SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Period Ended
March 31, 2000 Commission File No. 0-15413
BUSINESSMALL.COM, INC.
(Exact name of Registrant as specified in its Charter)
Nevada 95-3480640
(State or jurisdiction of
incorporation or organization) (IRS Employer Identification No.)
601 Cleveland Street, Suite 930, Clearwater, Florida 33755
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (727) 507-3555
Former name, former address and former fiscal year, if changed since last
report: Progressive Telecommunications Corporation
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for a shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of May 1, 2000, there were 13,133,685 shares of Common Stock, $.001
par value outstanding.
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
BUSINESSMALL.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, SEPTEMBER 30,
2000 1999
(NOTE 1) (NOTE 1)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,581,220 $ 33,346
Certificates of deposit 138,077 52,133
Notes receivable 126,429 100,000
Accounts receivable, net 380,927 541,545
Inventory 6,037 35,478
Prepaid and other 230,500 45,035
Total current assets 3,463,190 807,537
Property and equipment, net 3,171,569 944,392
Other assets:
Goodwill, net 4,735,103 4,348,039
Intangible assets, net 457,587 205,174
Deferred charges 50,941 50,000
Deposits 57,786 27,002
Total other assets 5,301,417 4,630,215
Total assets $ 11,936,176 $ 6,382,144
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1 ,228,993 $ 1,380,378
Accrued liabilities:
Accrued payroll and taxes 777,418 567,378
Other 79,661 599,064
Convertible debentures 2,002,500 -
Notes payable to related parties 117,625 441,200
Lines of credit 36,736 32,834
Current maturities of long-term debt 114,892 139,386
Current portion of capital lease obligation 123,773 143,466
Deposits on unissued common stock - 151,000
Total current liabilities 4,481,598 3,454,706
Long-term liabilities:
Long-term debt, net of current maturities 87,500 207,334
Long-term portion of capital lease obligation 53,333 56,886
Total liabilities 4,622,431 3,718,926
Minority interest 747,303 747,303
Stockholders' equity:
Common stock par value $.001, 50,000,000
shares authorized, 13,115,806 and 8,222,122
shares issued and outstanding at March 31,
2000 and September 30, 1999, respectively 13,116 8,222
Additional paid-in capital 19,773,958 8,546,226
Accumulated deficit (13,220,632) (6,638,533)
Total stockholders' equity 6,566,442 1,915,915
$ 11,936,176 $ 6,382,144
Unaudited - See accompanying notes to condensed financial statements
BUSINESSMALL.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES: $ 1,168,200 $ 1,330,567 $ 2,593,703 $ 1,435,698
COSTS AND EXPENSES:
Cost of sales 925,668 1,124,863 2,042,254 1,203,924
Selling, general &
administrative 3,694,500 1,021,114 5,658,031 1,910,383
4,620,168 2,145,977 7,700,285 3,114,307
OPERATING LOSS (3,451,968) (815,410) (5,106,582) (1,678,609)
OTHER INCOME (EXPENSE):
Other income 21,952 16,460 64,943 -
Interest expense (1,367,642) (63,413) (1,398,913) (63,413)
Amortization expense (84,010) (14,243) (141,545) (23,816)
(1,429,700) (61,196) (1,475,515) (87,229)
NET LOSS $ (4,881,668) $ (876,606) $ (6,582,097) $(1,765,838)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 10,721,654 3,219,020 9,625,658 2,985,059
NET LOSS PER SHARE - $(.46) $(.27) $(.68) $(.59)
BASIC AND DILUTED
Unaudited -- See accompanying notes to condensed financial statements.
