<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended - March 31, 2000
----------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
---------------------- ---------------------
Commission File Number 000-28601
-------------
MILLIONAIRE.COM
---------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 23-2970840
------------------ ------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
18 Plantation Park Drive, Bluffton, South Carolina 29910
----------------------------------------------------------------------
(Address of principal executive offices)
(843) 757-6600
-----------------------
(Issuer's telephone number)
-------------------------------------------------
(Former name, former address and former fiscal
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
12, 13 or 15 (d) of the Exchange Act during the past 12 months (or 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 .
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 23, 2000: 8,763,095 shares $.01 par value common stock.
---------
Transitional Small Business Disclosure Format (check one) Yes No X .
--- ---
<PAGE>
FORM 10-QSB
MILLIONAIRE.COM AND SUBSIDIARIES
TABLE OF CONTENTS
-----------------
PAGE
----
PART I. Financial Information
Item 1. Financial Statements................................ 3
Item 2. Management's Discussion and Analysis or Plan
of Operation....................................... 12
PART II. Other Information.............................................
Item 6. Exhibits and Reports on Form 8-K.................... 16
SIGNATURES............................................................. 20
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<PAGE>
PART I-ITEM 1
MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 578,868 $ 19,554
Certificate of deposit - 253,198
Accounts receivable - net 264,190 440,049
Inventories (Note 3) 435,062 472,241
Employee and related party advances 147,805 -
Prepaid expenses and other 74,226 153,258
---------- -----------
Total current assets 1,500,151 1,338,300
EQUIPMENT AND SOFTWARE
Equipment 391,582 301,964
Software 140,490 140,623
---------- ----------
532,072 442,587
Less accumulated depreciation 90,715 62,715
---------- ----------
441,357 379,872
OTHER ASSETS
Deposits 54,539 77,311
Goodwill, net 31,263 33,549
Trademarks, net 1,144,306 1,228,076
---------- ----------
1,230,108 1,338,896
---------- ----------
$3,171,616 $3,057,068
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,604,026 $ 1,844,030
Due to related parties - 132,267
Accrued expenses 179,614 60,182
Deferred revenue 218,446 186,590
Notes payable 7,812 7,812
Current portion of long-term note 92,776 92,776
Capitalized lease obligation, current portion 3,892 3,993
----------- -----------
Total current liabilities 2,106,566 2,327,650
CAPITALIZED LEASE OBLIGATION 15,427 16,082
LONG-TERM DEBT 1,194,295 1,194,295
CONVERTIBLE PREFERRED DEBT (Note 4) 1,750,000 -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 4,063 3,915
Preferred stock - -
Additional paid-in capital 10,282,512 8,518,660
Deferred Compensation (1,881,000) (1,980,000)
Retained earnings (deficit) (10,300,247) (7,023,584)
----------- -----------
Total stockholders' equity (deficit) (1,894,672) (480,959)
----------- -----------
$ 3,171,616 $ 3,057,068
=========== ===========
</TABLE>
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<PAGE>
Millionaire.com and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Quarters ended March 31,
-------------------------
2000 1999
------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales
Magazine sales $ 73,485 $ 42,596
Advertising sales 590,246 227,133
Inventory sales 158,716 44,124
----------- -----------
822,447 313,853
Cost of goods sold (exclusive of items
shown separately below)
Publishing costs 368,644 173,228
Inventory cost of sales 64,296 43,637
----------- -----------
432,940 216,865
----------- -----------
Operating expenses
Employee compensation 472,596 375,244
Selling and marketing 448,207 902,086
Professional fees 396,938 155,037
Depreciation and amortization 114,016 88,654
Rent 97,274 63,040
Bad debt expense 100,000 -
Administrative (Note 5) 712,948 265,992
----------- -----------
2,341,979 1,850,083
----------- -----------
Loss from operations (1,952,472) (1,753,095)
Other income (expenses)
Interest income 7,741 8,466
Interest expense (Note 4) (1,358,526) (52,533)
Other income 26,544 16,333
----------- -----------
(1,324,241) (27,734)
----------- -----------
Net loss before provision for income taxes (3,276,713) (1,780,829)
Income tax expense - -
----------- -----------
Net loss $(3,276,713) $(1,780,829)
=========== ===========
Net loss per common share $ (0.38) $ (0.21)
=========== ===========
Weighted average number of shares
Basic 8,736,677 8,479,370
=========== ===========
Diluted 8,736,677 8,479,370
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
Millionaire.com and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
