SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Period Ended
June 30, 2000
Commission File No. 0-15413
BUSINESSMALL.COM, INC.
(Exact name of Registrant as specified in its Charter)
Nevada 95-3480640
(State or jurisdiction of
incorporation or organization) (IRS Employer Identification No.)
601 Cleveland Street, Suite 930, Clearwater, Florida 33755
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (727) 507-3555
Former name, former address and former fiscal year, if changed since last
report: Progressive Telecommunications Corporation
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for a shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
As of August 18, 2000, there were 14,110,475 shares of Common Stock, $.001 par
value outstanding.
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
<TABLE>
BUSINESSMALL.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
JUNE 30, SEPTEMBER 30,
2000 1999
(Unaudited) (Restated)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45,545 $ 4,197
Restricted Cash 150,000 123,677
Notes receivable 10,825 130,000
Accounts receivable, net 13,944 -
Prepaid and other 206,231 40,459
Total current assets 426,545 298,333
Property and equipment, net 2,694,319 72,945
Other assets:
Goodwill, net 489,583 -
Intangible assets, net 295,933 13,397
Deferred charges 137,600 -
Deposits 75,380 1,800
Assets greater than liabilities
on discontinued operations - 3,293,078
Total other assets 998,496 3,308,275
Total assets $ 4,119,360 $ 3,679,553
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 1,474,289 $ 388,790
Accrued liabilities:
Accrued payroll and taxes 323,467 311,793
Other 440,871 445,344
Notes payable to related parties 173,575 415,200
Notes Payable 478,500 -
Current portion of capital
lease obligation 11,315 27,901
Deferred Revenue 246,082 -
Deposits on unissued common stock 5,000 151,000
Total current liabilities 3,153,099 1,740,028
Long-term liabilities:
Convertible debentures 2,002,500 -
Long-term debt, net of
current maturities - 100,000
Long-term portion of capital
lease obligation - 2,943
Total liabilities 5,155,599 1,842,971
Stockholders' equity:
Common stock par value $.001,
50,000,000 shares authorized,
13,669,185 and 8,222,122
shares issued and outstanding at
June 30,2000 and September 30, 1999,
respectively 13,669 8,222
Additional paid-in capital 22,380,389 8,546,226
Accumulated deficit (23,430,297) (6,717,866)
Total stockholders' deficit (1,036,239) 1,836,582
$ 4,119,360 $ 3,679,553
See accompanying notes to condensed financial statements
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BUSINESSMALL.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES: $ 379,139 $ - $ 383,243 $ -
COSTS AND EXPENSES:
Cost of sales 90,219 - 92,659 -
Selling, general & administrative 3,974,069 822,364 8,826,989 2,386,081
4,143,621 822,364 8,919,648 2,386,081
OPERATING LOSS (3,685,149) (822,364) (8,536,405) (2,386,081)
OTHER INCOME (EXPENSE):
Other income 89,319 15,352 129,250 15,852
Interest expense (240,365) (41,095) (1,595,807) (68,782)
Amortization expense 678 (1,067) (1,264) (2,134)
(150,368) (26,810) (1,467,821) (55,064)
LOSS FROM CONTINUING OPERATIONS (3,835,517) (849,174) (10,004,226) (2,441,145)
DISCONTINUED OPERATIONS:
Loss from discontinued operations (286,604) (318,780) (699,992) (492,647)
Loss from sale of discontinued
operations (6,975,116) - (6,975,116) -
NET LOSS $ (11,097,237)$ (1,167,954) $ (17,679,334) $(2,933,792)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 14,254,134 6,663,513 11,746,982 6,546,193
NET LOSS PER SHARE -
Basic and Diluted:
From Continuing Operations $(.27) $(.13) $(.85) $(.37)
From Discontinued Operations $(.51) $(.05) $(.66) $(.08)
From Continuing and
Discontinued Operations $(.78) $(.18) $(1.51) $(.45)
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
BUSINESSMALL.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
NINE MONTHS ENDED
JUNE 30,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss from continuing operations $ (10,004,226) $ (2,441,145)
Adjustments to reconcile net loss to
net cash flows used in operating activities:
Depreciation and amortization 211,350 13,538
Bad debt expense 477 -
Issuance of stock for services and interest
5,580,184 1,443,380
Change in assets and liabilities
Decrease (increase) in accounts receivable
109,733 (25,534)
Increase in prepaid and other (165,772) (358,437)
Increase in accounts payable 1,085,499 189,971
Decrease in accrued liabilities (354,547) (86,142)
Increase in deferred revenue 246,082 -
Net cash flows used in operating activities (3,291,220) (1,264,369)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,514,704) (18,369)
Decrease in notes receivable 130,000 -
Purchase of intangible assets (281,022) (400)
Increase in loans to stockholders (10,825) (7,350)
Increase in restricted cash (150,000) -
Increase in deposits (73,580) (1,000)
Cash acquired from merger - 21,709
