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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB/A
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Amended Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended August 31, 2000 Commission File No. 33-23430-D
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NETCOMMERCE, INC.
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(Exact name of registrant as specified in its charter)
Nevada 84-1091271
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1900 Westridge Drive, Irving, Texas 75038
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(Address of principal executive offices) (Zip Code)
(972) 465-5900
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(Registrant's telephone number, including area code)
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 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____
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APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 31, 2000, there were 32,268,937 shares of the Registrant's $.01
par value common stock issued and outstanding. There were also outstanding
warrants to purchase up to 668,014 shares of the Registrant's common stock.
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NETCOMMERCE, INC.
INDEX
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<CAPTION>
Page
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PART I
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Item 1. Financial Statements
Consolidated Balance Sheet - August 31, 2000........................... 3
Consolidated Statements of Operations - Three Months Ended
August 31, 2000................................................... 4
Consolidated Statements of Cash Flows - Three Months Ended
August 31, 2000................................................... 5
Notes to Consolidated Financial Statements............................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 7
PART II
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Item 1. Legal Proceedings...................................................... 9
Item 2. Changes In Securities.................................................. 9
Item 3. Defaults Upon Senior Securities........................................ 9
Item 4. Submission of Matters to a Vote of Security Holders.................... 9
Item 5. Other Information...................................................... 9
Item 6. Exhibits and Reports on Form 8- K...................................... 9
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Part I
NetCommerce, Inc.
Consolidated Balance Sheet
August 31, 2000
<TABLE>
<CAPTION>
ASSETS
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Cash $ 293,455
Marketable securities 142,858
Accounts receivable 12,775
Other current assets 87,888
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Total current assets 536,976
Investments at cost 484,952
Property and equipment, net of accumulated
depreciation of $277,457 625,656
Goodwill, net of accumulated amortization
of $341,523 977,051
Client lists, net of accumulated amortization
of $109,633 143,367
Other assets 114,285
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Total assets $ 2,569,831
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LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 250,000
Notes payable to related parties 149,235
Deferred revenue 218,888
Accounts payable 266,966
Accrued sales tax 151,517
Other current liabilities 166,205
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Total current liabilities 1,202,811
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Stockholders' equity:
Common stock, par value $0.01; 75,000,000 shares
authorized, 32,268,937 shares issued and outstanding 322,689
Additional paid-in capital 10,457,742
Unrealized gain 85,715
Accumulated deficit (9,499,126)
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Total stockholders' equity 1,367,020
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Total liabilities and stockholders' equity $ 2,569,831
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</TABLE>
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NetCommerce, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
August 31,
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2000 1999
<S> <C> <C>
NET REVENUES 250,156 206,159
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OPEPATING EXPENSES
Development and services 648,734 230,979
Sales and marketing 793,231 293,406
General and administrative 492,683 99,883
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TOTAL OPERATING EXPENSES 1,934,648 624,268
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LOSS FROM OPERATIONS (1,684,492) (418,109)
OTHER INCOME (EXPENSE)
Interest expense (55,553) (111,172)
Other income 26,452 -
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LOSS BEFORE INCOME TAXES (1,713,593) (592,281)
Income Taxes - 1,600
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NET LOSS $(1,713,593) $ (530,881)
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BASIC AND DILUTED NET LOSS PER SHARE $ (0.06) $ (0.03)
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BASIC AND DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 29,123,067 15,929,372
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</TABLE>
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NetCommerce, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
August 31,
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2000 1999
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(1,713,593) $(530,881)
Adjustments to reconcile net loss to net cash
(used) provided by operating activities:
Depreciation and amortization 122,041 67,882
Issuance of common stock for interest 45,768 200,000
Issuance of common stock for services 328,840 -
(Decrease) in accounts receivable (9,848) (10,950)
Increase in other current assets (43,928) -
Increase in accounts payable 81,760 138,436
Increase in accrued consulting fees - 28,000
Increase in other current liabilities 151,141 107,911
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Net cash (used) provided by operating activities (1,010,123) 398
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Cash Flows From Investing Activities:
Purchases of equipment (219,149) (46,637)
Increase in other assets (21,479) (150,000)
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Net cash used by investing activities (240,628) (196,637)
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Cash Flows From Financing Activities:
Proceeds from notes payable - 250,000
Proceeds from notes payable to related parties 100,000 -
Payments on notes payable to related parties (14,760) -
Proceeds from issuance of common stock 1,044,250 -
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Net cash provided by financing activities 1,129,490 250,000
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Net (decrease) increase in cash (121,261) 53,761
Cash, beginning of period 414,716 -
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Cash, end of period $ 293,455 $ 53,761
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</TABLE>
Supplemental Non-cash investing and financing activities:
See Notes 6 and 7 for Non-cash investing and financing activities.
