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As Filed With the Securities and Exchange Commission on April 25, 2000
Registration Statement No. 333-34462
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
eCom eCom.com, inc.
(Name of small business issuer in its charter)
Florida 7940 65-0538051
(State or jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Code Number) Identification Number)
organization)
3801 PGA Boulevard, Suite 1001
Palm Beach Gardens, Florida 33410
(561) 622-4395
(Address and telephone number of issuer's principal executive offices)
David J. Panaia
3801 PGA Boulevard, Suite 1001
Palm Beach Gardens, Florida 33410
(561) 622-4395
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to public: As soon as the registration
statement is effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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CALCULATION OF REGISTRATION FEE
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Proposed
Estimated Maximum
Title of Each offering Aggregate Amount of
Class of Securities Amount to be Price Offering Registration
to be Registered Registered(1) Per Unit(2) Price Fee
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Common Stock,
$.0001 par value 4,000,000 $2.25 $9,000,000 $2,376.00
Common Stock(3)
underlying Selling
Shareholder Warrants 320,000 $2.48 $ 793,600 $ 209.51
Common Stock(4)
underlying Selling
Shareholder Warrants 490,000 $2.50 $1,225,000 $ 323.40
TOTAL $2,908.91
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(1) In the event of a stock split, stock dividend or similar transaction
involving the Company's Common Stock, in order to prevent dilution, the number
of shares registered shall automatically be increased to cover the additional
shares in accordance with Rule 416(a) under the Securities Act of 1933, as
amended (the "Securities Act").
(2) In accordance with Rule 457(c), the aggregate offering price of shares of
Common Stock of the Registrant (sometimes referred to herein as the "Company")
is estimated solely for purposes of calculating the registration fees payable
pursuant hereto, as determined in accordance with Rule 457(c), using the
average of the high and low sales price reported by the OTC Bulletin Board for
the Common Stock on April 6, 2000, which was $2.25 per share and, with respect
to shares of Common Stock of the Company issuable upon exercise of outstanding
warrants, the higher of (i) such average sales price or (ii) the exercise
price of such warrants.
(3) Represents shares of Common Stock issuable to Swartz Private Equity, LLC
(the "Selling Shareholder") upon exercise of outstanding warrants issuable to
the Selling Shareholder pursuant to the Amended and Restated Investment
Agreement between the Company and Swartz Private Equity, LLC (the "Investment
Agreement"). Pursuant to the terms of the Investment Agreement, the Company
is required to issue to the Selling Shareholder warrants to purchase a number
of shares of Common Stock equal to 8% of the number of Shares sold to the
Selling Shareholder at exercise prices equal to 110% of the market price of
the Company's Common Stock on the Purchase Period End Date (as defined in the
Investment Agreement). The exercise price is subject to adjustment every six
(6) months and is tied to the average closing bid at the time of adjustment.
(4) Represents shares of Common Stock issuable to Swartz Investments, LLC
(the "Selling Shareholder") upon exercise of outstanding warrants issuable to
the Selling Shareholder pursuant to the Investment Agreement. Pursuant to the
Investment Agreement, the Company issued warrants to purchase up to 490,000
shares of Common Stock at an exercise price of $2.50. The warrants were
issued in April 1999, and the exercise price was based on the average closing
bid for the five days after April 11, 1999. The exercise price is subject to
adjustment every six (6) months and is tied to the average closing bid at the
time of adjustment.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
section 8(a) of the Securities Act of 1933, or until the registration
statement shall become effective on such date as the Commission, acting
pursuant to said section 8(a), may determine.
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PROSPECTUS
eCom eCom.com, inc.
This Prospectus relates to the resale, from time to time, of up to
4,810,000 shares of Common Stock of eCom eCom.com, inc. ("we," "us" or "eCom")
by Swartz Private Equity, LLC ("Swartz"). This Prospectus has been prepared
for the purpose of registering the shares offered by this Prospectus under the
Securities Act of 1933, as amended, to allow for future sales by Swartz to the
public without restriction. All or a portion of the shares offered by this
Prospectus may be offered for sale, from time to time, by Swartz for its own
benefit, pursuant to this Prospectus, in one or more private or negotiated
transactions, in open market transactions on the OTC Bulletin Board, in
settlement of short sale transactions, in settlement of options transactions,
or otherwise, or by a combination of these methods, at fixed prices that may
be changed, at market prices prevailing at the time of the sale, at prices
related to such market prices, at negotiated prices, or otherwise. See "Plan
of Distribution."
Of the 4,810,000 shares of Common Stock offered hereby:
- up to 4,000,000 shares may be issued to Swartz pursuant to the terms
of an Investment Agreement dated as of May 13, 1999 between us and
Swartz Private Equity, LLC, a Georgia limited liability company; and
- up to an additional 810,000 shares may be issued to Swartz upon
exercise of warrants issuable to Swartz pursuant to the Investment
Agreement. See "The Investment Agreement."
Swartz is an "underwriter" within the meaning of the Securities Act of
1933, as amended, in connection with the sale of the shares of Common Stock
offered hereby. Swartz will pay all commissions, transfer taxes and other
expenses associated with the sale of the shares by it. We will pay the
expenses of the preparation of this Prospectus. We have agreed to indemnify
Swartz against certain liabilities, including liabilities arising under the
Securities Act of 1933, as amended. We will not receive any of the proceeds
from the sale of the shares of Common Stock sold by Swartz. To the extent
that any of the warrants issued or issuable to Swartz are exercised, under
certain conditions, pursuant to a cashless exercise by Swartz, we will not
receive any proceeds from the exercise of such warrants. See "Plan of
Distribution."
Our Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended, and is listed on the OTC Bulletin
Board under the symbol "ECEC." On April 6, 2000, the last reported sale price
of the Common Stock was $1.8125 per share. There are 14,310,675 shares
currently issued and outstanding.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANYONE IN ANY
STATE OR JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED.
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THIS OFFERING ENTAILS A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION IN THE
BOOK VALUE OF SHARES PURCHASED HEREUNDER (SEE "RISK FACTORS" AND "DILUTION").
THERE IS NO ENDORSEMENT OR APPROVAL BY ANY STATE SECURITIES COMMISSION OF ANY
SECURITIES OFFERED OR THE TERMS OF THIS OFFERING. NO STATE SECURITIES
COMMISSION HAS PASSED UPON THE ACCURACY OR COMPLETENESS OF THIS PROSPECTUS OR
ANY SELLING LITERATURE.
We are currently a reporting company under the Securities Exchange Act of
1934 (the "Exchange Act"). Reports and information filed with the Commission
pursuant to the Exchange Act may be inspected and copied at the Securities and
Exchange Commission's public reference facilities at 450 Fifth Street NW,
Washington, D.C. 20549. Copies of such reports and information can be
obtained from the Commission's Public Reference Section in Washington, D.C. at
prescribed rates. They are also available at the Northeast Regional Office of
the Commission at 7 World Trade Center, Suite 1300, New York, NY 10048 and at
the Midwest Regional Office of the Commission at 500 West Madison Street,
Suite 1400, Chicago, IL 60661-2511. Our fiscal year is June 1 to May 31. We
will provide shareholders with quarterly reports of operations, including
unaudited financial statements. We will provide shareholders with annual
reports of operations, including audited financial statements.
THIS OFFERING IS SPECULATIVE AND ENTAILS A HIGH DEGREE OF RISK (SEE "RISK
FACTORS"). INVESTORS HEREUNDER WILL INCUR SUBSTANTIAL DILUTION OF THE BOOK
VALUE OF THEIR SHARES FROM THE OFFERING PRICE (SEE "DILUTION").
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK AND INVESTORS
SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE
THEIR ENTIRE INVESTMENT (SEE "RISK FACTORS").
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF ECOM AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
The following is a summary of the pertinent information regarding this
Offering. This summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. The Prospectus should be read in its entirety, as this
summary does not constitute a complete recitation of facts necessary to make
an investment decision.
The Offering
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Securities Offered 4,000,000 shares of Common Stock, plus an
additional 810,000 shares issuable upon exercise
of Warrants held by Swartz.
Offering Price The shares being registered hereunder are being
offered by Swartz from time to time at the then
current market price.
Common Stock to be 18,310,675 shares; does not include 810,000
Outstanding after the shares issuable upon exercise of Warrants
Offering held by Swartz.
Dividend Policy We do not anticipate paying dividends on our
Common Stock in the foreseeable future.
Use of Proceeds The shares offered herein are being sold by
Swartz and as such, we will not receive any of
the proceeds of the Offering. (See "Use of
Proceeds").
Material Risk Factors This Offering involves a high degree of risk,
elements of which include possible lack of
profitability, competition, breach of leasing
agreements, death or incapacity of management
and inadequate insurance coverage. There is a
risk to investors due to the speculative nature
of this investment, historical losses from
operations, a shortage of capital, lack of
dividends, dilution factors, control by present
shareholders and economic conditions in general.
There is a material risk that we may have
insufficient funding to engage in any or all of
the proposed activities (See "Risk Factors" and
"Dilution").
THE COMPANY
eCom eCom.com, inc. provides an e-commerce infrastructure that enables
the small business enterprise to carve its niche in the retail and business to
business Internet economy. eCom eCom B2BPlus provides an affordable, user-
friendly technological platform and professional resources to facilitate web
business development. The eCom eCom SuperHUB gives the web entrepreneur a
comprehensive package of on-line tools to generate, execute and fulfill
e-commerce transactions.
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eCom is the parent of US Amateur Sports Company, which is the parent of
USA Performance Products, Inc. USA Performance Products manufactures and
distributes paintball guns and accessories, and has served as a test model for
our e-commerce business concepts.
We were incorporated on June 14, 1994 in the State of Florida under the
name US Amateur Sports, Inc., but we changed our name in January 1999 to
better reflect our business operations. Our principal offices are located at
3801 PGA Boulevard, Suite 1001, Palm Beach Gardens, Florida 33410, and our
phone number is (561) 622-4395.
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS HIGHLY SPECULATIVE AND SHOULD BE
CONSIDERED ONLY BY PERSONS ABLE TO LOSE THE ENTIRE AMOUNT INVESTED. You
should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we will face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could
be harmed. In such case, the trading price of our Common Stock could decline,
and you may lose all or part of your investment.
We have a limited operating history.
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We were incorporated in June 1994. We have only a limited operating
history on which you can base an evaluation of our business and prospects. To
date, substantially all of our revenues have been derived from the sale of
paintguns and paintgun products. We have yet to achieve profitability. There
is no demonstrated public acceptance of the eCom eCom SuperHUB concept or of
our role as a business to consumer or business to business e-commerce enabler.
As an online commerce company in the early stage of development, we face
increased risks, uncertainties, expenses and difficulties. You should
consider an investment in our company in light of these risks, uncertainties,
expenses and difficulties.
We have incurred significant losses and cannot
predict when, if ever, we will make a profit.
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To date, we have incurred significant losses. As of February 29, 2000,
our accumulated deficit was $2,495,521 and our total liabilities exceeded our
total assets by $736,020. During the fiscal year ended May 31, 1999 we
incurred a net loss of $374,085 on total revenues of $228,613, and during the
1998 fiscal year we incurred a net loss of $143,051 on total revenues of
$149,582. For the nine months ended February 29, 2000, we incurred a net loss
of $1,575,514 on total revenues of $1,379,444. These losses have resulted
primarily from our historical inability to achieve a level of revenues that is
sufficient to cover our general operating expenses. We expect to incur
additional operating losses in the future unless and until we are able to
generate operating revenues sufficient to support expenditures. There is no
assurance that sales of our products and services will ever generate
sufficient revenues to fund our continuing operations, that we will generate
positive cash flow from operations or that we will attain and then continue to
make a profit in any future period.
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We will need additional funding during the next twelve months.
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We have limited cash resources and need additional capital to pay our
operating costs that are in excess of our revenues, increase production and
sales of paintball products, implement our eCom eCom SuperHUB and B2BPlus
concepts and achieve any subsequent growth of such activities. Based on the
rate of our cash operating expenditures and our current plans, we anticipate
our cash requirements for the next twelve months may be met primarily from the
proceeds to be obtained from puts of our shares to Swartz under the Investment
Agreement. However, our ability to obtain funds under the agreement is
subject to certain conditions. These conditions include the effectiveness of
this registration statement covering the resale of the shares sold under the
Investment Agreement and a limitation on our ability to issue shares based on
the volume of trading in the Common Stock. Although we are planning to
satisfy our future cash requirements from improved product sales, the sale of
Internet e-commerce services and advertising, the sale of additional equity
securities and debt financing, there can be no assurance that any funds
required during the next twelve months or thereafter will be generated from
operations or from any of the other potential sources. The lack of additional
capital could force us to substantially curtail or cease operations, which
would have a material adverse effect on our business. Further, there can be
no assurance that any funds, if available, will be available on attractive
terms or that they will not have a significantly dilutive effect on our
existing shareholders.
Our audited financial statements and those of Star Dot Marketing, Inc. contain
going concern language.
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The auditor's report for our financial statements for our fiscal years
ended May 31, 1999 and 1998 states that because of our net losses and
liquidity problems, there is a concern that we will be unable to continue to
operate. The auditor's report for Star Dot Marketing, Inc., a company
recently acquired by us, also contains the same language.
Our failure to manage future growth could harm us.
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We currently are experiencing a period of significant expansion in our
staffing requirements, facilities and infrastructure and we anticipate that
further expansion will occur. This expansion has placed, and we expect it
will continue to place, a significant strain on our management, operational
and financial resources. The areas that are put under severe strain by our
rate of growth include the following:
- Our current lack of capital. We do not have sufficient capital at
the present time to implement our business plan, to accomplish
acquisitions of operating businesses or useful technologies, or to
fund the growth of our core business. Our inability to obtain
capital on commercially reasonable terms could be extremely
detrimental to our future operations.
- The Websites. We anticipate a need to constantly add new
hardware, update software and add new engineering personnel to
accommodate increased use of our websites. If we are unable to
increase the capacity of our systems at least as fast as the
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growth in demand for this capacity, our websites may become
unstable and may cease to operate for periods of time.
Unscheduled downtime could harm our business and also could
discourage users of our websites and reduce future revenues.
- Customer Support. If we are unable to hire and successfully train
sufficient employees or contractors in the customer support area,
users of our websites may have negative experiences and current and
future revenues could suffer.
- Acquisitions. We must be careful to identify and acquire
businesses and enter into business relationships that are
complimentary to our business plan on terms that are favorable to
us. To the extent that we do not fully understand the intricacies
of any of the businesses that we are able to acquire (or those
businesses with whom we enter into business relationships), it is
possible that we could make mistakes that would be extremely
costly to us.
We will be dependent on key personnel.
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Although current management has had experience in the development and
operation of other businesses, it does not have prior experience in
establishing or operating either an e-commerce or a manufacturing business.
We will need to retain experienced management for these segments of the
business. The loss of the services of any of our executive officers or other
key employees could harm our business. We do not have long-term employment
agreements with any of our key personnel and we do not maintain any "key
person" life insurance policies.
The majority of our employees today have been with us less than one year
and we expect that our rate of hiring will continue at a high pace. Our
future success will depend on our ability to attract, train, retain and
motivate highly skilled technical, managerial, marketing and customer support
personnel. Competition for these personnel is intense and we may be unable to
successfully attract, integrate or retain sufficiently qualified personnel.
Our current and planned personnel, systems, procedures and controls may not be
adequate to support our future operations.
We have traditionally relied on strategic partnerships to fill key
positions. The "partner" then becomes an independent contractor and not an
employee of eCom. The partner may be paid either in cash or in stock of eCom,
or both. Currently, we are understaffed and in order to attract qualified
workers we may have to bring in these workers as employees rather than
partners. If so, we will incur additional costs in the way of health
insurance, unemployment insurance, vacation pay, sick leave and other benefits
generally afforded employees. We cannot guarantee that even if we offer
qualified workers an employment package that we will be able to secure enough
skilled employees to insure the future growth of eCom.
Our stock price has been and may continue to be extremely volatile.
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The trading price of our Common Stock has been and is likely to be
extremely volatile. Our stock price could be subject to wide fluctuations in
response to a variety of factors, including the actual and/or perceived
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positive and negative attributes of business arrangements that we enter into
and of businesses that we are able to acquire, variations in our quarterly
operating results, announcements of technological innovations or new services
by us or our competitors, conditions or trends in the Internet and online
commerce industries, changes in the market valuations of other Internet or
online service companies, developments in Internet regulations, unscheduled
system downtime, additions or departures of key personnel, sales of our Common
Stock or other securities in the open market and other events or factors that
may be beyond our control.
In addition, the trading prices of Internet stocks in general, and ours
in particular, have experienced extreme price and volume fluctuations in
recent months. These fluctuations often have been unrelated or
disproportionate to the operating performance of these companies in general
(and ours in particular). The valuations of many Internet stocks, including
ours, are still extraordinarily high, based on conventional valuation
standards such as price to earnings and price to sales ratios. These trading
prices and valuations may not be sustained. Negative changes in the public's
perception of the prospects of Internet or e-commerce companies are likely to
depress our stock price regardless of our results. Other broad market and
industry factors may decrease the market price of our Common Stock, regardless
of our operating performance. Market fluctuations, as well as general
political and economic conditions such as recession or interest rate or
currency rate fluctuations, also may decrease the market price of our Common
Stock. In the past, following declines in the market price of a company's
securities, securities class-action litigation often has been instituted
against the company. Litigation of this type, if instituted, could result in
substantial costs and a diversion of management's attention and resources.
We will need to develop new services, features
and functions in order to expand.
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Right now, we receive substantially all of our revenues from online and
telephone sales of paintball products. We plan to expand our operations by
developing new or complementary services, products or transaction formats or
expanding the breadth and depth of services. We may be unable to expand our
operations in a cost-effective or timely manner. Even if we do expand, we may
not maintain or increase our overall market acceptance. If we launch a new
business or service that is not favorably received by consumers, it could
damage our reputation.
We may pursue strategic relationships with third parties to provide many
of our services. By using third parties to deliver these services, we may be
unable to control the quality of the services, and our ability to address
problems will be reduced if any of these third parties fails to perform
adequately. Expanding our operations also will require significant additional
developmental expense and will strain our management, financial and
operational resources. The lack of market acceptance of any new services
could harm our business.
Acquisitions could result in dilution, operating
difficulties and other harmful consequences.
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On January 21, 2000, we executed an agreement to acquire Star Dot
Marketing, Inc. We are presently performing our due diligence in anticipation
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of closing this transaction. See "Business of the Company - Star Dot
Marketing."
We currently do not have any understandings, commitments or agreements
with respect to any other material acquisition. If appropriate opportunities
present themselves, we intend to acquire businesses, technologies, services or
products that we believe are strategically attractive. Integration of an
acquired company may require significant management resources that would
otherwise be available for ongoing development of our business. Moreover, the
anticipated benefits of any acquisition may not be realized. We may be unable
to identify, negotiate or finance future acquisitions successfully, or to
integrate successfully any acquisitions with our current business. Future
acquisitions could result in potentially dilutive issuances of equity
securities, the incurrence of debt, contingent liabilities or amortization
expenses related to goodwill and other intangible assets, any of which could
harm our business. Future acquisitions may require us to obtain additional
equity or debt financing, which may not be available on favorable terms or at
all. Even if available, this financing may be dilutive.
Insurance and potential liability.
- ----------------------------------
We currently maintain property, general liability and product liability
insurance, but our liability coverage is limited to single claims of up to
$1.0 million. A partially or completely uninsured claim against us, if
successful and of sufficient magnitude, could have a material, adverse effect
on eCom.
We are controlled by certain shareholders,
executive officers and directors.
- ------------------------------------------
Upon completion of this Offering, our executive officers and directors
(and their affiliates) will own approximately 24% of our outstanding Common
Stock. As a result, they may have the ability to control our company and
direct our affairs and business, including the election of directors and
approval of significant corporate transactions. This concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control of our company and may make some transactions more difficult or
impossible without the support of these shareholders. Any of these events
could decrease the market price of our Common Stock.
Our Articles of Incorporation allow for indemnification of officers,
directors and others and exclude personal liability
for directors for breach of fiduciary duty.
