Millionaire Com 10QSB 2001 Q2 Quarterly report (small business)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB

(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended - JUNE 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to

Commission File Number 000-28601

MILLIONAIRE.COM INC.

(Exact name of small business issuer as specified in its charter)

Nevada
(State or other jurisdiction of
incorporation or organization) 23-2970840
(IRS Employer Identification No.)

7 Plantation Park Drive, Bluffton, South Carolina 29910
(Address of principal executive offices)

(843)757-6600
(Issuer's telephone number)

12 Plantation Park Drive, Bluffton, South Carolina 29910
(Former name, former address and former fiscal
if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesü No .

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No .

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of August 17, 2001: 10,164,237 shares $.01 par value common stock.

Transitional Small Business Disclosure Format (check one) Yes Noü .

FORM 10-QSB

MILLIONAIRE.COM AND SUBSIDIARIES

TABLE OF CONTENTS

	PAGE
PART 1. Financial Information
Item 1. Financial Statement	F1 - F27
Item 2. Management's Discussion and Analysis or Plan of Operation	3 - 8
PART II. Other Information
Item 1. Legal Proceedings	9
Item 2. Defaults Upon Senior Securities	9
Item 3. Exhibits and Reports on Form 8-K	9
SIGNATURES	10

- F1 -

MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	June 30,     2001     (Unaudited)	December 31,     2000
ASSETS
CURRENTS ASSETS
Cash and cash equivalents	$            -	$         5,455
Accounts receivable, net of allowance for doubtful accounts of $75,000 and $284,472	42,106	161,879
Factored receivables, netof allowance for doubtful accounts of $11,552 and $122,392	65,460	201,642
Inventory	109,435	172,727
Employee and related party advances	89,893	50,993
Total current assets	306,894	592,696
Property and equipment, net of accumulated depreciation of $142,712 and $69,497	115,641	188,896
Software, net of accumulated depreciation of $151,263 and $123,263	94,090	133,028
Other assets	31,109	31,109
TOTAL ASSETS	$     547,734	$     945,729

The accompanying notes are an integral part of the consolidated financial statement.

- F2 -

MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)

	June 30,       2001       (Unaudited)	December 31,       2000
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENTS LIABILITIES
Bank overdraft	$        185,695	$             -
Account payable and accrued expenses	2,260,969	2,093,573
Due to related parties	259,343	92,534
Due to factor	65,460	118,682
Deferred revenue	197,000	221,109
Notes payable	7,812	7,812
Convertible debt	1,852,000	1,785,000
Capital lease obligations, current portion	4,700	_____4,694
Total current liabilities	4,832,979	4,333,404
Capital lease obligations - non current	12,300	12,461
Total liabilities	4,845,279	4,345,865
Commitments and contingencies	-	-
STOCKHOLDERS' DEFICIENCY
Preferred stock - $0.01 par value; 5,000,000 shares authorized; none issued and outstanding	- -	- -
Common stock - $0.01 par value; 50,000,000 shares authorized; 10,164,237 issued and outstanding	10,164	10,164
Additional paid-in capital	10,317,965	10,905,865
Deferred compensation	(    491,400)	(   1,134,000)
Accummulated deficit	(14,134,274)	(13,182,165)
Total stockholders' deficiency	(  4,297,545)	(  3,400,136)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY	$    547,734	$    945,729

The accompanying notes are an integral part of the consolidated financial statement.

- F3 -

MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	For the Three Months Ended                June 30,                    2001                   2000		For the Six Months Ended               June 30,                     2001                    2000
NET SALES
Magazine Sales	$      38,689	$     114,934	$     79,948	$     188,419
Advertising Sales	169,241	1,142,448	245,364	1,732,694
Internet Sales	25,077	1,257,382	63.085	-
Total net sales	233,007	1,257,382	388,397	1,921,113
COST OF GOODS SOLD
Publishing costs	143,675	868,677	260,476	1,582,115
Internet cost of sales	-	-	23,784	-
Total cost of goods sold	143,675	868,677	284,260	-
GROSS PROFIT	89,332	388,705	104,137	338,998
SELLING, GENERAL AND ADMINSTRATIVE EXPENSES
Salary and employee benefits	80,152	305,733	472,562	728,329
Selling and marketing expenses	24,233	118,420	48,278	306,140
Professional fees	35,619	111,205	140,678	508,143
Depreciation and amortization expenses	46,215	118,136	101,215	232,152
Rent expense	19,921	99,012	42,274	196,286
Bad debt expense	(36,577)	-	(33,897)	100,000
Other general and administrative   expenses	43,647	59,239	105,440	537,880
Total selling, general and   administrative expenses	213,210	761,745	867,550	2,608,930
LOSS FROM OPERATIONS	(123,878)	(423,640)	(772,413)	(2,269,932)

The accompanying notes are an integral part of the consolidated financial statement.

- F4 -

MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(UNAUDITED)

	For the Three Months Ended                June 30,                      2001                  2000		For the Six Months Ended               June 30,                      2001                   2000
OTHER INCOME (EXPENSE)
Interest income	33	446	674	12,207
Interest expense	(31,560)	-	(63,060)	-
Stock issuance expense	-	(228,734)	-	(1,587,260)
Other income	17,810	309	36,280	22,833
Total other income (expense), net	(13,717)	(227,979)	(26,106)	(1,552,220)
LOSS FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES	(137,595)	(651,019)	(798,519)	(4,022,152)
PROVISION FOR INCOME TAXES	-	-	-	-
LOSS FROM CONTINUING   OPERATIONS	(137,595)	(651,019)	(798,519)	(4,022,152)
DISCONTINUED OPERATIONS
Discontinuation of auction houses, net   of taxes	113,234	1,948	(153,590)	96,368
NET LOSS	$     (24,361)	$      (649,071)	$    (952,109)	$  (3,925,784)
LOSS PER SHARE BASIC AND DILUTED CONTINUING OPERATIONS	$     (    .01)	$    (    .07)	$     (    .08)	$     (   .46)
DISCONTINUED OPEATIONS	.01	-	(    .01)	(   .01)
NET LOSS	$     (    .00)	$    (    .07)	$     (    .09)	$    (   .45)

The accompanying notes are an integral part of the consolidated financial statement.

