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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number 0-14731
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EMARKETPLACE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0558415
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
255 WEST JULIAN STREET, SUITE 100
SAN JOSE, CALIFORNIA 95110
(Address of principal executive offices)
(408) 295-6500
(Registrant's telephone number, including area code)
----------------------------
Indicate by check mark whether the registrant: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act 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 [ ]
As of April 30, 2000, there were 16,757,190 shares of the Registrant's Common
Stock outstanding.
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1
<PAGE>
- --------------------------------------------------------------------------------
EMARKETPLACE, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 2000
INDEX
- --------------------------------------------------------------------------------
PAGE
PART I FINANCIAL INFORMATION NUMBER
ITEM 1. Financial Statements:
Consolidated Balance Sheet as of March 31, 2000.... 3
Consolidated Statements of Operations for the
three and nine months ended March 31, 2000 and 1999....... 4
Consolidated Statements of Cash Flows for the
nine months ended March 31, 2000 and 1999................. 5
Notes to Consolidated Financial Statements................... 6
Report of Independent Public Accountants..................... 17
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................ 18
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings............................................ 23
ITEM 2. Changes in Securities and Use of Proceeds.................... 23
ITEM 3. Defaults Upon Senior Securities.............................. 23
ITEM 4. Submission of Matters to a Vote of Security Holders.......... 24
ITEM 5. Other Information............................................ 24
ITEM 6. Exhibits and Reports on Form 8-K............................. 24
Signatures................................................... 25
2
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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMARKETPLACE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000
(Unaudited)
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 1,951,644
Accounts receivable 4,494,959
Note receivable - related party 800,000
Prepaids and other current assets 410,188
------------
TOTAL CURRENT ASSETS 7,656,791
------------
PROPERTY AND EQUIPMENT (NET) 1,442,852
OTHER ASSETS:
Note receivable 500,000
Related party loans 442,965
Intangible assets 14,224,463
Deposits & other assets 352,775
------------
TOTAL OTHER ASSETS 15,520,203
------------
TOTAL ASSETS $ 24,619,846
============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Loans payable to related parties $ 329,115
Lines of credit 365,639
Current portion of debt 25,058
Deferred tax liability 657,183
Accounts payable 1,977,363
Other accrued liabilities 990,721
------------
TOTAL CURRENT LIABILITIES 4,345,079
------------
Long-term note payable 1,124,079
------------
TOTAL LONG-TERM DEBT 1,124,079
------------
TOTAL LIABILITIES 5,469,158
------------
Minority Interest in Full Moon 2,790,516
------------
STOCKHOLDERS' EQUITY:
Preferred Stock - $0.0001 Par Value, 1,000,000 Shares
Authorized, No Shares Issued and Outstanding --
Common Stock - $0.0001Par Value, 50,00,000 Shares
Authorized, 15,212,185 Shares Issued and Outstanding 1,521
Capital in Excess of Par Value 21,371,907
Deferred compensation (319,145)
Accumulated deficit (4,694,111)
------------
TOTAL STOCKHOLDERS' EQUITY 16,360,172
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,619,846
============
See Notes to Consolidated Financial Statements.
3
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<TABLE>
<CAPTION>
EMARKETPLACE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
2 0 0 0 1 9 9 9 2 0 0 0 1 9 9 9
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE $ 13,108,108 $ -- $ 18,692,809 $ --
------------ ------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Cost of revenue 8,276,341 -- 13,495,131 --
Selling, general and administrative 5,006,901 5,308 6,820,644 10,844
Stock-based compensation 158,437 30,000 355,551 30,075
Amortization of goodwill and other
acquired intangibles 716,232 -- 1,919,875 --
------------ ------------ ------------ ------------
TOTAL OPERATING COSTS AND EXPENSES 14,157,911 35,308 22,591,201 40,919
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (1,049,803) (35,308) (3,898,392) (40,919)
OTHER INCOME (EXPENSE) (5,604) __ (5,604) --
INTEREST INCOME 37,047 -- 64,364 2,260
INTEREST EXPENSE (174,900) -- (191,689) --
------------ ------------ ------------ ------------
LOSS BEFORE MINORITY
INTEREST $ (1,193,260) $ (35,305) $ (4,031,321) $ (38,659)
------------ ------------ ------------ ------------
Minority interest in consolidated
subsidiaries 52,638 -- 72,638 --
------------ ------------ ------------ ------------
NET LOSS $ (1,140,622) $ (35,308) $ (3,958,683) $ (38,659)
============ ============ ============ ============
NET LOSS PER SHARE:
Basic and Diluted $ (0.08) $ (0.01) $ (0.29) $ (0.01)
============ ============ ============ ============
Weighted Average Common Shares
Outstanding 15,017,256 6,460,000 13,727,755 6,460,000
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
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<TABLE>
<CAPTION>
EMARKETPLACE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended March 31,
------------------------------
2 0 0 0 1 9 9 9
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss $ (3,958,683) (38,659)
Adjustments to Reconcile Net Loss to Net Cash Provided (Used)
by Operating Activities:
Stock-based compensation 355,551 30,000
amortization of deferred compensation 327,350 --
Depreciation and amortization 2,114,456 --
Bad debt expense 35,417
Revenue from conversion of capital lease (188,448) --
Accrued interest on notes to shareholder 10,698 --
Minority interest in consolidated subsidiary (72,638)
Changes in assets and liabilities:
accounts receivable (999,262) --
Other assets (195,654) --
Accounts payable and accrued liabilities (115,224) 15,399
Accrued liabilities (79,327) (4,480)
------------- -------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (2,765,764) 2,260
------------- -------------
INVESTING ACTIVITIES:
Notes receivable - related parties (5) (1,300,000) --
Loans to related parties (442,965)
Cash paid for acquisition, net of cash received (15,763) --
Proceeds from repayment of note receivable 357,771 --
Purchase of fixed assets (520,644) --
------------- -------------
NET CASH USED BY INVESTING ACTIVITIES (1,921,601) --
------------- -------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock in private placement 3,021,308 --
Proceeds from exercises of options and warrants 1,182,299 --
Repayment of loans (79,167) (2,260)
Proceeds from issuance of debt 1,260,922 --