Net cash used in investing activities (1,900,131) (5,410)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long term debt - 100,000
Costs of raising capital - -
Issuance of common stock 3,268,800 208,000
Decrease in loans from stockholders (241,625) (18,000)
Proceeds from line of credit - 1,110,321
Increase in convertible debentures 2,002,500 -
Proceeds from issuance of notes payable 200,000 17,500
Payments on long-term debt (100,000) -
Payments on capital lease obligations (19,529) (12,302)
Proceeds from deposits on unissued common stock - 426,000
Net cash flows provided by financing activities 5,110,146 1,831,519
Net cash provided by (used in) discontinued operations 122,553 (443,720)
NET CHANGE IN CASH AND CASH EQUIVALENTS 41,348 118,020
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,197 7,730
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 45,545 $ 125,750
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 39,203 $ 66,782
Conversion of debt into common stock
833,200 1,510,321
Common stock issued for property and equipment 1,386,585 -
Common stock issued for acquisition 500,000 4,517,443
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
BUSINESSMALL.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1-BASIS OF PRESENTATION:
The accompanying condensed consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
in the United States of America for complete financial statements. Management
believes that all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such financial statements, have been
included. The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of
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. These unaudited condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements, and notes
thereto, for the year ended September 30, 1999 as presented in the Company's
annual report on Form 10-K.
NOTE 2 - REVENUE RECOGNITION POLICY
Revenues are recognized as the services are performed or when the goods are
delivered. Deferred revenue consists primarily of annual fees paid in advance.
NOTE 3 - DISCONTINUED OPERATIONS AND ACQUISITIONS
On June 14, 2000, the Company sold its 83.2% stake in CCC Communications
Corporation ("CCC") for nominal consideration. The Company has also agreed to
compensate the buyer for certain costs amounting to $278,500, which is included
in notes payable. The Company has agreed to use its best efforts to purchase the
remaining issued and outstanding shares of CCC for approximately 643,679 shares
of its common stock. Immediately thereafter, the Company will transfer the
remaining 16.8% of CCC to the purchaser. The Company did not recognize any tax
benefits associated with the resulting losses.
The carrying value of the net assets of discontinued operations at September 30,
1999 were as follows:
Current Assets $ 509,204
Total Assets 5,248,366
Current Liabilities 1,794,011
Total Liabilities 1,955,288
Assets greater than Liabilities on
Discontinued Operations 3,293,078
Sales $4,512,368
During 2000, the company acquired the assets of The Yellow Page Directory, Inc.
in a business combination accounted for as a purchase. The company purchased
the fixed assets, URL domain name, and customer relationships for 200,000 shares
of common stock. At June 30, 2000 the entire $500,000 purchase price has been
preliminarily allocated to goodwill.
NOTE 4 - NOTES PAYABLE
During the nine months ended June 30, 2000, the Company issued 9% convertible
subordinated debentures due December 31, 2001 in the aggregate principal amount
of $502,500. As of June 30, 2000, the Company had an aggregate principal amount
of $502,500 of these debentures issued and outstanding.
Each debenture allows the holder to convert the debentures, in whole or in part,
into shares of the Company's common stock at a fixed conversion rate of $1.50
per share. In connection with the issuance of these debentures, for each $1.50
invested, the debenture holder also received one common stock purchase warrant.
Each warrant is immediately exercisable at the rate of $1.50 per share and
expires on December 31, 2002.
During the nine months ended June 30, 2000, the Company issued 10% convertible
subordinated debentures due March 31, 2003 in the aggregate principal amount of
$1,500,000. Interest is payable in cash or in shares of common stock at the
holder's option, upon conversion, redemption or maturity. These debentures, as
amended, have a variable conversion price, equal to the lower of .75 of the
average closing bid price of the Company's common stock for the three trading
days preceding the initial closing date or the conversion date. Based on the
closing date, the conversion price of these debentures was $3.44 per share. In
conjunction with the issuance of this debenture, the company issued warrants to
purchase 375,000 common stock purchase warrants. The warrants, as amended, are
exercisable at a price of $1.00 per share and expire March 31, 2003.