March 31, 2000, December 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional Retained
----------------------- paid-in Deferred Earnings
Shares Amount capital compensation (Deficit) Total
------------ -------- ---------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 14, 1998
(date of commencement) 3,400,000 $ 2,000 $ 935,575 $ - $ - $ 937,575
Merger transaction 3,300,000 - - - -
Issuance of common shares 1,200,000 1,200 2,998,800 - - 3,000,000
Compensation expense for
stock options - - 2,910,000 (2,910,000)
Net loss - - - - (739,303) (739,303)
--------- -------- ---------- ----------- ----------- ----------
Balance, December 31, 1998 7,900,000 3,200 6,844,375 (2,910,000) (739,303) 3,198,272
Issuance of common shares 600,095 600 1,499,400 - - 1,500,000
Issuance of common shares
for services 15,000 15 44,985 - - 45,000
Issuance of common shares
for services 25,000 25 137,475 - - 137,500
Issuance of common shares
for services 25,000 25 337,475 - - 337,500
Issuance of common shares
for employee services 50,000 50 74,950 - - 75,000
Compensation expense - - - 510,000 510,000
Forfeiture of compensatory
stock options - - (420,000) 420,000 - -
Net loss - - - - (6,284,231) (6,284,231)
--------- -------- ---------- ----------- ----------- ----------
Balance, December 31, 1999 8,615,095 3,915 8,518,660 (1,980,000) (7,023,534) (480,959)
Issuance of common shares (Note 5) 120,000 120 419,880 - - 420,000
Issuance of common shares 28,000 28 41,972 - - 42,000
Issuance of convertible debt (Note 4) - - 1,302,000 - - 1,302,000
Net loss - - - - (3,276,713) -
Compensation expense 99,000 99,000
Balance, March 31, 2000
(unaudited) 8,763,095 $ 4063 $10,282,512 (1,881,000) (10,300,247) (1,894,672)
</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE>
Millionaire.com and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Quarters ended March 31,
---------------------------
2000 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating
activities
Net loss $(3,276,713) $(1,780,829)
Adjustments to reconcile
net loss to net cash
Provided by operating
activities:
Depreciation and
amortization 114,016 88,654
Beneficial conversion
feature of convertible
debt 1,302,000 -
Issuance of common
stock for services
rendered 270,000 520,000
Compensation expense of
stock option 99,000 127,500
Bad debt expense (100,000) -
Changes in operating
assets and liabilities:
Increase in accounts
receivable 275,859 (76,666)
Increase in inventories 37,179 (435,488)
Increase in prepaid
expenses and deposits 101,804 (164,512)
Increase (decrease)
in accounts payable (240,004) 339,570
Increase (decrease)
in accrued expenses 119,432 67,810
Increase in deferred
revenue 31,856 105,103
----------- -----------
Net cash used in
operating activities (1,265,571) (1,208,858)
Cash flows from investing
activities:
Purchase of equipment and
software (89,485) (182,101)
Sale (purchase) of
certificate of deposit 253,198 (1,000,000)
----------- -----------
Net cash used in
investing activities 163,713 (1,182,101)
Cash flows from financing
activities:
Principal payments on
notes payable - (225,000)
Net proceeds from
(payments to) related
parties (280,072) -
Proceeds from issuance of
convertible debt 1,750,000 -
Proceeds from common
stock offering, net 192,000 1,500,000
Principal payments on
long-term debt (756) -
----------- -----------
Net cash provided by
financing activities 1,661,172 1,275,000
----------- -----------
Net increase (decrease) in
cash and cash equivalents 559,314 (1,115,959)
Cash and cash equivalents
at beginning of year 19,554 3,226,634
----------- -----------
Cash and cash equivalents
at end of year $ 578,868 $ 2,110,675
=========== ===========
Supplemental disclosure
-----------------------
Interest paid $ 56,526 $ -
=========== ===========
Income taxes paid $ - $ -
=========== ===========
</TABLE>
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<PAGE>
Millionaire.com and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements included in this report have been
prepared by Millionaire.com (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission for interim reporting and
include all normal and recurring adjustments which are, in the opinion of
management, necessary for a fair presentation. These financial statements have
not been audited by an independent accountant. The consolidated financial
statements include the accounts of the Company and its subsidiaries.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations for
interim reporting. The Company believes that the disclosures are adequate to
make the information presented not misleading. However, these financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Registration Statement on Form
105B12G/A, for the year ended December 31, 1999. The financial data for the
interim periods presented may not necessarily reflect the results to be
anticipated for the complete year.