Proceeds from issuance of subsidiary stock 859,979 --
Payment of acquired entities' debt (862,298) --
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,383,043 (2,260)
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 695,678 --
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIODS 1,255,966 --
------------- -------------
CASH AND CASH EQUIVALENTS - END OF PERIODS $ 1,951,644 $ --
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash interest paid for the periods: $ 9,013 $ --
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Issuance of Common Stock of in exchange for services
355,551 30,000
Reduction in fixed assets due to conversion of capital
lease to operating lease 2,558,634 --
Fixed assets acquired under capital lease 5,150 --
Issuance of Common Stock for acquisition of Interactive
Architects Firms 4,154,000 --
Issuance of Subsidiary's Common Stock for Acquisition of
Interactive Architects 4,785,500 --
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
EMARKETPLACE, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION:
eMarketplace, Inc., a holding company that acquires and develops Internet
companies that develop (i) end-to-end ecommerce solutions; and (ii) aggregate
affinity audiences within electronic, or "e" marketplaces, (formerly Computer
Marketplace, Inc.) (the "Company") was a California corporation that was
incorporated on July 19, 1983, as Quality Associates, Inc. and changed its name
to Computer Marketplace in June 1987. In March 1993, Computer Marketplace
changed its name to Computer Marketplace, Inc. ("Computer Marketplace") and its
state of incorporation from California to Delaware. In September 1999, the name
of the Company was again changed to eMarketplace, Inc. ("eMarketplace"). Until
April 1999, the Company was primarily engaged in the wholesale distribution of
new and used computer equipment to dealers, computer maintenance companies,
leasing companies, equipment brokers, and end users, despite the fact that the
Company was in the process of winding down its business because it failed to
operate profitably since the fiscal year ended June 1994. Computer Marketplace's
wholly owned subsidiary, Medical Marketplace, which was engaged in the
distribution of used medical equipment to health care providers, was disposed of
during the quarter ended September 30, 1999 (see Note 10).
On April 23, 1999, the Company acquired E-Taxi, Inc. ("E-Taxi") in a business
combination accounted for as a "reverse acquisition." As consideration for 9.1
million shares of E-Taxi's common stock and 400,000 shares of E-Taxi's Series A
Preferred Stock, the Company issued an aggregate of 9.1 million shares of common
stock, par value $.0001 per share, and 400,000 shares of Series A Preferred
Stock, par value $.0001 per share. For accounting purposes, E-Taxi is deemed to
be the acquirer, and the Company is deemed to be acquired, under the purchase
method of accounting. Therefore, the financial information presented herein
includes the historical results of E-Taxi and the results of the Company from
April 23, 1999 (date of acquisition) only. E-Taxi was incorporated in the State
of Delaware on April 14, 1998 to develop a vertical internet portal for the
small office, home office ("SOHO") market.
The acquisition of E-Taxi by the Company signified the adoption by the Company
of a new corporate strategy to develop, operate and acquire internet businesses
that provide content, commerce and online services to demographically-targeted
audiences. In April 1999, immediately prior to the Company's acquisition of
E-Taxi, E-Taxi acquired TechStore, L.L.C. ("TechStore"), an online retailer of
computer hardware and software, in a business combination accounted for as a
purchase. The results of operations include the results of TechStore from the
date of acquisition.
On November 23, 1999, the Company and its newly formed subsidiary, TopTeam, Inc.
closed on the acquisition of six internet consulting companies - Full Moon
Interactive Group, Inc., Orrell Communications, Inc., Devries Data Systems, Inc.
6
<PAGE>
(Unaudited)
Muccino Design Group, Inc., Image Network, Inc., and OnCourse Network, Inc.
(collectively, the "Interactive Architect Firms"). As a result of the
acquisitions, i) TopTeam owns all of the outstanding capital stock of the
Internet Architect Firms; and ii) eMarketplace owns approximately 44.9% of the
total TopTeam shares outstanding, exclusive of eMarketplace's rights to purchase
3.6 million shares of common stock of TopTeam at $7.50 per share, expiring upon
the earlier of May 23, 2000, or the effective date of a TopTeam registration
statement. On February 23, 2000, Top Team changed its name to Full Moon
Interactive, Inc. ("Full Moon"). Hereinafter, Top Team and its subsidiaries will
be referred to as Full Moon.
BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring accruals necessary for a fair presentation of the consolidated
financial position of the company as of March 31, 2000, the consolidated results
of its operations for the three months and nine months ended March 31, 2000 and
1999 and its cash flows for the nine months ended March 31, 2000 and 1999.
Although the Company believes that the disclosures in these financial statements
are adequate to make the information presented not misleading, certain
information and footnote information normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. Results of operations for the period ended March 31, 2000
are not necessarily indicative of results to be expected for the full year. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Form 10-KSB for the year ended June
30, 1999.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SALE OF STOCK BY A SUBSIDIARY - Changes in the Company's proportionate share of
subsidiary equity are accounted for as equity transactions.
BASIS OF CONSOLIDATION - The accompanying consolidated financial statements
include the accounts of eMarketplace, its wholly owned, direct and indirect,
subsidiaries which include E-Taxi, Inc. and TechStore, Inc. and its majority
owned subsidiary OfficeExpress, Inc. In addition, the Company is consolidating
certain financial statements of Full Moon as a consequence of its operational
control over the entity, notwithstanding the fact that the Company's ownership
consists of 44.9% of the common stock, exclusive of rights to purchase 3.6
million shares of common stock at $7.50 per share. All material intercompany
balances and transactions have been eliminated.
The accompanying consolidated financials statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission, and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results for the interim
periods presented. All such adjustments are of a normal recurring nature.
7
<PAGE>
(Unaudited)
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted pursuant to such rules and regulations, although
the Company believes the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's Annual Report on Form 10-KSB and the Company's quarterly Report on
Form 10-QSB.