- F5 -

MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY

	Common Stock        Shares             Amount		Additional Paid-in      Capital	Deferred Compensation	Accumulated    Deficit	Total Stockholders'   Deficiency
Balance at December 31, 1999	8,615,095	$     8,615	$  8,513,960	$  (1,980,000)	$ (7,023,534)	$    (480,959)
Issuance of common stock for cash and services	120,000	120	419,880	- -	- -	420,000
Issuance of convertible debt	-	-	1,302,000	-	-	1,302,000
Issuance of convertible debt	-	-	20,000	-	-	20,000
Issuance of convertible debt	-	-	85,714	-	-	85,714
Issuance of common stock for cash	28,000	28	41,972	-	-	42,000
Issuance of common stock for conversion of debt	1,057,142	1,057	448,943	- -	- -	450,000
Issuance of common stock for exercise of stock options	344,000	344	541,396	- -	- -	541,740
Compensation expense	-	-	-	378,000	-	378,000
Forfeiture of compensatory stock options	- -	- -	(468,000)	468,000	- -	- -
Net loss	-	-	-	-	( 6,158,631)	(6,158,631)
Balance at December 31, 2000	10,164,237	10,164	10,905,865	(1,134,000)	(13,182,165)	(3,400,136)
Compensation expense (unaudited)	-	-	-	54,600	-	54,600
Forfeiture of compensatory stock options (unaudited)	- -	- -	(588,000)	588,000	- -	- -
Net Loss (unaudited)	-	-	-	-	(952,109)	(952,109)
Balance at June 30, 2001 (unaudited)	10,164,237	10,164	$10,317,965	$    (491,400)	$(11,134,274)	$4,297,545

The accompanying notes are an integral part of the consolidated financial statement.

- F6 -

MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

	For The Six Months Ended          June 30,                   2001                    2000
CASH FLOW FROM OPERATING ACTIVITIES   Net loss	$      (952,109)	$   (3,925,784)
Adjustments to reconcile net loss to net cash used     in operating activities:       Depreciation and amortization expense       Interest expense       Issuance of common stock for services rendered       Issuance of common stock for exercise of stock options       Vesting of compensatory stock options       Bad debt expense (recovery)	101,215 - - - - - - 54,700 - -	232,152 1,322,000 270,000 209,000 - - 100,000
Changes in certain assets and liabilities:     (Increase) decrease in accounts receivable     (Increase) decrease in factor receivables     (Increase) decrease in inventory     (Increase) decrease in employee and related party advances     (Increase) decrease in prepaid expenses and other current assets     Increase in accounts payable and accrued expenses     Decrease in due to factor	119,773 136,182 63,292 (  38,900) - - 167,396 (  53,222)	(     91,344) - - 55,387 - - 36,929 (   256,073) - -
Decrease in deferred revenue	(  34,109)	69,564
Total cash (used in) provided by operating activities	(435,782)	(1,978,169)
CASH FLOWS FROM INVESTING ACTIVITIES   Increase in software	10,978	(    99,747)
(Purchase) maturity of certificate of deposit	-	253,198
Total cash (used in) provided by investing activities	10,978	153,451
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in bank overdraft	185,695	-
Proceeds from convertible debt	67,000	1,900,000
Repayment of notes payable	-	-
Increase (decrease) in due to related parties	166,809	(    100,099)
Repayment of long-term debt		-
Proceeds from convertible debt, converted		-
Decrease in capital lease obligation	(    155)	(      1,331)
Proceeds sale of common stock		192,000
Total cash provided by financing activities	419,349	1,990,570
Net increase in cash and cash equivalents	(5,455)	165,852
Cash and cash equivalents - beginning	5,455	19,554
Cash and cash equivaletns - ending	$              -	$    185,406

The accompanying notes are an integral part of the consolidated financial statement.

- F7 -

MILLIONAIRE.COM AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
JUNE 30, 2001

	For The Six Months Ended          June 30,                   2001                       2000
CASH PAID DURING THE YEAR FOR:
Interest expense	$            -	$      57,104
Income taxes	$            -	$            -

NON CASH FINANCING ACTIVITIES:

Six months ended June 30, 2001

During the six months ended June 30, 2001, 18,200 compensatory stock options vested. The options have an exercise price of $1.00. At the time of grant, the fair value of common stock was $4.00 per share. The vested stock options resulted in $54,600 in compensation expense during the six months ended June 30, 2001.

Also, 196,000 compensatory stock options were forfeited with an exercise price of $1.00. At the time of grant, the fair value of common stock was $4.00 per share. The forfeited stock options resulted in $588,000 of deferred compensation expense being reclassed against additional paid-in capital.

The accompanying notes are an integral part of the consolidated financial statement.

- F8 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a)Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.

For further information, refer to the consolidated financial statements and footnotes included in Form 10-KSB for the year ended December 31, 2000.

The accompanying consolidated financial statements include the accounts of Millionaire.com (the "Company"), formerly known as World Circle Trust Fund, Inc. ("WCTF") and Charter Investor Relations of North America, Inc. ("Charter"). The Company was incorporated on February 15, 1995 under the laws of the state of Florida, and its subsidiaries include;

1. Life Style Media Acquisition Corp. ("LMAC"), which was incorporated under the laws of the state of Pennsylvania on June 30, 1998, 100% owned by the Company, and;
2. Life Style Media Properties, Inc. ("LMPI"), which was incorporated under the laws of the state of Delaware on August 14, 1998 (see Note 6) ("LMPI").

On December 15, 1998, Charter, a non-operating shell company with no net assets, merged with its wholly owned subsidiary, Millionaire.com, a non-operating Nevada corporation, with Millionaire.com as the surviving company. Simultaneous with the merger, Millionaire.com acquired LMAC, which publishes magazines, including Millionaire and Billionaire magazine (see Note 6). The acquisition of LMAC was in effect a reverse acquisition and was accounted for as a recapitalization of LMAC, with LMAC as the accounting acquirer operating under the name of Millionaire.com.

The financial statements presented include the accounts of LMAC from its inception (June 30, 1998) and that of Millionaire.com from December 15, 1998 to December 31, 2000.

Significant intercompany accounts and transactions have been eliminated in consolidation.

- F9 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

a)Basis of Presentation (continued)

The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As of June 30, 2001, the Company has a working capital deficit of $4,250,892. The Company's loss from operation for the years ended December 31, 2001 were $6,158,631 and $6,284,231, respectively, and the loss from operations for the six months ended June 30, 2001 was $952,109. In addition, the Company is currently involved in various lawsuits for which management is currently unable to determine whether there will be a material impact on its results of operations, financial position or cash flows (see Notes 7 and 10).