- -------------------------------------------------------------
Our Articles of Incorporation provide for the indemnification of our
officers, directors, employees and agents. Under certain circumstances, they
are indemnified against attorneys' fees and other expenses incurred by them
and judgments rendered against them in any litigation to which they become a
party arising from their association with or activities on our behalf. We may
also bear the expenses of such litigation for any of our officers, directors,
employees or agents, upon their promise to repay such sums if it is ultimately
determined that they are not entitled to indemnification. This
indemnification policy could result in substantial expenditures by us that we
may be unable to recoup even if we are entitled to do so.
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Our Articles of Incorporation also exclude personal liability on the part
of our directors to us for monetary damages for breach of fiduciary duty,
except in certain specified circumstances. Accordingly, we would have a much
more limited right of action against our directors than otherwise would be the
case. This exclusionary provision does not affect the liability of any
director under federal or applicable state securities laws.
A significant number of shares are eligible for sale
and their sale could depress our stock price.
- ----------------------------------------------------
We have a significant market overhang on our Common Stock because in the
past we have paid many of the people with whom we have done business with
restricted shares of our Common Stock instead of cash. Of the amount of
restricted stock currently outstanding, approximately 500,000 shares are
currently eligible for resale under Securities Act Rule 144 because the people
have held the stock for more than a year. Because these people did not have
to pay cash for their shares and many of them have their own operating
expenses that they need to pay, many of them have been selling their shares
(which we believe has had a depressive effect on the market price of our stock
in recent weeks). It is likely that these people will continue to sell in the
future.
Sales of substantial amounts of our Common Stock (including shares issued
upon the exercise of outstanding options) in the public market after this
Offering could depress the market price of our Common Stock. These sales also
might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. In
addition to the 14,310,675 shares that were issued and outstanding as of March
31, 2000, we have allocated an additional 1,000,000 shares to an incentive
plan (all of which shares have been registered for sale on Form S-8), and we
believe that we will issue an additional 901,000 restricted shares in
transactions that are currently pending. Of this amount, 675,000 shares will
be issued pursuant to the Star Dot Marketing transaction.
You will experience immediate and substantial dilution
in the net tangible book value of the stock you purchase.
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The assumed price at which you will purchase shares is substantially
higher than the net tangible book value per outstanding share of Common Stock.
You will therefore incur immediate and substantial dilution in the net
tangible book value of the shares that you purchase. Additional dilution will
occur upon the exercise of outstanding options.
Our market for business-to-consumer, business-to-business and person-to-person
trading over the Internet is intensely competitive.
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We currently or potentially compete with many other companies. There are
a considerable number of companies that market web creation, maintenance and
marketing services to other businesses. These other companies include such
well-established competitors as Yahoo! which offers tools for do-it-yourself
website creation. Some offer free e-commerce sites such as Bigstep.com.
Bcentral.com offers business advice and services. VerticalNet is the leader
in industry-specific business hubs. There are many other companies that offer
a site or a service that competes with an individual component of the SuperHUB
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and B2BPlus programs. For example, eBay, Amazon.com and numerous smaller
auction sites compete with the auction venue of the SuperHUB. America Online,
Lycos and Microsoft offer business-to-consumer trading services and classified
ad services. Other large companies with strong brand recognition and
experience in online commerce, such as Cendant Corporation, QVC, USA Network
and large newspaper or media companies, also may seek to compete in these
online markets. We are currently not aware of any competitors presently that
focus on the small business segment of the e-commerce market and that provide
the complete package of resources and services offered by our programs.
However, it is likely that, unknown to us, competitors do currently exist
within this market sector and that, in the future, increased competition will
develop within this market sector. The principal competitive factors in our
market include financial backing, volume of transactions and selection of
goods, community cohesion and interaction, system reliability, customer
service, reliability of delivery and payment by users, brand recognition,
website convenience and accessibility, level of service fees, and quality of
search tools.
Most current and many potential competitors have longer company operating
histories, larger customer bases and greater brand recognition in other
business and Internet markets than we do. Most of these competitors also have
significantly greater financial, marketing, technical and other resources.
Other online trading services may be acquired by, receive investments from or
enter into other commercial relationships with larger, well established and
well financed companies. As a result, some of our competitors with other
revenue sources may be able to devote more resources to marketing and
promotional campaigns, adopt more aggressive pricing policies and devote
substantially more resources to website and systems development than we are
able to. Increased competition may result in reduced operating margins, loss
of market share and diminished value of our brand. Some of our competitors
have offered services for free and others may do this as well. We may be
unable to compete successfully against current and future competitors.
In order to respond to changes in the competitive environment, we may,
from time to time, make pricing, service or marketing decisions or
acquisitions that could harm our business. New technologies may increase the
competitive pressures by enabling our competitors to offer a lower cost
service. Some Web-based applications that direct Internet traffic to certain
websites may channel potential members to trading services that compete with
us.
We do not currently have any established Internet traffic arrangements
with large online services or search engine companies. There can be no
assurance that any such arrangements can be negotiated on commercially
reasonable terms. Even if these arrangements are made, they may not result in
increased usage of our service. In addition, companies that control access to
transactions through network access or Web browsers could promote our
competitors or charge us substantial fees for inclusion.
Our market for our paintball guns and products is competitive.
- --------------------------------------------------------------
There are a substantial number of manufacturers of known production
paintball markers presently in the marketplace, in addition to custom-made
markers. Many may be more established and better funded than we are. Some of
these competitors include Brass Eagle (formerly Daisy Manufacturing), Tippman,
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Kingman, WORR Products, Air Design, National Paintball, 888 Paintball and many
other smaller competitors.
We are subject to risks associated with information
disseminated through our Internet service.
- ---------------------------------------------------
We currently provide limited online services and plan to expand further
into this area. The law relating to the liability of online services
companies for information carried on or disseminated through their services is
currently unsettled. Claims could be made against online services companies
under both United States and foreign law for defamation, libel, invasion of
privacy, negligence, copyright or trademark infringement, or other theories
based on the nature and content of the materials disseminated through their
services. Several private lawsuits seeking to impose liability upon other
online services companies currently are pending. In addition, federal, state
and foreign legislation has been proposed that imposes liability for or
prohibits the transmission over the Internet of certain types of information.
If we become liable for information provided by our members and carried on our
service, we could be directly harmed and we may be forced to implement new
measures to reduce our exposure to this liability. This may require us to
expend substantial resources and/or to discontinue certain service offerings.
In addition, the increased attention focused upon liability issues as a result
of these lawsuits and legislative proposals could harm our reputation or
otherwise impact the growth of our business. As we do not currently carry any
liability insurance which covers this type of exposure, any costs incurred as
a result of this liability or asserted liability could harm our business.
New and existing regulation of the Internet
could harm our planned business activities.
- -------------------------------------------
We are subject to the same federal, state and local laws as other
companies conducting business on the Internet. Today there are relatively few
laws specifically directed towards online services. However, due to the
increasing popularity and use of the Internet and online services, it is
possible that laws and regulations will be adopted with respect to the
Internet or online services. These laws and regulations could cover issues
such as online contracts, user privacy, freedom of expression, pricing, fraud,
content and quality of products and services, taxation, advertising,
intellectual property rights and information security. Applicability to the
Internet of existing laws governing issues such as property ownership,
copyrights and other intellectual property issues, taxation, libel, obscenity
and personal privacy is uncertain. The vast majority of these laws were
adopted prior to the advent of the Internet and related technologies and, as a
result, do not contemplate or address the unique issues of the Internet and
related technologies. Those laws that do reference the Internet, such as the
recently passed Digital Millennium Copyright Act, have not yet been
interpreted by the courts and their applicability and reach are therefore
uncertain. In addition, numerous states, including the State of Florida,
where we are located, have regulations regarding how "auctions" may be
conducted and the liability of "auctioneers" in conducting such auctions. No
legal determination has been made with respect to the applicability of the
Florida regulations to our business to date and little precedent exists in
this area. One or more states may attempt to impose these regulations upon us
in the future, which could harm our business.
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Several states have proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission also has recently
settled a proceeding with one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues could directly affect the way we do business or could create
uncertainty in the marketplace. This could reduce demand for our services,
increase the cost of doing business as a result of litigation costs or
increased service delivery costs, or otherwise harm our business. In
addition, because our services are accessible worldwide, and we intend to
facilitate sales of goods to members worldwide, foreign jurisdictions may
claim that we are required to comply with their laws. Our failure to comply
with foreign laws could subject us to penalties ranging from fines to bans on
our ability to offer our services.
In the United States, companies are required to qualify as foreign
corporations in states where they are conducting business. As an Internet
company, it is unclear in which states we are actually conducting business.
We currently are qualified to do business only in Florida. Our failure to
qualify as a foreign corporation in a jurisdiction where we are required to do
so could subject us to taxes and penalties for the failure to qualify and
could result in our inability to enforce contracts in those jurisdictions.
Any new legislation or regulation, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to our business, could
harm our business.
Our proposed Internet business may be harmed by the listing
or sale of illegal items by the users of our websites.
- -----------------------------------------------------------
The law relating to the liability of providers of online services for the
activities of their users on their service is currently unsettled. It is
possible that certain goods, such as firearms, other weapons, adult material,
tobacco products, alcohol and other goods that may be subject to regulation by
local, state or federal authorities, may be listed and traded on our service.
We may be unable to prevent the sale of unlawful goods, or the sale of goods
in an unlawful manner, by users of our service, and we may be subject to civil
or criminal liability for unlawful activities carried out by users through our
service. Any costs incurred as a result of liability or asserted liability
relating to the sale of unlawful goods or the unlawful sale of goods, could
harm our business.
Our proposed Internet business may be harmed by
fraudulent activities on our websites.
- -----------------------------------------------
Our future success in Internet commerce will depend in part upon sellers
reliably delivering and accurately representing their listed goods and buyers
paying the agreed purchase price. We do not intend to take responsibility for
delivery of payment or goods to any user of our service and it is likely that
over the course of time we will receive complaints from members who did not
receive the purchase price or the goods that were to have been exchanged.
While we could suspend the accounts of members who fail to fulfill their
delivery obligations to other members, we do not have the ability to require
anyone to make payments or deliver goods or otherwise make buyers whole. We
do not compensate persons who believe they have been defrauded by our members.
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It is also possible that we might receive complaints from buyers as to the
quality of the goods purchased. As we are a new company with relatively
little market recognition at the present time, any negative publicity
generated as a result of fraudulent or deceptive conduct by users of our
service could be extremely harmful. If any of our users demand reimbursement
from us and threaten legal action against us if no reimbursement is made, any
resulting litigation could be costly for us, divert management attention,
result in increased costs of doing business, lead to adverse judgments or
could otherwise harm our business.
We may be subject to intellectual property litigation.
- ------------------------------------------------------
Other third parties may claim in the future that we have infringed their
past, current or future technologies. We expect that participants in our
markets increasingly will be subject to infringement claims as the number of
services and competitors in our industry segment grows. Any claim like this,
whether meritorious or not, could be time-consuming, result in costly
litigation, cause service upgrade delays or require us to enter into royalty
or licensing agreements. These royalty or licensing agreements might not be
available on acceptable terms or at all. As a result, any claim like this
could harm our business.
The inability to expand our systems may limit our growth.
- ---------------------------------------------------------
We will attempt to generate a high volume of traffic and transactions on
our websites. The satisfactory performance, reliability and availability of
our websites, processing systems and network infrastructure will be critical
to our reputation and our ability to attract and retain large numbers of
users. Our revenues from the Internet commerce business will depend upon our
ability to attract merchants and customers to the websites. As the volume of
traffic on our websites increases, we will need to expand and upgrade our
technology, transaction processing systems and network infrastructure. We may
not be able to accurately project the rate or timing of increases, if any, in
the use of our service or to timely expand and upgrade our systems and
infrastructure to accommodate any increases.
We use internally developed systems to operate our service and for
transaction processing, including billing and collections processing. We must
continually improve these systems in order to accommodate the level of use of
our websites. In addition, we may add new features and functionality to our
services that would result in the need to develop or license additional
technologies. Our inability to add additional software and hardware or to
upgrade our technology, transaction processing systems or network
infrastructure to accommodate increased traffic or transaction volume could
have adverse consequences. These consequences include unanticipated system
disruptions, slower response times, degradation in levels of customer support,
impaired quality of the members' experience on our service and delays in
reporting accurate financial information. Our failure to provide new features
or functionality also could result in these consequences. We may be unable to
effectively upgrade and expand our systems in a timely manner or to integrate
smoothly any newly developed or purchased technologies with our existing
systems. These difficulties could harm or limit our ability to expand our
business.
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System failures could harm our business.
- ----------------------------------------
Our future success in the Internet commerce business, and in particular
our ability to facilitate trades successfully and provide high quality
customer service to our members, will depend on the efficient and
uninterrupted operation of our computer and communications hardware and
software systems. The computer web servers for operating our service
currently are at the offices of Advanced Internet Technologies, Inc. (AIT), a
non-affiliated entity located in Fayetteville, North Carolina, and LiteSpeed
Technologies, Ltd. of West Palm Beach, Florida. These systems and operations
are vulnerable to damage or interruption from hurricanes, floods, fires, power
loss, telecommunication failures and similar events. They are also subject to
break-ins, sabotage, intentional acts of vandalism and similar misconduct. We
do not have fully redundant systems, a formal disaster recovery plan or
alternative providers of hosting services, and we do not carry any business
interruption insurance to compensate us for losses that may occur. Despite
any precautions we may take, the occurrence of a natural disaster or other
unanticipated problems at the AIT or LiteSpeed facilities could result in
interruptions in our services. In addition, the failure by our communications
providers (MCI, Sprint and ATT) to provide our required data communications
capacity could result in interruptions in our service. Any damage to or
failure of our systems could result in interruptions in our service. Such
interruptions would harm our future revenues and profits if our members
believe that our system is unreliable.
Unauthorized break-ins to our service could harm our business.
- --------------------------------------------------------------
Our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data or the inability to complete on-line transactions. In addition,
unauthorized persons may improperly access our data.
Our future success is dependent upon the continued growth
of the online commerce market.
- ---------------------------------------------------------
The market for the sale of goods over the Internet is a new and emerging
market. Assuming we are successful in achieving an acceptable level of market
recognition, our future revenues and profits in this market will be
substantially dependent upon the widespread acceptance of the Internet and
online services as a medium for commerce. Rapid growth in the use of and
interest in the Web, the Internet and online services is a recent phenomenon.
This acceptance and use may not continue. Even if the Internet is accepted,
concerns about fraud, privacy and other problems may mean that a sufficiently
broad base of consumers will not adopt the Internet as a medium of commerce.
In particular, our websites requires users to make publicly available their
e-mail addresses and other personal information that some potential users may
be unwilling to provide. These concerns may increase as additional publicity
over privacy issues over the Internet increases. Market acceptance for
recently introduced services and products over the Internet is highly
uncertain, and there are few proven services and products. In order to expand
our member base, we must appeal to and acquire consumers who historically have
used traditional means of commerce to purchase goods.
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Our Internet commerce business will be dependent on the
development and maintenance of the Web infrastructure.
- -------------------------------------------------------
The success of our Internet commerce business will in part depend upon
the development and maintenance of the Web infrastructure. This includes
maintenance of a reliable network backbone with the necessary speed, data
capacity and security, as well as timely development of complementary products
such as high speed modems, for providing reliable Web access and services.
Because global commerce and the online exchange of information is new and
evolving, we cannot predict whether the Web will prove to be a viable
commercial marketplace in the long term. If the Web continues to experience
increased numbers of users, increased frequency of use or increased bandwidth
requirements, the Web infrastructure may be unable to support the demands
placed on it. In addition, the performance of the Web may be harmed by
increased users or bandwidth requirements.
The Web has experienced a variety of outages and other delays as a result
of damage to portions of its infrastructure, and it could face outages and
delays in the future. These outages and delays could reduce the level of Web
usage as well as the level of traffic and the processing of e-commerce
transactions on our service. In addition, the Web could lose its viability
due to delays in the development or adoption of new standards and protocols to
handle increased levels of activity or due to increased governmental
regulation. The infrastructure and complementary products or services
necessary to make the Web a viable commercial marketplace for the long term
may not be developed successfully or in a timely manner. Even if these
products or services are developed, the Web may not become a viable commercial
marketplace for services such as those that we offer.
Our Internet commerce business is subject to online security risks.
- -------------------------------------------------------------------
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. Our security
measures may not prevent security breaches. Our failure to prevent security
breaches could harm our business. Advances in computer capabilities, new
discoveries in the field of cryptography, or other developments may result in
a compromise or breach of the technology used by us to protect customer
transaction data. Any such compromise of our security could harm our
reputation and, therefore, our business. In addition, a party who is able to
circumvent our security measures could misappropriate proprietary information
or cause interruptions in our operations. We may need to expend significant
resources to protect against security breaches or to address problems caused
by breaches. Security breaches could damage our reputation and expose us to a
risk of loss or litigation and possible liability. We do not carry any
insurance to reimburse us for losses caused by security breaches.
We must keep pace with rapid technological change to remain competitive.
- -------------------------------------------------------------------
The market in which we compete is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
introductions and enhancements and changing customer preferences.
The demands created by these market characteristics are increased by the
emerging nature of the Internet and the apparent need of companies from a
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multitude of industries to offer Web-based products and services. Our future
success in the Internet commerce business therefore will depend on our ability
to adapt to rapidly changing technologies, to adapt our services to evolving
industry standards and to continually improve the performance, features and
reliability of our service. Our failure to adapt to such changes would harm
our business. In addition, the widespread adoption of new Internet,
networking or telecommunications technologies or other technological changes
could require substantial expenditures to modify or adapt our services or
infrastructure.
Our business may be subject to sales and other taxes.
- -----------------------------------------------------
We do not collect sales or other similar taxes on goods sold through our
Internet service. One or more states may seek to impose sales tax collection
obligations on companies such as ours that engage in or facilitate online
commerce. Several proposals have been made at the state and local level that
would impose additional taxes on the sale of goods and services through the
Internet. These proposals, if adopted, could substantially impair the growth
of electronic commerce, and could diminish our opportunity to derive financial
benefit from our activities. The U.S. federal government recently enacted
legislation prohibiting states or other local authorities from imposing new
taxes on Internet commerce for a period of three years. This tax moratorium
will last only for a limited period and does not prohibit states or the
Internal Revenue Service from collecting taxes on our income, if any, or from
collecting taxes that are due under existing tax rules. A successful
assertion by one or more states or any foreign country that we should collect
sales or other taxes on the exchange of merchandise on our system could harm
our business.
No Dividends.
- -------------
To date, we have not paid any dividends on our Common Stock and we do not
intend to declare any dividends in the foreseeable future. Any future profits
will be reinvested in our Company to attempt to expand its business
operations.
Related Party Transactions.
- ---------------------------
Certain transactions to which we are a party and certain matters
affecting us have or will result in a material benefit to certain of our
directors and executive officers, or may create conflicts of interest.
Certain of the proceeds to be obtained from puts of our shares to Swartz under
the Investment Agreement will be paid to affiliates in the form of salaries,
payment for legal fees, and repayment of bridge financing. See "Related Party
Transactions."
BUSINESS OF THE COMPANY
The Company
- -----------
eCom eCom.com, inc. ("eCom") and its direct and indirect wholly-owned
subsidiaries, US Amateur Sports Company ("USASC") and USA Performance
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Products, Inc. ("USAPP") combined, are usually referred to as "we", "us" or
"eCom". We are located at 3801 PGA Boulevard, Suite 1001, Palm Beach Gardens,
Florida 33410, and our telephone number is (561) 622-4395.
We provide the e-commerce infrastructure that enables the small business
enterprise to carve its niche in the retail and business to business Internet
economy. Built on this infrastructure, the eCom eCom SuperHUB is an on-line
marketplace with multiple venues designed for business to consumer, business
to business and person to person Internet trading. Our B2BPlus services focus
on website design, maintenance and marketing services for small businesses.
Our mission is to make it possible for start-up, small and home-based
businesses to compete within an e-commerce market that is projected by
Forrester Research to top $1.3 trillion by the year 2003.