Full Moon's fiscal year ends July 31. The operating results of Full Moon's
operating subsidiaries for the period November 23, 1999 (the date of
acquisition), through March 31, 2000 have been included in eMarketplace's
results of operations for the three and nine-month periods ended March 31, 2000.
REVENUE RECOGNITION - The Company records product sales revenue when goods have
been shipped. Professional services revenue is recognized for time and
materials-based arrangements on the percentage-of-completion method.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments
with a maturity of three months or less when purchased to be cash equivalents.
There were no cash equivalents at March 31, 2000.
PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and equipment are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets, which range from three to seven years.
WEBSITE DEVELOPMENT - The Company capitalizes website development costs in
accordance with AICPA Statement of Position 98-1 "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." and EITF: Issue 00-2
"Accounting for Website Development Costs". EITF 00-2 requires costs incurred in
the planning stage of website development to be expensed and requires the
application of SOP 98-1 for costs incurred for website application and
infrastructure, graphics and content development stages, and costs incurred in
the operating stage. Generally, website application costs and infrastructure,
and graphics and content development costs are capitalized, while costs incurred
in the operating stage are expensed. The Company depreciates website development
costs over three years.
INTANGIBLES AND AMORTIZATION - Intangible assets are stated at cost.
Amortization is computed using the straight-line method over the estimated
useful life of the related asset, which is generally four to ten years.
IMPAIRMENT - Long-lived assets of the Company are reviewed at least annually as
to whether their carrying value has become impaired pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
requires long-lived assets, if impaired, to be remeasured at fair value,
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Management also reevaluates the periods of
8
<PAGE>
(Unaudited)
amortization of long-lived assets to determine whether events and circumstances
warrant revised estimates of useful lives.
NET LOSS PER SHARE OF COMMON STOCK - Net loss per share of common stock is
computed reflecting the shares issued in the reverse acquisition as outstanding
for all periods presented and on the basis of the weighted average shares of
common stock outstanding. Potential common shares arising from the effect of
dilutive stock options and warrants using the treasury stock method are included
if dilutive. For fiscal years 2000 and 1999, the per share results were computed
without consideration for contingently issuable shares underlying stock options
and warrants as the effect on the per share results would be anti-dilutive.
COMPREHENSIVE INCOME - The Company does not have any transactions included in
comprehensive income.
SEGMENTS - Effective July 1, 1998, the Company adopted the provisions of SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information.
"The Company identifies its operating segments based on business activities,
management responsibility and geographical location. During the three and nine
periods ended March 31,1999, the Company operated in a single business segment,
primarily in the United States. Prior to the acquisition of six internet
consulting firms by Full Moon on November 23, 2000 (Note 3), the Company's
operations consisted almost entirely of its online retailing activities.
Subsequent to this acquisition, the Company effectively has two business
segments for purposes of SFAS No. 131 (Note 11).
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at 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.
(3) ACQUISITIONS AND INVESTMENTS
E-TAXI, INC. - On April 23, 1999, the Company acquired E-Taxi, Inc. ("E-Taxi")
in a business combination accounted for as a "reverse acquisition." As
consideration for 9.1 million shares of E-Taxi's common stock and 400,000 shares
of E-Taxi's Series A Preferred Stock, the Company issued an aggregate of 9.1
million shares of common stock, par value $.0001 per share, and 400,000 shares
of Series A Preferred Stock, par value $.0001 per share. For accounting
purposes, E-Taxi is deemed to be the acquirer, and the Company is deemed to be
acquired, under the purchase method of accounting. Therefore, the financial
information presented herein represents the historical results of E-Taxi and the
results of the Company from April 23, 1999 (date of acquisition) only. The total
purchase price, including stock valued at $9.5 million and acquisition related
expenses of approximately $96,000 was allocated to net liabilities of the
Company of approximately $473,000, and $10 million of goodwill, which is being
amortized using the straight-line method over its estimated useful life of five
years.
9
<PAGE>
(Unaudited)
Effective July 1, 1999 the Company completed the sale of its wholly owned
subsidiary, Medical Marketplace, Inc., on terms more favorable to the Company
than originally anticipated at the time of the transaction between E-Taxi and
the Company, resulting in a decrease to the amount of goodwill recorded as a
result of the acquisition by approximately $558,000 in the nine month period
ended March 31, 2000 (see Note 11).
TECHSTORE, LLC - In April 1999, E-Taxi acquired TechStore, an online retailer of
computer hardware and software, in a business combination accounted for using
the purchase method of accounting. The results of operations include the results
of TechStore from the date of acquisition. The purchase price, which consisted
of stock valued at $1.5 million, cash of approximately $67,000 and acquisition
related expenses of approximately $38,000, was allocated to net tangible
liabilities acquired (approximately $170,000), developed technology ($140,000),
established workforce ($160,000), trademarks ($280,000), and goodwill ($1.2
million). The value and estimated lives of the identified intangible assets was
determined by a third-party valuation. The intangible assets are being amortized
over their estimated useful lives of four years.
FULL MOON ACQUISITIONS - On November 23, 1999, eMarketplace, Inc. and its wholly
owned subsidiary, Full Moon (formerly TopTeam, Inc.), closed on the acquisition
of six Internet consulting companies (the "Interactive Architect Firms"). In
connection with the acquisition of the Interactive Architect Firms, the Company
issued a total of 1.0 million shares of its common stock in exchange for shares
of common stock of each of the Interactive Architects (including shares issuable
pursuant to rights granted under the acquisition agreements). Concurrently
therewith, (i) the Company contributed its newly purchased shares of the
Interactive Architect Firms to Full Moon in exchange for Full Moon's issuance of
3.3 million shares of its common stock, and (ii) the stockholders of the
Interactive Architect Firms contributed all of the remaining outstanding shares
of the Interactive Architect Firms (the shares not purchased by the Company) to
Full Moon in exchange for the issuance of 3.8 million shares of Full Moon common
stock
The consolidated results of operations include the results of the Interactive
Architect Firms from the date of acquisition. The purchase price, which
consisted of stock valued at $8.9 million and acquisition related expenses of
approximately $1.1 million, was allocated to net tangible assets of $1.9 million
and minority interest of $2.8 million, resulting in goodwill of approximately
$5.3 million. The goodwill is being amortized over its estimated useful lives of
ten years.