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its operating cash requirements and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

In response to the matters described in the preceding paragraphs, management is pursuing additional equity financing. There can be no assurances that sufficient financing will be available on terms acceptable to the Company or at all. If the Company is unable to obtain such financing, the Company will be forced to scale back operations, which would have an adverse effect on the Company's financial condition and results of operation. Management believes that this additional financing will allow the Company to vigorously pursue its expansion efforts in the upcoming year and that this expansion will strengthen the Company's cash flow position to provide the Company with the ability to continue in existence. The Company is also vigorously defending its positions in the litigation matters.

b)Line of Business

The Company is a magazine publisher. During 1999 and part of 2000, the Company had an auction gallery and was also engaged in the business of buying and selling antiques and other luxury goods (see Note 13).

c)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 revenue and expenses during the periods presented. Actual results could differ from those estimates.

- F10 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

d)Revenue Recognition

The Company derives revenue primarily from four sources:

1)Sale of magazine subscriptions

Magazine revenues are recognized over the term of the subscription as the magazines are delivered. Annual and lifetime membership fees to the magazine are initially deferred and amortized, as magazines are delivered, on a monthly basis over one year to fifty years, the respective periods of expected performance.

2)Magazine advertising

Advertising revenue is initially deferred and recognized at the time of delivery of the respective issue.

3)Internet advertising

Website advertising without a guaranteed number of impressions will be amortized on a straight-line basis over the period of time that the advertisement will appear on the website. In cases where website-advertising revenue is based on a minimum number of impressions, the Company will initially defer revenue until the minimum number of impressions is attained. Revenue will then be recognized over the lesser of the ratio of the impressions delivered over the total guaranteed impressions or the straight-line basis over the term of the contract.

4)Auction sales and related commissions

Auction revenue is recognized at the time of delivery of the merchandise, assuming collectibility is reasonably assured. Inventory items held for others and sold by the Company are considered consigned inventory. Consigned inventory is not recorded in the accompanying financial statements. A net consignment fee revenue is recognized as the consigned items are sold.

e)Bartering

Non-monetary transactions are accounted for based on the fair value of the advertising provided. The fair value of the advertising provided in the bartering transaction was determined by comparison to market prices of competitive magazine publications and recent sales of advertising space for which the unrelated third parties paid cash. The significant terms of a barter transaction include the identification of the advertising provided, the number of issues in which the advertisement will be inserted, the items to be provided to the Company and the fair value of those items provided to the Company. The fair values of the items received by the Company are determined based on competitive industry prices for goods and services received in an arms-length transaction. Goods received included inventory items such as chandeliers and various art pieces. Services received included airline tickets, printing services, car rental and lodging.

- F11 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

f)Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

g)Concentration of Credit Risk

The Company places its cash in what it believes to be credit-worthy financial institutions. However, cash balances may exceed FDIC insured levels at various times during the year. . The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

h)Allowance for Doubtful Accounts

The Company maintains an allowance for doubtful accounts based upon the expected collectibility of accounts receivable. When amounts are determined to be uncollectible, they will be charged to operations when that determination is made. Accounts receivable are characterized mostly by a wide variety of individual customers of the auction house and the magazine. Should the customers fail to meet their contractual obligations to the Company, the Company would suffer material losses.

i)Inventory

Inventory is comprised solely of antiques and other luxury goods. Inventory is stated at the lower of cost or market; cost is determined using the specific identification method.

j)Property and equipment

Property and equipment is stated at cost. Depreciation and amortization is provided for in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives. Depreciation of property and equipment is calculated over a period of five to seven years on an accelerated basis while amortization of leasehold improvements is calculated over the life of the respective lease utilizing the straight-line basis. Assets recorded under capital leases are depreciated in a manner consistent with the Company's normal depreciation policies for owned assets.

. k)Software

Software is stated at cost. Amortization of software is calculated over a period of three years utilizing the straight-line basis. The Company capitalizes software development costs using Statement of Position ("SOP") No. 98-1 which specifies the appropriate accounting for costs incurred to develop or obtain computer software for internal use. The pronouncement provides guidance on which costs should be capitalized, and over what period such costs should be amortized and what disclosures should be made regarding such costs.

.

- F12 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

l)Goodwill

Goodwill represents the excess of cost over the fair value of net assets acquired and is being amortized on a straight-line method over 5 years. On an ongoing basis, management reviews the valuation and amortization of goodwill to determine possible impairment. The recoverability of goodwill is assessed by determining whether the amortization of goodwill over its remaining life can be recovered through projected undiscounted future cash flows. As of December 31, 2000, goodwill was deemed impaired (see Note 6).

m)Trademarks

Trademarks are stated on the cost basis. Amortization is calculated using the straight-line method over 5 years. Trademarks are periodically reviewed for impairment of carrying amount as compared to the fair value of the assets. In order to measure any impairment the Company evaluated whether there were any events or circumstances that occurred that may have affected the carrying amount of the intangible. Management believes that no such events have occurred as of December 31, 1999. In the event that management determines that a triggering event has occurred, the Company would estimate the future cash flows expected to result from the use of the asset and its eventual disposition. The future cash flows that would be used are the future cash inflows expected to be generated by the asset less the future cash outflows expected to be necessary to obtain those inflows. When the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss in accordance with SFAS 121 would be recognized. As of December 31, 2000, the balance of trademarks was $-0- (see Note 7).

n)Income Taxes

Income taxes are provided for based on the liability method of accounting pursuant to Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". The liability method requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the reported amount of assets and liabilities and their tax basis.

o)Advertising Costs

Advertising costs are expensed as incurred and included in selling, general and administrative expenses.

- F13 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

p)Fair Value of Financial Instruments

The Company's financial instruments consist of cash, accounts receivable, factor receivables, inventory, accounts payable and accrued expenses, convertible debt and long-term debt. The carrying amounts of cash, accounts receivable, due from factor and accounts payable and accrued expenses approximate fair value due to the highly liquid nature of these short-term instruments. The fair value of long-term borrowings was determined based upon interest rates currently available to the Company for borrowings with similar terms. The fair value of long-term borrowings approximates the carrying amounts as of June 30, 2001 and 2000.

q)Long-Lived Assets

SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted this statement and has determined that recognition of an impairment loss for applicable assets of continuing operations is not necessary.

r)Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income" establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of June 30, 2001 and 2000, the Company has no items that represent comprehensive income and, therefore, has not included a schedule of comprehensive income in the financial statements.

s)Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has elected to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations, as permitted by SFAS 123. Accordingly, compensation expense for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. . For stock options granted to employees at fair value, compensation expense related to the fair value of the stock options granted is disclosed for proforma purposes, as required by SFAS 123 and disclosed in Note 15, in the period in which the related employee services are rendered. For stock options issued to nonemployees, the issuance of stock options is accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Compensation expense is recognized in the financial statements for stock options granted to nonemployees in the period in which the consideration is obtained from the nonemployee.

