U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1999
Commission File Number: 0-24447
DRIVINGAMERICA.COM, INC.
(Exact name of small business issuer as specified in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
84-1463449
(IRS Employer Identification No.)
18004 Skypark Circle, Suite 170
Irvine, CA
----------
(Address of principal executive offices)
92614
(Zip Code)
(949) 263-8890
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days: Yes
__X__ No ____.
The number of shares of the registrant's only class of common stock issued and
outstanding, as of September 30, 1999, was 12,500,000 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the nine month period
ended September 30, 1999, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Company's unaudited financial statements and notes thereto included herein.
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this report and in any other statement
made by, or on the behalf of the Company, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward looking
statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company. The Company
disclaims any obligation to update forward looking statements.
Overview
DrivingAmerica.com, Inc., f/k/a Mathy Corporation (the
"Company" or "DRI"), was incorporated under the laws of the State of Colorado on
January 30, 1996. On May 7, 1999, pursuant to the terms of an Agreement and Plan
of Reorganization, the Company undertook a forward split of its issued and
outstanding common stock whereby 2.5 shares of common stock were exchanged for
every share then issued and outstanding and thereafter, the Company acquired all
of the issued and outstanding securities of The Cooper Memphis Group, Inc., a
California corporation ("CMG"), in exchange for 11,250,000 (post forward split)
"restricted" common shares of the Company. As a result, the Company was the
surviving entity. As part of the terms of the aforesaid transaction, the Company
amended its Articles of Incorporation, changing its name to its present name, as
well as changing its fiscal year end to December 31 in order to coincide with
the fiscal year end of CMG.
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The Company's principal business is as a marketer of database
information related to automotive marketing under the name "Automotive Consumer
Services." The initial database is comprised of new vehicle information,
including specifications and dealer vehicle costs, which are sold to consumers
in the form of printed vehicle reports. In turn, the consumers who purchase the
reports, along with their behavioral characteristics, become the source of a
secondary, marketed database of consumer information to several manufacturers of
automobiles, local dealer referral programs and affinity groups. DRI is based in
Irvine, California.
DRI intends to expand operations into other logically related
and lucrative services related to the acquisition of an automobile. At the same
time, it expects to develop Internet technology to facilitate the expansion of
the list of services to include other auto-related financial services.
RESULTS OF OPERATIONS
Comparison of Results of Operations for the Nine Month
Periods Ended September 30, 1999 and 1998
During the nine month period ended September 30, 1999, the
Company's revenues were $127,526, compared to $262,534 for the nine months ended
September 30, 1998, a decrease of $135,008 (48%). This decrease was attributable
to a change in the principal business of the Company, whereby the Company went
from a "paper" business to an Internet company. During 1998, the Company's
business consisted of data base marketing, based upon the sale of printed
information. In September 1998, management acknowledged the downturn of the
existing business and thereafter, elected to cause the Company to refocus its
resources and available capital to becoming an Internet based company.
Cost of sales during the nine month period ended September 30,
1999, were $43,172, compared to $17,343 for the similar period in 1998, an
increase of $25,829 (40%). This increase was incurred primarily as a result of
the Company's one time charge for acquisition of hardware and software relating
to the change in the Company's business plan.
Selling, general and administrative costs increased during the
nine month period ended September 30, 1999, to $755,979 compared to $433,648 for
the similar period in 1998, an increase of $322,331 (42%). Most of these charges
were incurred during the initial six months of 1999, as this significant
increase arose as a result of the Company incurring $275,000 in website
development costs, as well as approximately $137,000 in professional fees
relating to the above described reverse merger and activity subsequent thereto,
employee relocation costs of approximately $35,000 and additional payroll
expense of approximately $22,000. Each of the aforesaid costs is expected to be
a one time event and
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it is anticipated that general and administrative costs incurred by the Company
will rise in corresponding levels with anticipated increases in revenues,
primarily as a result of increased payroll costs. In this regard, selling,
general and administrative costs for the three month period ended September 30,
1999 were $35,842, as compared to $210,854 for the similar period in 1998, a
decrease of $175,012 (80%). However, this was due primarily to the Company
having lower payroll costs due to a smaller number of employees during the time
that the Company was adapting to its new business plan and corresponding
decrease in officer related expenses.
As a result, the Company incurred a net loss of $(681,769)
during the nine month period ended September 30, 1999, compared to a net loss
during the similar period in 1998, of $(213,578), an increase of $468,191 (68%).
LIQUIDITY AND CAPITAL RESOURCES
At the end of the nine month period ended September 30, 1999,
the Company had $410 in cash and cash equivalents. It also decreased its
accounts receivable to $16,763 from $28,911 since December 31, 1998, a decrease
of $12,148 (42%), which management attributes to the change in the Company's
business emphasis, as described under "Results of Operations" above.
The Company has an outstanding note payable to a non-
affiliate in the principal amount of $20,000, which accrues interest at the rate
of 10% per annum and which is due upon demand. In addition, the Company also has
received loans from two of its directors, John Davis and Daryl Travis, in the
principal amounts of $15,000 and $10,000, respectively. Each of these loans
accrues interest at the rate of 8% per annum and are also due upon demand.