We are the parent of US Amateur Sports Company (USASC), which in turn is
the parent of USA Performance Products, Inc. (USAPP). USASC owns the rights
to: (1) the All American Bowl, a high school football all-star game, last
played in 1997, when it was broadcast to over 40 million households; (2) the
ProCard/ComCard, a prepaid phone card concept; and (3) USA SportsNet, a
developmental project. USA SportsNet is planned to be an Internet portal for
access to sports information, products and services with a focus on amateur
athletes and local sports organizations. It currently offers the NAYSI on-
line correspondence course for those who volunteer to coach youth sports.
USAPP manufactures and distributes paintball guns and accessories, and served
as a test model for our e-commerce business concepts.
We recently executed an agreement to acquire Star Dot Marketing, Inc.
(SDMI) which offers a complete line of guaranteed authentic, hand-signed
sports memorabilia and other sports products. We are currently performing our
due diligence review of SDMI in anticipation of closing this transaction. We
currently estimate that the transaction will close by the end of the first
calendar quarter.
We were incorporated on June 14, 1994 in the State of Florida and were
originally named US Amateur Sports, Inc. ("USAS"). Our initial plans included
the development of a sports complex dedicated to amateur athletes and the
development of a sports training and fitness complex. We were unable to raise
sufficient capital to develop these concepts. However, the marketing program
proposed to promote the business of these concepts included use of the
Internet based on early recognition of the marketing power inherent in this
medium and the low cost of entry. In seeking to capitalize on use of the
Internet, our management proposed to develop the USA SportsNet concept. We
also acquired rights to the Viper M1 paintball marker and related assets with
the intention to market paintball products over the Internet. This led to
formation of the USAPP subsidiary.
Our experience in marketing the Viper M1 over the Internet confirmed our
management's belief that focus on electronic commerce would provide the
greatest opportunity for future development of our business, and on January
27, 1999, we changed our name to eCom eCom.com, inc. in the belief that this
name more accurately reflects the nature of our intended core business,
electronic commerce. US Amateur Sports Company then became a wholly-owned
subsidiary of ECOM, and USA Performance Products, Inc. became a wholly-owned
subsidiary of US Amateur Sports Company. In addition, the assets of the USA
SportsNet business unit were transferred into US Amateur Sports Company.
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The purpose of these changes was to provide a structure that would
maximize our ability to pursue certain e-commerce concepts that extend beyond
the amateur sports market.
Investors are warned that our business strategy includes a novel use of
the Internet, and despite the recent success of other Internet-related
companies, there can be no assurance that we will be successful.
Electronic Commerce
- -------------------
The Internet is growing to become a part of everyday life in the world of
commerce. Our strategy is to capitalize on the need to facilitate commerce
through the use of the Internet. This strategic emphasis has caused our
company to evolve into three operating units. The eCom eCom SuperHUB is a
marketplace with multiple venues designed for business to consumer, business
to business and person to person Internet trading. "B2BPlus" is focused on
business to business website design, maintenance and marketing services. A
third unit is comprised of the operations of US Amateur Sports Company and its
subsidiaries.
Although the SuperHUB and B2BPlus are separate operating units, they
provide complementary services designed to facilitate web business
development. B2BPlus is a package of on-line tools and professional resources
that enable the entrepreneur who is not necessarily web-savvy to establish and
promote his business on the Internet. The SuperHUB provides a portal to
funnel traffic to the business within a marketplace that includes an on-line
mall in addition to auction, barter and classified ad venues. The combined
resources of B2BPlus and the SuperHUB enable us to fulfill our motto, "B2B
from A to Z. No experience needed."
B2BPlus Services
- ----------------
B2BPlus is designed to simplify the process of establishing and operating
a web business by leading the business client through step-by-step
instructions to develop his website and draw customers to his virtual store.
The new site can be hosted on the eCom domain, or we can assist our client to
register a unique domain address (URL) that can be hosted on our server. The
client chooses between our Fast Start Up Program (FSU) or our more
comprehensive e-Connect Program (e-Connect).
FSU is available for business owners who wish to create a web presence
quickly with minimal cost. The following services are provided for an annual
charge of $99:
- Creation of a web page with a unique URL and e-mail address or
with a direct link to the client's existing URL.
- Right to unlimited use of the SuperHUB's auction, classified and
barter venues and a one-year listing in the SuperHUB's searchable
directory.
- Access to the B2BPlus resource page which provides helpful
information such as an advertising guide, state tax information,
travel resources, etc.
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For a base fee of $89 per month (with additional charges assessed when
the client opts for certain value-added services), e-Connect combines the
features of FSU with the powerful web-based tools of the iHOST Pro Site
Wizard. The client receives:
- Sophisticated website development tools with customized colors,
graphics and logos.
- Browser-based storefront construction with the ability to add
products individually or import a large number of products from
existing databases.
- Shopping cart and secure credit card transactions with real time
authorization.
- Submission to listings and search engines using key words and key
word searching to facilitate user interaction with the site.
- Use of back-office software for product management and fulfillment
support.
- Graphical site usage reports.
- Editing capability to dynamically manage text, images and page
organization.
After construction of the on-line business has been completed, our client
is eligible to join other merchants in the SuperHUB's on-line mall.
eCom eCom SuperHUB
- ------------------
The SuperHUB is a marketplace composed of a merchant mall and an auction
site combined with venues for advertising and trading through classified ad
and barter formats. A multi-purpose facility, the SuperHUB serves as a portal
to bring traffic to a site structured to accommodate trade between businesses
(B2B), between businesses and consumers (B2C) and between consumers themselves
(C2C). Trading through the auction, classified and barter sites is free to
all, a feature intended to increase consumer traffic.
Placement in the eCom eCom SuperHUB Merchant Mall is a significant
benefit to new web businesses. The mall currently is an entrance to over
sixty-five stores including prominent merchants such as Disney, Hallmark,
eToys, The Sharper Image and Office Max. (Through our affiliate program, we
receive a percentage of any sales generated when customers patronize
participating mall stores.) The mall provides visitors with a search engine
and a directory for easy navigation. New web businesses receive equal billing
with established retailers when the customer searches the mall. This levels
the "e-commerce playing field" in a way that can never be accomplished in
traditional retail outlets.
Use of the auction, classified and barter sites is an added benefit to
our merchant clients. The auction site allows anyone with a personal computer
to reach potential buyers all over the world to auction off any item to the
highest bidder. To auction an item, the seller selects the product category
in which he would like the item listed. He can then insert scanned or
electronically downloaded photographs of the item plus descriptive text. The
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seller may optionally elect enhanced selling features, such as bold item
headings, for a nominal fee. The auction format is then selected, ranging
from the traditional English auction procedure, in which "reserves" (similar
to minimum bids) are allowed, to a Dutch auction format, commonly used for
selling quantities of like items wherein the items are sold for a single
"market" price which is determined using a bid format.
The classified ad and barter venues are bulletin boards with a world-wide
reach, an obvious advantage for the seller who does not wish to restrict the
geographical scope of his market to the area of distribution provided by a
newspaper. With the growing cost of newsprint advertising, these venues
provide an attractive advertising alternative.
Our new website offering the services of B2BPlus and the eCom eCom
SuperHUB was launched at www.ecom.com on February 29, 2000. Preliminary
advertising to promote the FSU program has appeared in PC World magazine and
in the in-flight magazines of several major airlines. We are following up the
leads developed from these advertisements through telemarketing. A major
portion of the capital that may be received from our Investment Agreement with
Swartz Private Equity (See "The Investment Agreement" on page 24.) will be
used to buy advertising space in all media, but we plan to place a heavy
emphasis on television. This effort will be led by our Vice President of
Operations who recently joined us from Paxson Communications following a
twenty-five year career in the television industry.
US Amateur Sports
- -----------------
US Amateur Sports Company (USASC) is a wholly-owned subsidiary of eCom
eCom.com, inc. USASC holds several developmental assets and is the parent to
our wholly-owned subsidiary, USA Performance Products, Inc.
USA Performance Products
------------------------
USA Performance Products, Inc. (USAPP) was incorporated in the State of
Florida on January 20, 1998 to manufacture and distribute paintball guns and
accessories. Through USAPP we introduced the Viper M1, a durable, mid-priced
paintball gun with high-priced features, and then used the business unit as an
internal test model for our e-commerce concepts.
Paintball is a sport in which each contestant attempts to remove the
other contestants from the game by marking them with a capsule from the
paintball marker while at the same time trying to avoid being removed from the
game himself. The game can be played either indoors or outdoors and, except
for the paintball marker and face mask, it does not require extensive
equipment. There are many different ways to play paintball. In general, a
player uses the marker to "shoot" at other players or at specific targets. It
is most often played as a team event. Some universities have adopted the
sport as a course offering for the teaching of team building skills.
Corporations view the game as an opportunity for employees to increase
leadership and communication skills, to exercise and to have fun. Paintball,
conceived in 1981, is played in over 40 countries and has its own annual World
Cup event.
In 1996, we purchased certain assets of Performance Paintball Products,
Inc. of Riviera Beach, Florida. These assets consist of inventory, property
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and equipment, including the tools and dies necessary to manufacture the Viper
M1. The assets also include exclusive rights to the related names and
technology.
We initially subcontracted the manufacture and assembly of the Viper M1
paintball products to a company that proved to lack the capacity to produce
the paintball marker in quantities sufficient to meet demand. In 1998, we
leased approximately 6,000 square feet of commercial space in Riviera Beach,
Florida. The creation of an in-house production capability has allowed us to
grow to meet demand for the marker.
Having demonstrated the ability to manufacture the product in-house, our
advertising was expanded in mid-1999 to increase penetration of this segment
of the paintball market. To date, the majority of Viper M1 sales have been
through our e-commerce program. However, we have also contracted for
advertising in the leading paintball-related magazines and trade journals.
The popularity of paintball has created a market for equipment,
accessories, clothing and protective gear. To respond to this opportunity, we
linked the power of toll-free telecommunications with the global reach of the
Internet. In mid-1999, we implemented the use of the toll-free telephone
number, 1-800-PAINTBALL, and the Internet address, www.800paintball.com, which
leads to USAPP's paintball website. Since the introduction of our plan to use
the advertising advantages inherent in the combination of these two forms of
electronic commerce, paintball sales have posted an average month to month
increase of 35%. Our production is now fully capable of meeting the demand,
and we are expanding our customer service staff. To date, substantially all
of our revenues have come from the sale of paintball products.
Other Assets
- ------------
USA SportsNet is an Internet portal that is intended to enable amateur
athletes and their high school and youth athletic organizations to access
information, products and services to support their sports activities.
Through USA SportsNet, scores, standings, schedules and highlights of local
amateur athletic competitions can be posted free of charge by any community
recreation department, youth league or school. Local organizations can use
the site to sell advertising to raise funds for their programs. This local
information is intended to appear adjacent to features of interest to athletes
everywhere within a sports meeting place that offers a resource never
available before. An online correspondence course provides youth sports
organizations with a convenient and cost-effective means of ensuring that
volunteers are qualified to coach young athletes. Those aspiring athletes
will be able to learn how to throw a curve ball, receive tips from the pros,
find the best deals on sports equipment, and even view film of their own
sports achievements.
Responsibility for posting information of local interest will reside with
local athletic organizations, while portions of the website of interest to all
athletes will be maintained by us. We intend to retain the services of sports
celebrities to promote the concept and to answer the questions posed by young
athletes.
We believe that the USA SportsNet grassroots approach will attract
millions of visitors from a market that we estimate to include approximately
one hundred million amateur athletes, traversing all demographics. We expect
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the site to become a popular place for the merchants who are drawn to the
amateur sports market. We then expect to generate revenue from advertising in
addition to the sale of products through the website.
Development of the USA SportsNet concept was deferred in order to focus
on our other electronic commerce concepts. However, the online correspondence
course is presently available and is maintained through an agreement with the
North American Youth Sport Institute.
The All American Bowl is a high school football all-star game, last
played in 1997 when it was broadcast by the Sunshine Network and FOX SportsNet
to over 40 million households. The game showcases the top college football
recruits in the nation and promises to serve as an effective promotional
vehicle for our Internet concepts.
Major sponsors of the 1997 All American Bowl included Coca-Cola, Adidas
and Schutt Sports. We think that the very positive response to the game in
1997 is an indication that this event has the potential to attract sufficient
sponsorship in the future to contribute to Company profitability. However, we
now view the game as a special component of our future marketing programs
rather than as a separate profit center.
ProCard/ComCard is a prepaid telephone card concept with features geared
to the youth market. Designed to be marketed through youth sports
organizations, the ProCard is programmed with speed-dial numbers to quickly
reach family members and other important emergency contacts, such as the
family doctor, in the event of injury. Mailboxes can be speed-dialed to
access emergency medical information such as blood type, allergies and special
medical conditions. The accompanying ComCard is retained by parents to
control the speed-dial numbers programmed into the ProCard. We plan to
incorporate the ProCard/ComCard concept in the programs promoted through the
USA SportsNet.
Star Dot Marketing
------------------
On February 3, 2000 we entered into a Stock Exchange Agreement with the
shareholders of Star Dot Marketing, Inc. ("SDMI") which provides for the
transfer of all the outstanding Common Stock of SDMI to eCom in exchange for
675,000 shares of our Common Stock. It is currently anticipated that the
transaction will close before the end of April.
SDMI uses the trade name "Treasures of Sports" to offer a complete line
of guaranteed authentic, hand signed sports memorabilia and other sports
products. These products are marketed through joint sales agreements with
professional sports franchises including the San Francisco Giants, Los Angeles
Dodgers, Detroit Tigers, Baltimore Orioles, Golden State Warriors, Detroit
Pistons and Pittsburgh Penguins. SDMI also creates specialty products for
businesses to use as gifts, awards, premiums and employee incentives.
We intend to utilize the same marketing and sales program for SDMI
products as we have developed for our paintball products. This program
includes both a related website as well as a toll-free number.
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Competition
- -----------
The explosive growth of the Internet and electronic commerce has created
unparalleled opportunity for the Web entrepreneur. With the widespread
recognition of this opportunity, the competition for a share of this huge
developing market is extremely strong. In fact, it is this competitive
atmosphere that gives birth to the concept of the complementary services of
the eCom eCom SuperHUB and B2BPlus. Our mission is to enable start-up, small
and home-based businesses to compete in the e-commerce market.
In providing these services, we currently or potentially compete with
many other companies. There are a considerable number of companies that
market web creation, maintenance and marketing services to other businesses.
These other companies include such well-established competitors as Yahoo!
which offers tools for do-it-yourself website creation. Some offer free e-
commerce sites such as Bigstep.com. Bcentral.com offers business advice and
services. VerticalNet is the leader in industry-specific business hubs.
There are many other companies that offer a site or a service that competes
with an individual component of the SuperHUB and B2BPlus programs. For
example, eBay, Amazon.com and numerous smaller auction sites compete with the
auction venue of the SuperHUB. America Online, Lycos and Microsoft offer
business-to-consumer trading services and classified ad services. Other large
companies with strong brand recognition and experience in online commerce,
such as Cendant Corporation, QVC, USA Network and large newspaper or media
companies, also may seek to compete in these online markets. We are not aware
of any competitors presently that focus on the small business segment of the
e-commerce market and that provide the complete package of resources and
services offered by our programs. However, it is likely that, unknown to us,
competitors do currently exist within this market sector and that, in the
future, increased competition will develop within this market sector.
The principal competitive factors in the e-commerce market include
financial strength, volume of transactions and selection of goods, community
cohesion and interaction, system reliability, customer service, reliability of
delivery and payment by users, brand recognition, website convenience and
accessibility, level of service fees and quality of search tools. All of
these factors must be satisfactorily addressed in order for us to compete
successfully. Because our market includes businesses owned by entrepreneurs
who are not web-savvy, we intend to distinguish our services by providing a
high level of customer service. For example, while some competitors provide
on-line tools for website creation, the aspiring web entrepreneur typically is
left on his own to struggle with the details of implementation. In contrast,
we intend to "hold the hand" of our client merchants to guide them through the
creative process. To build the strong customer service department that will
be needed, to advertise our services and gain brand recognition, and to
promote our site to draw traffic into the SuperHUB will require considerable
financial resources. This need may be met with proceeds from the Investment
Agreement with Swartz Private Equity, LLC, if any. (See "THE INVESTMENT
AGREEMENT" below.)
Within the paintball market, we have established a competitive advantage
by acquiring the toll-free number 1-800-PAINTBALL coupled with the
800paintball.com URL. However, there are a substantial number of known
production paintball markers, in addition to custom-made markers, that are
presently in the marketplace. These compete directly with the Viper M1. Some
of the major competitors include Brass Eagle (formerly Daisy Manufacturing),
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Tippman, Kingman, WORR Products and Air Design. We know of three major
distributors that compete with us in the distribution of other paintball
products including National Paintball, 888 Paintball and Pursuit Marketing,
Inc. All of these companies have been established longer than we have, and
some of the companies may be better funded than we are.
In order to respond to changes in the competitive environment, we may,
from time to time, make pricing, service or marketing decisions or
acquisitions that could harm our business. New technologies may increase the
competitive pressures by enabling our competitors to offer a lower cost
service or product. Web-based applications that direct Internet traffic to
certain websites may channel potential visitors to trading services that
compete with ours. Whether we are able to compete successfully will depend on
our ability to anticipate and respond in a timely and appropriate manner to
these changes.
Litigation
- ----------
We are not involved in any litigation and the officers and directors are
aware of no threatened or pending litigation which would have a material,
adverse effect on eCom.
Government Regulation
- ---------------------
Currently, there is no government regulation that materially affects our
business operations.
Property
- --------
We lease approximately 5,720 square feet of office and warehouse space
located at 8125 Monetary Drive, Suite H-4 in Riviera Beach, Florida pursuant
to a written lease agreement with an unaffiliated party. The term of our
lease is from June 15, 1998 to June 30, 2001. Our rent is approximately
$3,000 per month. In addition, we lease approximately 1,500 square feet of
space at 3801 PGA Boulevard, Suite 1001, Palm Beach Gardens, Florida. This
space is leased on a month-to-month basis at a rental rate of approximately
$4,000 per month.
THE INVESTMENT AGREEMENT
On May 13, 1999, we entered into an Investment Agreement and a
Registration Rights Agreement with Swartz Private Equity, LLC ("Swartz"). On
April 6, 2000 we signed an Amended and Restated Investment Agreement with
Swartz which took the place of the May 13, 1999 Investment Agreement. Any
reference to the "Investment Agreement" in this Prospectus shall mean the
Amended and Restated Investment Agreement. Pursuant to the terms of the
Investment Agreement, we may, in our sole discretion and subject to certain
restrictions, periodically sell ("Put") shares of eCom's Common Stock for up
to $30,000,000 to Swartz on the effective registration of such Put shares and
continuing for a period of thirty-six months thereafter. The Investment
Agreement allows us to choose to sell Common Stock to Swartz at times which we
decide are advantageous. The Investment Agreement is not a debt instrument.
Any Put exercised by us is the sale of Common Stock and not a loan.
24
<PAGE>
PUT RIGHTS. An advance put notice must be delivered to Swartz at least
ten business days prior to the date that we intend to sell the Common Stock to
Swartz. The advance put notice must state the put date as well as the number
of shares of Common Stock that we intend to put to Swartz. The notice may
also state a minimum purchase price per share which cannot be greater than 80%
of the closing bid price of our Common Stock on the date of the advance put
notice.
After the registration statement to which this Prospectus relates is
declared effective, the number of shares Swartz may be required to purchase in
a given Put will be the lesser of the actual number of shares we intend to
sell to Swartz as set forth in the Advance Put Notice and the Individual Put
Limit. The Individual Put Limit is equal to the lesser of (I) 15% of the sum
of the aggregate daily reported trading volumes in the outstanding Common
Stock on our principal market, excluding any block trades of 20,000 or more
shares of Common Stock for all evaluation days in the pricing period; (ii) the
number of Put Shares which, when multiplied by their respective Put Share
Prices, equals the Maximum Put Dollar Amount (the lesser of the maximum put
amount set forth in our Advance Put Notice or $10,000,000); or (iii) 9.9% of
the total amount of our Common Stock that would be outstanding upon completion
of the Put.
PUT PRICE. The purchase price for the Put Shares will be equal to the
lesser of the Market Price for such Put minus $.25 or 92% of the Market Price
(lowest closing bid price for the Common Stock on the principal market during
the twenty day pricing period following the date of the Put Notice), but in no
event can it be less than our designated minimum put share price, if any, as
set forth in the Advance Put Notice.
