SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2003
Commission File Number 33-96638-A
eCom eCom.com, Inc.
- -----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 65-0538051
- ------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8125 Monetary Dr., Suite H5
Riviera Beach, Florida 33404
- -----------------------------------------------------------------------------
(Address of principal executive offices)
(561) 622-4395
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ]
As of November 30, 2003 the issuer had 49,955,112 shares of common stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
eCom eCom.com, Inc. Form 10-QSB November 30, 2003
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Independent Accountant's Report 3
Consolidated Balance Sheets:
November 30, 2003 and May 31, 2003 (Unaudited) 4
Consolidated Statements of Operations:
Six Months Ended November 30, 2003 and
2002 (Unaudited) 5
Consolidated Statements of Operations:
Three Months Ended November 30, 2003 and
2002 (Unaudited) 6
Consolidated Statements of Shareholders' Deficit:
Years Ended May 31, 2003 and 2002 and the
Six Months Ended November 30, 2003 (Unaudited) 7
Consolidated Statements of Cash Flows:
Six Months Ended November 30, 2003 and
2002 (Unaudited) 8
Notes to Consolidated Financial Statements 10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 21
ITEM 3 CONTROLS AND PROCEDURES 24
PART II OTHER INFORMATION
ITEMS 1-6 25
SIGNATURES AND CERTIFICATIONS 27
Exhibit 31.1 Certification required under Section 302 of 28
the Sarbanes-Oxley Act of 2002 by the CE0
Exhibit 31.2 Certification required under Section 302 of 29
the Sarbanes-Oxley Act of 2002 by the CFO
Exhibit 32 Certification of CEO and CFO Pursuant to
Section 906 of the Sarbanes-Oxley Act 30
2
Wieseneck, Andres & Company, P.A.
Certified Public Accountants
772 U. S. Highway 1, Suite 100
North Palm Beach, Florida 33408
(561) 626-0400
Thomas B. Andres, C.P.A.*, C.V.A. FAX (561) 626-3453
Paul M. Wieseneck, C.P.A.
*Regulated by the State of Florida
Independent Accountant's Report
To the Board of Directors and Stockholders eCom eCom.com, Inc.
We have reviewed the accompanying Balance Sheets of eCom eCom.com, Inc. as of
November 30, 2003 and May 31, 2003, and the related consolidated statements
of operations, for the three-month periods and the six-month periods ended
November 30, 2003 and 2002, the consolidated statement of stockholders' deficit
from May 31, 2002 through November 30, 2003, and the consolidated statement of
cash flows for the six-month periods ended November 30, 2003 and 2002. These
financial statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with U.S. generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company's current liabilities exceed the current
assets by $629,638 and the Company has incurred net operating losses since
inception. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans regarding those matters are
described in the notes. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Wieseneck, Andres & Company, P.A.
January 21, 2004
3
eCOM eCOM.COM, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
November 30, 2003 May 31, 2003
----------------- ------------
ASSETS
Current Assets
Cash and cash equivalents $ 9,057 $ 111
Accounts receivable other - 347
Inventories 195,035 147,389
Prepaid expenses 125,922 3,624
------------ ------------
Total Current Assets 330,014 151,471
------------ ------------
Property and Equipment, net 33,321 47,292
------------ ------------
Other Assets
Intangible assets, net 69,325 74,978
Other assets 9,273 9,383
------------ ------------
Total Other Assets 78,598 84,361
------------ ------------
Total Assets $ 441,933 $ 283,124
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 320,450 $ 270,585
Accrued expenses 26 2,694
Other Current Liabilities 1,578 1,402
Current portion of long-term debt 628,391 600,888
Interest accrued on current portion 9,207 -
------------ ------------
Total Current Liabilities 959,652 875,569
Notes Payable, Net of Current Portion - -
------------ ------------
Total Liabilities 959,652 875,569
------------ ------------
Stockholders' Equity
Common stock, $.0001 par value, 50 million
shares authorized, 49,955,112 and