In connection with the acquisition of the Interactive Architects and as
consideration for a $1.0 million loan, Full Moon executed a promissory note in
favor of the Company in the aggregate amount of $1.0 million, bearing interest
at a rate of seven percent per annum. Interest payments are due and payable
monthly and the principal amount outstanding is due and payable on November 22,
2001. Full Moon is required to prepay the note in full in the event that Full
Moon consummates an initial public offering of its common stock, which generates
gross proceeds of not less than $25 million. In addition, as consideration for
this acquisition, the Company received 250,000 shares of Full Moon common stock.
The Company also purchased 250,000 shares of Full Moon Series A Convertible
preferred stock for the total amount of $1.0 million. In addition, the Company
received rights for 3.6 million shares of Full Moon common Stock.
10
<PAGE>
(Unaudited)
As of November 23, 1999, the Company agreed to sell and assign the following to
Internet Asset Inc. Class D, an investment fund, for $2.0 million.
(a) A $1.0 million promissory note, dated November 23, 1999, issued by Full
Moon.;
(b) 250,000 shares of Full Moon's common stock;
(c) 250,000 shares of the Full Moon's Series A preferred stock, and
(d) Subject to certain conditions, an option to exercise rights to purchase
500,000 shares of TopTeam's stock at $7.50 per share ("Option Rights"). The
option rights expired January 20, 2000, although they were extended until
the earlier of i) February 20, 2000, or ii) within five (5) days following
notice of a firm commitment from certain qualified investment banks to
underwrite the common stock of Full Moon. The option rights expired, by
their terms, on February 21, 2000.
As a result of these transactions, (a) the Company presently owns (i) 3.3
million shares of Full Moon common stock or 44.9% of the total number of shares
of Full Moon common stock outstanding, and (ii) rights to purchase 3.6 million
shares of Full Moon common stock at a purchase price of $7.50 per share expiring
upon the earlier of May 23, 2000, or the effective date of a Full Moon
registration statement, subject to the Option Rights, and (b) Full Moon owns all
of the outstanding shares of capital stock of each of the Interactive
Architects. The Company is consolidating with Full Moon as it has operational
control over the entities.
GOLD LABEL AGREEMENT - As of December 27, 1999, the Company entered into a Stock
Purchase and Contribution Agreement, among the Company, Pat Boone's Gold Label,
Inc., a Delaware corporation ("Gold Label"), and all of the shareholders of The
Gold Label-Honest Entertainment, Inc., a Tennessee corporation ("Honest
Entertainment") (the "Gold Label Agreement"). Under the terms of the Gold Label
Agreement, i) the Company agreed to issue 370,000 shares of common to the Honest
Entertainment shareholders in exchange for 1.3 million shares of common stock of
Honest Entertainment; ii) the Company agreed to contribute its newly purchased
shares of Honest Entertainment to Gold Label in exchange for 1.3 million shares
of common stock of Gold Label; and iii) the shareholders of Honest Entertainment
agreed to contribute all of the remaining outstanding shares of Honest
Entertainment (the shares not purchased by the Company) to Gold Label for 3.1
shares of common stock of Gold Label . The transaction closed on April 8, 2000.
STARSONLINE - In February 2000, the Company capitalized a wholly owned
subsidiary, Starsonline, Inc., a Delaware corporation, with $250,000 to develop
and launch an internet based entertainment company. In February, Starsonline
hired William C. Allen, a director on Full Moon's board and a veteran television
executive, to serve as its President.
(4) INTANGIBLE ASSETS
Intangible assets consists of the following as of March 31, 2000:
Goodwill $ 15,968,512
Acquired Technology 140,000
Established Workforce 160,000
Trademarks 280,000
Other Intangible Assets 5,678
----------------
Total 16,554,190
Less: Accumulated Amortization (2,329,727)
----------------
TOTAL $ 14,224,463
================
11
<PAGE>
(Unaudited)
(5) NOTES RECEIVABLE AND RELATED PARTIES LOANS
On December 27, 1999, the Company entered into a Stock Purchase and Contribution
Agreement, among the Company, Gold Label, and all of the shareholders of The
Gold Label-Honest Entertainment, Inc., a Tennessee corporation (the "Gold Label
Agreement") (Note 3). In connection therewith, the Company loaned $500,000 to
Gold Label under a promissory note, dated December 31, 1999, bearing interest at
a rate of six (6) percent per annum (the "Note"). Interest payments are due and
payable monthly and the principal amount outstanding is due and payable on
December 31, 2001.
On February 29, 2000, the Company received a promissory note from Gateway
Advisors, Inc. (a company owned and controlled by Robert M. Wallace, the
Company's Chairman of the Board) in the amount of $800,000, and bearing interest
at 11% per annum. The principal amount and accrued interest are due and payable
on May 30, 2000. The indebtedness is secured by a pledge agreement executed by
Gateway Advisors, Inc. in favor of the Company whereby Gateway Advisors, Inc.
pledged certain warrants issued by the Company to Gateway Advisors, Inc.
Related party loans consist primarily of loans to officers of Full Moon.
(6) NOTES PAYABLE
NOTES PAYABLE - RELATED PARTIES: $100,000 is payable to a former director of the
Company, and consists of two secured promissory notes, each for $50,000 bearing
interest at 10% and due in July and September of 1999, dated on January 26, 1999
and April 15, 1999, respectively. The Company has received an extension on these
notes payable aggregating $100,000 until June 30, 2000. As of March 31, 2000,
the Company had accrued approximately $11,000 in interest payable on this
promissory note.
In addition, the Company has a payable to Gateway Advisors for $120,000 for
services provided and loans due to shareholders totalling approximately $98,000.