WARRANTS. At the time of each Put, Swartz will be issued a Purchase
Warrant which will give the holder the right to purchase up to eight percent
(8%) of the number of Put shares issued to Swartz in that Put. Each Purchase
Warrant will be exercisable at a price equal to 110% of the Market Price on
the Purchase Period End Date (as such term is defined in the Investment
Agreement) and will have semi-annual reset provisions. Each Purchase Warrant
will be immediately exercisable and will terminate on a date which is five
years after the date of issuance. The terms of the Purchase Warrants allow
for a non-cash exercise (so long as the shares underlying the warrants are not
registered pursuant to an effective registration statement). The shares
underlying the Commitment Warrants are being registered pursuant to the
registration statement to which this Prospectus relates.
COMMITMENT WARRANTS. In partial consideration of the Investment
Agreement, we issued warrants to Swartz (the "Commitment Warrants") to
purchase 490,000 shares of our Common Stock. The Commitment Warrants are
currently exercisable at the price of $2.50 per share, which price was
adjusted, pursuant to the Investment Agreement, from the original exercise
price of $13.275. Each Commitment Warrant is immediately exercisable and
terminates five years after the date of issuance (April 18, 2004). The shares
underlying the Commitment Warrants are being registered pursuant to the
registration statement to which this Prospectus relates.
SHORT SALES. Swartz and its affiliates are prohibited from engaging in
short sales of our Common Stock unless they have received a Put Notice and the
amount of shares involved in a short sale does not exceed the number of shares
speficied in the Put Notice.
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CANCELLATION OF PUTS. We must cancel a particular put if between the
date of the advance put notice and the last day of the pricing period:
- we discover an undisclosed material fact relevant to Swartz's
investment decision;
- the registration statement registering resales of the Common Shares
becomes ineffective; or
- shares are delisted from the then primary exchange.
The pricing period for that Put shall end as of the preceding business day,
and the Put shall remain effective for the shortened pricing period.
NON-USAGE FEE. If we have not put a minimum of $1,000,000 in aggregate
Put Dollar Amount during any six month period of time during the term of the
Investment Agreement, we will be required to pay Swartz a non-usage fee equal
to the difference of $100,000 minus 10% of the aggregate Put Dollar Amount of
the Put Shares put to Swartz during such six month period. In the event that
we deliver a termination notice to Swartz or an automatic termination occurs,
we must pay Swartz a termination fee equal to the difference of $200,000 minus
10% of the aggregate Put Dollar Amount of the Put Shares put to Swartz during
all Puts to such date.
SHAREHOLDER APPROVAL. We may issue more than 20% of our outstanding
shares. If we become listed on the Nasdaq Small Cap Market or Nasdaq National
Market, then we must get shareholder approval to issue more than 20% of our
outstanding shares. Since we are currently a bulletin board company, we do not
need shareholder approval.
TERMINATION OF INVESTMENT AGREEMENT. We may also terminate our right to
initiate further puts or terminate the Investment Agreement by providing
Swartz with notice of such intention to terminate; however, any such
termination will not affect any other rights or obligations we have concerning
the Investment Agreement or any related agreement.
RESTRICTIVE COVENANTS. During the term of the Investment Agreement and
for a period of one year thereafter, we are prohibited from certain
transactions. These include the issuance of any debt or equity securities in a
private transaction which are convertible or exercisable into shares of Common
Stock at a price based on the trading price of the Common Stock at any time
after the initial issuance of such securities or with a fixed conversion or
exercise price subject to adjustment. We are also prohibited from entering
into any private equity line type agreements similar to the Investment
Agreement without obtaining Swartz's prior written approval.
RIGHT OF FIRST REFUSAL. Swartz has a right of first refusal to purchase
any variable priced securities offered by us in any private transaction which
closes on or prior to six months after the termination of the Investment
Agreement.
SWARTZ'S RIGHT OF INDEMNIFICATION. We are obligated to indemnify Swartz
(including their stockholders, officers, directors, employees and agents) from
all liability and losses resulting from any misrepresentations or breaches we
made in connection with the Investment Agreement, our Registration Rights
Agreement, other related agreements or the registration statement.
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USE OF PROCEEDS
The proceeds from the sale of the shares of Common Stock offered hereby
will be received directly by Swartz. We will not receive any proceeds from
the sale of the shares of Common Stock offered hereby. We will receive,
however, proceeds from the sale of our Common Stock to Swartz.
DILUTION
As of February 29, 2000, we had a net tangible book value of ($736,020),
or approximately ($.056) per share, based upon the number of shares of Common
Stock outstanding. "Net tangible book value" represents total tangible assets
reduced by total liabilities. The following table illustrates the per share
dilution to new shareholders:
Dilution to New Shareholders
Estimated offering price $ 2.250
Net tangible book value before Offering $(0.056)
Increase attributable to payments by
new shareholders $ 0.518
Net tangible book value after Offering $ 0.462
Dilution to new shareholders $ 1.788
SELECTED FINANCIAL INFORMATION
The following selected financial information should be read in
conjunction with the financial statements of the Company and the notes thereto
included elsewhere herein.
1996 1997 1998 1999
---- ---- ---- ----
Net Revenues $ 3,448 $ 48,381 $ 149,582 $ 228,613
Income/(loss) from Operations $ (57,112) $(240,018) $(143,051) $(374,085)
Income/(loss) from Operations
Per Share* $ (.010) $ (.040) $ (.019) $ (.031)
Total Assets $ 233,574 $ 176,933 $ 323,561 $ 467,825
Total Liabilities $ 220,122 $ 279,513 $ 388,932 $ 456,259
Stockholders' Equity (Deficit) $ 13,452 $(102,580) $ (65,371) $ 11,566
___________
* Loss per share was calculated using the weighted average of Common Stock
issued and outstanding. Basic and diluted loss per share are the same. eCom
has issued no securities such as options (except for options issued on
January 2, 2000 to purchase an aggregate of 50,000 shares), warrants or
convertible securities or entered into any contingent stock agreements. Had
eCom entered into any such arrangements, the effect would have been anti-
dilutive.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
accompanying consolidated financial statements for the nine-month periods
ended February 29, 2000 and 1999 and the Forms 10-KSB for the fiscal years
ended May 31, 1999 and 1998.
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Special Note Regarding Forward-Looking Statements
- -------------------------------------------------
Certain statements in this Prospectus and elsewhere (such as in other
filings by us with the Securities and Exchange Commission ("SEC"), press
releases, presentations by us or our 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. Our 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
our products and services. eCom undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements, which may be
made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
Overview
Corporate Restructuring
- -----------------------
On December 17, 1998, our directors voted to change our name from US
Amateur Sports, Inc. to eCom eCom.com, inc. in the belief that the proposed
name more accurately reflected the nature of our core business, electronic
commerce. At a Special Meeting of Shareholders held on January 25, 1999, our
shareholders approved an amendment to our Articles of Incorporation in order
to adopt the new name. At that time, a current report on Form 8-K was filed
with the Securities and Exchange Commission, and the name change became
effective on January 27, 1999.
Also on January 27, 1999, Articles of Incorporation of US Amateur Sports
Company were filed with the State of Florida. US Amateur Sports Company
became a wholly-owned subsidiary of eCom eCom.com, inc., and USA Performance
Products, Inc. became a wholly-owned subsidiary of US Amateur Sports Company.
In addition, the assets of the USA SportsNet business unit were transferred
into US Amateur Sports Company.
The purpose of these changes was to structure eCom to maximize its
ability to pursue certain e-commerce concepts that extend beyond the amateur
sports market.
Electronic Commerce
- -------------------
Our approach to Internet commerce has caused our company to evolve into
three operating units: eCom eCom B2BPlus, eCom eCom SuperHUB and US Amateur
Sports Company.
The B2BPlus program and the SuperHUB provide complementary services to
support new web entrepreneurs. B2BPlus is a package of on-line tools and
professional resources to help business people who are not web-savvy put their
business on the Internet. Their business then has a home in our SuperHUB.
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The SuperHUB is an e-commerce marketplace that funnels traffic to
participating merchants. Visitors shop in an on-line mall in addition to
auction, barter and classified ad sites. The combined resources of B2BPlus
and the SuperHUB enable us to fulfill our motto: "B2B from A to Z. No
experience needed."
eCom eCom B2BPlus
-----------------
The B2BPlus program makes it simple for anyone to engage in e-commerce by
offering cost-effective ways to establish and operate an Internet company.
Most small businesses have limited resources and need a simple, expedient and
inexpensive way to get on the Internet. We offer our clients two options -
Fast Start Up and e-Connect - to get their Internet businesses up and running.
The Fast Start Up program is a quick, economical way for a small business
to establish its presence on the Web. For $99 per year, a web page is created
for the business. The business then is automatically included in our Merchant
Mall and has unlimited use of our classified, barter and auction venues to
advertise and promote their products and services.
The e-Connect program offers a full gamut of e-commerce enabling products
and services. It combines the features of our Fast Start Up program with
other tools needed to compete with larger, more-established companies. These
include web hosting and maintenance, secure payment and order processing,
custom application and online storefront development, marketing, advertising,
technical and administrative support, customer acquisition and order
fulfillment. In addition, clients have access to tips and other information
designed to help them succeed in the e-commerce marketplace. The cost of the
e-Connect program starts at $89 per month.
eCom eCom SuperHUB
------------------
The SuperHUB is an e-commerce marketplace, a shopping portal that brings
sellers and buyers together. Buyers can browse and search for money-saving
deals on merchandise in storefronts located in the Merchant Mall. Merchants
can share mall space and Internet traffic with top brand name affiliates. The
SuperHUB provides four ways to buy and sell merchandise through storefronts,
online auctions, barter and classified ad formats. We believe we are the only
e-commerce shopping portal to offer all of these options.
US Amateur Sports Company
US Amateur Sports Company is a wholly-owned subsidiary of eCom eCom.com,
Inc. US Amateur Sports holds several developmental assets and is parent to
the wholly-owned subsidiary, USA Performance Products, Inc.
Paintball
---------
USA Performance Products manufactures and distributes paintball guns and
accessories. Manufacturing is limited to production of the Viper M1, a
durable, mid-priced paintball gun with high-price features. After the
introduction of the Viper M1, we used the business unit as an internal test
model for our e-commerce concepts. Paintball magazines provide the primary
venue for advertising within the industry, but our reliance on this medium has
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been reduced by the success of our websites. In fact, the success of our web
marketing efforts generated a demand for the Viper M1 product line that
exceeded our manufacturing resources.
During the prior fiscal year, we moved production of the Viper M1 from a
subcontractor to in-house facilities. Although this created a period of
manufacturing down-time, it has allowed us to expand our production
capabilities so that we now are able to satisfy current demand.
During the third quarter of the 1999 fiscal year, we acquired the toll-
free telephone number 1-800-PAINTBALL and the Internet domain name
800paintball.com. The use of these marketing tools enabled us to sell other
manufacturers' products in addition to our own, thus making us a distributor
and significantly expanding the scope of our paintball business. Following
the introduction of these two forms of electronic commerce at the beginning of
the current fiscal year, paintball sales have posted an average month to month
increase of 35%. To date, substantially all of our revenues have come from
the sale of paintball products.
Other Assets
------------
USA SportsNet is an Internet portal intended to enable amateur athletes
and their high school and youth athletic organizations to access information,
products and services to support their sports activities. It will include a
site to post scores, standings, schedules and highlights of local amateur
athletic activities free of charge. We believe that the USA SportsNet concept
will draw heavy traffic from the huge amateur athletic market and the
merchants who cater to this market. We then expect to generate revenue from
advertising in addition to the sale of products through the website.
Development of USA SportsNet was deferred in order to focus on the SuperHUB
and B2B concepts.
The All American Bowl is a high school football all-star game last
played in 1997 when it was broadcast to over 40 million households. The game
showcases the top college football recruits in the nation and promises to
serve as an effective promotional vehicle for our Internet concepts.
ProCard/ComCard is a prepaid telephone card concept with special features
geared to the youth sports market. Along with the All American Bowl, we
believe the card will be a useful tool in our corporate marketing program.
Swartz Agreement
- ----------------
On May 13, 1999, we entered into an Investment Agreement and a
Registration Rights Agreement with Swartz Private Equity, LLC ("Swartz"). On
April 6, 2000 we signed an Amended and Restated Investment Agreement with
Swartz. Pursuant to the terms of the Investment Agreement, we may, in our
sole discretion and subject to certain restrictions, periodically sell ("Put")
shares of eCom's Common Stock for up to $30,000,000 upon the effective
registration of such Put shares and continuing for a period of thirty-six
months thereafter. The Investment Agreement allows us to choose to sell
Common Stock to Swartz at times which we decide are advantageous. The
Investment Agreement is not a debt instrument. Any Put exercised by us is the
sale of Common Stock and not a loan. For more detailed information concerning
the Swartz Agreement, please see "THE INVESTMENT AGREEMENT" on page 24 of this
Prospectus.
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Star Dot Marketing
- ------------------
On January 21, 2000 we entered into a Stock Exchange Agreement with the
shareholders of Star Dot Marketing, Inc. ("SDMI") which provides for the
transfer of all the outstanding common stock of SDMI to eCom eCom.com, Inc.
("ECOM") in exchange for 675,000 shares of our common stock. It is currently
anticipated that the transaction will close before the end of April 2000. SDMI
uses the trade name "Treasures of Sports" to offer a complete line of
guaranteed authentic, hand signed sports memorabilia and other sports
products. These products are marketed through joint sales agreements with
professional sports franchises including the San Francisco Giants, Los Angeles
Dodgers, Detroit Tigers, Baltimore Orioles, Golden State Warriors, Detroit
Pistons and Pittsburgh Penguins. SDMI also creates specialty products for
businesses to use as gifts, awards, premiums and employee incentives.
We intend to use the same marketing and sales program for SDMI products
as we have developed for our paintball products. This program includes both a
related website as well as a toll-free number.
Results of Operations for the fiscal year ended May 31, 1999
compared to the fiscal year ended May 31, 1998
- ------------------------------------------------------------
Revenue for the year ended May 31, 1999 was $228,613 compared to $149,582
during the prior year. All current period revenue consisted of sales of
paintball products. Therefore, the 53% increase in sales is attributable to
our paintball operations.
A net loss of $374,085 was posted during the year ended May 31, 1999
compared to a net loss of $143,051 for the prior year period. Cost of sales
increased $47,356 as a result of the growth in sales of the Viper M1. An
increase of $153,078 in sales and marketing expense consisted of expenditures
to promote our Internet presence in addition to increased advertising of the
Viper M1. Product development expense of $34,347 compared to $0 in the prior
year was associated with development of our Internet properties. General and
administrative expenses increased $64,711 as a result of necessary
administrative support for a larger base of operations and expected future
growth. Growth in rent, depreciation, office and other operating expenses was
created by relocation and equipping of our headquarters, while focus on
development of our Internet properties caused professional fees to rise.
Acquisition of Internet properties, including the AclassifiedAD and Swap and
Shop websites, plus purchase of the right to use the toll-free number 1-800-
PAINTBALL resulted in greater expense to amortize these intangible assets.
Results of Operations for the nine months ended February 29, 2000
compared to the nine months ended February 28, 1999
- ----------------------------------------------------------------
Revenue for the nine month period ended February 29, 2000 was $1,379,444
compared to $135,078 of revenue recorded during the same period of the prior
year. This increase, equivalent to over 900%, was created by expansion of our
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paintball business. During the prior period, production of the Viper M1
paintball marker was stifled by the inability of our primary subcontractor to
assemble the markers in sufficient quantities to satisfy demand. With
production transferred to in-house facilities, this problem was solved,
allowing us to meet a demand that is accelerating as a result of our
advertising efforts. The success of our advertising program stems from use of
the 1-800-paintball toll-free telephone number acquired early in 1999. Our
advertising copy promotes use of the number in addition to use of our web site
at www.800paintball.com.
During this start-up period of the 800-paintball program, we have relied
on other paintball distributors for procurement of paintball products other
than the Viper. With the growth in volume, we have begun negotiations
directly with manufacturers which will allow us to reduce our cost of sales
and increase gross profit margins. Although our gross profit increased from
$55,169 in the prior period to $95,027 in the current period, this represented
a decline in gross profit margin from 41% of sales in the prior period to 7%
in the current period.
A portion of the decline in gross profit resulted from recording costs
related to the electronic hosting of our web sites within current period cost
of sales. Our e-commerce web sites began operating in late April 1999 with
use of the sites available without charge. Significant revenues from these
sites will develop only after the funds needed for promotion of our new
e-commerce programs, the eCom eCom SuperHUB and eCom eCom B2B Plus, are
received through our financing activities.
Sales and marketing expenses have increased by $585,255, or 882%,
primarily as a result of the implementation of test marketing for our e-
commerce programs plus the addition of personnel for customer service to
support the sale of paintball products. Product development expense of
$421,154 incurred in the current period ($0 in the prior period) results from
our efforts to develop and refine our e-commerce properties. General and
administrative expenses have risen $424,622, or 374%, as the result of
additional salaries, consulting, and professional fees associated with our
Company's overall growth. Depreciation and amortization expense increased
$22,090, or 82%, primarily as the result of the addition of computers and
related electronic hardware. Interest expense is down slightly as the result
of less interest bearing debt outstanding.
Our developmental activities and the related expenditures resulted in a
net loss of $1,575,514 in the current year-to-date period compared to a loss
of $163,354 in the same period of the prior year.
Liquidity and Capital Resources
- -------------------------------
At May 31, 1999, current assets totaled $296,654 compared to $216,592 at
the prior year end. Accounts receivable increased $11,840 due to the growth
in paintball sales. An increase of $70,738 in inventories consisted of
paintball work-in-process and finished goods inventories. A reduction of
$18,831 in prepaid expense resulted primarily from the expensing of amounts
paid for advertising.
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<PAGE>
Current liabilities dropped from $272,518 at May 31, 1998 to $236,592 at
the current year end. Accounts payable decreased slightly from $131,704 to
$130,683, but $30,214 of the current portion of notes payable and $4,663 of
the related portion of accrued interest were eliminated from the prior year
balance.
Net cash used by operating activities was $400,150 and $167,275 for the
years ended May 31, 1999 and 1998, respectively. The principal use of cash in
both periods was to fund our net loss from operations. Other significant uses
of cash in the current year provided the increases in inventories and accounts
receivable.
Net cash used by investing activities was $108,882 during the year ended
May 31, 1999 and $34,372 during the prior year. All of the investment cash
used during the prior year purchased property and equipment. During the
current year, $51,220 was used to acquire property and equipment, and $57,662
was used for the acquisition of intangible assets.
Net cash provided by financing activities was $525,347 and $290,379 for
the years ended May 31, 1999 and 1998, respectively. Increased capital
contributions from private sales of restricted stock and the exchange of stock
for services produced current year cash flows of $451,021. Loans from
stockholders, which bear no interest, continued to be a significant source of
capital to fund operations, but these cash flows were offset by reductions in
notes payable.
At February 29, 2000, current assets totaled $493,808 compared to
$296,654 at the end of the prior fiscal year. Increases of $204,214 in
inventories and $59,754 in prepaid license fees and insurance offset decreases
in cash and accounts receivable. A $60,775 reduction in cash resulted from
our net loss year-to-date. Current liabilities grew from $236,620 at the
prior year-end to $847,010 at the end of the current period. This growth
primarily resulted from an increase of $599,597 in accounts payable and
accrued expenses, an increase created by the growth in inventories and
operating expenses.
Net cash used by operating activities during the nine months ended
February 29, 2000 totaled $1,170,791 compared to $195,994 during the same
period of the prior year. The principal use of cash in both periods was to
fund our net loss from operations.
Net cash used by investing activities increased from $37,950 in the prior
year period to $81,602 in the current year period due to the addition of
computer hardware and related electronic equipment.
Net cash provided by financing activities consisted of loans from
stockholders, which bear no interest, and capital contributions recorded from
the private sale of restricted stock. These cash flows totaled $1,191,618 in
the current year period compared to $303,254 in the same period of the prior
year.
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<PAGE>
We believe that the combination of revenues, loans from stockholders and
capital contributions will be sufficient to fund operations for the next
twelve months. The Investment Agreement with Swartz may provide us with an
equity line to be used to finance the expansion of our business through
acquisitions and internal growth. 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. There can be no assurance that additional
financing, if required, will be available to our company in amounts or on
terms that are acceptable.