36,393,112 shares issued and outstanding 4,995 3,639
Paid-in capital 6,393,848 6,048,622
Accumulated deficit (6,916,562) (6,644,706)
Treasury stock - -
------------ ------------
Total Stockholders' Deficit (517,719) (592,445)
------------ ------------
Total Liabilities and Stockholders' Equity $ 441,933 $ 283,124
============ ============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
4
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Six Months Ended
November 30, 2003 November 30, 2002
______________ _______________
Revenues
Net Sales $ 34,309 $ 83,823
Cost of Sales (33,561) (66,417)
______________ _______________
Gross Profit 748 17,406
______________ _______________
Other Operating Expenses
Sales and marketing 2,848 21,764
Product development 9,750 14,668
General and administrative 231,627 312,142
Amortization 10,792 10,127
______________ _______________
Total Operating Expenses 255,017 358,701
______________ _______________
Loss from Operations (254,269) (341,295)
Other Income (Expense)
Interest income - -
Interest expense (17,999) (4,937)
Gain on disposal of asset 411 22,590
______________ _______________
Net Other Expenses (17,588) 17,653
______________ _______________
Net Loss $ (271,857) (323,642)
============== ===============
Net Loss Per Common Share $ (.007) (.011)
============== ===============
Weighted Average Shares Outstanding 38,821,407 29,255,638
============== ===============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
5
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
November 30, 2003 November 30, 2002
_________________ __________________
Revenues
Net Sales $ 21,500 $ 43,048
Cost of Sales (19,808) (31,174)
______________ _____________
Gross Profit 1,692 11,874
______________ _____________
Operating Expenses
General and administrative 176,013 137,744
Sales and marketing 1,440 13,644
Product development 5,250 333
Amortization 5,560 5,065
______________ _____________
Total Operating Expenses 188,263 156,786
______________ _____________
Loss from Operations (186,571) (144,912)
Other Income (Expense)
Interest income - -
Interest expense (9,931) (2,450)
Loss on disposal of asset 412 22,590
______________ _____________
Net Other Expenses (9,519) 20,140
______________ _____________
Net Loss $ (196,090) (124,772)
============= =============
Net Loss Per Common Share $ (.005) (.004)
============= =============
Weighted Average Shares Outstanding 39,950,442 30,664,245
============= =============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
6
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED MAY 31,
2003 AND 2002 AND THE SIX MONTHS ENDED NOVEMBER 30, 2003
(Unaudited)
Number At Add'l Total
of Par Paid In Accum'd Treasury Stockholder
Shares Value Capital Deficit Stock Deficit
---------- ------ ---------- ----------- -------- -----------
Balance,
May 31, 2001 19,010,836 $1,901 $4,127,083 $(4,391,382)$ - $ (262,398)
Issuance of
Common Stock 7,728,686 773 1,628,684 - - 1,629,457
Net Loss - - - (1,482,533) - (1,482,533)
---------- ------ ---------- ----------- -------- -----------
Balance,
May 31, 2002 26,739,512 $2,674 $5,755,767 $(5,873,915)$ - $ (115,474)
Issuance of
Common Stock 9,653,600 965 292,855 - - 293,820
Net Loss - - - (770,791) - (770,791)
---------- ------ ---------- ----------- -------- -----------
Balance,
May 31, 2003 36,393,112 $3,639 $6,048,622 $(6,644,706)$ - $ (592,445)
Issuance of
Common Stock 13,562,000 1,356 345,226 - - 346,582
Net Loss - - - (271,856) - (271,856)
---------- ------ ---------- ----------- -------- -----------
Balance,
Nov 30, 2003 49,955,112 $4,995 $6,393,848 $(6,916,562)$ - $ (517,719)
========== ====== ========== =========== ======== ===========
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
7
eCOM eCOM.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
(Unaudited)
November 30, 2003 November 30, 2002
_______________ _______________
Cash Flows From Operating Activities
Cash received from customers $ 34,309 $ 83,823
Interest income 0 0
Cash paid to suppliers and employee (39,541) (167,325)
Interest paid (15,187) (4,519)
_______________ _______________
Net Cash Flows Used in
Operating Activities (20,419) (88,021)
_______________ _______________
Cash Flows From Investing Activities
Purchase of equipment (1,360) 0