Contemporaneously with the execution of the debenture, the company placed
1,148,196 shares of common stock with an escrow agent for the conversion of the
debentures and warrants. The common shares are not considered outstanding at
June 30, 2000.
The company recognized approximately $214,000 and $886,000 of interest expense
for the beneficial conversion features associated with these debentures during
the three and nine months ended June 30, 2000, respectively.
On July 10, 2000, the Company issued $555,000 of additional 10% convertible
subordinated debentures due March 31, 2000 under the same general terms as
denoted previous. In conjunction with the issuance of this debenture, the
Company issued warrants to purchase 370,000 common stock purchase warrants at an
exercise price based at the July 10, 2000 closing bid price.
The Company incurred $478,500 of debt related to the sale of CCC Communications.
The six debt instruments bear interest at rates from 0% to 6% and are due
between July 14, 2000 and September 18, 2000. The Company is currently in
default on five of these notes, totaling $458,500 in principal. The debt
instruments include penalties that increase the interest rate to 18% after the
maturity date with an assessment of a 5% late payment fee. The instruments are
secured by the fixed assets of the Company. In conjunction with the default,
the creditors have filed a petition for bankruptcy (see note 6).
NOTE 5 - STOCKHOLDERS' EQUITY
Earnings (Loss) per share
Earnings (loss) per share are computed using the basic and diluted
calculations on the face of the statement of operations. The shares
outstanding, 13,669,185, listed on the face of the income statement is less than
the weighted average shares outstanding used in the earnings per share
calculation for two reasons. In accordance with the agreement to purchase CCC
Communications on December 31, 1998, as amended, the Company is required to
issue 875,000 additional shares to the former CCC Communications shareholders.
In addition, there are 643,679 shares required to be issued to complete the
divestiture of CCC Communications. While the costs associated with these
transactions have been recognized, neither of these issuances were completed at
June 30, 2000. As a result, these shares were not included in the shares
outstanding at June 30, 2000, but were included in the weighted average shares
to calculate the loss per share.
Private Placement Shares
During the nine months ended June 30, 2000, the company raised approximately
$3.4 million in a private placement offering of common stock valued at $2.50 per
share (1,367,800 shares). Each share issued is accompanied by a one-year
warrant to purchase one additional share at a price of $2.50.
Shares Issued for Services
During the nine months ended June 30, 2000, the company issued shares of common
stock valued at approximately $3.5 million in lieu of cash payments for the fair
value of services rendered or the value of common stock where applicable. The
stock was valued at the closing bid price on the date of the agreement, said
price ranging from $0.56 to $2.50 per share.
Shares Issued to Retire Debt
During the nine months ended June 30, 2000, the company issued 635,642 shares of
common stock in exchange for the retirement of approximately $1.0 million of
indebtedness with third-party investors.
The company also issued 1,020,470 shares of common stock to related parties in
exchange for the retirement of approximately $900,000 of indebtedness. These
shares were recorded at a value of $1.50 per share, resulting in approximately
$700,000 in interest expense.
Other Transactions
As part of the finalization of the 1999 reverse merger with Marquee
Entertainment Corp, the Company will issue a tender offer to the remaining 17%
minority shareholders of Progressive Telecommunications, Inc. (a Florida
corporation). This could result in approximately 1.2 million shares of
additional common stock of the Company becoming outstanding if all the minority
shares are tendered.
In connection with employment and consulting agreements, including those
discussed above, the company issued warrants and options to purchase
approximately 864,000 shares of common stock at prices ranging from $.5625 to
$2.50 during the nine months ended June 30, 2000.
NOTE 6 - CONTINGENCIES
On June 21, 2000, the Company was named as defendant in an arbitration filed
with the American Arbitration Association in Atlanta, Georgia. The Claimant,
James Maguire, a former employee, alleges breach of his employment agreement.
The Claimant seeks all monies and securities due him pursuant to the terms of
his employment agreement, filed on November 16, 1999 under a Form S-8
Registration Statement with the Securities and Exchange Commission. The Company
has filed an answering statement. Included therein the Company made nine
affirmative defenses, including that Maguire repudiated the employment agreement
by stating he had no intention to perform under the terms of the agreement,
wrongful acts, failure to perform, doctrine of unclean hands, doctrine of
estoppel and bad faith. The Company intends to defend this matter vigorously
and is contemplating making a counterclaim against Mr. Maguire.