Provision for Income Taxes
- --------------------------
No provision for federal and state income taxes has been recorded because
our company has incurred net operating losses since inception. Our net
operating loss carry-forwards as of May 31, 1999 total $920,006. These carry-
forwards will be available to offset future taxable income. If not used, the
operating loss carry-forwards will expire from 2010 to 2014. We do not
believe that the realization of the related deferred income tax assets meets
the criteria required by generally accepted accounting principles and,
accordingly, deferred income tax assets have been reduced to $0 as of May 31,
1999.
Market for Common Equity
- ------------------------
Following the change in our name discussed above, our Common Stock symbol
was changed to ECEC and the CUSIP number was changed to 27889U-10-2. The
stock continues to trade on the OTC Bulletin Board, and Equitrade Securities
Corporation of Lake Forest, California continues to serve as the lead market
maker for the stock.
MANAGEMENT
eCom's directors and executive officers as of February 29, 2000 are:
Name Age Position with Company
- ---- --- ---------------------
David J. Panaia 60 President, Treasurer and a Director
Thomas DeRita, Jr. 56 Secretary and a Director
Gerald V. Bergman 53 Director
Elling J. Myklebust 54 Vice President and Director
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<PAGE>
David J. Panaia, President, Treasurer and Director, is the founder of
eCom and has served as Director and President since we were incorporated in
June 1994. Mr. Panaia previously founded several other businesses, including
Gold Cross Ambulance Service, Inc. and Gold Cross Medical Services, Inc., and
acquired several other companies which were consolidated into Gold Cross,
Inc., which provided ground and air ambulance service, medical services,
equipment and supplies. After operating for over twenty years, Gold Cross was
sold in 1982. Mr. Panaia then founded Biomedics Corporation, a durable
medical equipment dealer, which he operated until its sale in 1988. Both
corporations were privately owned. From 1988 to 1994, he served as a
political and small business marketing consultant through his own firm,
Sunpoint Industries, Inc. Sunpoint offered political consulting services to
candidates and medical equipment businesses located in the United States. Mr.
Panaia has served in numerous community, business and political capacities.
He will concentrate full time in his duties as the President of eCom.
Gerald V. Bergman has served as a Director of eCom since June 1995. From
June, 1995 through May, 1998 he also served as Chief Financial Officer and
Treasurer. Effective May 31, 1998, Mr. Bergman resigned his position as CFO
and Treasurer. A CPA, Mr. Bergman joined Price Waterhouse & Co. in 1975 where
he was an audit manager. In 1980 he was appointed Director of Corporate
Planning and Analysis of the Red Lobster division of General Mills. In 1984
through 1985 he served as Vice President and Controller of J.L. Mason, Inc., a
homebuilder. Mr. Bergman then became the Chief Financial and Administrative
Officer and a Director of Overseas Service Corporation, an international
manufacturers' representative. He left Overseas Service Corporation in May
1992 to form DBS Associates, a business consulting firm that replaced a third
party rendering financial and administrative services to Overseas Service
Corporation. Mr. Bergman has served as chairman or as a member of numerous
civic and school task forces and committees. Mr. Bergman shall devote only as
much time as necessary in his position as a director of ECOM.
Thomas DeRita, Jr. joined eCom as a Director effective May, 1999.
Currently, Mr. DeRita serves as the President of Resource Group, N.A., Inc., a
public relations firm. From 1992 until 1999, Mr. DeRita served as President
of Stuart Nissan, an automobile dealership located in Stuart, Florida. From
1986 to 1992, Mr. DeRita was employed by Cuillo Enterprises of West Palm
Beach, Florida as its Chief Financial Officer. Cuillo Enterprises is a multi-
automobile dealership holding company. From 1983 to 1986, Mr. DeRita owned
and operated North Chrysler Plymouth Dealership in Houston, Texas. Mr. DeRita
received his associates' BA degree from Johnson & Wales Business School in
1966 and his BA in Business from The University of Rhode Island Extension in
1970. Mr. DeRita shall devote only as much time as necessary in his position
as a director of eCom.
Elling J. Myklebust was elected a Director of eCom on February 17, 2000.
He also serves as our Vice President of Internet Technology. Mr. Myklebust is
the founder and Chief Executive Officer of Lighthouse Communications Group,
LLC, a digital communications services company located in Arvada, Colorado.
Mr. Myklebust has held this position since December 1996. He holds a Bachelor
of Science degree in Civil Engineering from the University of Colorado and a
Masters degree in Environmental Policy and Management from the University of
Denver. Mr. Myklebust has held responsible positions in operations
management, strategic planning, business development, purchasing and materials
management, human resource management, project management, computer systems
operations and engineering, and holds registrations as a Registered
Professional Engineer in five states. Active in civic affairs, he has served
35
<PAGE>
as chairman or co-chairman of numerous Colorado gubernatorial task forces and
Denver committees. Mr. Myklebust shall concentrate full time on his duties at
eCom.
EXECUTIVE COMPENSATION
The following table provides information regarding the executive
compensation of eCom's executive officers for the fiscal years ended 1999,
1998 and 1997. No other executive officer received compensation in excess of
$100,000 during such periods.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Securities
Other Underlying All
Annual Restricted Options/ Other
Name and Principal Compen- Stock SARs LTIP Compen-
Position Year Salary Bonus sation Award(s) (Number) Payouts sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David J. Panaia 1999 -0- -0- -0- -0- -0- -0- -0-
CEO, President, 1998 -0- -0- -0- -0- -0- -0- -0-
Treasurer 1997 -0- -0- -0- -0- -0- -0- -0-
Guy T. Lindley 1999 -0- -0- -0- -0- -0- -0- -0-
Secretary and 1998 -0- -0- -0- -0- -0- -0- -0-
CFO 1997 -0- -0- -0- -0- -0- -0- -0-
Gerald V. Bergman 1999 -0- -0- -0- -0- -0- -0- -0-
CFO 1998 -0- -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0- -0- -0-
Thomas J. Thomas 1999 -0- -0- -0- -0- -0- -0- -0-
Secretary 1998 -0- -0- -0- 12,421 -0- -0- -0-
1997 -0- -0- -0- 1,557 -0- -0- -0-
</TABLE>
None of eCom's executive officers has an employment agreement or stock
option arrangement with eCom. It is intended that the directors be
compensated at the rate of $4,000 per year, plus $100.00 per meeting attended
and reasonable travel expenses if cash flow permits. To date, none of the
officers or directors has received a salary or other cash compensation. When
cash flow permits, it is anticipated that the officers will be compensated in
accordance with appropriate employment contracts.
DESCRIPTION OF INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Our bylaws provide for indemnification of officers, directors or eCom
agents against legal expenses, judgments, fines, settlements and other amounts
reasonably incurred by such persons after having been made or threatened to be
made a party to legal action. Payment of such amounts may also be made in
advance if expenses are likely to be incurred by officers, directors or agents
in defense of any such action.
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<PAGE>
The extent, amount and eligibility for the indemnification provided will
be determined by the Board of Directors. These indemnifications will be made
by a majority vote of a quorum of directors, including any director who is a
party to such action, suit, or proceeding or by the shareholders by a majority
vote of a quorum of shareholders including any shareholder who is a party to
such action, suit or proceeding. We are further authorized by the bylaws to
purchase insurance for indemnification of any person as provided by the bylaws
and to the extent provided by Florida law.
Florida Statutes Section 607.0850 authorizes indemnification of officers,
directors, employees and agents in instances constituting: (1) certain
violations of criminal law which the person did not know were illegal, or (2)
actions taken in good faith by persons which were intended to be in the best
interests of the corporation.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of eCom pursuant to the foregoing provisions or otherwise,
we have been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by eCom of expenses incurred or paid by a director,
officer or controlling person of eCom in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by eCom is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
RELATED PARTY TRANSACTIONS
Certain transactions to which we are a party and certain matters
affecting us have or will result in a material benefit to certain of our
directors and executive officers, or may create conflicts of interest, as
follows:
Linda Bergman was the sole owner of a privately-held business called
Amateur Athletes of America. She is also the wife of Gerald V. Bergman, who
is a Director and our former Chief Financial Officer. On November 23, 1996,
we issued an aggregate of 500,000 shares for cancellation of debt to Linda
Bergman and Gerald Bergman in the amount of $16,333. The Bergmans directed
that 460,000 shares be issued directly to Linda Bergman, and that each of
their four children be issued 10,000 shares.
Mr. Brody Brockman is the son-in-law of Gerald V. Bergman and is an
employee of US Amateur Sports Company. 25,000 shares were issued to Mr.
Brockman on November 23, 1996 as compensation for sales and shipping services.
Mr. Thomas J. Thomas is a Florida attorney who performed legal services
for us and also served as our Secretary and a Director. On May 31, 1997, we
issued 50,000 shares to Mr. Thomas as compensation for his legal services
performed prior to that date.
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<PAGE>
On August 12, 1997, we extended a promissory note in favor of Statex
Corporation in the amount of $100,000. The loan bears interest at the rate of
prime plus 6% and is due and payable in full in September 2000. Derek Panaia,
son of David Panaia, is the sole shareholder of Statex Corporation.
On February 6, 1998, we issued 5,000 shares to Angela Bergman as
compensation for her performing secretarial, receptionist and other services
for us. Angela Bergman is the daughter of Gerald V. Bergman and Linda
Bergman.
On February 6, 1998, we issued 5,000 shares to Mr. Brody Brockman as
compensation for his performing sales and shipping services for us. Mr. Brody
Brockman and Angela Bergman were recently married (June 12, 1999).
On February 27, 1998 we acquired certain assets of Amateur Athletes of
America, Inc. in a tax-free exchange of assets for stock. We acquired all
rights to the ProCard and ComCard plus certain Internet-based sports equipment
exchange concepts in exchange for 1,000,000 shares of Common Stock. The
ProCard and ComCard are prepaid telephone cards with unique emergency medical
features which are marketed through youth athletic organizations. A portion
of the stock was used for payment of a note held by Amateur Athletes of
America. Amateur Athletes of America, Inc. was a private corporation owned by
Linda C. Bergman, wife of Gerald V. Bergman, former corporate Chief Financial
Officer and a member of our Board of Directors.
On February 6, 1998, we issued 1,500,000 shares to Axis Enterprises
pursuant to an agreement with Axis Enterprises to provide management services
for USA Performance Products, Inc. and to provide financial assistance to us.
On February 6, 1998, we issued an additional 150,000 shares to Thomas J.
Thomas as compensation for legal services performed by him prior to that date.
On February 6, 1998, we issued 327,900 shares to David Panaia (the
Company's Chief Executive Officer, President and a Director) in cancellation
of indebtedness in the amount of $6,148.
On April 16, 1998, we issued 100,000 shares to Bonnie Panaia as
compensation for accounting and other services and issued an additional
400,000 shares to her as compensation for her services in connection with the
preparation of the infrastructure of our billing and online e-commerce
systems. Bonnie Panaia is the daughter of David Panaia, our Chief Executive
Officer, President and a Director.
On April 16, 1998, we issued 25,000 shares to Doug Panaia as compensation
for performing manual labor for us prior to that date. Doug Panaia is the
brother of David Panaia, our Chief Executive Officer, President and a
Director.
On April 16, 1998, we issued 150,000 shares as compensation for
engineering services performed by Jack Enterline for the Company prior to that
date. Mr. Enterline requested that the shares be issued in the name of his
wife, Karen. At the time these services were performed, Mr. Enterline served
as one of our Directors.
On April 16, 1998, we issued 200,000 shares to Gerald V. Bergman (our
Chief Financial Officer at that time) in cancellation of indebtedness in the
amount of $12,810.
38
<PAGE>
On April 16, 1998, we issued 200,000 shares to David Panaia (our Chief
Executive Officer, President and a Director) in cancellation of indebtedness
in the amount of $12,810.
On April 16, 1998, we issued an additional 150,000 shares to Thomas J.
Thomas as compensation for legal services performed by him prior to that date.
On January 22, 1999, we issued 60,000 shares to Angela Bergman as
compensation for her performing secretarial, receptionist and other services
for us. Angela Bergman is the daughter of Gerald V. Bergman and Linda
Bergman.
On January 22, 1999, we issued 30,000 shares to Mr. Brody Brockman as
compensation for his performing sales and shipping services.
On March 4, 1999, we issued an additional 62,000 shares to Axis
Enterprises in a privately-negotiated transaction in cancellation of
indebtedness to Axis in the amount of $11,780.
On May 16, 1999, we issued 100,000 shares to Resource Group, NA, Inc. for
promotional services performed for us. Thomas DeRita, a member of our Board
of Directors, is a shareholder in Resource Group, N.A., Inc.
On May 16, 1999, we issued 100,000 shares to Lighthouse Communications
Group, LLC for Internet development services. Elling Myklebust, a member of
our Board of Directors and our Vice President-Internet Technology since
February 2000, owns Lighthouse Communications Group, LLC.
On December 22, 1999, we issued 25,000 shares to Elling Myklebust for
Internet development services. Elling Myklebust became a director on February
17, 2000.
On December 22, 1999, we issued 10,010 shares to Christen Myklebust for
Internet development services. Christen Myklebust is the son of Elling
Myklebust.
On December 22, 1999, we issued an additional 1,000 shares to Brodie
Brockman for performing sales and shipping services.
On January 2, 2000, we issued options to our outside legal counsel,
Stanley F. Freedman and Sharon M. Link, to purchase up to 25,000 shares each
of our Common Stock at an initial exercise price of $1.00 per share as
additional compensation for performing legal services in connection with the
preparation and filing of our Exchange Act reports for the years 1996, 1997,
1998 and 1999.
Except as described above, no director, officer or principal
securityholder of eCom has or has had a direct or indirect material interest
in any transaction to which we are or were a party. We believe that the terms
of each of the transactions described above were no less favorable to us than
could have been obtained from third parties. However, it should be noted that
all stock issuances to affiliates are made at 95% discount from the then
market value of our Common Stock. In addition, in the future we will not enter
into additional transactions with directors, officers or principal
shareholders unless the terms thereof are no less favorable to us than could
be obtained from third parties.
39
<PAGE>
PRINCIPAL HOLDERS OF COMMON SHARES
As of the date of this Prospectus, we have a total of 50,000,000 shares
of Common Stock authorized at a par value of $.0001, and there are 14,310,675
shares of Common Stock outstanding. The following table sets forth
information, as of such date, with respect to the beneficial ownership of our
Common Stock by (a) each person known by us to be the beneficial owner of more
than 5% of our outstanding Common Stock, (b) the directors and officers of
eCom, and (c) the directors and officers of eCom as a group.
Number of % of Shares
Name and Address Shares Owned Outstanding
---------------- ------------ -----------
David J. Panaia (1) 2,212,400 16.05
10 Wyndham Lane
Palm Beach Gardens, FL
Gerald V. Bergman (2) 1,854,300 13.45
10692 Hidden Lake Circle
Palm Beach Gardens, FL
Thomas DeRita, Jr. 103,800 *
5770 Whirlaway Road
Palm Beach Gardens, FL
Elling J. Myklebust 150,000 1.09
1600 Jackson Street
Golden, Colorado 80401
Axis Enterprises, Ltd. 1,042,030 7.56
P. O. Box N1201
Nassau, Bahamas
All Officers and
Directors as a Group-4 5,362,530 38.91
persons
___________________________
* Less than one percent
(1) David J. Panaia, an officer and director of the Company, is the
beneficial owner of 400,000 shares held in the name of the Panaia Family Trust
and 50,000 shares held in the name of Barbara Panaia, wife of David Panaia.
(2) Gerald V. Bergman, a director of the Company, is the beneficial owner of
1,460,000 shares held in the name of Linda Bergman, wife of Gerald Bergman,
and 10,000 shares held by each of three of Mr. Bergman's children.
(3) Thomas DeRita, a director of the Company, is the beneficial owner of
65,000 shares held in the name of Barbara DeRita, wife of Thomas DeRita.
(4) Elling Myklebust, a director of the Company, is the beneficial owner of
100,000 shares held in the name of Lighthouse Communications Group, LLC, a
company in which Mr. Myklebust has voting/beneficial control.
40
<PAGE>
DESCRIPTION OF SECURITIES
eCom is authorized to issue 50,000,000 shares of Common Stock with a par
value of $.0001. Of these shares, 14,310,675 are issued and outstanding.
All issued shares of Common Stock are fully paid and non-assessable. All
shares of Common Stock have one equal non-cumulative vote on all corporate
matters which are the proper subjects of such votes. All shares participate
equally in any dividends or liquidation distributions. There are no pre-
emptive rights relative to the issuance of additional Common Stock. No
dividends have ever been paid, and none will be paid for the foreseeable
future.
The Swartz Warrants are exercisable at any time beginning on the date of
issuance thereof and ending on a date five years later. The shares of Common
Stock underlying the Swartz Warrants, when issued upon exercise in whole or in
part, will be fully paid and nonassessable, and we will pay any transfer tax
incurred as a result of the issuance of the Common Stock to the holder upon
its exercise.
Each of the Swartz Warrants contains provisions that protect the holder
against dilution by adjustment of the exercise price. Such adjustments will
occur in the event, among others, of a merger, stock split or reverse stock
split, stock dividend or recapitalization. We are not required to issue
fractional shares upon the exercise of any Registered Shareholder Warrants.
The Swartz Warrants may be exercised upon surrender on or before the
expiration date of the relevant Swartz Warrant at the offices of eCom, with an
exercise form completed and executed, accompanied by payment of the exercise
price for the number of shares with respect to which the Swartz Warrant is
being exercised. Each Swartz Purchase Warrant may be exercisable at a price
equal to 110% of the market price on the Purchase Period End Date (as such
term is defined in the Investment Agreement) and will have semi-annual reset
provisions. Each Swartz Commitment Warrant shall be intially exercisable at
$2.50. Payment of the Exercise Price may be made by either payment in cash,
bank or cashier's check or wire transfer, or a cashless exercise as that term
is defined in the Swartz Warrants.
For the life of each of the Swartz Warrants, the holder thereof has the
opportunity to profit from a rise in the market price of the Common Stock
without assuming the risk of ownership of the shares of Common Stock issuable
upon the exercise of a Swartz Warrant. The Swartz Warrantholder may be
expected to exercise the Swartz Warrant at a time when we would, in all
likelihood, be able to obtain any needed capital by an offering of Common
Stock on terms more favorable than those provided for by the Swartz Warrants.
Furthermore, the terms on which we could obtain additional capital during the
life of the Swartz Warrants may be adversely affected.
Transfer Agent. We have retained the services of Florida Atlantic Stock
Transfer, Inc. ("FAST") to serve as our transfer agent.
SWARTZ PRIVATE EQUITY, LLC
The following table sets forth certain information as of March 31, 2000,
with respect to Swartz Private Equity, LLC ("Swartz"). We will not receive
any of the proceeds from the sale of the shares by Swartz.
41
<PAGE>
Number Number
of Shares Maximum Number of Shares
Beneficially of Shares to be Beneficially
Owned Prior to Sold Pursuant to Owned After
Offering (1) This Prospectus Offering (2)
Name of Selling ------------------ ------------------- ------------
Shareholder Number Percent Number Percent
- ------------------------------------------------------------------------------
Swartz 4,810,000(3) 25%(3) 4,810,000(3) 25%(3) -0-
Private Capital, LLC
Atlanta, GA 30350
- -----------------------
(1) Except as otherwise indicated below, beneficial ownership for purposes of
this table is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Except as
indicated by footnote, Swartz has sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by it.
Includes (solely for purposes of this Prospectus) up to an aggregate of
4,000,000 shares of Common Stock that may be acquired by Swartz in connection
with the issuance and sale of shares of Common Stock to Swartz pursuant to the
Investment Agreement, 490,000 shares of Common Stock issuable upon exercise of
Warrants issued to Swartz and currently exercisable at an exercise price of
$2.50 and up to 320,000 shares of Common Stock issuable upon the exercise of
warrants that may be issued to Swartz, which shares would not be deemed
beneficially owned within the meaning of Sections 13(d) and 13(g) of the
Exchange Act prior to their acquisition by Swartz. See "The Investment
Agreement." Based on an aggregate of 14,310,675 shares of Common Stock issued
and outstanding as of March 31, 2000.