Management does not believe that any demand will be made by these note holders
in the foreseeable future. The Company also obtained a loan in the principal
amount of $100,000 from a non-affiliate. This loan accrues interest at the rate
of 12% per annum and is due upon demand. While no assurances can be provided, it
is anticipated that this loan will be converted into equity in accordance with
the Company's private offering described hereinbelow.
In order to effectuate the Company's business plan, management
has recognized the Company's need for additional operating capital. In response
thereto, management is hopeful that the Company will undertake a private
placement of its securities in the near future. It was originally thought that
such an offering would take place during the third calendar quarter of 1999.
However, this proposed offering did not take place, as the entities who had
provided assurances to the Company of their intent to provide such funding
failed to perform. Management of the Company has had discussions with other
groups who have indicated their desire to fund the Company and as of the date of
this report, the
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Company has received a letter from Bridgewater Capital Corporation, Newport
Beach, CA ("BCC"), wherein BCC has provided the Company with a commitment to
provide no less than $500,000 to the Company within 15 days following the
receipt by the Company of an approval to the Company's pending application
submitted to the NASD to allow the Company to begin trading its common stock on
the OTC Bulletin Board operated by the NASD. This letter also commits to raise
an additional $2.5 million in equity capital and provide the Company with an
equity line of credit in the amount of $2-$3 million. However, no definitive
agreement has been reached with BCC, the terms of such equity capital have not
been firmly established and there is no assurance that the Company's application
to list its common stock for trading will be approved. Failure to obtain
adequate funding will have a significant negative impact on the Company's
proposed plan of operation. If such funding is obtained, of which there can be
no assurance, it is believed that the Company will be able to fully implement
its business plan if the full amount stated is received.
In August 1999, the Company signed various agreements,
including an investment banking agreement with Deere Park Capital LLC,
Northbrook, Illinois, ("Deere Park") wherein Deere Park did agree to provide the
Company with $125,000 in the form of a Convertible Debenture. The principal
balance and all interest as accrued was due and payable in October 1999 and the
Company is currently in default of its obligations to Deere Park. Management has
had numerous discussions with representatives of Deere Park, but as of the date
of this report no resolution of this default has been reached. No formal action
against the Company has been filed or threatened and the parties are hopeful
that the Company will receive the funding described above in order to resolve
this issue. There are no assurances that such funding will be available to the
Company. In its sole discretion, Deere Park has the right to convert all or any
portion of the principal and any interest as accrued thereon as of the date of
such notice of conversion into (i) the Company's private offering in an amount
equal to the balance of the principal and interest then due, or (ii) 50,000
"free trading" shares of the Company's common stock presently held in escrow,
which were placed into escrow by nonaffiliate shareholders of the Company. In
the event Deere Park elects to convert pursuant to (ii) above, any further
obligation owed to Deere Park by the Company shall be deemed to have been fully
satisfied and the Company will have no further obligation to Deere Park
applicable to the Debenture.
TRENDS
Management believes that the Company will continue to operate
the Company's business at a loss for the foreseeable future, but is optimistic
that the Company will begin generating profits from its operations beginning in
the third calendar quarter of 2000, and possibly earlier if sufficient working
capital
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discussed in "Liquidity and Capital Resources," above, is received by the
Company. This will occur as a result of anticipated increased revenues derived
from website traffic, the Company obtaining additional contracts for data based
marketing and from direct sales of related automobile products, including loan
and lease products and insurance products. In regard to obtaining additional
contracts for data based marketing, the Company is currently engaged in
discussions with various parties and expects that these discussions will result
in the Company entering into additional contracts with these parties. However,
there can be no assurances that the Company will become profitable within the
time parameters described herein, or at all.