NOTE 2 - EARNINGS PER SHARE
Basic net earnings per common share are based upon the weighted average number
of common shares outstanding during the period. Diluted net earnings per
common share is based upon the weighted average number of common shares
outstanding plus dilutive potential common shares, including options and
warrants outstanding during the period.
NOTE 3 - INVENTORIES
Inventories are comprised solely of antiques and other luxury goods.
Inventories are stated at the lower of cost or market; cost is determined using
the specific identification method. At December 31, 1999 and March 31, 2000
inventories are shown net of reserves of $64,141 and $102,106, respectively.
NOTE 4 - CONVERTIBLE NOTES PAYABLE
On January 24, 2000, the Company entered into two separate unsecured promissory
notes payable. Both notes payable have substantially the same terms and
totaled $1,750,000. The notes payable were received from current shareholders
of the Company. The notes bear interest at 7% per annum. There are no
required principal or interest payments on the notes until their maturities on
January 24, 2001. The notes are convertible, at the option of the holders, to
shares of common stock of the Company at any time prior to January 24, 2001 at
a price of $1.25 per share. The excess of the aggregate fair value of common
stock that the holder received upon issuance of the promissory notes
approximated $1,302,000. This amount will be recorded as interest expense
during the first quarter in the year ended December 31, 2000.
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<PAGE>
Millionaire.com and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
(Unaudited)
NOTE 5 - DISCOUNT ON SALE OF COMMON STOCK
On January 14, 2000, the Company sold 120,000 shares of common stock, at $1.25
per share, to parties that provided investment banking services at $1.25 per
share. At the date of this transaction, the quoted market price of the common
stock was $3.50 per share. Accordingly, the Company recognized a $270,000
administrative expense related to the sale of stock.
NOTE 6 - SEGMENT INFORMATION
The Company has two reportable segments magazine operations and auction
operations.
<TABLE>
<CAPTION>
Reportable Segment Information
------------------------------
Magazine Auction
Operations Operations Totals
----------- ----------- ------------
<S> <C> <C> <C>
For the quarter ended March 31, 2000
------------------------------------
Revenues from external customers $ 663,731 $ 158,716 $ 822,447
Segment profit (loss) (1,011,670) (267,675) (1,279,345)
Segment assets, net 1,675,301 917,447 2,592,748
For the quarter ended March 31, 1999
------------------------------------
Revenues from external customers 269,729 44,124 313,853
Segment profit (loss) (760,332) (266,824) (1,027,156)
As of December 31, 1999
-----------------------
Segment assets, net 1,869,903 914,413 2,784,316
</TABLE>
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<PAGE>
Millionaire.com and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2000 and 1999
(Unaudited)
NOTE 6 - SEGMENT INFORMATION - Continued
Reconciliation to Consolidated Amounts
--------------------------------------
<TABLE>
<CAPTION>
For the quarter ended
March 31,
2000 1999
----------- -----------
<S> <C> <C>
Revenues
--------
Total external revenues for reportable segments $ 822,447 $ 313,853
----------- -----------
Total consolidated revenues $ 822,447 $ 313,853
=========== ===========
Loss
----
Total loss for reportable segments $(1,279,345) $(1,023,156)
Unallocated amounts
Corporate expense (1,997,368) (753,673)
----------- -----------
Consolidated loss before income taxes $(3,276,713) $(1,780,829)
=========== ===========
March 31, 2000 December 31, 1999
-------------- -----------------
Assets
------
Total assets for reportable segments $ 3,750,484 $ 2,784,316
Other unallocated assets 578,868 272,752
----------- -----------
Total consolidated assets $ 3,171,616 $ 3,057,068
=========== ===========
</TABLE>
At March 31, 2000 and December 31, 1999, the other unallocated assets were
comprised solely of the total cash and certificate of deposit balance of the
Company in the amounts of $578,868 and $272,752, respectively.