Purchase of intangible assets (3,076) 0
Proceeds received from sale of asse 500 0
_______________ _______________
Net Cash Flows Provided By
(Used In) Investing Activities (3,936) 0
_______________ _______________
Cash Flows From Financing Activities
Proceeds from note receivable 0 15,000
Proceeds of loans from stockholders 83,490 94,801
Repayment of loans to stockholders (50,188) (33,534)
_______________ _______________
Net Cash Flows Provided By
Financing Activities 33,302 76,268
_______________ _______________
Net Increase/(Decrease) in Cash 8,947 (11,753)
Cash and Cash Equivalents at
Beginning of Period 111 12,803
_______________ _______________
Cash and Cash Equivalents at
End of Period 9,057 1,050
=============== ===============
Supplemental Disclosures
- ------------------------
Non-Cash transactions
Stock issued for payment of services 215,975 130,125
Stock issued for purchase of intangibles 0 90,000
Stock issued for purchase of prepaid assets 149,898 0
Stock issued for repayment of debt 35,214 0
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
8
eCOM eCOM.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
(Unaudited)
Reconciliation of Net Loss to Net Cash Flows Used in Operating Activities:
November 30, 2003 November 30, 2002
_______________ _______________
Net Loss $ (271,857) $ (323,642)
Add items not requiring outlay of cash:
Depreciation and amortization 26,123 32,650
Bad Debts 0 0
Expenses paid by issuing stock 215,975 130,125
Gain on sale of assets 411 0
Cash was increased by:
Decrease in accounts receivable 347 0
Decrease in inventory 0 10,640
Decrease in prepaid expenses 0 14,797
Decrease in other current asset 0 1,500
Decrease in deposits 0 0
Decrease in other assets 0 0
Increase in accrued interest payable 9,207 4,443
Increase in accounts payable 49,865 64,854
Cash was decreased by:
Increase in accounts receivable 0 (22,612)
Increase in other assets 0 0
Increase in inventory (47,646) 0
Decrease in accounts payable 0 0
Decrease in accrued expenses (2,668) (776)
Decrease in other current liabilities (176) 0
Decrease in accrued interest payable (9,207) 0
_______________ _______________
Net Cash Flows Used In
Operating Activities (20,419) (88,021)
=============== ===============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
9
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE A - NATURE OF OPERATIONS
eCom eCom.com, Inc. ("eCom" or "the Company") was incorporated in the State of
Florida on June 14, 1994. eCom changed its direction to focus on separating its
business segments. The goal is to identify at least one target company for each
of the Company's subsidiaries.
This plan was undertaken for the purposes of allowing the management and
employees the opportunity to operate each segment independently. Also, to have
the ability for each segment, to raise its own funding for growth and expansion.
The Company is in the process of finalizing spin off's for USA SportsNet Company
and MyZipSoft, Inc. At the time this report was being prepared neither
transaction was completed. For more information please refer to "Subsequent
Events" within this report. eCom's subsidiaries are listed below indicating
either if agreements have been made or pending, along with the prospective
target company.
1. USA Performance Products, Inc.
2. eSecureSoft Corp.
3. USA SportsNet Company* American Capital Holding, Inc.
4. MyZipSoft, Inc. * Freedom 4 Wireless, Inc.
5. USAS Digital, Inc.** Smart Pill Diagnostics, Inc.
6. Pro Card Corp. ** Cornerstone Energy Partners
7. AAB Company ** 21st Century Exploration Corp.
8. A Classified Ad, Inc.
9. Swap and Shop Corp
10. A Super Deal, Inc.
* Agreement
** Pending
It is the Company's intention to eventually make available for partnership or
spin off most of its subsidiaries for the purposes of attracting management and
operational staff. The mission is to make each company profitable and to grow
on their own, thus returning value to all shareholders.
The business segments listed below are in the process of being spun off
indicating the target company that they plan to acquire.
1. USA SportsNet Company, Palm Beach Gardens, Florida
Product Line: e-Commerce business.
Target Company: American Capital Holdings, Inc.