NOTES PAYABLE - LONG-TERM: In connection with the acquisition of the Interactive
Architect Firms, the Company executed a promissory note in favor of Full Moon in
the aggregate amount of $1.0 million bearing interest at a rate of seven percent
per annum. Interest payments are due and payable monthly and the principal
amount outstanding is due and payable on November 22, 2001. Full Moon is
required to prepay the note in full in the event that Full Moon consummates an
12
<PAGE>
(Unaudited)
initial public offering of its Common Stock which generates gross proceeds of
not less than $25 million. On December 15, 1999, the Company agreed to assign
its interest under the Full Moon note to Internet Asset Inc. Class D as of
November 23, 1999 (See Note 3 - Notes to Consolidated Financial Statements).
On January 1, 2000, Full Moon executed a note payable to High Tide, LLC for
$100,000 in exchange for cash. The note bears interest at seven percent per
annum. Interest and principal is due on January 1, 2001.
(7) EQUITY TRANSACTIONS
PRIVATE PLACEMENT - On July 16, 1999, the Company commenced, and completed on
November 30, 1999, a private offering (the "Offering") of approximately 826,000
shares of its Common Stock at $3.875 per share (each a "Share" and collectively
the "Shares"). The Offering was conducted under the exemptions from the
registration requirements of the Securities Act of 1933, as amended (the "Act"),
provided by Section 4(2) of the Act and the provisions of Rule 506 of Regulation
D. Sales of the Shares were made only to "accredited investors," as such term is
defined in Rule 501(a) under the Act. The Company received gross proceeds of
approximately $3.2 million before deducting commissions (placement agent) and
expenses of the Offering (consisting of accounting and legal fees, "blue sky"
fees and other related expenses) totaling approximately $180,000. The proceeds
of the Offering are being used to fund working capital needs of the Company and
its subsidiaries.
EXERCISE OF WARRANTS - During December 1999, warrants issued to Gateway
Advisors, Inc. (a company owned and controlled by Robert M. Wallace, the
Company's Chairman of the Board) in April 1999 and sold to an investor in
December 1999 to purchase approximately 300,000 shares of common stock of the
Company at an exercise price of $2.50 per share were exercised ("Warrant
Exercise"). The Company received net proceeds of $680,000 as a result of the
Warrant Exercise.
On January 5, 2000, Crossfire Ventures exercised 25,000 warrants for 25,000
shares of the Company's common stock for net proceeds of $62,500.
OPTIONS - For the nine months ended March 31, 2000, the Company granted 652,000
options under the 1999 Stock Plan at a weighted average exercise price of $3.77.
Of this amount 270,000 were issued to consultants in lieu of cash for services
provided in connection with certain acquisitions. Compensation expense for
options issued to consultants in lieu of cash is determined by the fair value of
the services provided. The company incurred approximately $544,000 of
compensation expense for the nine-months ended March 31, 2000 for options issued
to employees and consultants. Of that amount, approximately $188,000 was
capitalized as acquisition related costs. At March 31, 2000, the Company had
approximately $1.8 million options outstanding with a weighted average exercise
price of $3.76.
13
<PAGE>
(Unaudited)
During the nine months ended March 31, 2000, approximately 325,000 options were
exercised, which resulted in gross proceeds to the company of approximately
$441,000; year-to-date 25,000 options were forfeited.
(8) TERMINATED ACQUISITION
On January 24, 2000, the Company terminated its agreements to purchase SSPS,
Inc., a California corporation ("SSPS"), and Impact Team International, LLC, a
California limited liability company and an affiliate of SSPS ("Impact"). As of
June 14, 1999, the Company and its wholly owned subsidiary entered into (i) a
Stock Purchase Agreement (the "Stock Purchase Agreement") with all of the
shareholders of SSPS, and (ii) a Membership Interest Purchase Agreement with all
of the members of Impact. The Company paid SSPS and Impact approximately
$200,000 for expenses associated with the proposed acquisition. The Company also
recorded $150,000 of stock-based compensation for options granted to two
consultants in lieu of cash for services provided in connection with the
terminated acquisition.
(9) NEW SUBSIDIARIES AND OTHER AGREEMENTS
On March 28, 2000, the Company announced that it had retained U.S. Bancorp Piper
Jaffray as its exclusive financial advisor. U.S. Bancorp Piper Jaffray has
agreed to provide eMarketplace with financial advisory services, which may
include assisting the Company in its capital raising activities.
On February 18, 2000 the Company announced that it had entered into a letter of
intent to acquire IC-Direct, a competitor of TechStore Inc., a wholly owned
subsidiary of the company. IC-Direct.com is a business-to-business and
business-to-consumer e-commerce company that provides businesses and consumers
over 40,000 products online through its Web site. Under the terms of the Letter
of Intent, the owners of Interconnected LLC will receive $200,000 in cash and
75,000 shares of common stock of eMarketplace. The consummation of the
transaction is subject to the negotiation and execution of a definitive
agreement and other customary conditions. There can be no assurance that a
definitive agreement will be entered into or that the transactions contemplated
thereby will be consummated.
In August 1999, OfficeExpress, Inc. a subsidiary of the Company, began its
operations to sell office products and supplies through its Web site.
(10) SALE OF SUBSIDIARY
MEDICAL MARKETPLACE - On October 12, 1999, the Company entered into a definitive
agreement to sell 100% of its interest in Medical Marketplace to a third party
effective July 1, 1999 for $65,000 in cash and notes. In connection with the
sale of the capital stock of Medical Marketplace, the Company received $40,000
in cash and a promissory note in the aggregate principal amount of $25,000. The
note is secured by the assets and stock of Medical Marketplace and bears
interest at a rate of 8% per annum. Interest and principal shall be paid
quarterly commencing on January 1, 2000 in eleven (11) payments of two thousand
eighty five dollars ($2,085) (with the twelfth and final payment being in the
amount of $2,065) plus interest on the outstanding balance. In addition, in the
event that (i) the Company receives not less than $225,000 in proceeds from a
specified account receivable (the "Specified
14
<PAGE>
(Unaudited)
Receivable") or (ii) all liabilities of Medical Marketplace have terminated to
the satisfaction of Seller, the obligations to the Company under the Note shall
be deemed satisfied in full. Further, the outstanding principal amount of the
Note shall be reduced (i) proportionately based upon the proceeds received by
the Company with respect to the Specified Receivable divided by $225,000 and
(ii) to the extent that Medical Marketplace incurs any tax liabilities from the
non-payment of taxes by Medical Marketplace prior to June 30, 1999, subject to
certain limitations. Because of the uncertainties surrounding ultimate
collection of the $25,000 note, the full amount of the note has been reserved
for as of March 31, 2000.
