<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended February 29, 2000
Commission File Number 33-96638-A
ecom ecom.com, inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 65-0538051
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3801 PGA Boulevard, Suite 1000
-----------------------------------------------------------
(Address of principal executive offices)
(561) 622-4395
----------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes -X- No__
As of February 29, 2000, the issuer had 13,877,165 shares of common stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes __ No -X-
<PAGE>
eCom eCom.com, Inc. Form 10-QSB
February 29, 2000
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets:
February 29, 2,000 and May 31, 1999 3
Consolidated Statements of Operations:
Nine-Month Periods Ended
February 29, 2000 and February 28, 1999 4
Three-Month Periods Ended
February 29, 2000 and February 28, 1999 5
Consolidated Statements of Cash Flows:
Nine-Month Periods Ended
February 29, 2,000 and February 28, 1999 6
Notes to Consolidated Financial Statements 7
Proforma Consolidated Balance Sheet:
February 29, 2000 8
Proforma Consolidated Statement of Operations:
Nine Months Ended February 29, 2000 9
Proforma Consolidated Balance Sheet:
May 31, 1999 10
Proforma Consolidated Statement of Operations:
Year Ended May 31, 1999 11
Proforma Consolidated Balance Sheet:
May 31, 1998 12
Proforma Consolidated Statement of Operations:
Year Ended May 31, 1998 13
Proforma Consolidated Notes to Financial Statements 14
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 16
PART II OTHER INFORMATION
ITEMS 1-6 20
2
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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.
3
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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.
4
<PAGE>
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month Periods Ended February 29, 2000 and February 28, 1999
(Unaudited)
Three Months Three Months
Ended Ended
February 29, 2000 February 28, 1999
----------------- -----------------
Net sales $ 927,873 $ 81,092
Cost of sales 873,480 50,748
------------- -------------
Gross profit 54,393 30,344
------------- -------------
Other operating expenses
Sales and marketing 369,265 23,785
Product development 156,205 0
General and administrative 263,474 34,361
Depreciation and amortization 16,671 9,149
------------- -------------
Total operating expenses 805,615 67,295
------------- -------------
Loss from operations (751,222) (36,951)
Interest expense 3,615 3,921
------------- -------------
Net loss $ (754,837) $ (40,872)
============= =============
Net loss per common share
(primary and diluted) $ (.055) $ (.003)
------------- -------------
Weighted average shares outstanding 13,672,802 12,288,600
------------- -------------
See notes to financial statements.
5
<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.
6
<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.
7
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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>
8
<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>
9
<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>
10
<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>
11
<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>
12
<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>
13
<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
14
<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.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the accompanying
consolidated financial statements for the nine month periods ended February
29, 2000 and February 28, 1999 and the Form 10-KSB for the fiscal year ended
May 31, 1999.
Special Note Regarding Forward-Looking Statements
- -------------------------------------------------
Certain statements in this report and elsewhere (such as in other filings by
the Company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the Company of its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements. Factors that might cause or contribute to such differences
include, among others, competitive pressures, the growth rate of the paintball
industry and electronic commerce, constantly changing technology and market
acceptance of the Company's products and services. The Company undertakes no
obligation to publicly release the result of any revisions to these forward-
looking statements, which may be made to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
eCom eCom SuperHUB and B2B Plus Services
- ----------------------------------------
Prior to the end of the current quarter, we launched a redesigned website at
www.ecomecom.com that presented the on-line services of the eCom eCom SuperHUB
and B2B Plus programs. The SuperHUB is a marketplace with multiple venues
designed for business to consumer, business to business and person to person
Internet trading. B2B Plus is focused on business to business website design,
maintenance and marketing services.
Although the SuperHUB and B2B Plus are separate operating units, they provide
complementary services designed to facilitate web business development. B2B
Plus 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. We have entered into a partnership with iTool.com
that allows us to license iTool software to provide the infrastructure for B2B
Plus. After our client's on-line business is established, 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 mall currently is an entrance to over seventy-five stores
including prominent merchants such as Disney, Hallmark, eToys, The Sharper
Image and Office Max. New web businesses receive equal billing with
established retailers when the customer searches the mall.
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.
16
<PAGE>
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.