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NetCommerce, Inc.
Notes to Consolidated Financial Statements
Note 1 - Organization and History
NetCommerce, Inc. ("NetCommerce" or the "Company") is incorporated in the State
of Nevada. The company develops, designs, and hosts internet web pages.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements at August 31, 2000, include
the accounts of NetCommerce and its majority-owned subsidiaries (collectively,
the "Company"). All significant intercompany accounts have been eliminated in
consolidation.
The accompanying consolidated financial statements reflect the historical
operations of Metroplex for all periods presented. The accompanying
consolidated financial statements include the operations of the Company's
acquirees from the dates of acquisition.
Liquidity
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. Since inception, the Company
has generated cash flows from financing activities to fund losses from
operations. The Company expects to raise equity and/or debt financing through a
private placement of securities. The Company expects to use the financing to
fund losses from operations for the foreseeable future. Losses from operations
are expected to increase due to management's belief that expanded marketing and
sales efforts is required to significantly increase the Company's revenues.
There are no assurances that the Company will be successful in obtaining
additional funding on terms satisfactory to the Company. These factors raise
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Unaudited Interim Financial Statements
The interim financial data as of August 31, 2000, and for the three months ended
August 31, 2000 and 1999, is unaudited; however, in the opinion of management,
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly and Company's financial position as of
August 31, 2000, and the results of its operations and cash flows for the three
months ended August 31, 2000 and 1999.
Note 3 - Marketable Securities
At August 31, 2000 the Company held 28,572 shares of NetHoldings.com, Inc. for
which the market quote on the OTC:BB was $5 per share and has been reflected as
such on the accompanying balance sheet. As of November 8, 2000, the value has
declined to $2.50 per share. No adjustment has been made to the accompanying
consolidated financial statements to reflect this subsequent decline in value as
management has deemed such decline to be temporary.
Note 4 - Sales Taxes
Effective October 1, 1999, the State of Texas requires that sales tax must be
paid on all revenues derived from services related to the development of web
sites. Through August 31, 2000, the Company has not charged its clients for
sales tax nor has it remitted any amounts to the State of Texas for sales taxes
on their web development services. The Company has recorded an accrued sales
tax liability of $151,517 as a result of the Sales Tax Audit conducted by the
Comptroller of Public Accounts in Texas. Management is seeking relief from
payment of such amount and they will
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begin collecting and remitting sales tax beginning November 1, 2000. The
interpretation of the statute is still under scrutiny by a large segment of the
business community in Texas.
Note 5 - Notes payable
On June 2, 1999, the Company issued 8% notes totaling $250,000. At August 31,
2000. this note was in default and due on demand. Demand has been made and the
holder of the note has been notified that the Company does not have the
financial resources available to repay the note. To date, no legal action has
been taken against the Company.
See Note 6 for discussion of notes satisfied through common stock pledged by
related parties.
Note 6 - Notes Payable to Related Parties
The Company signed two notes payable to related parties payable in two years,
with 8% interest, totaling an aggregate of $100,000 for the purpose of securing
a letter of credit as a deposit for the landlord on the headquarters (see Note
7).
The Company had a note payable due to an officer of the Company totaling $49,235
at August 31, 2000 for advances to the Company through charges for Company
expenses on his personal credit card. The note bears interest at 17% per annum
and is due on demand.