(11) SEGMENT DISCLOSURES
The following table presents operating results by segment for the nine-month
period ended March 31, 2000, or from the time of acquisition through March 31,
2000, if acquired after July 1, 1999:
<TABLE>
<CAPTION>
Interactive Arctitects Online Retailers Corporate
---------------------- ---------------- -----------
(a) (b) (c)
-------------- ------------- -----------
<S> <C> <C> <C>
REVENUE $ 9,965,184 $ 8,719,053 $ 8,572
Cost of revenue 5,329,815 8,145,598 19,718
Selling, general and administrative 4,139,123 692,916 1,988,605
Stock-based compensation 355,551
Amortization of intangibles (d) 1,919,875
-------------- ------------- -----------
TOTAL OPERATING COSTS AND EXPENSES 9,468,938 8,838,514 4,283,749
-------------- ------------- -----------
LOSS FROM OPERATIONS $ 496,246 $ (119,461) $(4,275,177)
Other income (5,604)
Interest income 6,251 58,113
Interest expense (170,603) (1,375) (19,711)
-------------- ------------- -----------
INCOME BEFORE MINORITY INTEREST 325,643 (120,189) (4,236,775)
Minority interest 72,638
-------------- ------------- -----------
NET INCOME $ 325,643 $ (120,189) $(4,164,137)
============== ============= ===========
</TABLE>
(a) The Interactive Architect Firms were acquired on November 23, 1999 by
Full Moon (Note 3). Approximately $169,000 of administrative expenses
incurred by Full Moon are included in Corporate.
(b) Online Retailers include Tech Store and Office Express
(c) Corporate includes all non-operating entities and Starsonline, which
year-to-date had zero revenues and approximately $72,000 of expenses,
primarily start-up costs.
(d) Of the total amortization of intangibles, $179,000 is attributable to
the Interactive Architect Firms and $331,000 is attributable to Tech
Store. The remainder is attributable to E-Taxi.
15
<PAGE>
(Unaudited)
(12) SUBSEQUENT EVENTS
On April 7, 2000, Gateway Advisors, Inc., principally owned and operated by
Robert M. Wallace, Chairman and Chief Executive Officer of the Company,
exercised its warrants to purchase 1.2 million shares of common stock at an
exercise price of $2.50 ("Warrant Shares"). As payment for the Warrant Shares,
Gateway tendered cash in the amount of $117.50 and a promissory note in the
amount of $2.9 million (the "Note"). The Note bears interest at six percent and
all principal and interest are due April 7, 2001.
16
<PAGE>
INDEPENDENT REVIEW REPORT
To the Stockholders and Board of Directors of
eMarketplace, Inc. and Subsidiaries
San Jose, California
We have reviewed the accompanying consolidated balance sheet of
eMarketplace, Inc. and subsidiaries as of March 31, 2000, and the related
consolidated statements of operations for the three and nine months ended March
31, 2000 and 1999, and the consolidated statement of cash flows for the nine
months ended March 31, 2000 and 1999. These consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying consolidated financial
statements in order for them to be in conformity with generally accepted
accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
May 12, 2000
17
<PAGE>
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
FORWARD LOOKING STATEMENTS
Statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this document as well as
statements made in press releases and oral statements that may be made by the
Company or by officers, directors or employees of the Company acting on the
Company's behalf that are not statements of historical or current fact
constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other unknown factors that
could cause the actual results of the Company to be materially different from
the historical results or from any future results expressed or implied by such
forward-looking statements. In addition to statements which explicitly describe
such risks and uncertainties, readers are urged to consider statements labeled
with the terms "believes", "belief", "expects", "intends", "anticipates" or
"plans" to be uncertain forward-looking statements. The forward looking
statements contained herein are also subject generally to other risks and
uncertainties that are described from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission.
OVERVIEW
eMarketplace, Inc. (the "Company") consists of eMarketplace, Inc. and its
subsidiaries. Until April 1999, the Company was primarily in engaged in the
purchase and sale of new and used computer equipment, and through its Medical
Marketplace, Inc. subsidiary, the purchase and sale of used medical equipment.
In April 1999, the Board of Directors, in connection with their shift in
business strategy, announced its intention to divest of Medical Marketplace,
resulting in the classification of the business as a discontinued operation, and
was reflected as disposed of at the time of the merger with E-Taxi.
On April 23, 1999, the Company acquired E-Taxi, which is accounted for as a
"reverse acquisition." As consideration for the 9.1 million shares of E-Taxi's
common stock and 400,000 shares of the E-Taxi's Series A Preferred Stock, the
Company issued an aggregate of 9.1 million shares of common stock, par value
$.0001 per share, and 400,000 shares of Series A Preferred Stock, par value
$.0001 per share. For accounting purposes, E-Taxi is deemed to be the acquirer,
and the Company is deemed to be acquired, under the purchase method of
accounting. Therefore, the financial information presented herein represents the
historical results of E-Taxi and the results of the Company from April 23, 1999
(date of acquisition) only. E-Taxi was incorporated in the State of Delaware on
April 14, 1998 to develop a vertical Internet portal for the small office, home
office ("SOHO") market. The Company's acquisition and development of TopTeam,
Inc., its interactive architect subsidiary, has forced the Company to channel
its resources away from the development of a SOHO portal. As a result, it is
unlikely that the Company will focus on the development of a SOHO portal in the
near future.