(2) Assumes that all of the Shares are sold pursuant to this Prospectus.
(3) As of the date of this Prospectus, Swartz owns no outstanding shares of
Common Stock of eCom. This number includes 490,000 shares of Common Stock
issuable upon exercise of outstanding warrants which are currently
exercisable, which represents less than 3% of the issued and outstanding
Common Stock of eCom as of March 31, 2000. Also includes (solely for purposes
of this Prospectus) up to an aggregate of 4,000,000 shares of Common Stock
that may be acquired by Swartz pursuant to the Investment Agreement (including
up to 320,000 shares of Common Stock issuable upon the exercise of warrants
that may be issued to Swartz), which shares would not be deemed beneficially
owned within the meaning of Sections 13(d) and 13(g) of the Exchange Act prior
to their acquisition by Swartz. See "The Investment Agreement."
Swartz has not had any material relationship with eCom or any of our
affiliates within the past three years other than as a result of the ownership
of securities of eCom, through the placement by Swartz or its affiliates of
securities of eCom or as a result of the negotiation and the execution of the
Investment Agreement and the Registration Rights Agreement. The natural
person controlling Swartz is Eric Swartz.
The shares of Common Stock offered hereby by Swartz were or will be
acquired pursuant to the Investment Agreement or upon exercise of the Swartz
Warrants. Under the Investment Agreement and the Registration Rights
Agreement, we agreed to register the shares of Common Stock offered hereby
42
<PAGE>
under the Securities Act, for resale by Swartz to permit their resale by
Swartz from time to time to the public without restriction. We will prepare
and file such amendments and supplements to the registration statement as may
be necessary in accordance with the rules and regulations of the Securities
Act to keep it effective until the earlier to occur of (i) the date as of
which all of the shares of Common Stock may be resold in a public transaction
without volume limitations or other material restrictions without registration
under the Securities Act, including without limitation, pursuant to Rule 144
under the Securities Act, or (ii) the date as of which all of the shares of
Common Stock offered hereby have been resold.
We have agreed to pay the expenses incurred (other than broker discounts
and commissions, if any) in connection with this Prospectus.
PLAN OF DISTRIBUTION
We have been advised by Swartz that all or a portion of the shares of
Common Stock offered by this Prospectus may be offered for sale, from time to
time, by Swartz in one or more private or negotiated transactions, in open
market transactions on the OTC Bulletin Board, in settlement of short sale
transactions, in settlement of option transactions, or otherwise, or a
combination of these methods, at prices and terms then obtainable, at fixed
prices, at prices then prevailing at the time of sale, at prices related to
such prevailing prices, or at negotiated prices or otherwise. Swartz may
effect these transactions by selling the shares of Common Stock offered hereby
directly to one or more purchasers or to or through other broker-dealers or
agents including: (a) in a block trade in which the broker or dealer so
engaged will attempt to sell the shares as agent, but may position and resell
a portion of the block as principal to facilitate the transaction; (b) in
purchases by another broker or dealer and resale by such broker or dealer as a
principal for its account pursuant to this Prospectus; (c) in ordinary
brokerage transactions; and (d) in transactions in which the broker solicits
purchasers. The compensation to a particular underwriter, broker-dealer or
agent may be in excess of customary commissions.
To our knowledge, Swartz has made no arrangement with any brokerage firm
for the sale of the shares of Common Stock offered hereby. We have been
advised by Swartz that it presently intends to dispose of the shares of Common
Stock offered hereby through its own account established at another broker-
dealer, or through other broker-dealers in ordinary brokerage transactions at
market prices prevailing at the time of the sale. However, depending on
market conditions and other factors, Swartz may also dispose of the shares
through one or more of the other methods described above. Concurrently with
sales under this Prospectus, Swartz may effect other sales of the shares of
Common Stock offered hereby under Rule 144 or other exempt resale
transactions. There can be no assurance that Swartz will sell any or all of
the shares of Common Stock offered hereby.
Swartz is an "underwriter" within the meaning of the Securities Act, in
connection with the sale of the shares offered hereby. Any other
broker-dealers or agents who act in connection with the sale of the shares may
also be deemed to be underwriters. Profits on any resale of the shares by
Swartz and any discounts, commissions or concessions received by any such
broker-dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.
43
<PAGE>
Any broker-dealer participating in such transactions as agent may receive
commissions from Swartz (and, if they act as agent for the purchaser of such
shares, from such purchaser). Broker-dealers may agree with Swartz to sell a
specified number of shares of Common Stock offered hereby at a stipulated
price per share and, to the extent such a broker-dealer is unable to do so
acting as agent for Swartz, to purchase as principal any unsold shares of
Common Stock at the price required to fulfill the broker-dealer commitment to
Swartz. Broker-dealers who acquire shares of Common Stock offered hereby as
principal may thereafter resell such shares from time to time in transactions
(which may involve crosses and block transactions and which may involve sales
to and through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market, in negotiated transactions or
otherwise at market prices prevailing at the time of sale or at negotiated
prices, and in connection with such resales may pay to or receive from the
purchasers of such shares commissions computed as described above. To the
extent required under the Securities Act, a supplemental prospectus will be
filed, disclosing (a) the name of any such broker-dealers; (b) the number of
shares of Common Stock involved; (c) the price at which such shares are to be
sold; (d) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable; (e) that such broker-dealers did not conduct
any investigation to verify the information set out or incorporated by
reference in this Prospectus, as supplemented; and (f) other facts material to
the transaction.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the shares of Common Stock offered hereby may not
simultaneously engage in market making activities with respect to the shares
for a period beginning when such person becomes a distribution participant and
ending upon such person's completion of participation in the distribution,
including stabilization activities in the Common Stock to effect covering
transactions, to impose penalty bids or to effect passive market making bids.
In addition to and without limiting the foregoing, in connection with
transactions in the shares of Common Stock offered hereby, eCom and Swartz may
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rule 10b-5 thereof and,
insofar as eCom and Swartz are distribution participants, Regulation M and
Rules 100, 101, 102, 103, 104 and 105 thereof. All of the foregoing may
affect the marketability of the shares of Common Stock offered hereby.
Swartz has agreed that it will not create or increase a net short
position with respect to the Common Stock, provided however, that Swartz may
enter into any short sale or other hedging or similar arrangement it deems
appropriate with respect to put shares after it receives a put notice, so long
as such sales or arrangements do not involve more than the number of put
shares in the put notice. Swartz has further agreed that it will not engage
in any trading practice or activity for the purpose of manipulating the price
of the Common Stock or otherwise engage in any trading practice or activity
that violates the rules and regulations of the SEC.
Swartz will pay all commissions, transfer taxes and other expenses
associated with the sales of shares of Common Stock by Swartz. The shares
offered hereby are being registered pursuant to contractual obligations of
eCom, and we have agreed to pay the expenses of the preparation of this
Prospectus. We have also agreed to indemnify Swartz against certain
liabilities, including, without limitation, liabilities arising under the
Securities Act.
44
<PAGE>
We may not receive any proceeds from the exercise of the Swartz Warrants,
if the warrants are exercised pursuant to a cashless exercise by Swartz. We
will not receive any of the proceeds from the sale of the shares of Common
Stock offered hereby by Swartz.
In order to comply with the securities laws of certain states, if
applicable, the shares of Common Stock offered hereby may be sold in these
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the shares of Common Stock offered hereby may not
be sold unless such shares have been registered or qualified for sale in these
states or an exemption from registration or qualification is available and
complied with.
The Common Stock of eCom is currently traded on the OTC Bulletin Board
under the symbol "ECEC."
EXPERTS AND COUNSEL
The audited financial statements of eCom eCom.com, Inc. in this
Prospectus have been audited by Hafer & Gilmer, P.A., 251 Royal Palm Way, Palm
Beach, Florida 33480, independent certified public accountants, to the extent
and for the periods set forth in their report thereon and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The audited financial statements of Star Dot Marketing, Inc. in this
Prospectus have been audited by Hood & Strong, LLP, 101 California St., San
Francisco, CA 94111, independent certified public accountants, to the extent
and for the periods set forth in their report thereon and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The law firm of Krys, Boyle, Freedman & Sawyer, P.C., 600 17th Street,
Suite 2700S, Denver, Colorado 80202 represented us in connection with certain
legal matters regarding the Offering, including the preparation of this
Prospectus.
On January 2, 2000, we issued options to our outside legal counsel,
Stanley F. Freedman and Sharon M. Link (attorneys with the law firm of Krys,
Boyle, Freedman & Sawyer, P.C.), to purchase up to 25,000 shares each of our
Common Stock at an initial exercise price of $1.00 per share as additional
compensation for performing legal services in connection with the preparation
and filing of our Exchange Act reports for the years 1996, 1997, 1998 and
1999. The options expire on January 2, 2005.
Each of the experts named above has consented to being named in this
Prospectus and to inclusion within this Prospectus of information provided in
its report.
ADDITIONAL INFORMATION
eCom has filed with the SEC a registration statement on Form S-1 (herein,
together with all amendments and exhibits, referred to as the "Registration
statement") under the Securities Act relating to the Shares being offered
pursuant to this Prospectus. For further information pertaining to the shares
of Common Stock to which this Prospectus relates, reference is made to such
Registration statement. This Prospectus constitutes the Prospectus of eCom
45
<PAGE>
filed as a part of the Registration statement and it does not contain all
information set forth in the Registration statement, certain portions of which
have been omitted in accordance with the rules and regulations of the SEC. In
addition, we are subject to the informational requirements of the Exchange Act
and, in accordance therewith, we file reports, proxy statements and other
information with the SEC relating to our business, financial statements and
other matters. Reports and proxy and information statements filed pursuant to
Section 14(a) and 14(c) of the Exchange Act and other information filed with
the SEC as well as copies of the Registration statement can be inspected and
copied at the public reference facilities maintained by the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's Midwest Regional Office at 500 West Madison Street, Chicago, Illinois
60606 and Northeast Regional Office at 7 World Trade Center, New York, New
York 10048. Copies of such material can also be obtained at prescribed rates
from the Public Reference Section of the SEC at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Such
material may also be obtained electronically by visiting the SEC's website on
the Internet at http://www.sec.gov. The Common Stock of eCom is traded on the
OTC Bulletin Board under the symbol "ECEC."
Our fiscal year is June 1 to May 31. We will provide shareholders with
quarterly reports of operations, including unaudited financial statements. We
will provide shareholders with annual reports of operations, including audited
financial statements.
46
<PAGE>
CONTENTS
Page
eCom eCom.com, Inc. Financial Statements
- ----------------------------------------
Report of Independent Auditors ................................ F-2
Consolidated Balance Sheets for fiscal years ended
May 31, 1999 and 1998 ....................................... F-3
Audited Consolidated Statements of Operations for the fiscal
years ended May 31, 1999 and 1998 ........................... F-4
Audited Consolidated Statements of Stockholders' Equity for
the fiscal years ended May 31, 1999 and 1998 ................ F-5
Audited Statements of Cash Flows for the fiscal years ended
May 31, 1999 and 1998 ....................................... F-6
Notes To Consolidated Financial Statements .................... F-7
Unaudited Consolidated Balance Sheet for the nine months
ended February 29, 2000 ..................................... F-13
Unaudited Consolidated Statements of Operations for the
nine month periods ended February 29, 2000 and
February 28, 1999 ........................................... F-14
Unaudited Consolidated Statements of Cash Flow for the
nine month periods ended February 29, 2000 and
February 28, 1999 ........................................... F-15
Notes to Consolidated Financial Statements for the nine
month periods ended February 29, 2000 and
February 28, 1999 ........................................... F-16
Star Dot Marketing, Inc. Financial Statements
- ---------------------------------------------
Independent Auditors' Report .................................. F-17
Balance Sheet for fiscal years ended May 31, 1999 and 1998 .... F-18
Statement of Operations for fiscal years ended May 31,
1999 and 1998 ............................................... F-19
Statement of Stockholders' Deficit for fiscal years ended
May 31, 1999 and 1998 ....................................... F-20
Statement of Cash Flows for fiscal years ended May 31,
1999 and 1998 ............................................... F-21
Notes to Financial Statements ................................. F-22
Pro Forma Financial Statements
- ------------------------------
Proforma Consolidated Balance Sheets for fiscal years
ended May 31, 1999 and 1998 and nine months ended
February 29, 2000 ........................................... F-25
Proforma Consolidated Statements of Operations for fiscal
years ended May 31, 1999 and 1998 and nine months
ended February 29, 2000 ..................................... F-28
Notes to Proforma Financial Statements ........................ F-31
F-1
<PAGE>
Report of Independent Auditors
Board of Directors and
Stockholders of eCom eCom.com, Inc.
We have audited the consolidated balance sheets of eCom eCom.com, Inc. as of
May 31, 1999 and 1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of eCom eCom.com, Inc. as of May
31, 1999 and 1998, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements the Company has incurred net losses since its inception and has
experienced liquidity problems. Those conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to those matters are described in Note N. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Hafer & Gilmer
Hafer & Gilmer
August 24, 1999
F-2
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED BALANCE SHEETS
MAY 31, 1999 AND 1998
May 31, 1999 May 31, 1998
------------ ------------
Assets
Current assets
Cash and cash equivalents $ 105,857 $ 89,542
Accounts receivable 19,155 7,315
Inventories 155,893 85,155
Prepaid expense 15,749 34,580
---------- ----------
Total current assets 296,654 216,592
Property and equipment 97,263 70,980
Intangible assets 67,135 25,309
Deferred charges 0 2,818
Other assets 6,773 7,862
---------- ----------
Total assets $ 467,825 $ 323,561
========== ==========
Liabilities
Current liabilities
Accounts payable and accrued expenses $ 130,683 $ 131,704
Current portion of notes payable 100,000 130,214
Current portion of accrued interest 5,937 10,600
---------- ----------
Total current liabilities 236,620 272,518
Loans from stockholders 212,344 101,600
Notes payable, less current portion 7,295 13,500
Accrued interest, less current portion 0 1,314
---------- ----------
Total liabilities 456,259 388,932
---------- ----------
Stockholders' equity
Common stock, $.0001 par value:
Authorized - 50,000,000 shares;
Issued - 12,883,600 shares in 1999
and 11,894,600 shares in 1998 1,288 1,189
Additional paid-in capital 935,284 484,361
Accumulated deficit (920,006) (545,921)
Less treasury stock - at cost 2,000
shares at May 31, 1999 (5,000) (5,000)
---------- ----------
Total stockholders' equity 11,566 (65,371)
---------- ----------
Total liabilities and stockholders' equity $ 467,825 $ 323,561
========== ==========
See notes to financial statements.
F-3
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 1999 AND 1998
Year Ended Year Ended
May 31, 1999 May 31,1998
------------ -----------
Revenues
Net sales $ 228,613 $ 149,582
Cost of sales 148,344 100,988
---------- ----------
Total revenues 80,269 48,594
Other operating expenses
Sales and marketing 176,376 23,298
Product redevelopment 34,347 0
General and administrative 187,166 122,455
Depreciation and amortization 43,591 28,378
---------- ----------
Total operating expenses 441,480 174,131
---------- ----------
Loss from operations (361,211) (125,537)
Interest expense 12,874 17,514
---------- ----------
Net loss $ (374,085) $ (143,051)
========== ==========
Net loss per common share $ (.03) $ (.02)
========= ==========
Weighted average shares outstanding 12,233,142 7,430,045
See notes to financial statements.
F-4
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1999 AND 1998
Number of Addi- Total
Shares tional Accumu- Stock
Issued and Paid-in lated Treasury holders'
Outstanding Amount Capital Deficit Stock Equity
----------- ------ --------- ----------- -------- ---------
Balance at
May 31, 1997 6,000,600 $ 600 $ 299,690 $ (402,870) $ - $(102,580)
Purchase of
Treasury stock (2,000) - - - (5,000) (5,000)
Issuance of
common stock 5,894,000 589 184,671 - - 185,260
Net loss, year
ended May 31,
1998 - - - (143,051) - (143,051)
---------- ------ --------- ----------- ------- ---------
Balance,
May 31, 1998 11,892,600 1,189 484,361 (545,921) (5,000) (65,371)
Issuance of
common stock 989,000 99 450,923 - - 451,022
Net loss, year
ended May 31,
1999 - - - (374,085) - (374,085)
---------- ------ --------- ----------- ------- ---------
Balance May 31,
1999 12,881,600 $1,288 $ 935,284 $ (920,006) $(5,000) $ 11,566
========== ====== ========= =========== ======= =========
See notes to financial statements.
F-5
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1999 AND 1998
Year Ended Year Ended
May 31,1999 May 31,1998
----------- -----------
Cash flows from operating activities
Net loss $ (374,085) $ (143,051)
Reconciling adjustments:
Amortization 18,654 12,092
Depreciation 24,937 16,286
(Increase) in receivables (11,840) (4,251)
(Increase) in inventories (70,738) (7,209)
Decrease (increase) in prepaid expenses 18,831 (32,580)
Decrease (increase) in other assets 1,089 (7,862)
Increase (decrease) in accounts payable (1,021) 52,243
Increase (decrease) in accrued expenses 0 (40,000)
(Decrease) in accrued interest (5,977) (12,943)
---------- ----------
(26,065) (24,224)
Net cash used by operating activities (400,150) (167,275)
---------- ----------
Cash Flows From Investing Activities
Acquisition of property and equipment (51,220) (34,372)
Acquisition of intangible assets (57,662) 0
---------- ----------
Net cash used by investing activities (108,882) (34,372)
Cash Flows From Financing Activities
Capital contributions 451,021 180,260
Notes payable (36,419) 74,519
Loans from stockholders 110,745 35,600
---------- ----------
Net cash provided by financing activities 525,347 290,379
---------- ----------
Net increase in cash 16,315 88,732
Cash balance, beginning of period 89,542 810
---------- ----------
Cash balance, end of period $ 105,857 $ 89,542
========== ==========
See notes to financial statements.
F-6
<PAGE>
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999 AND 1998
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
The Company maintains its accounts on the accrual basis of accounting. 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.
Consolidation
- -------------
The consolidated financial statements of the Company include the accounts of
USA Performance Products, Inc. The Company formed USA Performance Products,
Inc. as a separate wholly-owned subsidiary on January 20, 1998 and transferred
all assets related to the manufacture and sale of the Viper M1 paintball
marker and accessories to this new corporation. See note L.
Revenue Recognition
- -------------------
Revenues are derived primarily from the sale of paintball markers and
accessories and this revenue is recognized at the time title is transferred
which is normally on shipment of the goods. With respect to the Company's
sporting events operations, revenue is recognized at the time the underlying
event is held.
Depreciation
- ------------
The cost of property and equipment 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 Note C.
NOTE B: CASH EQUIVALENTS
Cash equivalents consist of cash credits received in connection with the sale
of All American Bowl Sponsorship Promotional Packages to Itex Corporation.
These cash credits will be used for the purchase of products and/or services
provided by other Itex clients.
F-7
<PAGE>
COM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1999 AND 1998
NOTE C: INVENTORIES
Inventories consist of merchandise acquired for sale by the Company's USA
SportsNet business unit in addition to paintball markers and accessories.
Inventories are carried at cost which is considered to be less than market
value.
NOTE D: PREPAID EXPENSE
Prepaid expense includes amounts paid for commercial insurance and
advertising.
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 May 31, 1999 and 1998:
May 31, 1999 May 31, 1998
------------ ------------
Computer hardware $ 60,858 $ 32,245
Computer software 28,584 10,564
Furniture, fixtures and equipment 22,948 21,072
Tools, dies and fixtures 54,928 52,217
--------- ---------
Total cost 167,318 116,098
Less: accumulated depreciation 70,055 (45,118)
--------- ---------
Total net property and equipment $ 97,263 $ 70,980
========= =========
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
F-8
<PAGE>
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1999 AND 1998
NOTE F: INTANGIBLE ASSETS
During the year ended May 31, 1996, the Company acquired the assets of
Performance Paintball Products, Inc. Included in the purchase were exclusive
rights to use of the Viper name and related technology used in the manufacture
of the Viper M1 paintball marker. The total cost of these rights are valued
at $54,134 less accumulated amortization of $32,639 and $22,146 at May 31,
1999 and 1998, respectively.