- F14 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

s)Stock-Based Compensation (continued)

Compensation expense is recognized in the financial statements for issuances of common shares to employees and non-employees that have rendered services to the Company. Compensation expense is recognized based on the fair value of the services rendered or the fair value of the common stock, whichever is more readily determinable.

t)Loss Per Share

SFAS No. 128, "Earnings Per Share" requires presentation of basic loss per share ("Basic LPS") and diluted loss per share ("Diluted LPS").

The computation of basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. The computation of diluted LPS does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on losses. For the six months ended June 30, 2001 and 2000, there were 2,000,000 and 2,700,000 common stock options that could potentially dilute EPS, respectively

The shares used in the computation of loss per share, were as follows:

	June 30,                 2001                  2000
Basic	10,164,237	8,749,813
Diluted	10,164,237	8,749,813

u)Segment Disclosure

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" was issued, which changes the way public companies report information about segments. SFAS No. 131, which is based on the selected segment information, requires quarterly and entity-wide disclosures about products and services, major customers, and the material countries in which the entity holds assets and reports revenues. The Company has adopted SFAS No. 131 as of December 31, 1999.

- F15 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

v)New Accounting Pronouncements

On June 29, 2001, Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", was approved by the Financial Accounting Standards board ("FASB"). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The Company is required to implement SFAS No. 141 on July 1, 2001 and it has not determined the impact, if any, that this statement will have on its consolidated financial position or results of operations.

On June 29, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets", was approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company is required to implement SFAS No. 142 on January 1, 2002 and it has not determined that impact, if any, that this statement will have on its consolidated financial position or results of operations.

NOTE 2 - FACTORING OF ACCOUNTS RECEIVABLE

On March 8, 2000, the Company entered into an Agreement to transfer certain accounts receivable with recourse to a funding company. The funding company will advance 85% of the advertising invoices on all approved accounts. This agreement remains in effect for one year and may be extended at the option of the funding company. As of June 30, 2001 and December 31, 2000, there were $65,460 and $201,642 receivables being factored with recourse, respectively. There is an allowance set up totaling $11,552 and $122,392, and a balance payable to the factor totaling $65,460 and $118,682 for advances received less certain fees.

NOTE 3 - INVENTORY

	June 30,    2001	December 31,    2000
Antiques and other luxury goods	$	$     372,727
Less: inventory reserve		(  200,000)
Inventory, net	$    109,435	$     172,727

- F16 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 4 - RELATED PARTY TRANSACTIONS

The Company had various related party transactions with officers and employees. Related party receivables and payables are as follows:

Employee and related party advances

	June 30,    2001	December 31,    2000
Employee advances - magazine	$    179,893	$      21,389
Employee advances - internet	(90,000)	29,604
Total due from related parties	$     89,893	$      50,993

These advances to the Company are payable on demand, unsecured and non-interest bearing.

Due to related parties

	June 30,    2001	December 31,    2000
Due to President	$    162,102	$     69,977
Due to Vice-President	97,241	22,557
Total to due to related parties	$    259,343	$    92,534

NOTE 5 - PROPERTY AND EQUIPMENT

Property and Equipment is summarized as follows:

	June 30,    2001	December 31,    2000
Office equipment	$    108,001	$    108,041
Auction equipment and improvements	48,227	48,227
Furniture and fixtures	67,322	67,322
Leasehold improvements	34,803 258,353	34,803 258,393
Less: accumulated depreciation and amortization	(142,712)	(69,497)
Property and equipment, net	$   115,641	$   188,896

Depreciation and amortization expense for the six months ended June 30, 2001 and 2000, was $101,215 and $232,152, respectively.

- F17 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

 NOTE 6 - GOODWILL/ACQUISITIONS AND MERGERS

Life Style Media Corporation

On August 14, 1998, LMAC purchased all of the outstanding common shares of Life Style Media Corporation ("LMC") and the trademarks Millionaire and Billionaire. This transaction was accounted for as a purchase business combination. LMC was a corporation which originally published the Millionaire and Billionaire magazines.

The purchase price of LMC was $1,674,595. The purchase price was paid with long-term debt and initial cash payment of $300,000, as described in Note 7, and 200 shares of LMAC. In the purchase of LMC by LMAC, the excess of the liabilities over assets assumed amounted to $45,749 which was allocated to goodwill and amortized on a straight-line method over a 5-year period. There were no contingent payments, options or commitments specified in the acquisition agreement.

The measurement date of August 14, 1998 was used to determine the value of the LMAC shares issued in the purchase business combination. The value assigned to the 200 shares of LMAC provided to the former shareholders of LMC was deminimus. The 200 shares of LMAC represented 20% of the outstanding shares of LMAC. After the acquisition of LMC and at the date of the reverse merger with Millionaire.com, the sellers of LMC were entitled to 20% of the 2,400,000 shares issued by Millionaire.com to the shareholders of LMAC, or 480,000 shares of Millionaire.com.

As part of the transaction, Life Style Media Properties ("LMPI") was formed, to hold the Trademarks. The sellers of LMC were granted a security interest in the Trademarks and the stock of LMPI to secure the performance of the note payable. The sole event of default under the terms of the note is failure to make scheduled payments on time. LMPI was considered a subsidiary of the Company as of December 31, 1999.

As described more fully in Notes 7 and 9, the Company was in litigation with LMC over the use of the trademarks as of December 31, 2000. The Company ceased amortization of goodwill during August 2000. The stock of LMPI was seized by the seller or LMC. As of December 31, 2000, goodwill totaling $28,997 was deemed impaired and offset against the forgiveness of debt.

- F18 -

MILLIONAIRE.COM AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 7 - TRADEMARK

As described in Note 6, on August 14, 1998, the Company purchased all of the outstanding shares of LMC, a magazine publishing business, and the trademarks "Millionaire" and "Billionaire" (the "Trademarks"). In consideration for the purchase, the Company issued a note payable in the amount of $1,674,595 to the sellers. As part of the transaction, the Company formed LMPI to hold the Trademarks. The sellers of LMC and the Trademarks were granted a security interest in the Trademarks and the stock of LMPI to secure the performance of the note payable. The sole event of default under the terms of the note is failure to make scheduled payments on time. As of June 30, 2000, all payments due under the note were current with the next scheduled payment due August 14, 2000.

