $ (0.03) $ (0.01)
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Weighted average shares outstanding 12,883,600 11,934,600
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See notes to financial statements.
4
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ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended
August 31, 1999 August 31, 1998
--------------- ---------------
Cash flows from operating activities
Net loss $ (400,494) $ (69,720)
Reconciling adjustments:
Depreciation and Amortization 15,611 8,606
(Increase) Decrease in:
Accounts receivable 7,493 (8,831)
Inventories (120,010) (4,181)
Prepaid expenses (95,241) 8,323
Other assets - (7,260)
Increase (Decrease) in:
Accounts payable and accrued expenses 280,374 3,664
Accrued interest 3,563 4,072
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Net cash used by operating activities (308,704) (65,327)
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Cash flows from investing activities
Acquisition of property and equipment (70,427) (4,403)
Acquisition of intangible assets - -
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Net cash used by investing activities (70,427) (4,403)
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Cash flows from financing activities
Capital contributions - 33,997
Notes payable - (4,317)
Loans from stockholders 296,804 32,200
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Net cash provided by financing activities 296,804 61,880
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Net increase (decrease) in cash (82,327) (7,850)
Cash balance, beginning of period 105,857 89,542
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Cash balance, end of period $ 23,530 $ 81,692
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See notes to financial statements.
5
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ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)
NOTE 1 - UNAUDITED INTERIM INFORMATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB
and Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended August 31, 1999 are not necessarily indicative of the results
that may be expected for the year ending May 31, 2000. For further
information, refer to the financial statements and footnotes thereto included
in the Company's Form 10-KSB for the year ended May 31, 1999.
Certain items have been reclassified for comparative purposes.
NOTE 2 - BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. The Company currently has two reportable
segments: paintball products and Internet commerce. The paintball segment
produces a mid-priced paintball marker and distributes related accessories.
The Internet segment develops and operates Internet websites including the
Trading Club. There have been no intersegment sales or transfers. Revenues
from sale of the Company's paintball products over the Internet are reported
within the paintball segment. Internet revenues consist of the sale of
products through the electronic Trading Club's auction web site.
Following is a summary of segment information:
6
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ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
August 31, 1999
(Unaudited)
Note 2 (Cont'd)
Three Months Ended August 31, 1999
----------------------------------------------
Total Paintball Internet All Other(a)
----- --------- -------- ------------
Revenues 191,898 190,355 1,543 -
Interest 3,563 3,563 - -
Depreciation and
Amortization 15,611 7,515 6,421 1,675
Profit (Loss) (400,494) (160) (257,620) (142,714)
Assets 648,072 310,074 281,296 56,702
Three Months Ended August 31, 1998
----------------------------------------------
Total Paintball Internet All Other(a)
----- --------- -------- ------------
Revenues 22,967 22,967 - -
Interest 4,072 3,655 - 417
Depreciation and
Amortization 8,606 5,063 - 3,543
Profit (Loss) (69,720) (12,717) - (57,003)
Assets 323,457 108,368 - 215,089
(a) Includes amounts not allocated to operating segments.
7
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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 three month periods ended August 31,
1999 and 1998 and the Form 10-KSB for the fiscal year ended May 31, 1999.
Special Note Regarding Forward-Looking Statements
Certain statements in this report and elsewhere (such as in other filings by
the Company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the Company of its management and oral statements)
may constitute 'forward-looking statements " within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements. Factors that might cause or contribute to such differences
include, among others, competitive pressures, the growth rate of the paintball
industry and electronic commerce, constantly changing technology and market
acceptance of the Company's products and services. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations
Comparison of the three months ended August 31, 1999 with the three months
ended August 31. 1998
Revenue increased by $168,931, or 735.5% substantially as the result of
increased paintball marker and accessories sales. This growth is attributed
to the Company's utilization of the 1800 PAINTBALL telephone number acquired
in March, 1999 and the additional emphasis on the distribution of other
manufacturers' paintball accessory products. The Company's gross profit
increased $24,036, or 184.7%, as the result of substantially increased
revenues. The emphasis on growth and the addition of the distribution of
accessory products, which normally carry lower gross profit margins, as an
adjunct to the Company's Viper M1 paintball marker has caused the gross
profit margin to decline from 56.7% to 28.0% and the remaining decline to
arrive at the current period's gross margin of 19.3%, is caused by costs
associated with electronic hosting of the Company's web sites totalling
$16,302 in the current quarter and $0 in the prior year quarter.