NOTE 7 - STOCKHOLDERS'EQUITY
During the three months ended March 31, 2000 the Company's stockholder equity
decreased from $(480,959) on December 31, 1999 to $(1,894,672) on March 31,
2000. As indicated in Notes 4 and 5 the Company issued common stock for
services rendered and also entered into promissory notes with beneficial
conversion features. These two transactions increased stockholders equity by
$420,000 and $1,302,000, respectively. The Company sold 28,000 shares of common
stock at fair market value of $1.50 per share. The sale resulted in an increase
of $42,000 in stockholders' equity. During the three month periods ended March
31, 2000 and 1999, compensation expense of $99,000 and $127,500, respectively,
a corresponding reduction of Additional paid-in capital were recognized. This
resulted from the ratable recognition of compensatory stock option expense.
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<PAGE>
PART I-ITEM 2
MILLIONAIRE.COM AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Revenue
Revenues for the magazine are generated from the sale of advertising space as
well as the sale of the magazines themselves through subscriptions, newsstand
distribution and Company owned inventory sales. Revenues for the auction House
are generated by the sale of Company owned items, commissions paid by
consignors, buyer's premiums, retail trade and by selling inventory through
auction houses not owned by the Company.
Revenues for the first quarter of 2000 were $822,447 compared to $313,853 for
the first quarter of 1999, an increase of $508,594 or 162.0%. The increase in
revenues can be attributed to the Company adding qualified sales
representatives to its staff.
Bad debt expense for the first quarter of 2000 was $100,000 compared to $0 for
the first quarter of 1999. The increase in bad debt expense can be attributed
to clients who for various business and/or personal reasons have not been able
to pay their invoices. After all other collection efforts failed, the Company
is turning the accounts over to attorneys for collection. Until collected, the
expense will remain on the Company's financials.
Sources of Revenue Growth. Beginning with the July 1999 issue, the Company
began publishing Millionaire magazine monthly, rather than quarterly. The
"Billionaire" issue is presently a supplemental annual issue. Additionally,
increased advertising has contributed to a larger page count. Newsstand sales
have increased by 20% and subscription revenue has doubled.
The Company has launched on its Web Site at millionaire.com a new catalog where
individuals and companies alike can advertise items for sale, which generates
advertising revenue for the Internet division. Likewise, the Company has
launched a shopping mall with 1,700 stores available for lease at a rental rate
of $3,000/year. Both the catalog and the mall will add additional advertising
revenue and profits from product sales.
Constraints on Revenue Growth. Delays in the development of the Company's web
site resulted in less advertisement sales and fewer auctions being conducted
than was originally planned. The delays were primarily due to the change in the
control of the Board of Directors that resulted from the merger with The Great
Gatsby's, Inc. Auction Gallery. This resulted in a change of the Internet team
charged with the design and implementation of the web site. It was not until
the merger was rescinded that the original board took back control of the
Company and internally developed the income-producing site that exists today.
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<PAGE>
Cost of goods sold (exclusive of items in operating expenses)
The cost of magazine publishing consists primarily of design, printing and
distribution costs related to advertising and magazine sales. The Company has
brought all design in house at savings of approximately $35,000 per month. A
recently signed contract with Kable News has increased the circulation of the
magazine. The larger print run has lowered the cost of each individual copy.