On August 11, 2000 an involuntary petition to place the Company into bankruptcy
was filed on behalf of CCC Communications Corp., Forcedmatrix.com, Inc. and ITS
Billing, Inc., in the United States Bankruptcy Court, Middle District of
Florida. All three of these entities are managed and beneficially owned by
Damian Freeman, a former employee of the Company. The Company intends to move
to dismiss the petition, which counsel has advised may have been filed without
merit and which management believes was filed in bad faith.
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
The Company originally was a fully integrated provider of advanced
telecommunications and communications management services to businesses through
its subsidiary, CCC Communications Corp. The Company disposed of this operation
on June 14, 2000 and is pursuing other lines of business that are explained
below.
BusinessMall.com (the "Company"), a Nevada Corporation, is both an Internet
portal and an e-commerce site focused on providing businesses a one-stop
solution for all of their business product, service and information needs, as
well as providing a safe and secure place for them to conduct business, all
under one virtual roof. BusinessMall.com was developed to raise the standards in
products and services and to become the industry leader of business-to-business
(B2B) commerce on the Internet by providing businesses worldwide a universal
platform on which to transact business electronically. Specifically,
BusinessMall.com targets the vast and lucrative SOHO (small office-home office)
and SMB (small to mid-sized) market. BusinessMall.com has also implemented a
customer/member support staff and technology infrastructure to promote the
services provided on the BusinessMall, including access to live online customer
service agents available twenty-four hours a day, seven days a week, that the
Company considers unsurpassed in the B2B e-commerce industry.
The foundation of BusinessMall.com is TheYellowPageDirectory.com (YPD). The YPD
is an Internet directory that provides enhanced listings and a multitude of
bundled services to potentially millions of business owners specifically
targeting the SOHO and SMB markets. The YPD is housed in a recently opened
73,000 square foot facility and works in conjunction with an E-Contact Solutions
Center (E-csc), which has state-of-the-art computer telephony software and
equipment. The facility can accommodate 1000+ people on site and at least three
times that many virtual employees.
RESULTS OF OPERATIONS
The Company had revenue from continuing operations of $379,000 for the three
months ended
June 30, 2000 compared to none during the three months ended June 30, 1999.
Gross profit for the three months ended June 30, 2000 was $289,000 compared to
zero for the three months ended June 30, 1999. The increase in revenue and
gross profits is attributable to the start-up in operations of The Yellow Page
Directory.com, Corp.
The Company had revenue from operations of $383,000 for the nine months ended
June 30, 2000 compared to zero during the nine months ended June 30, 1999. Gross
profit for the nine months ended June 30, 2000 was $291,000 compared to zero for
the nine months ended June 30, 1999. The increase in revenue and gross profits
is attributable to the start-up in operations of The Yellow Page Directory.com,
Corp.
Selling, general and administrative expenses were $4,053,000 for the three
months ended June 30, 2000 compared to $822,000 for the three months ended June
30, 1999. The increase in expenses resulted from the start-up of The Yellow
Page Directory.Com Corp. and BusinessMall.Com, Inc. The Company incurred
approximately $1,507,000 in payroll, $1,095,000 in legal and consulting fees and
$198,000 in advertising expense related to the start up.
Selling, general and administrative expenses were $8,906,000 for the nine months
ended June 30, 2000 compared to $2,386,000 for the nine months ended June 30,
1999. The increase in expenses resulted from the start-up of The Yellow Page
Directory.Com Corp. and BusinessMall.Com, Inc.
The Company recorded approximately $2,694,000 in payroll costs, $2,290,000 in
legal and consulting fees and $358,000 in advertising expense related to the new
business direction.
Net loss from discontinued operations of $287,000 for the three months ended
June 30, 2000 approximated the net loss from discontinued operations of $319,000
for the three months ended June 30, 1999.
Net loss from discontinued operations was $700,000 for the nine months ended
June 30, 2000 compared to $493,000 for the nine months ended June 30, 1999. The
increase in the net loss is attributable to the increased competition in the
telecommunications business.
The Company sold its subsidiary, CCC Communications, Corp., on June 14, 2000
resulting in a net loss from the sale of discontinued operations of $6,975,000.
This loss is mainly the result of the writing off of goodwill associated with
the original acquisition of CCC.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $3,291,000 for the nine months ended
June 30, 2000 compared to $1,264,000 for the comparable period in 1999. The
change was primarily due to the increased net cash loss of $3,228,000 offset by
a net increase in accounts payable, accrued liabilities and deferred revenue of
$873,000. The net cash loss was calculated as the net loss from continuing
operations adjusted for depreciation, amortization, bad debt expense, and the
issuance of stock for services and interest.