On June 30, 2000, the Company was notified that the sellers had seized the stock of LMPI and cancelled all agreements that provided the Company with the rights to use the Trademarks based on the seller's claim that the Company was not adequately protecting the "Millionaire" trademark. The Company maintains that the only basis for the sellers to enforce their security interest was failure to make scheduled payments on the note. The Company's management and legal counsel believed that the actions of the sellers were illegal and occurred without regard to the binding agreements between the Company and the sellers that detailed the ownership and usage of the trademarks. The Company initiated legal action against the sellers on August 31, 2000, intended to affirm the Company's ownership of Trademarks and to recover damages caused as a result of the sellers actions.

Because of the Sellers' actions, the note payment due on August 14, 2000, was not made. The Sellers made no demands for payment, but the Company had not obtained release from the note obligation either from the Sellers or by legal action.

During August 2000, in order to insure that publication of the Company's magazine was not interrupted and to protect advertisers, vendors, distributors and other suppliers from claims of trademark infringement, the Company decided to change the name of its magazine from "Millionaire" to "Opulence". The Company ceased amortization of the trademarks during August 2000, upon the change of magazine names. As a result of the decision to change the name of the magazine, the Trademarks were deemed to be impaired assets and the carrying value of $1,089,553 was written off.

- F19-

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 7 - TRADEMARK (Continued)

On February 1, 2001, the Company and the Sellers entered into a settlement agreement related to the trademark litigation. Under the terms of the agreement, the Company agreed to transfer the Trademarks, the "Millionaire" and "Billionaire" trade names and certain Internet domain names to the Sellers in exchange for cancellation of the outstanding note balance of $1,287,071. The current Internet websites will maintain links to the Company's new sites for a period of one year. The Company expects to complete the transition to a new corporate name within six months. Since the Company previously changed the name of its magazine, management does not expect the name changes resulting from the settlement to have a significant impact on operations.

NOTE 8 - NOTE PAYABLE

The note payable balance as of June 30, 2001 and 2000, consisted of a note payable to a finance company in the amount of $7,812. The note accrues interest at a rate 9% per annum, is unsecured and was payable in full by February 18, 1999. There were no loan covenants associated with the note. As of June 30, 2001 and December 31, 2000, the Company was in a dispute with the creditor and currently was in default of the loan. Interest is still being accrued on this loan and is included in accounts payable and accrued expenses.

NOTE 9 - CONVERTIBLE DEBT

On January 24, 2000, the Company entered into two separate unsecured promissory notes payable. Both notes payable have substantially the same terms and totaled $1,750,000. The notes payable were received from current shareholders of the Company. The notes bear interest at a rate of 7% per annum. There are no required principal or interest payments on the notes until their maturities on January 24, 2001. The notes are convertible, at the option of the holders, to shares of common stock of the Company at any time prior to January 24, 2001 at a price of $1.25 per share. The excess of the aggregate fair value of common stock that the holder received upon issuance of the promissory notes approximated $1,302,000. This amount was recorded as interest expense during the year ended December 31, 2000. During the six months ended June 30, 2001, the Company defaulted on payment of this note.

- F20 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 9 - CONVERTIBLE DEBT (Continued)

On June 29, 2000, the Company entered into three separate unsecured promissory notes payable. The notes payable have substantially the same terms and totaled $150,000. The notes payable were received from current shareholders of the Company. The notes bear interest at a rate of 7% per annum. There are no required principal or interest payments on the notes until their maturities on December 29, 2000. The notes are convertible, at the option of the holders, to shares of common stock of the Company at any time prior to December 29, 2000 at a price of $.75 per share. The excess of the aggregate fair value of common stock that the holder received upon issuance of the promissory notes approximated $20,000. This amount was recorded as interest expense during the year ended December 31, 2000. During the year ended December 31, 2000, these convertible notes were converted into 200,000 shares of the Company's common stock.

On August 24, 2000, the Company entered into three separate unsecured promissory notes payable. The notes payable have substantially the same terms and totaled $300,000. The notes payable were received from current shareholders of the Company. The notes bear interest at a rate of 7% per annum. There are no required principal or interest payments on the notes until their maturities on December 24, 2000. The notes are convertible, at the option of the holders, to shares of common stock of the Company at any time prior to December 24, 2000 at a price of $.35 per share. The excess of the aggregate fair value of common stock that the holder received upon issuance of the promissory notes amounted to $85,714. This amount was recorded as interest expense during the year ended December 31, 2000. During the year ended December 31, 2000, these convertible notes were converted into 857,142 shares of the Company's common stock.

During 2000, the Company entered into an unsecured promissory note payable. The note payable totaled $45,000. The note payable was received from a current shareholder of the Company. The notes bear interest at the rate of 7% per annum. There are no required principal or interest payments on the note until it matures during June 2001. The note is convertible, at the option of the holder, to shares of common stock of the Company at maturity at the market price of the stock. During the year ended December 31, 2000, $10,000 of this note was repaid.

During the six months ended June 30, 2001, $67,000 in additional financing was received by the Company.

- F21 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 10 - COMMITMENTS AND CONTINGENCIES

a)Litigation

In addition to the litigation described in Note 7, the Company is party to claims and lawsuits, either as plaintiff or defendant, arising in the normal course of operations involving alleged violations of non-compete covenants, disagreements with its former employees, breach of contract and nonpayment for legal services. Management is of the opinion that these claims and lawsuits will not have a material effect on the financial position of the Company. The Company believes these claims and lawsuits should not exceed $800,000 and, accordingly, has established a reserve included in accounts payable and accrued expenses.

The following are legal proceedings involving the Company and include, but may not be limited to:

1. St. Ives, Inc. v. Millionaire. com. The plaintiff, Millionaire magazine's former printer, brought an action against Millioniare.com alleging that amounts were due under certain printing bills. The plaintiff seeked $552,984. Millionaire.com counterclaimed, alleging that the printer caused substantial problems on numerous occasions and requests an offset of damages in excess of such amount. This case was pending in Broward County, Florida. The Company accrued these costs in accounts payable and accrued expense as of December 31, 1999.

On February 16, 2000, the Company settled its legal proceedings with St.Ives, Inc. The settlement called for total payments by the Company to St. Ives, Inc. in the amount of $375,000. The Company made a $250,000 payment on March 1, 2000 and, beginning May 2000, made $25,000 payments on approximately the fifteenth day of each of the following five months. If the Company failed to make any scheduled payment by its due date, the Company would have been liable for a total indebtedness of $600,000 less any previously remitted payments. As of December 31, 2000, all payments were made and the Company was relieved from any further obligation.