2. MyZipSoft, Inc., Palm Beach Gardens, Florida
Product Line: Development and distribution of software.
Target Company: Freedom 4 Wireless, Inc.
See accompanying independent accountants' review report.
10
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE A - NATURE OF OPERATIONS (CONTINUED)
On April 9, 2002 we announced that we had signed a new agreement for use of high
power compression encoding technology developed by MeVis Technology of Germany.
The first product released using the new technology is MyPhotoZip (tm).
MyPhotoZip(tm) provides a better quality image than JPEG and other compression
products now on the market. We are moving ahead as quickly as possible to
develop and market an array of compression products using this new technology
while it is still the state of the art. Software Development Kits (SDK's) are
also available. This will be assigned to our eSecureSoft division.
The company continues to renegotiate a teaming agreement that was
entered into on June 18, 2002 with World Data Group LLC, of Boca Raton,
Florida. The original agreement provided revenue sharing in the amount of 10% of
all World Data Group's income derived from MeVis Technology integrations. In
addition, any of the integrated products to be offered for commercial sale will
be made available to eCom eCom to resell.
On July 15, 2002 we announced the availability of MyPhotoZip(tm) for download
from our new website, www.myphotozip.com. In addition, we provided details of
the primary marketing strategy for all of our company's compression products
which is based on an agreement signed with Plugin Technologies of the United
Kingdom. Using Plugin's network of thousands of sales affiliates, ECOM's
product lines will be promoted globally to a variety of market segments. While
broadening the target audience to international markets, this approach takes
advantage of the Internet without incurring the heavy cost of traditional
Internet-based advertising programs.
On December 12, 2002 we signed a contract to purchase the software rights to
FotoCrazy from Interveloce.net. FotoCrazy is an on-line subscription based
photo-album system, which will allow users to post and organize digital images
on their own web pages. This product will be renamed MyAlbumZip and is
scheduled to be released in 2004.
In February 2003, the company signed a Master Distributor Agreement with Artera
Group, Inc., of Westport CT, a subsidiary of NCT Group, Inc. (OTCBB:NTCI). The
agreement covers the distribution of Artera Turbo Web Accelerator for Internet
access. The company will market the product as MyNetZip for a monthly
subscription fee. MyNetZip will have the MyPhotoZip technology imbedded to
provide DSL speed over dial-up internet connections. MyNetZip can be used with
all Internet connections and especially Internet access which is normally
enhanced to the DSL level of service.
On November 30, 2003, the Company acquired the Internet URL, PhotoZip.com, for
a total cost of $3,076. This asset will be amortized over five years .
Amortization related to this assets will begin December 1, 2003.
See accompanying independent accountants' review report.
11
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE A - NATURE OF OPERATIONS (CONTINUED)
On July 1, 2002, the Company acquired the licensing rights to Pandora and
Virtual Protect from Internet Security Solutions, for a total cost of $56,250.
This asset is being amortized over five years. Accumulated amortization
related to this asset is $16,875 as of November 30, 2003.
On July 1, 2002, the Company paid Peter Tamayo, Jr. to work with MeVis
Technologies to complete the development of MyPhotoZip, for a total cost of
$33,750. This asset is being amortized over five years. Accumulated
amortization related to this asset is $10,125 as of November 30, 2003.
On September 18, 2002, the Company issued 25,000 shares of stock as payment
towards the purchase of FotoCrazy software. This deposit was recorded as
$1,125.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation, Use of Estimates
The Company maintains its accounts on the accrual basis of accounting. The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Consolidation
The consolidated financial statements of the Company include the accounts of
USA Performance Products, Inc. The Company formed USA Performance Products,
Inc. as a separate wholly owned subsidiary on January 20, 1998 and
transferred all assets related to the manufacture and sale of the Viper M1
paintball marker and accessories to this new corporation. We expanded the
activities of USA Performance Products in 1999 by selling other paintball
products through use of the 800-PAINTBALL toll-free telephone number and
related website acquired by USASC.
Revenue Recognition
Revenue from the sale of paintball markers and accessories is recognized at
the time title is transferred which is normally on shipment of the goods.