BUSINESSMALL.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
March 31
2000 1999
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (6,582,097) $ (1,765,838)
Adjustments to reconcile net loss to
net cash flows used in operating activities:
Depreciation and amortization 357,461 62,142
Bad debt expense 20,946 -
Issuance of stock for services and interest 4,925,841 1,368,380
Change in assets and liabilities
Decrease in accounts receivable 139,671 81,947
(Increase) in notes receivable (26,429) -
Decrease in inventory 29,441 -
Decrease (increase) in prepaid and other 14,535 (808,566)
(Decrease) increase in accounts payable (151,384) 145,483
(Decrease) in accrued liabilities (309,364) (223,626)
Net cash flows used in operating activities (1,581,379) (1,140,078)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired from acquisition - 21,709
Purchase of property and equipment (1,079,009) (30,338)
Increase in notes receivable - (36,633)
Purchase of intangible assets (281,022) -
Increase in advances to stockholders - (7,350)
(Increase) in certificates of deposit (85,944) -
Increase (decrease) in deposits and deferred charges (31,725) 76,847
Net cash provided by (used in) investing activities 1,477,700) 24,235
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 3,268,500 304,000
Increase (decrease) in loans from stockholders 499,625 (19,000)
Increase in convertible debentures 2,002,500 -
Net advances under line of credit 3,902 810,321
Proceeds from issuance of notes payable - 330,100
Payments on long term debt (144,328) -
Payments on capital lease obligations (23,246) (251,504)
Net cash flows provided by financing activities 5,606,953 1,173,917
NET CHANGE IN CASH AND CASH EQUIVALENTS 2,547,874 58,074
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 33,346 7,730
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,581,220 $ 65,804
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 31,501 $ 35,726
Conversion of debt into common stock $ 823,200 $ -
Common stock issued for property and equipment $ 1,364,085 $ -
Common stock issued for acquisition, $ 500,000 $ -
all recorded to goodwill
Unaudited-See accompanying notes to condensed financial statements.
BUSINESSMALL.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1-BASIS OF PRESENTATION:
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete statements. Management believes that all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such financial statements, have been included. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2 - ACQUISITIONS
During 2000, the company acquired the assets of The Yellow Page Directory,
Inc. in a business combination accounted for as a purchse. The Company
purchased the fixed assets, URL domain name, and customer relationships for
200,000 of common stock. At March 31, 2000, the entire $500,000 purchase
price has been allocated to good will.
NOTE 3 - NOTES PAYABLE
The Company issued 9% convertible debentures due December 31, 2001 in the
aggregate ammount of $ 502,500. As of March 31, 2000, the Company had an
aggregate ammount pf 502,500 of these debentures issued and outstanding.
Each debenture allows the holder to convert, in whole or part, into shares of
the Company's common stock at a fixed conversion rate of $1.50 per share. In
connection with the issuance of these debentures, for each $1.50 invested, the
debenture holder also received one common stock purchase warrant. Each of
these warrants are exercisable at the rate of $1.50 per share, are immediately
exercisable and expire on December 31, 2002.
The Company issued 10% convertible subordinated debentures due March 31, 2003
in the aggregate principal amount of $1,500,000. Interest is payable in cash
or in shares of common stock at the holder's option, upon conversion,
redemption or maturity. These debentures have a variable conversion price,
equal to the lower of .75 of the average closing bid price of the Company's
common stock for the ten trading days preceding (x) the Initial Closing Date
or (y) the conversion date, with a minimum conversion price of $1.00 per share.
Based on the closing date the conversion price of these debentures was $3.44
per share. In conjunction with the issuance of this debenture the company
issued to the purchaser 375,000 common stock purchase warrants. The warrants
are exercisable at a price of $3.88 per share and expire March 31, 2003.
Contemporaneously with the execution of the debenture, the company placed
1,148,196 shares of common stock with an escrow agent for the conversion of
the debentures and warrants. The common shares are not considered
outstanding at March 31, 2000.
The company recognized approximately $672,000 of interest expense for the
beneficial conversion features associated with these debentures during the
three and six months ended March 31, 2000.
NOTE 4 - STOCKHOLDER'S EQUITY
Private Placement shares
During the six months ended March 31, 2000, the Company has raised approximately
$3.4 million in a private placement offering at $2.50 per share (1,367,800
shares). Each share issued is accompanied by a one-year warrant to purchase
one additional share at a price of $2.50.
Shares issued for service
During the six months ended MArch 31, 2000, the Company issued approximately
$3.1 million of its common stock in lieu of payment for the fair value of
services rendered. The stock was valued at $2.50 per share.
Shares issued to Retire Debt
During the six months ended March 31, 2000, the Company issued 635,642 shares
of common stock in exchange for the retirement of approximately $1 million of
indebtedness with third-party investors.