- F22 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

2. Annelise Kolde, et al v. Millionaire.com. Kolde, a former independent contractor/salesperson for Millionaire magazine, has sued Millionaire.com for alleged commissions owed and seeks to invoke certain stock options. The plaintiff seeks general damages in an undetermined amount, special damages in an amount exceeding $15,000 punitive damages, pre-judgment and post-judgment interest, pre-judgment garnishment and declaratory relief, injunctive relief, attorneys' fees and other costs as the court deems justified. This case is pending in Kauai, Hawaii. An estimated loss can neither be readily determined nor reasonably probable given the current circumstances of the legal proceeding. Accordingly, no accrual has been made for this litigation. Management cannot determine whether this lawsuit will have a material impact on results of operations, financial position or cash flows.
3. Luxury Media Corp. and Robb Report, Inc. v. Millionaire.com. Plaintiffs recently brought this action, alleging that Millionaire.com had violated a non- competition covenant and had infringed upon the Robb Report trademark. This case has been settled as of December 31, 2000.
4. Tieken Design and Creative Services v. Millionaire.com. and Millionaire.com v. Tieken Design and Creative Services. Plaintiffs brought this action, alleging that they have provided graphic design services for Millionaire.com in the amount of approximately $51,700. Management denies the claim stating that the services provided were defective and not usable. The Company filed a claim against Tieken Design and Creative Services. This case has been settled as of December 31, 2000.
5. Smith Gambrell and Russell v. Millionaire.com. Plaintiffs brought this action against the Company for failure to pay $90,773 of legal fees. Management denies that Smith Gambrell and Russell are entitled to any amount for legal services and intends to assert a claim for $110,000 for amounts previously paid to Smith Gambrell and Russell. As of June 30, 2001 and 2000, the Company has accrued $91,000 relating to this action.

- F23 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

6. Broadus and Associates, Inc. v. Millionsair.com. Plaintiff was a provider of services to the Company's magazine division and asserted a claim for $53,373. Management denies the claim, but does admit that some amount is due. As of June 30, 2001 and December 31, 2000, management has accrued $40,000 relating to these services.
7. World Graphics Companies v. Millionaire.com. Plaintiffs were a provider of services to the Company's magazine division and asserted a claim for $6,233. This claim was settled during 2000.
8. Earthlink v. Millionaire.com. Earthlink is a provider of internet services through a mall site agreement dated December 31, 1999. Earthlink claims a total of $75,000 is due for services rendered under this agreement. As of June 30, 2001 and December 31, 2000, $75,000 is accrued for by the Company.
9. Quebecor World (USA) v. Millionaire.com. Quebecor was a provider of printing services to the Company's magazine division. They have demanded for payment of $580,000 for these services. As of June 30, 2001 and December 31, 2000, this amount is accrued for by the Company.

b)SEC Investigation

During March 1999, the Company received a subpoena from the Securities and Exchange Commission in connection with an investigation the SEC had begun into Millionaire.com. The Company provided the SEC with documents in response to the subpoena and some employees provided testimony. Management has cooperated fully with the SEC in this matter. The probability and amount of any additional cost associated with this investigation cannot be reasonably determined given the current circumstances of the matter. Accordingly, no accrual has been made.

- F24 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

c)Proposed Public Offering

In 1999, the Company's Board of Directors approved a future public offering of $12 - $15 million of the Company's common stock. The Company intended to use approximately $2 million of the proceeds to acquire an auction gallery and the remainder for general corporate purposes. The Company previously committed to compensate the investment company for raising a certain amount of new equity capital. The Company was to provide the investment banking firm with approximately 1,050,000 common shares, or 10% of the Company's outstanding common shares, for reaching the stated goals. As of December 31, 1999, no new equity had been raised by this investment banking firm.

c)Proposed Public Offering (continued)

During February 2000, the investment banking firm described above was no longer active in any capacity with the Company. The original commitment made to that investment banking firm was renegotiated. During February 2000, the Company agreed to sell 28,000 shares of common stock to the investment banking firm at $1.50 per share. The sale of stock was recorded at estimated fair value, resulting in an expense of approximately $56,000. The Company is currently attempting to engage another investment banking firm to identify and evaluate various financing alternatives, including the proposed public offering of the Company's common stock.

d)Guarantee of Debt

The Company and an officer of the Company have guaranteed a $1,750,000 line of credit which expired on May 31, 2000.

e)Advertising Contract

Effective December 30, 1999, the Company entered into an advertising contract with Earthlink Network, Inc. (Earthlink). During the twelve-month term of the contract, Earthlink will provide the Company with graphical and textual links to the Company's internet website. The purpose of the contract is to increase the exposure of the Company and to provide more internet traffic and potential customers to the Company's website. Rent payable to Earthlink for the advertising space is $25,000 monthly. The contract automatically renews for separate one-year terms unless terminated by either party.

- F25 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued)

f)Letter of Intent

On December 22, 1999, the Company entered into a Letter of Intent with the shareholders of an auction gallery. The auction gallery (the Acquiree) sells unique collectibles and antiques and is located in New Orleans, Louisiana. The Letter of Intent provided that the Company may purchase 49% of the issued and outstanding capital stock of the Acquiree for $2,000,000 cash and 1.5 million shares of common stock should all the requirements of the Letter of Intent be satisfied. At the closing of the potential acquisition of the initial 49% of common stock, the Company will receive an option to purchase the remainder of the issued and outstanding capital stock of the Acquiree for $2,000,000 and one million shares of common stock. All of the shares of the Company's common stock issued to the Acquiree shall be restricted shares pursuant to Rule 144 of the Securities and Exchange Commission. In order to complete the purchase transaction, the Company was required to meet various legal and financia l stipulations. The Company did not meet these requirements and the letter of intent was rescinded.

NOTE 11 - STOCKHOLDERS' EQUITY

The Company has two types of stock:

Common Stock

Common stock consists of 50,000,000 shares of authorized $.001 par value common stock of which 10,164,237 were outstanding at June 30, 2001 and December 31, 2000, respectively.

Preferred Stock

Preferred stock consists of 5,000,000 shares of authorized $.001 par value preferred stock. As of June 30, 2001 and December 31, 2000, there were no issued or outstanding shares of preferred stock.

Deferred Compensation

On December 15, 1998, 970,000 stock options were granted at an exercise price of $1.00 and the fair value was determined to be $4.00. The total potential compensation expense that may be recognized in the Company's financial statements is $2,910,000. The stock options vest over a five-year period. During the six months ended June 30, 2001, the Company recognized compensation expense of $54,600, along with a corresponding reduction of additional paid-in capital. This resulted from the ratable recognition of compensatory stock options expense. The Company recognized $588,000 of forfeited deferred compensation and additional paid-in capital during the six months ended June 30, 2001, respectively.