Revenue from the sale of compression products is also recognized at the
time the products are shipped or downloaded. Revenue received from contracts
for web site development services is recorded as unearned revenue until
development of the related web site is complete and accepted by the client.
See accompanying independent accountants' review report.
12
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash
Cash consists of deposits in banks and other financial institutions having
original maturities of less than ninety days.
Allowance for Doubtful Accounts
It is the policy of management to review the outstanding accounts receivable
at year end, as well as the bad debt write-offs experienced in the past, and
establish an allowance for doubtful accounts for uncollectible amounts.
Depreciation
Property and equipment is recorded at cost and is depreciated over the
estimated useful lives of the related assets. Depreciation is computed using
the straight-line method.
Amortization
Intangible assets consisting of rights to technology and associated
trademarks are amortized using the straight-line method over five years.
Inventories
Inventories are stated at the lower of cost or market using the first in
first out method.
NOTE C - INVENTORIES
Inventories consist principally of paintball markers and paintball
accessories and sports-related memorabilia. Inventories are carried at cost,
which is considered to be less than market value.
On November 30, 2003, inventory consisted of the following:
Finished goods $ 36,697
Work in process 158,337
Raw materials 0
----------
Total inventory $ 195,035
==========
NOTE D - PREPAID EXPENSES
Prepaid expenses consist principally of amounts paid for rent, subscriptions
and domain name registrations.
See accompanying independent accountants' review report.
13
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE E - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment recorded in the
financial statements at cost less depreciation as of November 30, 2003 and May
31, 2003:
November 30, 2003 May 31, 2003
----------------- ------------
Computer hardware $ 151,471 $ 150,111
Computer software 56,308 56,308
Furniture, fixtures and equipment 47,760 47,760
Tools, dies and fixtures 57,401 57,401
---------------- ------------
Total Cost 312,940 311,580
Accumulated Depreciation 279,619 264,288
------------ ------------
Total Net Property and Equipment $ 33,321 $ 47,292
============ ============
Depreciation expense included in the cost
of sales for the periods ended are: $ 15,331 $ 45,053
The useful lives assigned to property and equipment to compute depreciation
are:
Computer Hardware 5 years
Computer Software 5 years
Furniture, fixtures and equipment 7 years
Tools, dies and fixtures 5 years
NOTE F - INTANGIBLE ASSETS
In February 1999, the Company acquired two Internet websites, AclassifiedAd
and Swapandshop, for a total cost of $11,200. These assets are amortized over
five years. Accumulated amortization related to these assets was $10,550 and
$9,430 as of November 30, 2003 and May 31, 2003, respectively.
On July 1, 2002, the Company acquired the licensing rights to Pandora and
Virtual Protect from Internet Security Solutions, for a total cost of $56,250.
This asset is being amortized over five years. Accumulated amortization
related to this asset is $16,875 as of November 30, 2003.
On July 1, 2002, the Company paid Peter Tamayo, Jr. to work with MeVis
Technologies to complete the development of MyPhotoZip, for a total cost of
$33,750. This asset is being amortized over five years. Accumulated
amortization related to this asset is $10,125 as of November 30, 2003.
See accompanying independent accountants' review report.
14
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE F - INTANGIBLE ASSETS (CONTINUED)
On September 18, 2002, the Company issued 25,000 shares of stock as payment
towards the purchase of FotoCrazy software. This deposit was recorded as
$1,125.
On August 1, 2003, the Company agreed to pay Digital River $2,000 to develop a
distribution system for the MyPhotoZip compression software.
On November 30, 2003, the Company acquired the Internet URL PhotoZip.com for a
total cost of $3,706.04.
NOTE G - OTHER ASSETS
Other assets consist primarily of security deposits on the lease of office
facilities, an employee advance and utility deposits.