Subsequent Event
- ----------------
On April 10, 2000 we filed a registration statement on Form S-1 with the
Securities and Exchange Commission. The registration statement provides for
the resale of up to 4,810,000 shares of ECOM's common stock by a selling
shareholder. The offering will constitute new financing for ECOM as ECOM,
while it will not directly receive any of the proceeds of the offering, will
receive proceeds from the initial sale of the securities to the selling
shareholder.
Results of Operations
- ---------------------
Comparison of the nine months ended February 29, 2000
with 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
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.
17
<PAGE>
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.
Comparison of the three months ended February 29, 2000
with the three months ended February 28, 1999
------------------------------------------------------
Revenue grew to $927,873 during the three-month period ended February 29, 2000
compared to $81,092 of revenue recorded during the same period of the prior
year. This represented an increase of over 1000% compared to the prior year
quarter. Increases in cost of sales and operating expenses, consistent with
the description in the year-to-date comparison above, created a net loss of
$754,837 in the current quarter compared to $40,872 in the prior year period.
Liquidity and Capital Resources
- -------------------------------
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 the Company's
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 investing activities increased $43,652 due to the addition of
computer hardware and related electronic equipment.
Net cash provided by financing activities consists of loans from stockholders,
which bear no interest, and capital contributions recorded from the private
sale of restricted stock.
The Company continues to be reliant upon the combination of revenues, loans
from stockholders and capital contributions to fund operations. The Company
has not generated any profits from its existing operations and continues to
incur substantial costs related primarily to development and maintenance of
its e-commerce web sites. 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
18
<PAGE>
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. In regard to registration as discussed above
under "Subsequent Event," the Company can make no assurances that it will be
successful in registering the subject shares or that the market in the
Company's stock will remain adequate to allow the Company to raise necessary
funds through the use of the Put Option. Until the Company obtains sufficient
funds necessary to capitalize the growth of its existing operations,
expenditures required to increase revenues, including advertising and
promotion of both its e-commerce web site and paintball products, will be
substantially limited. Should the Company be unable to obtain continued
funding from existing shareholders or under the terms of the Put Option
agreement, its operations may be adversely affected.
19
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is not involved in any material legal proceedings or litigation,
and the officers and directors are aware of no other pending litigation which
would have a material, adverse effect on the Company.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
At its annual shareholders' meeting held on February 17, 2000, the
shareholders of the Company voted to appoint Wieseneck, Andres & CO., P.A. as
the Company's independent accountants replacing the Company's prior
independent accountants, Hafer & Gilmer, P.A. who were dismissed as of such
date. The decision to elect a new accounting firm was recommended by the
Company's Board of Directors in order to access the resources provided by an
accounting firm with a more extensive practice servicing publicly held
companies. The following directors were elected to serve one-year terms:
David J. Panaia, Gerald V. Bergman, Gerald V. Bergman and Elling J. Myklebust.
ITEM 5. Other Events.
None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------- ----------- --------
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K:
Form 8-K, dated January 21, 2000 reporting on Item 5 "Other Events"
Form 8-K, dated February 17, 2000 reporting on Item 4 "Changes in
Registrant's Certifying Accountant"
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ecom ecom.com, inc.
April 13, 1999 By: /s/ David J. Panaia
David J. Panaia, Chief Executive Officer
and Principal Financial Officer
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3 and 4 of the
Company's Form 10-QSB for the quarter ended February 29, 2000, and is
qualified in its entirety by reference to such financial statements.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 45,082
<SECURITIES> 0
<RECEIVABLES> 13,116
<ALLOWANCES> 0
<INVENTORY> 360,107
<CURRENT-ASSETS> 493,808
<PP&E> 248,700
<DEPRECIATION> 102,968
<TOTAL-ASSETS> 694,317
<CURRENT-LIABILITIES> 847,010
<BONDS> 0
0
0
<COMMON> 1,388
<OTHER-SE> (737,408)
<TOTAL-LIABILITY-AND-EQUITY> 694,317
<SALES> 1,379,444
<TOTAL-REVENUES> 1,379,444
<CGS> 1,284,417
<TOTAL-COSTS> 2,944,165
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,793
<INCOME-PRETAX> (1,575,514)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,575,514)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,575,514)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