INFLATION
Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that inflation had a
material affect on the results of operations during the nine month period ended
September 30, 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
None
ITEM 5. OTHER INFORMATION - NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K - None
6
<PAGE>
<TABLE>
DRIVINGAMERICA.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
September 30, December 31,
1999 1998
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 410 $ -
Accounts receivable 16,763 28,911
----------- -----------
TOTAL CURRENT ASSETS 17,173 28,911
PROPERTY AND EQUIPMENT, Net 6,640 9,439
----------- -----------
$ 23,813 $ 38,350
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank overdraft $ - $ 6,672
Accounts payable 97,667 166,261
Settlement payable 140,000 -
Bridge loans payable 110,000 -
Loans payable 31,707 30,167
----------- -----------
TOTAL CURRENT LIABILITIES 379,374 203,100
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.001 par value;
authorized - 25,000,000 shares;
issued and outstanding - none - -
Common stock, $.001 par value;
authorized - 100,000,000 shares;
issued and outstanding - 12,500,000 shares 12,500 12,500
Additional paid-in capital 829,268 434,228
Due from officer - (95,918)
Accumulated deficit (1,197,329) (515,560)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (355,561) (164,750)
----------- -----------
$ 23,813 $ 38,350
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
DRIVINGAMERICA.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
------------------------- ------------------------
1999 1998 1999 1998
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUE $ 33,776 $ 91,231 $ 127,526 $ 262,534
COST OF SALES 5,437 8,433 43,172 17,343
----------- ----------- ----------- ----------
GROSS PROFIT 28,339 82,798 84,354 245,191
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 35,842 210,854 755,979 433,648
----------- ----------- ----------- ----------
LOSS FROM OPERATIONS (7,503) (128,056) (671,625) (188,457)
OTHER INCOME (EXPENSES) - NET 801 (15,180) (10,144) (25,121)
----------- ----------- ----------- ----------
NET LOSS $ (6,702) $ (143,236) $ (681,769) $ (213,578)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,500,000 12,500,000 12,500,000 12,500,000
=========== =========== =========== ===========
BASIC LOSS PER SHARE $ (0.00) $ (0.01) $ (0.05) $ (0.02)
=========== =========== =========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
F-2
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<PAGE>
<TABLE>
DRIVINGAMERICA.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended Sept. 30,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (681,769) $ (213,578)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 2,799 6,771
Changes in operating assets and liabilities:
Accounts receivable 12,148 52,779
Accounts payable (68,594) -
Settlement payable 140,000 -
NET CASH PROVIDED BY (USED IN) ----------- -----------
OPERATING ACTIVITIES (595,416) (154,028)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - (4,451)
Due from officer, net 95,918 (114,110)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES 95,918 (118,561)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft (6,672) -
Contributed capital 395,040 -
Proceeds from loans payable
and bridge financing 111,540 269,159
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 499,908 269,159
----------- -----------
NET INCREASE (DECREASE) IN CASH 410 (3,430)
CASH, BEGINNING OF PERIOD - 5,254
----------- -----------
CASH, END OF PERIOD $ 410 $ 1,824
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
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<PAGE>
DRIVINGAMERICA.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been
prepared by DrivingAmerica.com, Inc. (the "Company") without audit and,
in the opinion of the management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of (a) the results of
operations for the three and nine months ended September 30, 1999 and
1998, (b) the financial position at September 30, 1999, and (c) the
cash flows for the nine months ended September 30, 1999 and 1998.
Interim results are not necessarily indicative of results for a full
year.
The balance sheet presented as of December 31, 1998 has been derived
from the financial statements that have been audited by the Company's
independent public accountants. The financial statements and notes are
condensed and do not contain certain information included in the annual
financial statements and notes of the Company. The financial statements
and notes included herein should be read in conjunction with the
audited financial statements and notes for the years ended December 31,
1998 and 1997 included in the Company's Form 8-K/A 1 filed on July 6,
1999.
2. BRIDGE FINANCING
During the nine months ended September 30, 1999, the Company received
$110,000 bridge financing in the form of a Convertible Debenture. The
principal balance and all interest as accrued shall be due and payable
upon the earlier of (i) 75 days from the date of the Debenture, or (ii)
within three (3) business days following closing of the Company's
Private Placement Offering described under "Liquidity and Capital
Resources" above herein. In its sole discretion, the debenture holder,
Deere Park Capital LLC, may convert all or any portion of the principal
and any interest as accrued thereon as of the date of such notice of
conversion into (i) the Company's private offering in an amount equal
to the balance of the principal and interest then due, or (ii) 50,000
"free trading" shares of the Company's common stock presently held in
escrow, which were placed into escrow by nonaffiliate shareholders of
the Company. In the event Deere Park elects to convert pursuant to (ii)
above, any further obligation owed to Deere Park by the Company shall
be deemed to have been fully satisfied and the Company will have no
further obligation to Deere Park applicable to the Debenture.
3. STOCKHOLDERS' DEFICIENCY
During the nine months ended September 30, 1999, a stockholder of the
Company contributed $395,040 to the capital of the Company.
F-4
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DRIVINGAMERICA.COM, INC.
(Registrant)
Dated: January 27, 2000
By:s/ Charles M. Davis
-------------------
Charles M. Davis,
President
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<PAGE>
DRIVINGAMERICA.COM, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
EXHIBITS Page No.
EX-27 Financial Data Schedule....................................13
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 410
<SECURITIES> 0
<RECEIVABLES> 16,763
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,173
<PP&E> 6,640
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,813
<CURRENT-LIABILITIES> 379,374
<BONDS> 0
0
0
<COMMON> 12,500
<OTHER-SE> (368,061)
<TOTAL-LIABILITY-AND-EQUITY> 23,813
<SALES> 127,526
<TOTAL-REVENUES> 127,526
<CGS> 43,172
<TOTAL-COSTS> 43,172
<OTHER-EXPENSES> 755,979
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,144
<INCOME-PRETAX> (681,769)
<INCOME-TAX> 0
<INCOME-CONTINUING> (681,769)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (681,769)
<EPS-BASIC> (.05)
<EPS-DILUTED> 0
</TABLE>