The cost of goods sold for the auction house consists primarily of the cost of
merchandise purchased whether sold on location or through other auction houses.
Cost of goods sold does not include depreciation and amortization expense and
other operating costs show separately on the statement of operations. Cost of
goods sold for the first quarter of 2000 amounted to $432,940 or 52.6% of net
sales compared to $216,865 or 69.1% of net sales for the first quarter of 1999.
The decrease as a percentage of net sales is attributed to the Company's staff
ability to resource inventory for resale at lower prices.
Operating Expenses
Total operating expenses for the first quarter of 2000 were $2,341,979
(including bad debt expense) or 284.8% of net sales compared to $1,850,083 or
589.5% of net sales for the first quarter of 1999. The decrease as a
percentage of net sales resulted from relatively lower expenses.
Interest Income (Expense) and Other Income, Net
Interest and other income (expense), net, was $(1,324,241) for the first
quarter of 2000 compared to $(27,734) for the first quarter of 1999. The
increased net expense is attributable primarily to $1,302,000 charged to
interest expense in the first quarter of 2000, representing the value assigned
to the beneficial conversion feature of the convertible notes payable issued in
January 2000.
Income Taxes
The Company incurred a net loss of $(3,276,713) for the first quarter of 2000,
of which $(1,302,000) was due to a charge against interest expense that
represented the value assigned to the beneficial conversion feature of the
convertible notes payable issued in January, 2000. This compared to a net loss
of $(1,780,829) for the first quarter of 1999. There were no current or
deferred provisions for income taxes. The net deferred tax assets arising from
net operating loss carry forwards are fully reserved with a valuation
allowance. The net operating losses begin expiring in 2019.
Liquidity and Capital Resources
The Company had cash of $578,868 at March 31, 2000 compared to cash and
certificates of deposit of $272,752 at December 31, 1999. The increase in cash
was a result the receipt of $1,750,000 from an investor. The deficit in working
capital was $(606,415) at March 31, 2000, compared to $(989,350) December 31,
1999.
The Company's principal use of cash in the first quarter of 2000 was for
operations. Cash used by operations was $1,265,571 in the first quarter of
2000. Cash used in operations consists of net loss plus a non-cash expense such
as depreciation and deferred income tax expense and changes in operating assets
and liabilities.
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<PAGE>
Cash provided by financing activities was $1,661,172 in the first quarter of
2000, consisting primarily of cash proceeds from issuance of convertible debt.
We anticipate requiring additional cash to support the anticipated growth in
accounts receivable and for the purchase of inventory. Our operating expenses
are expected to decrease over the next quarter. Until additional capital is
raised to finance additional inventory the auction division is expected to
incur losses.
The Company intends to raise capital throughout the year to purchase certain
highly profitable auction houses. We have contracted to hold several multi
million dollar auctions this year where our Company equally shares revenues
with Lycos. The Company is considering selling certain assets. By doing so
the net worth of the Company could increase substantially, overhead would
decrease allowing the Company to be profitable in all divisions before
projected.
We may consider alternative financing such as the issuance of additional equity
or debt securities or obtaining further credit facilities.
As of March 2000, management has engaged CIT to assist in collecting accounts
receivable on a timely basis. It is anticipated that, as a working relationship
is developed, a credit facility will evolve.
Merger discussions with other luxury space providers are being considered to
maximize the value of the existing assets and brand.
Forward Looking and Cautionary Statements
This document contains certain forward-looking statements We generally identify
forward-looking statements by the use of terminology such as "may," "will,"
"expect," "intend," "plan," "estimate," "anticipate," "believe," or similar
phrases. We base these statements on our beliefs as well as assumptions we made
using information currently available to us. Because these statements reflect
our current views concerning future events, these statements involve risks,
uncertainties and assumptions. Our actual future performance could differ
materially from these forward-looking statements. These forward-looking
statements involve a number of risks and uncertainties. Important factors that
could cause actual results to differ materially from our expectations include
matters not yet known to us or not currently considered material by us.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits - Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K - None
-13-