NOTE H - LONG-TERM DEBT
Long-term debt as of November 30, 2003 and May 31, 2003 consisted of:
November 30, 2003 May 31, 2003
--------------- ------------
A non-interest bearing, non-collateralized loan
from an offshore corporation that is due on
demand. 184,220 184,220
Three non-interest bearing, non-collateralized
loans from stockholders. The loans are due on
demand. 444,171 416,668
---------- ----------
Total Long-Term Debt 628,391 600,888
Less Current Portion (628,391) (600,888)
---------- ----------
Net Long-term Debt $ 0 $ 0
========== ==========
The long-term loans payable mature as follows:
May 31, 2004 628,391 600,888
---------- ----------
$ 628,391 $ 600,888
========== ==========
See accompanying independent accountants' review report.
15
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE I - COST OF SALES
Included in the cost of sales are the following:
November 30, 2003 May 31, 2003
------------ ------------
Shipping and handling costs $ 806 $ 0
Packaging costs 124 460
------------ ------------
Total $ 930 $ 460
============ ============
Shipping income $ 1,717 $ 8,946
============ ============
NOTE J - COMMITMENTS AND CONTINGENCIES
The Company leases office facilities under an operating lease one which
expires on March 31, 2004. The Company leases its manufacturing facility under
an operating lease which expires June 30, 2004. Future minimum lease payments
including sales tax as of November 30, 2003 are:
Fiscal Years ending:
May 31, 2004 $ 22,610
May 31, 2005 1,855
May 31, 2005 0
-------
Total Minimum Lease Payments $ 24,465
Rent expense for the six-month period ending November 30, 2003 and 2002 are
$30,933 and $40,726 respectively.
We are party to lawsuits in the normal course of our business. Litigation can
be expensive and disruptive to normal business operations; the results of legal
proceedings are difficult to predict.
Our dispute with four companies had similar suits of non-payment against either
eCom eCom.com or it's subsidiary USA Performance Products. Each of these suits
were initially settled during the fiscal year ending May 31, 2002. However two
matters have recently come to light. The first matter concerning National
Paintball which has notified us through their attorney that the issuance of
stock agreed upon in the settlement was insufficient to cover the settlement.
The company is currently trying to determine the circumstances which led to the
shortfall. The second matter is the attorney for Renick Enterprises Inc. has
notified us of his contention that the company failed to complete its agreement
by the appropriate date. Management feels that the claim is unfounded and that
the company met its obligation timely.
See accompanying independent accountants' review report.
16
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE J - COMMITMENTS AND CONTINGENCIES (CONTINUED)
At the time of this filing the court ruled in favor of the Company. Please refer
to Subsequent Events for more information on this matter.
On May 15, 2002 a settlement was reached with Renick Enterprises, Inc. As part
of the settlement USAPP received cash, notes receivable, inventory, and
cancellation of accounts payable. USA Performance products gave up raw
material located at Renick.
National Paintball Supply, Inc. filed a complaint against USA Performance
Products and eCom eCom.com, Inc. in the State of South Carolina, Greenville
County Court of Common Pleas on May 14, 2001. The complaint alleged that an
amount of $85,743.35 is owed to the complainant. The Company disputes this
claim. National Paintball Supply handled paintball fulfillment requests for USA
Performance products. USA Performance Products contended that many requests for
fulfillment were not completed while some requests were shipped twice. USA
Performance Products has recorded a balance due of $69,373.36 as of May 31,
2001. As part of the SB-2 dated August 8, 2002, stock was registered to pay-off
this debt. As of February 28, 2003 all stock that had previously been held in
an Attorney escrow account, had been sold and transferred to National Paintball.
The balance reportedly owed National Paintball as of November 30, 2003 is
$59,475.83.
NOTE K - RELATED PARTY TRANSACTIONS
On January 10, 1998, the Company's Board of Directors approved an agreement
with Axis Enterprises, Ltd., a Bahamian corporation of Nassau, Bahamas, to
retain Axis for a period of three years to provide certain financing,
marketing and management services in support of the Company's subsidiary,
USA Performance Products, Inc. In exchange for performance of these services,
Axis was granted 1,500,000 shares of common stock. The final marketing and
management agreement was executed on April 8, 1998. Derek D. Panaia, son of
David J. Panaia, CEO of the Company, was retained as a consultant to provide
management oversight of USAPP in connection with this agreement. In 1999,
Axis loaned the Company $296,000, and this indebtedness was reduced by
$111,780 through the issuance of 150,000 shares of the Company's common stock.