- F26 -

MILLIONAIRE.COM AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001

 NOTE 12 - SEGMENT INFORMATION

The accounting policies used to develop segment information correspond to those described in the summary of accounting policies. In addition, the Company does not allocate certain corporate expenses to its segments. Segment profit or loss is based on profit or loss is based on profit or loss from operations before income taxes. There are no sales or transfers between segments. The reportable segments are distinct business unit operating in different industries. They are separately managed, with separate marketing and distribution systems.

As of December 31, 2000, auction operations have been discontinued; therefore, auction operations is shown in discounted operations on the statement of operations.

As of June 30, 2001 and December 31, 2000, the Company had also derived revenue from internet advertising. Revenue from internet advertising has been deemed immaterial for segment reporting purposes.

NOTE 13 - DISCONTINUED OPERATIONS

Discontinued operations relate to the Company shutting down its auction house during December 31, 2000. Loss on discontinued operations is as follows:

	For the Year Ended        December 31,              2000                      1999
Auction Income	$   589,438	$     565,230
Cost of sales	(728,758)	(651,811)
Gross profit	(139,320)	( 86,581)
Selling, general and administrative and other expenses	(618,260)	(1,115,149)
Loss on discontinued operations	$  (757,580)	$(1,201,730)

As of December 31, 2000, the Company is still pursuing the auction of inventory and equipment. The Company will sell off the inventory at cost and utilize the equipment.

As of June 30, 2001, these operations are shown as discontinued.

- F27 -

PART I-ITEM 2

MLLIONAIRE.COM AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion of our financial condition and results of operations should be read together with the financial statements and the related notes included in another part of this Form 10-QSB and which are deemed to be incorporated into this section as well as the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000. This discussion contains forward-looking statements that involve risks and uncertainties.

General

The Company publishes a magazine under the trademark "Opulence" eight to twelve times each year. The Company also operates an e-commerce siteatwww.opulence.comand sells fine art, antiques and collectibles through their magazine, website and by consigning these items to upscale existing auction houses throughout the United States.

For the period from the inception of the business in February 1995 through December 15, 1998 we did not conduct any business. From December 15, 1998 to the present, our operating activities have consisted primarily of recruiting personnel, purchasing operating assets, establishing vendor relationships and developing the infrastructure required to support the businesses that we are engaged in, including development of the computer systems required to conduct business over the Internet. As a result of these activities, net losses have been incurred. We expect to expand our marketing staff to increase the "Opulence" brand loyalty and advertising sales. We expect to experience net losses through the third quarter of the year 2001.

Results of Operations

Revenue

Revenue derived from the magazine are generated from the sale of advertising, as well as the sale of the magazines themselves through subscriptions, bookstore distribution and controlled circulation. Revenue is also generated by consigning Company owned goods to existing non company owned auction houses. We also lease mall space and rent catalog space on our website atwww.opulence.com.

Advertising revenue for the six months ended June 30, 2001 and 2000 was $245,364 and $1,732,694, respectively, representing a decrease of $1,487,330. Magazine sales for the six months ended June 30, 2001, and 2000 were $79,948 and $188,419, respectively, representing a decrease of $108,471 or 57.6%. Revenues for the Internet were $63,085 for the three months ended June 30, 2001.

-3-

 Advertising revenue for the three months ended June 30, 2001 and 2000 were $169,241 and $1,142,448, respectively, representing a decrease of $973,207. Magazine sales for the three months ended June 30, 2001, and 2000 were $38,689 and $114,934, respectively, representing an decrease of $76,245 or 66.3%.

Revenues from the Internet were $25,077 for the three months ended June 30, 2001 and $-0- the three months ended June 30, 2000. The decrease in revenue can be attributed to management's reorganization of the business.

Bad debt expense (recovery) for the six months ended June 30, 2001 was $(33,897) or 1.7% of sales. Bad debt expense for the six months ended June 30, 2000 was $100,000 or 25.7% of sales.

Bad debt expense for the three months ended June 30, 2001 was $(36,577) or 15.6% of sales. Bad debt expense for the three months ended June 30, 2000 was $-0-. Management enlisted a factoring group during 2000 to formalize the credit approval process as well as to collect the accounts for which the reserve was provided.

During the six months and three months ended June 30, 2001, we exchanged magazine advertisements for goods and services with an approximate value of $___________ and $__________. These non-monetary transactions have been accounted for under APB Opinion No. 29, Accounting for Non-monetary Transactions and EITF issue No. 93-11, Accounting for Barter Transactions Involving Barter Credits. The non-monetary transactions were accounted for based on the fair value of the goods exchanged. An impairment of the non-monetary asset exchanged is recognized prior to recording the exchange if the fair value of the advertising space exchanged has a fair value greater than the goods or services received. The impairment is measured as the amount by which the carrying amount of the asset exceeds its fair value. Accordingly, the accompanying financial statements reflect only cash transactions.

Sources of Revenue Growth. Beginning with the November 2000 issue of Opulence magazine the company focused our distribution efforts to a select group of 20,000 millionaire, multi millionaire and billionaire clients. This allowed us to decrease printing costs without decreasing page rates. The intent is to deal with a relatively small group of elite buyers who combined have more buying power than the larger audience that we previously directed our distribution efforts. As an additional incentive to our magazine advertisers, they are allowed to advertise on our website at www.opulence.com at a reduced cost of those who advertise on the website alone.

Constraints on Revenue Growth. Delays in the development of our website resulted in less advertisement sales during 2000. Today, with the website complete and continuously evolving, we are able to offer Mall Space to advertisers. The "Space" being rented is in actuality a link to the advertisers site. The advertiser pays $3,800 for the link on an annual basis. 1,700 links are available. For the three months ended June 30, 2001, $38,008 of gross revenue has been generated.

-4-

Cost of goods sold (exclusive of depreciation and amortization)

Cost of goods sold (exclusive of depreciation and amortization in operating expenses) related to magazine publishing consists primarily of printing and distribution costs related to magazine and advertising sales. Cost of goods sold (exclusive of depreciation and amortization in operating expenses) for the auction house consists primarily of merchandise purchased and consigned. Cost of goods sold does not include depreciation and amortization expense and other operating costs shown separately on the statement of operations.

Cost of goods sold (exclusive of depreciation and amortization) related to publishing for the six months ended June 30, 2001 was $260,476 or 67.0% of net magazine and advertising sales compared to $1,582,115 for the six months ended June 30, 2000 or 82.3%.