During 1999, the Company acquired the rights to the toll free telephone
number, 800-724-6822, and marketed as 1 800 PAINTBALL. The Company paid
$20,000 in cash and 100,000 shares of the Company's common stock. This asset
is reflected in the balance sheet at a gross cost of $40,000 less accumulated
amortization of $5,000 and $0, as of May 31, 1999 and 1998, respectively.
This asset is amortized over a 5 year life. Also during 1999, the Company
acquired two internet websites. AclassifiedAd and Swapandshop for $11,200.
This asset is being amortized over 5 years and accumulated amortization was
$560 and $0 as of May 31, 1999 and 1998, respectively.
NOTE G: OTHER ASSETS
Other assets consist primarily of deposits. In 1998, this included an advance
to an officer of the company which was fully liquidated in 1999.
NOTE H: NOTES PAYABLE AND LOANS FROM STOCKHOLDERS
The Company's notes payable consist of the following as of May 31,:
1999 1998
--------- ---------
Stratex Corporation (due September 2000,
interest at prime plus 6%, secured) $ 100,000 $ 100,000
MME (due on demand, interest at 12.25%
per annum, unsecured) 7,295 13,500
Other (due September 98, unsecured,
non-interest bearing) 0 30,214
Security for the Stratex loan consists of the rights to the Viper M1 paintball
marker including its names and technology used in its manufacture.
Loans from Stockholders consist of advances provided to the Company by the
Chief Executive officer and such loans are unsecured and no interest is
charged on such advances.
F-9
<PAGE>
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1999 AND 1998
NOTE I: COMMITMENTS AND CONTINGENCIES
The Company leases its manufacturing and office facilities under an operating
lease which expires June 30, 2001. Rent expense approximated $32,800 and
$22,800 for the years ended May 31, 1999 and 1998, respectively. Future
minimum operating lease payments as of May 31, 1999 are:
Year ended May 31, Total
------------------ ----------
2000 $ 38,160
2001 41,976
----------
Total minimum lease payments $ 80,136
==========
From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business. The
Company is not currently a party to any legal proceedings, the adverse outcome
of which, individually or in the aggregate, would have a material adverse
effect on the Company's financial position or results of operations.
NOTE J: ISSUANCE OF COMMON STOCK
During the year, the Board of Directors authorized the issuance of 5,999,400
shares of common stock. These newly-issued shares were designated to pay for
certain management, financial, marketing and other business related services,
to allow certain creditors of the Company to trade their debt for equity and
to effect a tax-free acquisition of the assets of Amateur Athletes of America,
Inc. 11,894,600 shares were issued as of May 31, 1998. 2,000 shares were
purchased for the treasury. During the year ended May 31, 1999, the Board of
Directors authorized the issuance of 989,000 shares of Common Stock. These
issuances primarily were to allow certain creditors of the Company to trade
their debt for equity and to pay for management, financial, marketing and
other business related services.
NOTE K: RELATED PARTY TRANSACTIONS
In January 1998, the Company's Board of Directors approved an agreement with
Axis Enterprises, Ltd., a Bahamian corporation of Nassau, Bahamas, to retain
Axis for a period of three years to provide certain financing, marketing and
management services in support of the Company's subsidiary, USA Performance
Products, Inc. In exchange for performance of these services, Axis was
granted 1,500,000 shares of common stock. The final marketing and management
agreement was executed in April 1998. In 1999, the Company issued 150,000
shares of common stock in cancellation of indebtedness of $111,780.
Derek D. Panaia, son of David J. Panaia, CEO of the Company, was retained as a
consultant to provide management oversight of USA Performance Products. In
connection with this agreement, Derek Panaia was granted 400,000 shares of
common stock in return for his services.
F-10
<PAGE>
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1999 AND 1998
NOTE K: RELATED PARTY TRANSACTIONS (CONT'D)
Stratex Corporation has a loan to the Company in the amount of $100,000 (see
Note H). Stratex Corporation is owned by Derek D. Panaia, son of David J.
Panaia, Chief Executive Officer of the Company.
On February 27, 1998, the Company acquired certain assets of Amateur Athletes
of America, Inc. in a tax-free exchange of assets for stock. The Company
acquired all rights to the ProCard and ComCard plus certain Internet-based
sports equipment exchange concepts in exchange for one million shares of
common stock. The ProCard and ComCard are prepaid telephone cards with unique
medical features which are marketed through youth athletic organizations. A
portion of the stock was used for payment of a note held by Amateur Athletes
of America. Amateur Athletes of America, Inc. was a private corporation owned
by Linda C. Bergman, wife of Gerald V. Bergman, former Treasurer and a member
of the Company's Board of Directors.
In May 1999, the Company issued 100,000 shares to Resource Group, Inc. in
exchange for promotional and related consulting services. Resource Group,
Inc. is a public relations and promotional firm of which a member of the
Board, Mr. Thomas DeRita, is a principal.
NOTE L: BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. The Company has three reportable segments:
paintball products, sports events, and Internet commerce. The paintball
segment produces a mid-priced paintball marker. The event segment has produced
the All American Bowl, a national high school football all-star game. The
Internet segment develops and operates internet websites including the ECEC
Trading Club.
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 sale of the Company's paintball products
over the Internet are reported within the paintball segment. Internet
revenues for 1998 consist principally of advertising sold through barter
transactions.
Following is a summary of segment information:
Sports Internet All
Paintball Events Commerce Others(a) Totals
--------- --------- --------- --------- ---------
May 31, 1999
- ------------
Revenues $ 228,613 $ - $ - $ - $ 228,613
Interest expense 12,874 - - - 12,874
Depreciation 10,915 - - 14,022 24,937
Amortization 10,493 - - 8,161 18,654
Segment profit (loss) (114,357) (8,230) (120,501) (130,997) (374,085)
Segment assets 177,293 0 60,048 230,484 467,825
F-11
<PAGE>
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1999 AND 1998
NOTE L: BUSINESS SEGMENTS (CONT'D)
Sports Internet All
Paintball Events Commerce Others(a) Totals
--------- --------- --------- --------- ---------
May 31, 1998
- ------------
Revenues $ 52,139 $ 17,289 $ 80,000 $ - $ 149,582
Interest expense 14,310 - - 3,204 17,514
Depreciation 10,063 - - 6,223 16,286
Amortization 9,492 - - 2,600 12,092
Segment profit (loss) (64,723) (64,894) 58,400 (71,834) (143,051)
Segment assets 76,676 - 80,123 166,762 323,561
(a) Includes amounts not allocated to operating segments.
NOTE M: RECOVERABILITY OF ASSETS AND GOING CONCERN
The Company's financial statements have been presented on the basis that it is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company's continued existence is dependent upon its ability to secure
financing or its ability to generate sufficient cash flows through operations
to meet its operating costs and repay current obligations as they come due.
In April of 1999, the Company entered into a financing agreement with a third
party whereby the Company may sell to the third party and that third party
must buy a number of the Company's shares of common stock, subject to
restrictions (the "Put Option"). The more salient of the restrictions under
the Put Option includes that the Company must first 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.
NOTE N: INCOME TAXES
No provision for federal and state income taxes has been recorded because our
company has incurred net operating losses since inception. Our net operating
loss carry-forwards as of May 31, 1999 total $920,006. These carry-forwards
will be available to offset future taxable income and expire beginning in
2010. We do 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
carryforwards have been fully reserved.
F-12
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 2000 AND MAY 31, 1999
February 29, 2000 May 31, 1999
----------------- ------------
Assets (Unaudited)
Current Assets
Cash $ 45,082 $ 105,857
Accounts receivable 13,116 19,155
Inventories 360,107 155,893
Prepaid expense 75,503 15,749
------------- -------------
Total current assets 493,808 296,654
Property and equipment 145,732 97,263
Intangible assets 51,335 67,135
Other assets 3,442 6,773
------------- -------------
Total assets $ 694,317 $ 467,825
============= =============
Liabilities
Current liabilities
Accounts payable and accrued expenses $ 730,280 $ 130,683
Current portion of notes payable 100,000 100,000
Current portion of accrued interest 16,730 5,937
------------- -------------
Total current liabilities 847,010 236,620
Loan from stockholders 576,032 212,344
Notes payable, less current portion 7,295 7,295
------------- -------------
Total liabilities 1,430,337 456,259
------------- -------------
Stockholders' equity
Common stock, $.0001 par value:
Authorized - 50,000,000 shares;
Issued - 13,877,165 shares at
February 29, 2000 and 12,883,600
shares at May 31, 1999 1,388 1,288
Additional paid-in capital 1,763,113 935,284
Accumulated deficit (2,495,521) (920,006)
Less treasury stock at cost, 2,000 shares (5,000) (5,000)
------------- -------------
Total stockholders' equity (736,020) 11,566
------------- -------------
Total liabilities and stockholders' equity $ 694,317 $ 467,825
============ =============
See notes to financial statements.
F-13
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine-Month Periods Ended February 29, 2000 and February 28, 1999
(Unaudited)
Nine Months Nine Months
Ended Ended
February 29, 2000 February 28, 1999
----------------- -----------------
Net sales $ 1,379,444 $ 135,078
Cost of sales 1,284,417 79,909
------------- -------------
Gross profit 95,027 55,169
------------- -------------
Other operating expenses
Sales and marketing 651,595 66,340
Product development 421,154 0
General and administrative 538,068 113,446
Depreciation and amortization 48,931 26,841
------------- -------------
Total operating expenses 1,659,748 206,627
------------- -------------
Loss from operations (1,564,721) (151,458)
Interest expense 10,793 11,896
------------- -------------
Net loss $ (1,575,514) $ (163,354)
============= =============
Net loss per common share
(primary and diluted) $ (.119) $ (.013)
------------- -------------
Weighted average shares outstanding 13,242,500 12,253,100
------------- -------------
See notes to financial statements.
F-14
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine-Month Periods Ended February 29, 2000 and February 28, 1999
(Unaudited)
Nine Months Nine Months
Ended Ended
February 29, 2000 February 28, 1999
----------------- -----------------
Cash flows from operating activities
Net loss $ (1,575,514) $ (163,354)
Reconciling adjustments:
Depreciation and amortization 48,931 26,841
(Increase) Decrease in:
Accounts receivable 6,039 (14,258)
Inventories (204,214) (68,472)
Prepaid expense (59,754) 25,393
Other assets 3,331 (1,743)
Increase (Decrease) in:
Accounts payable and accrued expenses 599,597 6,554
Accrued interest 10,793 (6,955)
------------- -------------
Net cash used by operating activities (1,170,791) (195,994)
------------- -------------
Cash flows from investing activities
Acquisition of property and equipment (81,602) (20,071)
Acquisition of intangible assets 0 (17,879)
------------- -------------
Net cash used by investing activities (81,602) (37,950)
------------- -------------
Cash flows from financing activities
Capital contributions 827,929 211,826
Notes payable 0 (4,317)
Loans from stockholders 363,689 95,745
------------- -------------
Net cash provided by financing activities 1,191,618 303,254
------------- -------------
Net increase (decrease) in cash (60,775) 69,310
Cash balance, beginning of period 105,857 89,542
------------- -------------
Cash balance, end of period $ 45,082 $ 158,852
============= =============
See notes to financial statements.
F-15
<PAGE>
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000 and February 28, 1999
(Unaudited)
NOTE 1 - UNAUDITED INTERIM INFORMATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended February 29, 2000 are not necessarily indicative of the results that may
be expected for the year ending May 31, 2000. For further information, refer
to the financial statements and footnotes thereto included in the Company's
Form 10-KSB for the year ended May 31, 1999.
NOTE 2 - BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. The Company currently has two reportable
segments: paintball products and Internet commerce. The paintball segment
produces a mid-priced paintball marker and distributes related accessories.
The Internet segment develops and operates Internet web sites including the
eCom eCom Super Hub. There have been no intersegment sales or transfers.
Revenues from sales of the Company's paintball products over the Internet are
reported within the paintball segment. Internet revenues consist of the sale
of products through the auction web site and fees from eCom eCom B2B Plus
services.
Following is a summary of segment information:
Nine Months Ended February 29, 2000
Total Paintball Internet All Other (a)
Revenues 1,379,444 1,376,083 3,361
Interest 10,793 10,793
Depreciation and
Amortization 48,931 25,192 19,724 4,015
Profit (Loss) (1,575,514) (115,000) (1,170,847) (289,667)
Assets 694,317 495,151 149,222 49,944
Nine Months Ended February 28, 1999
Total Paintball Internet All Other (a)
Revenues 135,078 135,078
Interest 11,896 10,540 1,355
Depreciation and
Amortization 26,841 19,411 7,430
Profit (Loss) (163,354) (56,295) (10,000) (97,059)
Assets 463,060 148,992 11,700 302,368
_________________
(a) Includes amounts not allocated to operating segments.
F-16
<PAGE>
Independent Auditors' Report
THE BOARD OF DIRECTORS
STAR DOT MARKETING, INC.
San Francisco, California
We have audited the accompanying balance sheet of STAR DOT MARKETING, INC.
(the "Company") as of May 31, 1999 and 1998 and the related statements of
operations, stockholders' deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Board's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant esti
mates made by management, as well as evaluating the overall financial state
ment presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Star Dot Marketing, Inc. as
of May 31, 1999 and 1998 and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 7. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Hood & Strong LLP
September 10, 1999
F-17
<PAGE>
Star Dot Marketing, Inc.
Balance Sheet
May 31, 1999 1998
- ------- ---------- ----------
Assets
Current Assets:
Cash $ 3,345 $ 9,850
Accounts receivable, net of
allowance for doubtful accounts
of $8,000 in 1999 and $7,000 in 1998 64,194 89,878
Inventories 215,031 266,678
Prepaid expenses and other assets 11,219 13,333
---------- ----------
Total current assets 293,789 379,739
Property and Equipment, net 8,343 21,749
---------- ----------
$ 302,132 $ 401,488
========== ==========
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 49,671 $ 56,236
Accrued interest payable 94,931 27,727
Accrued commissions 13,756 14,757
Due to stockholders 248,496 1,181,969
----------- -----------
Total current liabilities 406,854 1,280,689
----------- -----------
Stockholders' Deficit:
Common stock, no par value,
2,000,000 shares authorized;
issued and outstanding -
409,091 in 1999 and
100,000 in 1998 1,230,000 210,000
Additional paid in capital 40,000 40,000
Accumulated deficit (1,374,722) (1,129,201)
----------- -----------
Total stockholders' deficit (104,722) (879,201)
----------- -----------
$ 302,132 $ 401,488
============ ===========
The accompanying notes are an integral part of this statement.
F-18
<PAGE>
Star Dot Marketing, Inc.
Statement of Operations
For the Years Ended May 31, 1999 1998
- --------------------------- ----------- -----------
Net Sales $ 542,003 $ 599,218
Cost of Goods Sold 233,682 306,922
----------- -----------
Gross profit 308,321 292,296
----------- -----------
General and Administrative Expenses:
Salary and related benefits 271,910 258,277
Commission expense 114,409 112,686
Other operating expenses 101,194 208,221
----------- -----------
487,513 579,184
Other Income (Expense), net (65,529) (25,236)
----------- -----------
Loss Before Provision for State Income Taxes (244,721) (312,124)
Provision for State Income Taxes 800 800
----------- -----------
Net Loss $ (245,521) $ (312,924)
=========== ===========
The accompanying notes are an integral part of this statement.
F-19
<PAGE>
Star Dot Marketing, Inc.
Statement of Stockholders' Deficit
<TABLE>
<CAPTION>
For the Years Ended May 31, 1999 and 1998
- -----------------------------------------
Common Stock Additional Total
------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Deficit
<S> <C> <C> <C> <C> <C>
Balance - May 31, 1997 100,000 $ 210,000 $ 40,000 $ (816,277) $ (566,277)
Net Loss for the Year
Ended May 31, 1998 (312,924) (312,924)
------- ---------- -------- ----------- ----------
Balance - May 31, 1998 100,000 210,000 40,000 (1,129,201) (879,201)
Common Stock Issued 309,091 1,020,000 1,020,000
Net Loss for the Year
Ended May 31, 1999 (245,521) (245,521)
------- ---------- -------- ----------- ----------
Balance - May 31, 1999 409,091 $1,230,000 $ 40,000 $(1,374,722) $ (104,722)
======= ========== ======== =========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-20
<PAGE>
Star Marketing, Inc.
Statement of Cash Flows
Years Ended May 31, 1999 1998
- ------------------- ---------- ---------
Cash Flows from Operating Activities:
Net loss $ (245,521) $(312,924)
---------- ---------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 14,713 13,964
Allowance for doubtful accounts 1,000 7,000
Loss on disposition of equipment 433
Changes in assets and liabilities:
Decrease (increase) in account receivables 24,684 (55,006)
Decease (increase) in inventories 51,647 (3,518)
Decrease (increase) in prepaid expenses
and other assets 2,114 (874)
Increase in accounts payable and accrued expenses 59,638 31,342
---------- ---------
Total adjustments 154,229 (7,092)
---------- ---------
Net cash used by operating activities (91,292) (320,016)
---------- ---------
Cash Flows from Investing Activities:
Purchase of equipment (1,740) (8,368)
---------- ---------
Cash Flows from Financing Activities:
Borrowings from stockholders 86,527 333,200
---------- ---------
Net (Decrease) Increase in Cash (6,505) 4,816
Cash - Beginning of year 9,850 5,034
---------- ---------
Cash - End of year $ 3,345 $ 9,850
========== =========
Supplemental Disclosure of Cash Flow Information:
Income taxes paid $ 800 $ 800
========== =========
Non-Cash Transaction
Conversion of due to stockholders to common stock $1,020,000
==========
The accompanying notes are an integral part of this statement.
F-21
<PAGE>
Star Dot Marketing, Inc.
Notes to Financial Statements
Note 1- Nature of Operations:
Star Dot Marketing, Inc (the Company) is engaged in the business of selling
sports-related memorabilia. The Company has agreements with retailers,
primarily major league franchises, who sell the Company's goods on a
consignment basis. These agreements are cancelable with a thirty day written
notice. The Company also, on a smaller scale, sells its merchandise on a
direct basis.
Note 2 - Summary of Significant Accounting Policies:
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, and revenues and expenses during the reported period. Actual
results could differ from those estimates.
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows.
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.
Inventories:
-----------
Inventories are stated at the lower of cost or market. Cost is computed
by the first-in, first-out (FIFO) method.
Depreciation and Amortization Methods:
-------------------------------------
Property and equipment are stated at cost. Depreciation and amortization
are computed principally on the straight-line method over the estimated
useful lives of the assets which are generally 3 years.
F-22
<PAGE>
Star Dot Marketing, Inc.
Notes to Financial Statements
(Continued)
Note 2 - Summary of Significant Accounting Policies (Continued):
Income Taxes:
------------
The Company has elected to be taxed as an S Corporation on its federal
and California income tax returns. As an S corporation, the Company is
generally not subject to federal income tax and is subject to California
income tax at a reduced rate. Accordingly, the provision for income
taxes reflects only the California income tax.
Note 3 - Property and Equipment:
At May 31, 1999 and 1998, property and equipment is as follows:
1999 1998
Computer equipment $ 34,086 $ 45,335
Office equipment 2,048 2,048
-----------------------------------------------------
36,134 47,383
Accumulated depreciation 27,791 25,634
-----------------------------------------------------
$ 8,343 $ 21 749
-----------------------------------------------------
Depreciation expense amounted to $14,713 and $13,964 for the years ended May
31, 1999 and 1998, respectively.
Note 4 - Commitments:
The Company leases office space under a non-cancelable lease agreement which
terminated at July 31, 1999. The leasing of this office space is now on a
month to month basis. The monthly rental amount is $2,595.
Note 5- Due to Stockholders:
Over the past several years certain stockholders have made advances to the
Company. These advances are unsecured, bear interest at an annual rate of
5.63% and are due on demand. Effective May 31, 1999 the Company converted
$1,020,000 of advances due to stockholders to contributed capital. 309,091
shares of common stock were issued by the Company to the stockholders.
F-23
<PAGE>
Star Dot Marketing, Inc.
Notes to Financial Statements
(Continued)
Note 6 - Concentration of Risk:
Financial Instruments which potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivables. Credit
risk is substantially mitigated by the Company's historically short collection
periods.