The Company's e-commerce web sites began operating in late April 1999 and as a
means to attract users, membership has been provided free until November 1999.
Therefore, no membership revenues have been generated. As an additional means
of attracting visitors to the site, the Company placed consumer goods on the
auction site of which $1,543 were sold. This revenue is included in
the current period's net sales of $191,898.
Sales and marketing expenses have increased by $112,648, or 268.3%, primarily
as the result of advertising and promotions for the Company's e-commerce web
site. Likewise, Product development in the current period is the result of
8
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preparing and upgrading the Company's web site. General and administrative
expenses have risen $112,648, or 268.0% as the result of additional salaries,
consulting, and professional fees associated with the Company's overall
growth. Depreciation and Amortization expense increased $7,005, or 81.4%,
primarily as the result of the addition of Computers and related electronic
hardware. Interest expense is down slightly as the result of less interest
bearing debt outstanding.
Liquidity and Capital Resources
The Company's working capital has decreased from $60,034 to a deficit of
$98,471, primarily as the result of a substantial increase in accounts payable
reflecting a rise in expenses as previously noted. The Company's net loss,
which increased from $69,720 to $400,494, contributed the substantial portion
of the $243,377 increase in Net cash used by operating activities.
Net cash used by investing activities increased $66,024 due to the addition of
computer hardware and related electronic equipment.
Net cash provided by financing activities consists of loans from stockholders,
which bear no interest.
The Company continues to be reliant upon the combination of revenues, loans
from stockholders and capital contributions to fund operations. The Company
has not generated any profits from its existing operations and continues to
incur substantial costs related primarily to further development and
maintenance of its e-commerce web site. The Company's continued existence is
dependent upon its ability to secure financing or its ability to generate
sufficient cash flows through operations to meet its operating costs and repay
current obligations as they come due. In this regard, in April of 1999, the
Company entered into a financing agreement with a third party whereby the
Company may sell to the third party and that third party must buy a number of
the Company's shares of common stock, subject to restrictions (the "Put
Option"). The more salient of the restrictions under the Put Option includes
that the Company must first register the shares which may be subject to the
put and the number of the shares which may be put to the third party in any 30
day period is dependent upon the Company's share price as determined on the
OTC Bulletin Board and volume of trading activity. The Company can make no
assurances that it will be successful in registering the subject shares or
that the market in the Company's stock will remain adequate to allow the
Company to raise necessary funds through the use of the Put Option. Until the
Company obtains sufficient funds necessary to capitalize the growth of its
existing operations, expenditures required to increase revenues including
advertising and promotion of both its e-commerce web site and paintball marker
products, will be substantially limited. Should the Company be unable to
obtain continued funding from existing shareholders or under the terms of the
Put Option agreement its operations may be adversely affected.
9
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OTHER INFORMATION
PART II
ITEM 1. Legal Proceedings.
The Company is not involved in any material legal proceedings or litigation,
and the officers and directors are aware of no other pending litigation which
would have a material, adverse effect on the Company.
ITEM 2. Changes in Securities.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Reports - None
10
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ecom ecom.com, inc.
October 15, 1999 By/s/ David J. Panaia
David J. Panaia, Chief Executive Officer
and Principal Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3 and 4 of the
Company's Form 10-QSB for the quarter ended August 31, 1999, and is qualified
in its entirety by reference to such financial statements.
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> AUG-31-1999
<CASH> 23,530
<SECURITIES> 0
<RECEIVABLES> 11,662
<ALLOWANCES> 0
<INVENTORY> 275,903
<CURRENT-ASSETS> 422,086
<PP&E> 237,744
<DEPRECIATION> 80,182
<TOTAL-ASSETS> 648,072
<CURRENT-LIABILITIES> 520,556
<BONDS> 0
0
0
<COMMON> 1,288
<OTHER-SE> (390,216)
<TOTAL-LIABILITY-AND-EQUITY> 648,072
<SALES> 191,898
<TOTAL-REVENUES> 191,898
<CGS> 154,846
<TOTAL-COSTS> 588,829
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,563
<INCOME-PRETAX> (400,494)
<INCOME-TAX> 0
<INCOME-CONTINUING> (400,494)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (400,494)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