The company also issued 1,020,470 shares of common stock to related parties in
exchange for the retirement of approximately $900,000 of indebtedness. These
shares were recorded at a value of $1.50 per share, resulting in
approximately $700,000 milliom being recorded as interest expense.
Other Transactions
In conneciton with employment and consulting agreements, the Company issued
warrants and options to purchse approximately 760,000 shares of common stock at
$2.50 during the six months ended March 31, 2000.
NOTE 5 - SEGMENT INFORMATION
The Company is currently operating in two-industry segments: Internet directory
and business-to-business e-commerce ("BusinessMall.com") and advanced
telecommunications services, including local and long distance telephone
services ("CCC Communications"). The following is operating information for
these industry segments for the six months ended March 31, 2000;
CCC
BusinessMall.com Communications Total
Revenue: $ 4,104 $ 2,589,599 $ 2,593,703
Operating Loss: (4,851,255) ( 255,327) (5,106,582)
Total Assets: 10,554,879 1,381,297 11,936,176
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
BusinessMall.com (the "Company"), a Nevada Corporation, is both an Internet
portal and e-commerce site focused on providing businesses a one stop solution
for all of their business product, service and information needs, as well as
providing a safe and secure place for them to conduct business, all under one
virtual roof. BusinessMall.com was developed to raise the standards in
products and services and to become the industry leader of
business-to-business (B2B) commerce on the Internet by providing businesses
worldwide a universal platform on which to transact business electronically.
Specifically, BusinessMall.com targets the vast and lucrative SOHO (small
office-home office) and SMB (small to mid size) market. BusinessMall.com has
also implemented a customer/member support staff and technology
infrastructure to promote the services provided on the BusinessMall,
including access to live online customer service agents available twenty-four
hours a day, seven days a week, that is unsurpassed in the B2B e-commerce
industry.
The foundation of BusinessMall.com is TheYellowPageDirectory.com (YPD). The
YPD is an Internet directory that provides enhanced listings and a multitude
of bundled services to millions of business owners specifically targeting the
SOHO and SMB markets. The YPD is housed in a recently opened 73,000 sq. ft.
facility and works in conjunction with an E-Contact Solutions Center (E-csc)
which has state-of-the-art computer telephony software and equipment. The
facility can accommodate 1000+ people on site and at least three times that
many virtual employees.
The Company continues to be a fully-integrated provider of advanced
telecommunications and communications management services to businesses
through its subsidiary, CCC Communications Corp (CCC). The Company
manages global telecommunications services capable of transporting all types
of voice, data and wireless communications. This includes all aspects of
network planning and management, transmission capacity, enhanced service
delivery platforms and billing systems.
Results of Operations
The following table presents the percentage of total revenues for the
periods indicated and changes from period to period of certain items included
in the Company's Statements of Operations:
Period to Period Percentage Changes
For the Three Months For the Six Months For the Three Months For the Six Months
Ended March 31 Ended March 31 Ended March 31 Ended March 31
1999 2000 1999 2000 1999 vs 2000 1999 vs 2000
Sales (net) 100% 100% 100% 100% (12%) 81%
Cost of Sales 85% 79% 84% 79% (18%) 70%
Gross Profit 15% 21% 16% 21% 18% 138%
Selling,general &
administrative
expenses 76% 317% 133% 218% 262% 196%
Operating Loss (61%) (296%) (117%) (197%) 323% 204%
Total Other income
(expense) ( 5%) (122%) ( 6%) ( 57%) 2,236% 1,592%
Net Loss (66%) (418%) (123%) (254%) 457% 273%
THREE AND SIX MONTHS ENDED MARCH 31, 2000 COMPARED WITH THE THREE AND SIX MONTHS
ENDED MARCH 31, 1999
The Company had revenue from operations of $1,168,000 for the three months
ended March 31, 2000 compared to $1,331,000 during the three months ended
March 31, 1999. Gross profit for the three months ended March 31, 2000 was
$243,000 compared to $206,000 for the three months ended March 31, 1999. The
decrease in revenue is attributable to increased competition in the
telecommunications business. Gross profits increased because of the higher
gross profit margins on the telecommunications business.