18
<PAGE>
Immediately prior to the closing of the E-Taxi Acquisition, E-Taxi closed
(i) a private offering of its shares of preferred stock and common stock raising
an aggregate of approximately $1.4 million and (ii) the acquisition of TechStore
LLC, a California limited liability company ("TechStore"), is an online retailer
of computer hardware and software. The acquisition was accounted for as a
purchase. The results of operations include the results of TechStore from the
date of acquisition, which was April of 1999.
In August 1999, the Company's newly formed subsidiary, OfficeExpress, Inc.,
launched its web site, WWW.OFFICEEXPRESS.COM. Offering over 20,000 brand name
office products, the site enables online customers to purchase office products
and supplies at competitive prices. Products are generally shipped for next day
delivery for most domestic US destinations and the site features advanced online
customer service features, including customer shopping lists, which allows users
to manage lists of frequently purchased items.
In May of 1999, the Company formed TopTeam, Inc. ("TopTeam") to undertake a
strategic consolidation of the highly fragmented Internet professional services
industry, commonly referred to as Interactive Architects. On November 23, 1999,
the Company and TopTeam, Inc. closed on the acquisition of six Internet
consulting companies-Full Moon Interactive Group, Inc., Orrell Communications,
Inc., Devries Data Systems, Inc. Muccino Design Group, Inc., Image Network,
Inc., and OnCourse Network, Inc. (collectively, the "Interactive Architect
Firms"). TopTeam's strategy is to continue to develop and acquire Interactive
Architects who, collectively, comprise all of the diverse skill sets necessary
to design, develop, and deploy total e-business solution for its clients. On
February 23, 2000, Top Team changed its name to Full Moon Interactive, Inc.
("Full Moon") and hereinafter is referred to as Full Moon. Financial operations
for the six Interactive Architect Firms are included in this report commencing
November 23, 1999.
RESULTS OF OPERATIONS
Because the Company had no revenues and nominal expenses for the quarter
ended March 31, 1999 (total operating expenses were approximately $35,000) and
for the nine months ended March 31, 1999 (total operating expenses were
approximately $41,000), any comparison of fiscal 2000 results to fiscal 1999
would not be meaningful and have been excluded from the following discussion.
The E-Taxi acquisition was accounted for as a reverse acquisition. The
historical financial statements reflect the operations of E-Taxi for all periods
prior to April 1999. The acquisitions of the Interactive Architect Firms was
accounted for as a purchase, and Full Moon's fiscal year ends July 31,
accordingly, the operating results of the acquired subsidiaries for the period
November 23, 1999 (the date of acquisition), through March 31, 2000 have been
included in eMarketplace's results of operations for the three-month period
ended March 31, 2000. In addition, any forward-looking information does not
include the impact, if any, of potential acquisitions discussed above.
19
<PAGE>
THREE AND NINE MONTHS ENDED MARCH 31, 2000
NET LOSS
The Company recorded a net loss of $1.1 million for the three months ended
March 31, 2000 and a net loss of $4.0 million for the nine months ended March
31, 2000 because the revenue generated was not sufficient to cover cost of
revenues and expenses generated. Management believes that (i) the
discontinuation of its computer resale operations; (ii) the divestiture of
Medical Marketplace; and (iii) interest income resulting from interest on
financing proceeds could result in improved profitability. Detail of the net
income or loss by operating segment can be found in the Notes to Consolidated
Financial Statements: Note (12) Segment Disclosures. There can be no assurance
that the Company will be successful in reducing net losses.
REVENUE
Total revenue for the three months ended March 31, 2000 was $13.1 million
and for the nine months ended March 31, 2000 was $18.7 million, which consists
primarily of revenue from online sales of computer hardware, software,
electronics and office supplies by the Company's wholly owned subsidiary,
TechStore and majority owned subsidiary Office Express, and service revenue
generated by Full Moon. Full Moon designs, develops, and deploys total
e-business solutions for its clients.
Online retailing generated $3.1 million in revenue for the three-month
period ended March 31, 2000 and $8.7 million for the nine-month period ended
March 31, 2000. Revenues for Full Moon were approximately $10.0 million for both
the three month and the nine month periods (results of operations for Full Moon
from the time acquisition, November 23, 1999, through March 31, 2000 are
included in the three month period ended March 31, 2000).
COST OF REVENUE
Total cost of revenue for the three months ended March 31, 2000 was $8.3
million or 63.4% of revenue and for the nine months ended March 31, 2000 was
$13.5 million or 72.2% of revenue. Cost of revenue includes the cost of products
sold, credit card processing fees and freight costs for product sales and time
and materials for internet consulting services.
Online retailing had cost of sales of $2.9 million, or 93.5% of revenue,
for the three-month period ended March 31, 2000 and $8.1 million, or 93.1% of
revenue, for the nine-month period ended March 31, 2000. Full Moon's cost of
revenue was $5.3 million, or 53% of revenue, for both the three and nine-month
periods ended March 31, 2000. Full Moon's cost of sales as a percentage of
revenue has increased since the time of acquisition because the company is in
the process of building its infrastructure to meet demand for its services.
Management expects this trend to continue.
20
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Total selling, general and administrative expenses for the quarter ended
March 31, 2000 were $5.0 million or 38.2% of revenue and for the nine months
ended March 31, 2000 were $6.8 million, or 36.4% of revenue. Selling, general
and administrative expenses consist of salaries and other personnel related
expenses, facilities related expenses, legal and other professional fees,
advertising costs and travel expenses. The fiscal quarter ended March 31, 2000
included $238,000 in non-cash expenses related to the amortization of deferred
compensation and stock-based compensation; the nine months ended March 31, 2000
included $683,000 in non-cash expenses related to the amortization of deferred
compensation and stock-based compensation. The Company expects to incur
approximately $80,000 per quarter for four more quarters for the amortization of
the deferred compensation associated with the warrants.
Online retailing incurred SG&A of $203,000, or 6.5% of revenue for the
three months ended March 31, 2000 and $693,000, or 8.0% for the nine months
ended March 31, 2000. Full Moon's SG&A was $4.1 million, or 41% of revenue for
three and nine months periods ended March 31, 2000. Full Moon's SG&A as a
percentage of revenue increased approximately 5 percentage points since the time
of acquisition because the company is in the process of building its
infrastructure to meet demand for its services. Management expects this trend to
continue.