Cost of goods sold (exclusive of depreciation and amortization) related to publishing for the three months ended June 30, 2001 was $143,675 or 62.7% of net magazine and advertising sales compared to $868,677 for the three months ended June 30, 2000 or 69.1%. The decrease in cost of publishing as a percentage of magazine and advertising sales resulted from the reorganization of the company.

Selling, General and Administrative Expenses

Selling,General and Administrative. General and administrative expenses consist primarily of payroll and related expenses for executive, accounting and logistical personnel, bad debt expense, facilities expenses, recruiting and professional fees, as well as other general corporate expenses. Sellingexpenses consist primarily of advertising and marketing the magazine.

Selling, General and Administrative Expenses were $867,550 or 223.3% of net sales for the six months ended June 30, 2001, compared to $2,608,930 or 135.8% of net sales for the six months ended June 30, 2000. The decrease of $1,741,380 resulted mainly from the issuance of Common Stock and Options as compensation during the three months ended June 30, 2000.

Selling, General and Administrative Expenses were $213,210 or 91.5% of net sales for the three months ended June 30, 2001, compared to $761,745 or 60.6% of net sales for the three months ended June 30, 2000. The decrease of $598,265 resulted mainly from the issuance of Common Stock and Options as compensation during the three months ended June 30, 2000.

Other Income, (Expense)

Other income (expense), was $(26,106) and $(15,522), for the six months ended June 30, 2001 and June 30, 2000, respectively. Interest income during the six months ended June 30, 2001, was attributed primarily to the interest earned on the cash and certificate of deposits resulting from the cash received from capital raised during 2000.

-5-

Other income (expense), was $(13,717) and $(227,979), for the three months ended June 30, 2001 and June 30, 2000, respectively. Interest income during the three months ended June 30, 2001, was attributed primarily to the interest earned on the cash and certificate of deposits resulting from the cash received from capital raised during 2000.

Interest expense relating to the stated interest rates of our debt was $31,560 for the three months ended June 30, 2001.

Stock issuance expenses of $1,587,260 and $228,734 for the six months and three months ended June 30, 2000, resulted from the issuance of convertible debt at a discounted conversion feature.

Income Taxes

We incurred a net loss of $952,108 for the six months ended June 30, 2001 compared to a net loss of $3,925,784 for the six months ended June 30, 2000.

We incurred a net loss of $24,361 for the three months ended June 30, 2001 compared to a net loss of $649,071 for the three months ended June 30, 2000. There were no current or deferred provisions for income taxes. At June 30, 2001 and 2000, we had deferred tax assets primarily relating to net operating losses.

The net deferred tax assets were fully reserved with a valuation allowance. The net operating losses begin expiring in 2019.

We experienced a change in control as defined under Section 382 of the Internal Revenue Code, during calendar year 1998. As a result, approximately $750,000 of tax loss carry forwards will be limited to annual utilization amounts. None of these limited amounts have been reflected in the financial statements.

Discontinued Operations

Discontinued operations relate to the Company shutting down its auction house during the year ended December 31, 2000. The auction house held auctions during 2000 and conducted retail sales. The income (loss) from auction operations for the six months and three months ended June 30, 2001 was $(153,590) and $113,234.

Liquidity and Capital Resources

Cash Inflows and Outflows

Operating Activities. Net cash used in operating activities amounted to $435,782 for the six months ended June 30, 2001 compared to net cash used in operating activities of $1,978,169 for the six months ended June 30, 2000. The net cash used in operations was primarily attributable to the net losses from operations of $952,109 and $3,925,784 for the respective periods indicated.

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Investing Activities. Net cash provided by investing activities amounted to $10,978 and $153,451 for the six months ended June 30, 2001 and June 30, 2000, respectively.

Financing Activities. Our operations have been financed primarily through the sale of common stock in a Section 504, Regulation D offering in 1998 that netted proceeds of approximately $945,000 and a private placement begun in 1998 and completed in January, 2000, that netted proceeds of approximately $4,632,474. As part of the purchase price of the trademarks purchased from Lifestyle Media Corporation, Lifestyle Media Acquisition Corporation entered into a long-term debt agreement with the shareholders of Lifestyle Media Corporation. The initial balance entered into was $1,674,595 of which $300,000 was paid prior to closing. This note had a five year amortization and was secured by the "Millionaire" trademark. There are no operating covenants associated with this debt. On January 24, 2000, we entered into two separate unsecured convertible promissory notes payable in the aggregate amount of $1,750,000. The notes payable were received from two of our current shareholders, who, in agg regate own more than 5% of our outstanding common stock. These notes are in default as of January 24, 2001. On June 29, 2000, we entered into three separate unsecured convertible promissory notes payable in the aggregate amount of $195,000. The notes payable were received from three of our current shareholders. $35,000 principal amount is currently outstanding under these notes, $10,000 was repaid and the remaining $150,000 principal amount was converted into shares of our common stock. On August 24, 2000, we entered into 3 separate unsecured promissory notes payable in the aggregate amount of $300,000. The notes payable were received from three of our current shareholders. The amounts due under the notes were converted into shares of our common stock in September 2000. During the three months ended June 30, 2001, the Company received $67,000 additional financing through loans.

We anticipate requiring additional cash to support the anticipated growth in accounts receivable and inventory. We expect our operating expenses to decrease even as we continue to expand the "Opulence" brand. We have eliminated clerical help and increased our marketing staff who work either on a draw against commission or on a commission basis. We expect to incur losses through the third quarter of the year 2001 and as a result we will need to raise additional cash to finance accounts receivable, capital expenditures and operating expenses.

As described in Note 1, to the accompanying financial statements, there is a doubt as to our ability to continue as a going concern. We have incurred a loss of $952,109 for the six months ended June 30, 2001 and $6,158,631 for the years ended December 31, 2000, and have an accumulated deficit of $14,134,274 as of June 30, 2001.

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We are considering various sources of financing, such as the issuance of additional equity or debt securities or obtaining further credit facilities. As of March 2000, management has engaged a factoring firm to help collect accounts receivable as well as establish credit lines for existing customers. Should adequate financing not be available on a timely basis, merger discussions with other auction and luxury space providers, as well as other luxury publications, would be entered into in an effort to maximize the value of the existing assets and brand established and operated by the company.

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 PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 3. DEFAULTS UPON SENIOR SECURITY - None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

A. Exhibits - None

B. Reports on Form 8-K - None

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MILLIONAIRE.COM
(Registrant)

Date: August 20, 2001 By:/s/ Robert L. White
Robert L. White, Chief Executive Officer

By:/s/__________________________________
Principal Financial and Accounting Officer