The Company had revenue from operations of $2,594,000 for the six months
ended March 31, 2000 compared to $1,436,000 during the six months ended March
31, 1999. Gross profit for the six months ended March 31, 2000 was $551,000
compared to $232,000 for the six months ended March 31, 1999. The increase
in revenue is attributable to acquisition of CCC Communications Corp in
December 1998. Gross profits increased because of the higher gross profit
margins for the telecommunications business.
Selling, general and administrative expenses were $3,695,000 for the three
months ended March 31, 2000 compared to $1,021,000 for the three months ended
March 31, 1999. The increase in expenses resulted from the start-up of The
Yellow Page Directory.Com Corp. and BusinessMall.Com, Inc.
Selling, general and administrative expenses were $5,658,000 for the six
months ended March 31, 2000 compared to $1,910,000 for the six months ended
March 31, 1999. The increase in expenses is attributable to the acquisition
of CCC Communications Corp in December 1998 and the start-up of The Yellow
Page Directory.Com Corp. and BusinessMall.Com, Inc.
Liquidity and Capital Resources
Net cash used in operating activities was $1,581,000 for the six months ended
March 31, 2000 compared to $1,140,000 for the comparable period in 1999. The
change was primarily due to a net cash loss of $ 1,278,000 and a reduction in
accounts payable and accrued expenses in the amount of $461,000. This was
offset by a decrease in accounts receivable in the amount of $140,000.
Net cash used for investing activities was $1,478,000 for the six months
ended March 31, 2000 compared to cash provided by investing activities of
$24,000 for the comparable period in 1999. The increase is primarily due to
leasehold improvements on a new facility for The Yellow Page Directory.Com
Corp.
Net cash provided by financing activities was $5,607,000 for the six months
ended March 31, 2000 compared to $1,174,000 for the comparable period in
1999. During the six months ended March 31, 2000, the Company raised
$3,269,000 through private placements, received $600,000 from a stockholder,
and issued $2,002,000 in convertible debentures.
Inflation
The Company believes that there has not been a significant impact from
inflation on the Company's operations during the past three fiscal years.
Additional Factors That May Affect Future Results
Future Operating Results - Future operating results may be impacted by a
number of factors that could cause actual results to differ materially from
those stated herein, which reflect management's current expectations. These
factors include worldwide economic and political conditions, industry
specific factors, the Company's ability to maintain access to external
financing sources and its financial liquidity, the acceptance of the
BusinessMall by small and mid-sized businesses, and the Company's ability to
manage expense levels.
Need for Additional Capital - As of March 31, 2000, the Company had
approximately $ 2,581,000 of cash and short-term investments. The Company has
experienced negative cash flow since inception and expects negative cash flow
to continue until significant revenue is generated by the Company's
subsidiaries. The Company expects that the monthly negative cash flow will
decrease as a result of increased activities related to BusinessMall.com. The
Company's future success is highly dependent upon its continued access to
sources of financing which it believes are necessary for the continued
advertising and marketing of the Company's internet websites. In the event the
Company is unable to maintain access to its existing financing sources, or
obtain other sources of financing, there would be a material adverse effect on
the Company's business, financial position and results of operations.
Stock Price Fluctuations - The Company's participation in a highly
competitive industry often results in significant volatility in the Company's
common stock price. This volatility in the stock price is a significant risk
investors should consider.
Forward Looking Statements - This report contains certain forward-looking
statements that are based on current expectations. In light of the important
factors that can materially affect results, including those set forth above
and elsewhere in this report, the inclusion of forward-looking information
herein should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved. The
Company may encounter competitive, technological, financial and business
challenges making it more difficult than expected to continue to market its
products and services; competitive conditions within the industry may change
adversely; the Company may be unable to retain existing key management
personnel; the Company's forecasts may not accurately anticipate market
demand; and there may be other material adverse changes in the Company's
operations or business. Certain important factors affecting the forward
looking statements made herein include, but are not limited to (i) accurately
forecasting capital expenditures and (ii) obtaining new sources of external
financing. Assumptions relating to budgeting, marketing, product development
and other management decisions are subjective in many respects and thus
susceptible to interpretations and periodic revisions based on actual
experience and business developments, the impact of which may cause the Company
to alter its capital expenditure or other budgets, which may in turn effect the
Company's financial position and results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time the Company is a party to litigation, which arise, in the
normal course of business. There is no litigation pending that, if
determined adversely, would have a material effect upon the business or
financial condition of the Company.