Net cash used for investing activities was $1,778,000 for the nine months ended
June 30, 2000 compared to $5,000 for the comparable period in 1999. The
increase is primarily due to leasehold improvements on a new facility for The
Yellow Page Directory.Com Corp.
Net cash provided by financing activities was $5,110,000 for the nine months
ended June 30, 2000 compared to $1,388,000 for the comparable period in 1999.
During the nine months ended June 30, 2000, the Company raised $3,269,000
through private placements and issued $2,002,000 in convertible debentures.
As of June 30, 2000, the Company had approximately $46,000 of cash and
short-term investments. The Company has experienced negative cash flows since
inception and expects the negative cash flow to continue until the Company and
its subsidiaries generate significant revenue. This negative cash flow and the
resultant decrease in cash and short-term investments have resulted in the
Company becoming delinquent in the payment of current liabilities, including
being in default on certain notes payable. The Company expects that the monthly
negative cash flow will decrease as a result of increased activities related to
BusinessMall.Com and The Yellow Page Directory.Com. The Company's future
success is highly dependent upon its continued access to sources of financing
which it believes are necessary for the continued advertising and marketing of
the Company's Internet websites. In the event the Company is unable to maintain
access to its existing financing sources, or obtain other sources of financing,
there would be a material adverse effect on the Company's business, financial
position and results of operations.
FORWARD LOOKING STATEMENTS
This report contains certain forward-looking statements that are based on
current expectations. In light of the important factors that can materially
affect results, including those set forth above and elsewhere in this report,
the inclusion of forward-looking information herein should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved. The Company may encounter competitive,
technological, financial and business challenges making it more difficult than
expected to continue to market its products and services; competitive conditions
within the industry may change adversely; the Company may be unable to retain
existing key management personnel; the Company's forecasts may not accurately
anticipate market demand; and there may be other material adverse changes in the
Company's operations or business. See also additional risk factors discussed in
the Company's previous filings with the Securities and Exchange Commission.
Certain important factors affecting the forward looking statements made herein
include, but are not limited to (i) accurately forecasting capital expenditures
and (ii) obtaining new sources of external financing. Assumptions relating to
budgeting, marketing, product development and other management decisions are
subjective in many respects and thus susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause the Company to alter its capital expenditure or other budgets,
which may in turn affect the Company's financial position and results of
operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is a party to litigation, which arise, in the
normal course of business. There is no litigation pending, or threatened that,
if determined adversely, would have a material effect upon the business or
financial condition of the company.
During 1998, in the Circuit Court of the 17th Judicial Circuit, in and for
Broward Country, Florida, case no. 98-010111(04), a lawsuit was filed against
the Company and the two principals of the Company, individually, alleging breach
of fiduciary duties while the two principals were employees of a cable
television and satellite installation company. In addition, the suit alleges
usurped corporate opportunities belonging to the other company, tortious
interference with business relations, misrepresentations, and the taking of
business belonging to the other company, resulting in the ultimate demise of the
cable television and satellite installation company. It is management's belief
that the allegations are without merit, that the outcome appears to be
favorable, and they intend to vigorously defend and/or prosecute these matters.
A mediator has been appointed and the case will be heard on August 31, 2000.
On April 17, 2000, the Company was named as defendant in an arbitration filed
with the American Arbitration Association in Orlando, Florida. The Claimant,
Matthew Gillio and Matthew Gillio Enterprises, Ltd. allege claims of breach of
contract, breach of fiduciary duty and fraud. The claim arises out of certain
agreements entered into between the Company's majority owned subsidiary and the
claimant. The claim seeks $45,000 and securities of the Company. The Company's
position is that Mr. Gillio provided absolutely no services on its behalf and,
in fact, directed the Company to enter into agreements with third parties which
resulted in the Company paying fees to third parties without receiving any
benefit in return. The Company has defended this matter vigorously and filed a
counterclaim against Mr. Gillio. The Company filed a motion to strike punitive
damages and a motion to dismiss the arbitration. On July 24, 2000, these
motions were denied without prejudice with leave to allow the parties to
readdress the motions during the arbitration hearing. On July 24, 2000 the
Claimant filed a motion for summary judgment on the Company's counterclaim, or
alternatively, motion for judgment on the pleadings or alternatively, answer to
statement of counterclaim. The Company responded to the motions. As of today's
date no decision has been rendered as to these pleadings.