The Company currently makes approximately 50% of its merchandise sales to one
company. As of May 31, 1999 and 1998, accounts receivable from this Company
totaled approximately $8,500 and $18,000, respectively.
Note 7 - Subsequent Event:
As of the report date, the Company's stockholders are in negotiations to sell
all of their shares of common stock to an unaffiliated company. Under the
terms of the purchase agreement, the individual stockholders are to receive
shares of common stock issued by the unaffiliated company in exchange for all
the common stock of the Company. In addition, any remaining debt to the
stockholders will need to be settled prior to finalization of this purchase
agreement. To that extent, the stockholders expect to convert this debt into
additional equity.
F-24
<PAGE>
eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
May 31, 1999
<TABLE>
<CAPTION>
eCom eCom SDMI Eliminations
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 105,857 $ 3,345 $ - $ 109,202
Accounts receivable 19,155 64,194 - 83,349
Inventories 155,893 215,031 - 370,924
Prepaid expense and other current assets 15,749 11,219 - 26,968
Property and equipment 97,263 8,343 - 105,606
Intangible assets 67,135 - - 67,135
Deferred charges - - - -
Other assets 6,773 - - 6,773
----------- ----------- ----------- -----------
Total Assets $ 467,825 $ 302,132 $ - $ 769,957
=========== =========== =========== ===========
LIABILITIES
Accounts payable and accrued expenses $ 130,683 $ 63,427 $ - $ 194,110
Current portion of accrued interest 5,937 94,931 94,931 5,937
Current portion of loans from stockholders - 248,496 248,496 -
Current portion of notes payable 100,000 - - 100,000
Accrued interest, less current portion - - - -
Loans from stockholders, less current portion 212,344 - - 212,344
Notes payable, less current portion 7,295 - - 7,295
----------- ----------- ---------- -----------
Total Liabilities 456,259 406,854 343,427 519,686
----------- ----------- ---------- -----------
STOCKHOLDERS' EQUITY
Common stock 1,288 1,230,000 1,229,932 1,356
Additional paid-in capital 935,284 40,000 (1,478,428) 2,453,712
Accumulated deficit (920,006) (1,374,722) (94,931) (2,199,797)
Treasury stock (5,000) - - (5,000)
----------- ----------- ---------- -----------
Total Stockholders' Equity 11,566 (104,722) (343,427) 250,271
----------- ----------- ---------- -----------
Total Liabilities and Stockholders' Equity $ 467,825 $ 302,132 $ - $ 769,957
=========== =========== ========== ===========
</TABLE>
F-25
<PAGE>
eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
May 31, 1998
<TABLE>
<CAPTION>
eCom eCom SDMI Eliminations
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 89,542 $ 9,850 $ - $ 99,392
Accounts receivable 7,315 89,878 - 97,193
Inventories 85,155 266,678 - 351,833
Prepaid expense and other current assets 34,580 13,333 - 47,913
Property and equipment 70,980 21,749 - 92,729
Intangible assets 25,309 - - 25,309
Deferred charges 2,818 - - 2,818
Other assets 7,862 - - 7,862
----------- ----------- ----------- -----------
Total Assets $ 323,561 $ 401,488 $ - $ 725,049
=========== =========== =========== ===========
LIABILITIES
Accounts payable and accrued expenses $ 131,704 $ 70,993 $ - $ 202,697
Current portion of accrued interest 10,600 27,727 27,727 10,600
Current portion of loans from stockholders - 1,181,969 1,181,969 -
Current portion of notes payable 130,214 - - 130,214
Accrued interest, less current portion 1,314 - - 1,314
Loans from stockholders, less current portion 101,600 - - 101,600
Notes payable, less current portion 13,500 - - 13,500
----------- ----------- ----------- -----------
Total Liabilities 388,932 1,280,689 1,209,696 459,925
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock 1,189 210,000 209,932 1,257
Additional paid-in capital 484,361 40,000 (1,391,901) 1 ,916,262
Accumulated deficit (545,921) (1,129,201) (27,727) (1,647,395)
Treasury stock (5,000) - - (5,000)
----------- ----------- ----------- -----------
Total Stockholders' Equity (65,371) (879,201) (1,209,696) 265,124
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 323,561 $ 401,488 $ - $ 725,049
=========== =========== =========== ===========
</TABLE>
F-26
<PAGE>
eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
February 29, 2000
<TABLE>
<CAPTION>
eCom eCom SDMI Eliminations
------------ ----------- ------------ -----------
<S> <C> C> <C> <C>
ASSETS
Cash $ 45,082 $ 5,637 $ - $ 50,719
Accounts receivable 13,116 34,792 - 47,908
Inventories 360,107 216,710 - 576,817
Prepaid expense and other current assets 75,503 7,216 - 82,719
Property and equipment 145,732 4,068 - 149,800
Intangible assets 51,335 - - 51,335
Other assets 3,442 7,000 - 10,442
------------ ----------- ----------- -----------
Total Assets $ 694,317 $ 275,423 $ - $ 969,740
============ =========== =========== ===========
LIABILITIES
Accounts payable and accrued expenses $ 730,280 $ 52,470 $ - $ 782,750
Current portion of accrued interest 16,730 - - 16,730
Current portion of loans from stockholders - 100,000 - 100,000
Current portion of notes payable 100,000 - - 100,000
Loans from stockholders, less current portion 576,032 - - 576,032
Notes payable, less current portion 7,295 - - 7,295
------------ ----------- ----------- -----------
Total Liabilities 1,430,337 152,470 - 1,582,807
------------ ----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock 1,388 1,659,927 1,659,859 1,456
Additional paid-in capital 1,763,113 40,000 (1,564,928) 3,368,041
Accumulated deficit (2,495,521) (1,576,974) (94,931) (3,977,564)
Treasury stock (5,000) - - (5,000)
------------ ----------- ----------- -----------
Total Stockholders' Equity (736,020) 122,953 - (613,067)
------------ ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 694,317 $ 275,423 $ - $ 969,740
============ =========== =========== ===========
</TABLE>
F-27
<PAGE>
eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended May 31, 1999
<TABLE>
<CAPTION>
eCom eCom SDMI Eliminations
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $ 228,613 $ 542,003 $ - $ 770,616
Cost of Sales 148,344 233,682 - 382,026
----------- ----------- ----------- -----------
Gross Profit 80,269 308,321 - 388,590
----------- ----------- ----------- -----------
Operating Expenses
Sales and marketing 176,376 114,409 - 290,785
Product development 34,347 - - 34,347
General and administrative 187,166 356,716 - 543,882
Depreciation and amortization 43,591 14,713 - 58,304
----------- ----------- ----------- -----------
Total Operating Expenses 441,480 485,838 - 927,318
----------- ----------- ----------- -----------
Loss From Operations (361,211) (177,517) - (538,728)
Interest Expense 12,874 67,204 67,204 12,874
----------- ----------- ----------- -----------
Loss Before Taxes (374,085) (244,721) (67,204) (551,602)
State Income Taxes - 800 - 800
----------- ----------- ----------- -----------
Net Loss $ (374,085) $ (245,521) $ (67,204) $ (552,402)
=========== =========== =========== ===========
Net Loss Per Common Share (0.03) (0.04)
Weighted Average Shares outstanding 12,233,142 12,908,142
</TABLE>
F-28
<PAGE>
eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended May 31, 1998
<TABLE>
<CAPTION>
eCom eCom SDMI Eliminations
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $ 149,582 $ 599,218 $ - $ 748,800
Cost of Sales 100,988 306,922 - 407,910
----------- ----------- ----------- -----------
Gross Profit 48,594 292,296 - 340,890
----------- ----------- ----------- -----------
Operating Expenses
Sales and marketing 23,298 112,686 - 135,984
Product development - - - -
General and administrative 122,455 450,043 - 572,498
Depreciation and amortization 28,378 13,964 - 42,342
----------- ----------- ----------- -----------
Total Operating Expenses 174,131 576,693 - 750,824
----------- ----------- ----------- -----------
Loss From Operations (125,537) (284,397) - (409,934)
Interest Expense 17,514 27,727 27,727 17,514
----------- ----------- ----------- -----------
Loss Before Taxes (143,051) (312,124) (27,727) (427,448)
State Income Taxes - 800 - 800
----------- ----------- ----------- -----------
Net Loss $ (143,051) $ (312,924) $ (27,727) $ (428,248)
=========== =========== =========== ===========
Net Loss Per Common Share (0.02) (0.05)
Weighted Average Shares outstanding 7,430,045 8,105,045
</TABLE>
F-29
<PAGE>
eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended February 29, 2000
<TABLE>
<CAPTION>
eCom eCom SDMI Eliminations
------------ ----------- ------------ -----------
<S> <C> C> <C> <C>
Net Sales $ 1,379,444 $ 304,480 $ - $ 1,683,924
Cost of Sales 1,284,417 124,382 - 1,408,799
------------ ----------- ----------- -----------
Gross Profit 95,027 180,098 - 275,125
------------ ----------- ----------- -----------
Operating Expenses
Sales and marketing 651,595 68,190 - 719,785
Product development 421,154 - - 421,154
General and administrative 538,068 311,092 - 849,160
Depreciation and amortization 48,931 5,071 - 54,002
------------ ----------- ----------- -----------
Total Operating Expenses 1,659,748 384,353 - 2,044,101
------------ ----------- ----------- -----------
Loss From Operations (1,564,721) (204,255) - (1,768,976)
Interest Expense 10,793 - - 10,793
------------ ----------- ----------- -----------
Loss Before Taxes (1,575,514) (204,255) - (1,779,769)
State Income Taxes - - - -
------------ ----------- ----------- -----------
Net Loss $ (1,575,514) $ (204,255) $ - $(1,779,769)
============ =========== =========== ===========
Net Loss Per Common Share (0.12) (0.13)
Weighted Average Shares outstanding 13,242,500 13,917,500
</TABLE>
F-30
<PAGE>
eCOMeCOM.COM, INC. AND SUBSIDIARY, STAR DOT MARKETING, INC.
PROFORMA CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BUSINESS COMBINATION
The Company is negotiating the purchase of Star Dot Marketing, Inc. (SDMI).
The transaction is expected to be recorded as a pooling of interest. The
Company will exchange 675,000 shares of its $.0001 par value common stock for
all of the outstanding shares of SDMI.
SDMI is a turn-key provider of a complete line of guaranteed authentic, hand-
signed sports memorabilia and other related sports products. SDMI specializes
in product design and creation, with a particular emphasis on presentation
concepts, including unique layouts, customized display cases, personalized
engraving and matting and framing. Products are marketed and sold
domestically and internationally under the trademarks and trade names
"Treasures of Sports" and "Treasures of the Diamond."
SDMI's primary distribution and sales strategy to date has centered on the
development of joint sales agreements with professional sports franchises.
Key pro team clients include the San Francisco Giants, Los Angeles Dodgers,
Detroit Tigers and Baltimore Orioles of Major League Baseball and the Golden
State Warrior and Detroit Pistons of the National Basketball Association.
SDMI has also forged a vital client relationship with ARAMARK, one of the
nation's largest sports arena and stadium concessionaires, offering product
for sale at Oriole Park at Camden Yards - home field of the Baltimore Orioles
- - and at the Pittsburgh Civic Arena - home ice for the Pittsburgh Penguins.
SDMI offers the same range of products through the national service
organization, Les Concierges, and wholesales to a limited but growing number
of local and regional retailers.
Most recently, SDMI began creating specialty products for corporations and
businesses to use as corporate gifts, awards, premiums and employee
incentives. Products signed by the world's greatest athletes are merged into
unique design and display concepts and can be made to incorporate company
names, logos and slogans to create "branded impressions" that are treasured by
recipients and proudly displayed in the home or office.
SDMI works directly with professional athletes, their respective agents and
select number of promoters to obtain only guaranteed authentic signatures and
products. All products are backed by a money-back guarantee.
SDMI has created a unique product marketing and tracking system to ensure the
authenticity and integrity of each and every product it offers and is hopeful
to introduce and process and the technology supporting it within the calendar
year 2000.
NOTE 2 - BASIS OF PRESENTATION
The Company's unaudited proforma consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
proforma financial information and pursuant to the instructions to Form S-1
and Regulation S-X. Accordingly, they do not include all of the information
and footnotes
F-31
<PAGE>
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, consisting of
normal recurring accrual adjustments, considered necessary for a fair
presentation have been included. Proforma operating results for the six
month period ended November 30, 1999 and for the years ended May 31, 1999
and 1998 are not necessarily indicative of the results that may be expected
for the year ended May 31, 2000.
These financial statements and notes should be read in conjunction with the
Company's audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended May 31, 1999.
F-32
<PAGE>
Back Cover Page
No person is authorized in connection with the Offering made hereby to give
any information or to make any representation not contained in this Prospectus
and, if given or made, such information and representation must not be relied
upon as having been authorized by eCom or its officers. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy any of
the securities offered hereby to any person or by anyone in any jurisdiction
in which it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implications that information contained herein is
correct as of any date subsequent to the date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary ................................ 3
Risk Factors ...................................... 4
Business of the Company ........................... 16
The Investment Agreement .......................... 24
Use of Proceeds ................................... 27
Dilution .......................................... 27
Selected Financial Information .................... 27
Management's Discussion and Analysis ............... 27
Management ........................................ 34
Executive Compensation ............................ 36
Description of Indemnification of
Officers and Directors ......................... 36
Related Party Transactions ........................ 37
Principal Holders of Common Shares ................ 40
Description of Securities ......................... 41
Plan of Distribution .............................. 43
Experts and Counsel ............................... 45
Additional Information ............................ 45
Financial Statements .............................. F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses of the Offering are estimated as follows:
Attorneys Fees $ 20,000
Accountants Fees $ 10,000
Registration Fees $ 2,909
Printing $ 10,000
Advertising $ 0
Other Expenses $ 1,500
--------
TOTAL $ 44,909
========
Item 14. Indemnification of Directors and Officers.
The Company's by-laws provide for indemnification of officers, directors
or Company agents against legal expenses, judgments, fines, settlements and
other amounts reasonably incurred by such person after having been made or
threatened to be made a party to legal action. Payment of such amounts may
also be made in advance if expenses are likely to be incurred by officers,
directors or agents in defense of any such action.
The extent, amount and eligibility for the indemnification provided will
be determined by the Board of Directors. These indemnifications will be made
by a majority vote of a quorum of directors, including any director who is a
party to such action, suit, or proceeding or by the shareholders by a majority
vote of a quorum of shareholders including any shareholder who is a party to
such action, suit or proceeding.
The corporation is further authorized by the Bylaws to purchase insurance
for indemnification of any person as provided by the Bylaws and to the extent
provided by Florida law.
Florida Statutes Section 607.0850 authorizes indemnification of officers,
directors, employees and agents in instances constituting: (1) certain
violations of criminal law which the person did not know were illegal, or (2)
actions taken in good faith by persons which were intended to be in the best
interests of the corporation.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
II-1
<PAGE>
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 15. Unregistered Securities Issued or Sold Within One Year.
eCom eCom.com, Inc. issued 7,465,500 unregistered common shares of its
stock during the past three years. The Company issued such shares to the
following persons in the amounts shown in the table below for the
consideration as noted:
Date Holder Number of Shares Consideration
- ---- ------ ---------------- -------------
2/6/98 Employees
and Independent 2,099,400 Services rendered
Contractors
Private investor 1,000,000 Purchase of Assets
4/16/98 Employees
and Independent 1,810,000 Services rendered
Contractors
6/18/98 Independent
Contractors 40,000 Services rendered
7/29/98 Private Investor 250,000 $120,500
Independent
Contractors 5,000 Services rendered
12/14/98 Private Party 100,000 Marketing rights
Independent
Contractors 10,000 Services rendered
1/12/99 Private Investor 300,000 $20,000
Private party 80,000 Toll free phone number
1/22/99 Employees
and Independent 90,000 Services rendered
Contractors
2/17/99 Employees 25,000 Services rendered
Private investor 150,000 $75,000
3/4/99 Private investor 234,000 $89,780
Private investor 25,000 Services rendered
II-2
<PAGE>
5/18/99 Employees
and Independent 200,000 Services rendered
Contractors
Amex 45,000 Exchange for debt
12/22/99 Landlord 17,600 Office rent
Employees
and Independent 35,000 Professional fees
Contractors
Private investor 625,000 $480,000
1/27/00 Employees and
Independent 21,000 Services rendered
Contractors
Independent
Vendor 80,000 Software license
3/16/00 Independent
Vendor 23,500 Product Advertising
Employees and
Independent 200,000 Services rendered
Contractors
The Issuer claims exemption from registration of these securities under
the Securities Act of 1933 by reason of Section 4 (2) thereof. The Issuer
also claims exemption from registration in the State of Florida by reason of
Florida Statutes, Section 517.061.
II-3
<PAGE>
Item 16. Index to Exhibits.
Exhibit
No. Description
- ------- -----------
3.0 Articles of Incorporation (1)
3.1 By-laws (1)
5.0 Opinion of Krys, Boyle, Freedman & Sawyer, P.C. (5)
10.1 Investment Agreement between the registrant and Swartz
Private Capital, LLC (2)
10.2 Amended and Restated Investment Agreement between the
registrant and Swartz Private Capital, LLC (3)
10.3 Stock Exchange Agreement between the registrant and
Star Dot Marketing, Inc. (4)
10.4 Amended and Restated Investment Agreement between the
registrant and Swartz Private Capital, Inc. (5)
21 Subsidiaries of the registrant (5)
23.1 Consent of Hafer & Gilmer, CPA*
23.2 Consent of Hood & Strong LLP, CPA*
23.3 Consent of Krys Boyle Golz Freedman & Sawyer, P.C. (5)
________________________
(1) Included as an Exhibit to the Form SB-1 Registration Statement filed
on September 6, 1995.
(2) Included as an Exhibit to the Form 8-K filed on May 26, 1999.
(3) Included as an Exhibit to the Form 10-KSB for the fiscal year ended
May 31, 1999.
(4) Included as an Exhibit to the Form 8-K filed on February 17, 2000.
(5) Included as an Exhibit to the Form S-1 filed on April 10, 2000.
* Filed herewith
II-4
<PAGE>
Item 17. Undertakings.
The Company on behalf of itself hereby undertakes and commits as follows:
A. 1. To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any Prospectus required by Section 10(a)(3) of the
Securities Act.
(ii) Reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
3. To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
B. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
C. The Issuer will, for determining any liabilities under the Securities
Act, treat the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Issuer under Rule 424 (b) (1), or (4) or 497
(h), under the Securities Act (Sections 230.424(b)(1),4 or 230.497(h)) as part
of this Registration Statement as of the time the Commission declared it
effective.
The Issuer will also, for determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of Prospectus as
a new Registration Statement for the securities offered in the Registration
Statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
has caused this Amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Palm Beach
Gardens and State of Florida on the 20th day of April, 2000.
ECOM ECOM.COM, INC.
By: /s/ David J. Panaia
David J. Panaia, Chairman of the
Board, Chief Executive Officer
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signatures Title Date
/s/David J. Panaia Chief Executive 4/20/00
David J. Panaia Officer, Chairman
of the Board, Treasurer
and Director
/s/ Thomas DeRita, Jr. Secretary and 4/20/00
Thomas DeRita, Jr. Director
/s/ Gerald V. Bergman Director
Gerald V. Bergman
/s/ Elling J. Myklebust Director 4/20/00
Elling J. Myklebust
HAFER & GILMER
Certified Public Accountants
251 Royal Palm Way, Suite 302
Palm Beach, Florida 33480-4310
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
Ecom Ecom.com, Inc.
We consent to the inclusion of our audited financial statements for the years
ended May 31, 1998 and May 31, 1999 in the S-1 Registration Statement
currently being filed with the Securities and Exchange Commission.
/s/ Hafer & Gilmer
Hafer & Gilmer CPA's
April 20, 2000
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
Star Dot Marketing, Inc.
We consent to the inclusion of our audited financial statements of Star Dot
Marketing, Inc. as of and for the years ended May 31, 1999 and May 31, 1998
in the S-1 Registration Statement currently being filed by Ecom Ecom.com, Inc.
with the Securities and Exchange Commission.
/s/ Hood & Strong LLP
Hood & Strong LLP, CPA's
April 20, 2000