On December 14, 1999, the Company issued 8% notes to a company totaling $90,000,
originally due and payable January 14, 2000. As an inducement to obtain the
financing, a NetCommerce shareholder pledged as collateral 250,000 shares of
common stock. On January 14, 2000, the Company defaulted on the loan and the
creditor retained the 250,000 shares of common stock as settlement. The Company
valued the pledged shares at $390,500 on the date of default and charged
interest expense. During the three months ended August 31, 2000, the Company
issued 300,000 shares of restricted common stock to this shareholder in full
settlement of this debt.
On September 1, 1999, the Company issued an 8% note totaling $100,000, due and
payable January 1, 2000. As an inducement to obtain the financing, a NetCommerce
shareholder pledged as collateral 235,000 shares of common stock. On January 1,
2000, the Company defaulted on the loan and the creditor retained the 235,000
shares of common stock as settlement. The Company valued the pledged shares at
$440,625 on the date of default and charged interest expense in fiscal 2000. To
satisfy the outstanding balance of $100,000, the Company issued 275,000 shares
of restricted common stock to this shareholder in full settlement of this debt
during the three months ended August 31, 2000.
Note 7 - Stockholders Equity
On various dates during the three months ended August 31, 2000, the Company
issued 3,849,000 shares of restricted common stock for cash at prices ranging
from $0.20 to $0.75 per share.
On August 31, 2000, the Company entered into a agreement with two related
parties for 1,500,000 shares of restricted common stock for total cash proceeds
of $200,000 (see note 5).
On April 4, 2000, the Company issued 100,000 shares of restricted common stock
to a relative of an officer of the Company. The shares were issued, as an
incentive for the officer's relative to enter into a lease on behalf of the
Company for computers and related equipment. The shares were valued at $112,500
and will be amortized over the 36-month life of the lease. The Company charged
$9,333 to rent expense in the first fiscal quarter 2001, as a result of this
issuance.
Note 8 - Proposed Acquisition
On September 5, 2000, the Company entered into a letter of intent giving the
Company a direct equity interest for developing, positioning, and streamlining
e-commerce operations for a Columbian based coal mining operation. The Company
has terminated negotiations and the letter of intent.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
NetCommerce is an Internet-related holding company, which invests in, develops
and operates Internet service companies from majority or wholly owned
subsidiaries. NetCommerce's Internet services, including web page design, web
hosting and ISP marketing activities are conducted through Metroplexweb. All of
the Company's telecommunication services are conducted through InterCom. Both
Metroplexweb and InterCom are wholly owned subsidiaries of the Company.
On January 24, 2000 the Company acquired Netcom ISP. Netcom ISP provides
connectivity and bandwidth services to small and medium sized businesses. Prior
to the acquisition of Netcom, the Company outsourced the Company's bandwidth
needs. To date, Netcom ISP has provided limited revenue. The Company believes
that the acquisition of Netcom ISP allows them to better serve their clients and
brings the Company one step closer to providing the complete package of Internet
solutions to small and medium sized businesses. Netcom ISP is currently
inactive.
During fiscal 2000, the Company had increased their web site design, development
and hosting services through acquisitions of CurrentMedia LLC and Tectonic Data,
LLC. CurrentMedia is located in Park City, Utah, and develops, designs and
hosts Internet web pages. Tectonic Data LLC, a majority owned subsidiary, is
based in Dallas, Texas and to date, has not produced any revenue. The Company
believes that the acquisition is the first major step in expanding their
operations throughout the United States. Tectonic is a provider of products and
services for video/audio media storages and streaming. The Company plans on
having Tectonic provide products, such as streaming video technology and full
service encoding of media to the 3,000 existing clients of the Company. These
services will allow clients to include commercials, sales presentations, movies
and other media messages. These acquisitions are not material to the Company.
On June 2, 2000, NetCommerce created Netcapitalonline.com, Inc., a wholly owned
financial services marketing and branding company. In the course of its current
business of web hosting and design, NetCommerce has the ability to develop and
source important business transactions related to financial planning,
Internet/Web strategic planning, business development, and accounting/payroll
services. Leveraging its proven business model, Netcapitalonline.com intends to
create opportunities for ongoing acquisition and strategic investments that
increase net value and complement the Company's core business. In most cases,
NetCommerce will retain an equity position in these companies, independently
maintained by its subsidiary Netcapitalonline.com, Inc.