On June 21, 2000, the Company was named as defendant in an arbitration filed
with the American Arbitration Association in Atlanta, Georgia. The Claimant,
James Maguire, a former employee, alleges breach of his employment agreement.
The Claimant seeks all monies and securities due him pursuant to the terms of
his employment agreement, filed on November 16, 1999 under a Form S-8
Registration Statement with the Securities and Exchange Commission. The Company
has filed an answering statement. Included therein the Company made nine
affirmative defenses, including that Maguire repudiated the employment agreement
by stating he had no intention to perform under the terms of the agreement,
wrongful acts, failure to perform, doctrine of unclean hands, doctrine of
estoppel and bad faith. The Company intends to defend this matter vigorously
and is contemplating making a counterclaim against Mr. Maguire.
On August 11, 2000 an involuntary petition to place the Company into bankruptcy
was filed on behalf of CCC Communications Corp., Forcedmatrix.com, Inc. and ITS
Billing, Inc., in the United States Bankruptcy Court, Middle District of
Florida. All three of these entities are managed and beneficially owned by
Damian Freeman, a disgruntled former employee of the Company. The Company
intends to move to dismiss the petition, which counsel has advised may have been
filed without merit and which management believes was filed in bad faith.
Item 2: Changes in Securities
(a) None
(b) None
(c) None
(d) Not Applicable
Item 3. Defaults upon Senior Securities
The Company incurred $478,500 of debt related to the sale of CCC
Communications. The six debt instruments bear interest at rates from 0% to 6%
and are due between July 14, 2000 and September 18, 2000. The Company is
currently in default on five of these notes, totaling $458,500 in principal.
The debt instruments include penalties that increase the interest rate to 18%
after the maturity date with an assessment of a 5% late payment fee. The
instruments are secured by the fixed assets of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On June 14, 2000, the Company sold its 83.2% stake in CCC Communications
Corporation ("CCC") for nominal consideration. The Company has also agreed to
compensate the buyer for certain costs amounting to $278,500, which is included
in notes payable. The Company had agreed to complete the purchase of the
remaining issued and outstanding shares of CCC for approximately 643,679 shares
of its common stock. Immediately thereafter, the Company will transfer the
remaining 16.8% of CCC to the purchaser.
On August 11, 2000 an involuntary petition to place the Company into bankruptcy
was filed on behalf of CCC Communications Corp., Forcedmatrix.com, Inc. and ITS
Billing, Inc., in the United States Bankruptcy Court, Middle District of
Florida. All three of these entities are managed and beneficially owned by
Damian Freeman, a former employee of the Company. The Company intends to move
to dismiss the petition, which counsel has advised may have been filed without
merit and which management believes was filed in bad faith.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
27 Financial Data Schedule
(b) Reports on Form 8-K
(i) A Form 8-K was filed by the Company dated April 12, 2000 and filed April
12, 2000
(ii) A Form 8-K was filed by the Company dated June 23, 2000 and filed June
28
28, 2000.
(iii) A Form 8-K was filed by the Company dated June 29, 2000 and filed July 7,
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: August 18, 2000 BUSINESSMALL.COM, INC.
By: /s/ Barry L. Shevlin
Barry L. Shevlin, CEO and Principal
Executive and Principal Financial Officer
<PAGE>
EXHIBIT 27
ARTICLE 5
MULTIPLIER
PERIOD - TYPE 9 MONTHS
FISCAL YEAR END SEPTEMBER 30
PERIOD END JUNE 30, 2000
CASH $45,545
RECEIVABLES $13,944
ALLOWANCES $ -
INVENTORY $ -
CURRENT ASSETS $426,545
DEPOSITS $75,380
PP&E $2,914,906
DEPRECIATION $220,587
TOTAL ASSETS $4,119,360
CURRENT LIABILITIES $3,153,099
BONDS $2,002,500
COMMON $13,669
OTHER - SE $(1,049,908)
TOTAL LIABILITIES AND EQUITY $4,119,360
SALES $383,243
TOTAL REVENUES $383,243
CGS $92,659
TOTAL COSTS $8,919,648
OTHER EXPENSES $(127,986)
LOSS PROVISION 0
INTEREST EXPENSE $1,595,807
LOSS FROM DISCONTINED
OPERATIONS $ 7,675,108
INCOME PRETAX $(17,679,334)
INCOME TAX 0
NET LOSS $(17,679,334)
EPS PRIMARY $(1.51)
EPS DILUTED $(1.51)