During 1999, a lawsuit was filed against the Company and the two principals of
the Company, individually, alleging breach of fiduciary duties while the two
principals were employees of a cable television and satellite installation
company. In addtion, the suit alleges usurped corporate opportunities belonging
to the other company, tortious interference with business relations,
misrepresentations, and the taking of business belonging to the other company,
resulting in the ultimate demise of the cable television and satellite
installation company. It is management's belief that the allegations are
without merit, that the outcome appears to be favorable, and they intend to
vigorously defend and/or prosecute these matters.
On April 17, 2000, the Company was named as defendant in an arbitration filed
with the American Arbitration Association in Orlando, Florida. The Claimant,
Matthew Gillio and Matthew Gillio Enterprises, Ltd. allege claims of breach of
fiduciary duty and fraud. The claim arises out of certain agreements entered
into between the Company's majority owned subsidiary and the claimant. The
claim seeks $45,000 and securities of the Company. The Company forwarded the
statement of claim to its litigation counsel and is awaiting advice as to how
to proceed. The Company's position is that Mr. Gillio provided absolutely no
services on its behalf and, in fact, directed the Company to enter into
agreements with third parties without receiving any benefit in return. The
Company intends to defend this matter vigorously and is contemplating making a
counterclaim against Mr. Gillio.
Item 2: Change in Securities and Use of Proceeds
(a) None
(b) None
(c) None
(d) Not Applicable
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on March 24, 2000,
pursuant to written notice and the Company's bylaws. The total number of the
Company's shares outstanding on February 21, 2000, the record date of the
meeting, was 11,608,922 of which 8,421,347 were present, in person or by
proxy. The following persons were nominated by management and each was
elected to serve as director until the next annual meeting of stockholders:
Barry L. Shevlin
James C. Watson
Dr. Howard Tackett
Michael Kogan
Charles M. Meeks
James E. Wallace
The following matters were submitted to stockholders and adopted by the
requisite vote of a majority of the shares present and voting on the matter:
For Against Abstain
To approve the Company's 2000
Equity Incentive Plan 7,646,533 33,838 18,905
To approve an amendment to the
Company's Certificate of Incorp-
oration changing its name to
BusinessMall.com, Inc. 8,401,936 15,646 3,765
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
27 Financial Data Schedule
(b) Reports on Form 8-K
(i) A Form 8-K was filed by the Company dated as of December 29, 1999 and
filed January 12, 2000.
(ii) A Form 8-K was filed by the Company dated February 10, 2000 and
filed February 15, 2000.
(iii) A Form 8-K was filed by the Company dated April 12, 2000 and filed
April 12, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 18, 2000 BUSINESSMALL.COM, INC.
By: /s/ Barry L. Shevlin
Barry L. Shevlin, CEO and
Principal Executive and
Chief Financial Officer
EXHIBIT 27
ARTICLE 5
MULTIPLIER
PERIOD - TYPE 6 MONTHS
FISCAL YEAR END SEPTEMBER 30, 2000
PERIOD END MARCH 31, 2000
CASH $2,581,220
RECEIVABLES $961,349
ALLOWANCES $453,993
INVENTORY $6,037
CURRENT ASSETS $3,463,190
DEPOSITS $57,786
PP&E $3,582,976
DEPRECIATION $411,407
TOTAL ASSETS $11,936,176
CURRENT LIABILITIES $4,481,598
BONDS 0
COMMON $13,116
OTHER - SE $6,553,326
TOTAL LIABILITIES AND EQUITY $11,936,176
SALES $2,593,703
TOTAL REVENUES $2,658,646
CGS $2,042,254
TOTAL COSTS $7,700,285
OTHER EXPENSES $141,545
LOSS PROVISION 0
INTEREST EXPENSE $1,398,913
INCOME PRETAX $(6,582,097)
INCOME TAX 0
NET LOSS $(6,582,097)
EPS PRIMARY $(.68)
EPS DILUTED $(.68)