On June 28, 2000, NetCommerce developed Askourcity.com which functions as the
leading online city directory for local information and transactions for any
given industry. Operating in cities worldwide, Askourcity.com delivers local
entertainment, commerce, news, community resources and personal interaction
toresidents and visitors.
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Results of Operations
Three Months Ended August 31, 2000 Compared to Three Months Ended August 31,
1999
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Revenues for the three months ended August 31, 2000, were $250,156 versus
$206,159 during the same period in 1999 representing an increase of $43,997 or
21%. Revenues increased as the Company continued to expand its operations. The
Company's revenues from web development and hosting were $224,460 and $25,696,
respectively, for the current quarter versus total revenues of $206,159 for the
1999 quarter.
Development expenses were $648,734 during the three months ended August 31, 2000
compared to $230,979 during the same quarter in 1999. The 181% increase was
primarily attributable to an increase in web development related compensation,
which increased by approximately 475% from $71,000 during the first quarter of
fiscal 2000 to $478,000 during the first quarter of fiscal 2001.
Sales and marketing expenses increased by $499,915 or 170% from $293,406 to
$793,321 during the first quarter of fiscal 2001. The increase is related to
the Company's expansion of its direct telemarketing sales staff.
General and administrative expenses increased by $392,800 or 393% from $99,883
during the first quarter of fiscal 2000 to $492,683 during the same quarter in
fiscal 2001. The increase is primarily due to the Company's expansion of its
finance and accounting functions, as well as incurring other expenses necessary
to operate a public company.
Liquidity and Capital Resources
As of August 31, 2000, the Company had a working capital deficiency of $665,835
with a cash balance of $293,455.
The Company's plan is to seek for additional sources of capital and new
operating opportunities. Management believes that $1 to $3 million is needed to
fund sales, marketing, and product development. In the interim, the Company's
existence is dependent on continuing financial support from affiliates.
Furthermore, the Company intends to utilize its common stock for future
financial support to finance its needs. There are no assurances that the
Company will be successful in completing an offering sufficient to meet its
operating needs. Such conditions raise substantial doubt about the Company's
ability to continue as a going concern unless substantial funds can be raised
through debt or equity capital.
The Company has no commitments for capital expenditures or additional equity or
debt financing and no assurances can be made that its working capital needs can
be met. The Company incurred $219,149 of capital expenditures during the first
quarter of fiscal 2001.
The Company has generated cash from sales of its common stock and notes to fund
its capital expenditures and operating losses. During the three months ended
August 31, 2000, the Company generated $1,044,250 and $100,000 from the issuance
of common stock and notes, respectively, versus proceeds from the issuance of
notes payable of $250,000 during the same period in 1999. The Company used
$1,010,123 of cash for operations in the current quarter versus generating $398
of cash for the prior year 1999 quarter.
The Company has incurred losses, which are available to offset future taxable
income. Due to the uncertainties regarding the recovery of such asset through
future operations, management has recorded a valuation allowance to reduce all
its deferred tax assets to zero. Accordingly, there is no benefit for income
taxes in the accompanying financial statements.
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Part II OTHER INFORMATION
Item 1. Legal Proceedings
There have been no changes since the Company's last report in Item 3, "Legal
Proceedings" of Form 10-KSB for the fiscal year ended May 31, 2000.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to Vote of Securities Holders
None
Item 5. Other Information
In the Current Quarter, 2nd 2000, the Company has three directors and is
expanding to seven directors. The quarter in this filing and prior there was
only two directors. The Company plans to select an audit committee from the new
board in the third quarter.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Form 8-K - None
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NetCommerce, Inc.
Date: November 20, 2000 By: /s/ Mark Lindberg
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Mark Lindberg
President and
Chief Executive Officer
By: /s/ Daniel Henderson
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Daniel Henderson
Secretary
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