AMORTIZATION OF GOODWILL AND OTHER ACQUIRED INTANGIBLES
Amortization expenses associated with the acquisitions of TechStore, Full
Moon and the reverse merger between the Company and E-Taxi were $716,000 for the
quarter ended March 31, 2000 and $1.9 million for the nine months ended March
31, 2000. The intangible assets associated with these acquisitions, consisted of
$15,968,512 in goodwill, $140,000 in acquired technology $160,000 in established
workforce and $280,000 in trademarks, are being amortized over their estimated
useful lives of four to ten years. In the event that the Company continues to
acquire other companies, amortization of acquisitions will continue to have an
impact on the Company's results of operations in the future. Management does not
believe there will be any impairment of the goodwill associated with its
acquisitions. The Company believes the projected cash flow and market value of
these companies currently support the goodwill value of the acquisitions
completed as of March 31, 2000. Based on acquisitions completed as of March 31,
2000, and assuming no impairment of the value resulting in an acceleration of
the amortization, future amortization will reduce net income from operations by
approximately 2.6 million in fiscal year 2000. $2.8 million in each fiscal year
2001 through 2003, $1.8 million in 2004, and $0.5 million in 2005 through 2010.
If the Company completes additional acquisitions in the future, this will likely
result in additional amortization charges of the resulting goodwill from the
acquisition.
INTEREST INCOME AND EXPENSE
Interest income was $37,000 for the three months ended March 31, 2000 and
$64,000 for the nine months ended March 31, 2000. Interest expense was $175,000
for the three months ended March 31, 2000 and 192,000 for the nine-month period
ended March 31, 2000. Interest expense related primarily to interest on loans,
leases and lines of credit. Approximately 97% of the interest expense
year-to-date was incurred by Full Moon, which was due, in
21
<PAGE>
part, to capital leases, which were converted to operating leases during the
nine month period ended March 31, 2000. Interest income resulted primarily from
interest earned on the proceeds from the private placement completed by the
Company in November, 1999 and notes receivable from related parties (See Note 5
- - Notes to Consolidated Financial Statements).
VARIABILITY OF PERIODIC RESULTS AND SEASONALITY
Results from any one period cannot be used to predict the results for other
fiscal periods. Revenues fluctuate from period to period, however, management
does not see any seasonality or predictability to these fluctuations. Financial
operations for the six Interactive Architect Firms are included in this report
from November 23, 1999 forward.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had a cash balance of $1.9 million and
working capital of $3.3 million. The primary source of working capital to the
Company during the nine months ended March 31, 2000 was the net proceeds of
approximately $3.0 million received in connection with the Private Placement of
the Company's Common Stock, approximately $860,000 from the sale of stock by
Full Moon to an investor (net of commissions), $1.0 million in proceeds from the
issuance of a Note Payable, and $1.2 in net proceeds from the issuance of Common
Stock for warrant and option exercises. Of this amount, approximately $3.4
million was used to fund current operations, approximately $231,000 was used to
acquire fixed assets, approximately $16,000 was the net amount of cash paid for
expenses associated with the acquisition of the Interactive Architect Firms, net
of the cash received, and $1.7 million was used in the procurement of a Notes
and loans receivable in exchange for cash to related parties. Additionally,
approximately $862,000 was used to retire debt of the Interactive Architect
Firms at the closing of the acquisition, and approximately $79,000 was used to
repay loans assumed in previous acquisitions. The Company believes that its
projected cash flow from operations and cash balances as of March 31, 2000 of
approximately $1.9 million will be sufficient to meet the working capital needs
of the Company.
The Company's principle commitments at March 31, 2000 consist of monthly
operating rental payments, compensation of employees and accounts and notes
payable.
The Company will rely upon additional debt and equity financing for its
long-term capital needs.
Absence of Dividends
The Company has never declared or paid, nor does it intend to pay in the
foreseeable future, cash dividends on its Common Stock, but intends instead to
retain any future earnings to finance expansion and operations.
22
<PAGE>
- --------------------------------------------------------------------------------
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
23
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.01 Financial data schedule (EDGAR only)
(b) Reports on Form 8-K
1. The Company filed a Current Report on Form 8-K/A on
February 7, 2000, amending its report on Form 8-K dated
November 23, 1999 (Item 7).
24
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURE
- --------------------------------------------------------------------------------
In accordance with the requirements of the Securities Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EMARKETPLACE, INC.
Date: May 15, 2000 By: /s/ ROBERT M. WALLACE
-------------------------------------
Robert M. Wallace
Chief Executive Officer and Chairman,
(Chief Accounting Officer)
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
eMarketplace's quarterly report on Form 10-QSB/A for the quarter ended March 31,
2000 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000900475
<NAME> EMARKETPLACE, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-1999
<PERIOD-START> JUL-01-1999 JUL-01-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<EXCHANGE-RATE> 1 1
<CASH> 1,951,644 0
<SECURITIES> 0 0
<RECEIVABLES> 4,494,959 0
<ALLOWANCES> (0) 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,656,791 0
<PP&E> 1,442,852 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 24,619,846 0
<CURRENT-LIABILITIES> 4,345,079 0
<BONDS> 1,124,079 0
0 0
0 0
<COMMON> 1,521 0
<OTHER-SE> 16,358,651 0
<TOTAL-LIABILITY-AND-EQUITY> 24,619,846 0
<SALES> 0 0
<TOTAL-REVENUES> 18,692,809 0
<CGS> 13,495,131 0
<TOTAL-COSTS> 22,591,201 40,919
<OTHER-EXPENSES> 5,604 (2,260)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 191,689 0
<INCOME-PRETAX> (3,958,683) 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,958,683) 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,958,683) (38,659)
<EPS-BASIC> (.29) (.01)
<EPS-DILUTED> (.29) (.01)
</TABLE>