The Company is currently indebted to Axis for $184,220.
The Company has received cash advances from David J. Panaia, Chairman and CEO
of the Company, in varying amounts and at various times subsequent to the
inception of the Company. These shareholder loans were non-interest bearing,
non-collateralized and due on demand.
On May 10, 2001, 1,286,359 shares of restricted stock were issued to Mr.
Panaia in return for cancellation of $437,362 ($.34 per share) of the debt
owed to him. The balance owed to Mr. Panaia at November 30, 2003 was $330,791.
See accompanying independent accountants' review report.
17
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE K - RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has received cash advances from Bonnie Crum, daughter of David J.
Panaia, CEO of the Company, in varying amounts and at various times subsequent
to May 31, 2001. These related party loans were non-interest bearing, non-
collateralized and due on demand. The balance owed to Ms. Crum as of November
30, 2003 is $40,000.
NOTE L - BUSINESS SEGMENTS
Prior to the Board of Directors decision to spin of its subsidiaries the
Company's reportable segments were business units that offer different products
and services. The Company had two reportable segments: electronic commerce and
software. The electronic commerce segment has provided an e-commerce
infrastructure to enable small businesses to expand to the Internet. The
e-commerce segment focuses on classifieds, auctions and its paintball gun
company. The software segment focuses on the design and resale of secure
software applications for compression and transmission of large data files.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. There have been no
intersegment sales or transfers. Revenues from sales of the Company's
paintball products over the Internet are reported within the paintball
segment.
The following is a summary of segment activity:
Electronic
Paintball Commerce Totals
Six Months Ended: ---------- ---------- ----------
November 30, 2003
- ------------------
Revenues $ 32,355 $ 1,954 34,309
Interest expense 338 17,661 17,999
Depreciation 7,687 7,664 15,331
Amortization - 10,792 10,792
Segment loss (30,550) (241,307) (271,857)
Segment assets 186,270 279,980 291,547
Electronic
Paintball Commerce Totals
Six Months Ended: ---------- -------- -----------
November 30, 2002
- -----------------
Revenues $ 76,706 $ 7,118 83,824
Interest expense 270 4,668 4,938
Depreciation 11,573 10,954 22,527
Amortization - 10,127 10,127
Segment loss (28,240) (295,401) (323,642)
Segment assets 392,979 285,969 678,948
See accompanying independent accountants' review report.
18
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE M - RECOVERABILITY OF ASSETS AND GOING CONCERN
These financial statements are presented on the basis that the Company is a
going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a
reasonable length of time. The accompanying financial statements show that
current liabilities exceed current assets by $629,638 at November 30, 2003 and
by $724,098 at May 31, 2003 and that the Company has incurred net operating
losses since inception.
eCom has been funding operations and software development through product sales,
asset sales, shareholder loans and private sales of company stock. eCom
contracted with Digital River Inc to market and distribute MyPhotoZip. USA
Performance Products completed its approval with the United States General
Services Administration. The Viper M-1 paintball gun can now be purchased
through GSA Advantage, the Federal Government's online purchasing system. eCom
is continuing to look for partners or buyers for the USA Performance Products
division.
In accordance with the May 2001 agreement to sell the 1-800-PAINTBALL
number, the Company agreed not to sell paintball accessories for a period of
three years which will end in May 2004. The company continues to manufacture and
sell the Viper paintball gun. The Company is currently focusing its efforts on
locating a business partner for its USA Performance Products, Inc. to engage in
the manufacturing, sales and distribution of a complete line of paintball
products.
NOTE N - INCOME TAXES
Deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of the Company's assets and
liabilities. Temporary differences, net operating loss carry forwards
and valuation allowances comprising the net deferred taxes on the balance
sheets is as follows:
November 30, 2003
--------------
Loss carry forward for tax purposes $ 6,906,165
==============
Deferred tax asset (34%) 2,348,096
Valuation allowance (2,348,096)
--------------
Net deferred tax asset -
==============
See accompanying independent accountants' review report.
19
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE N - INCOME TAXES (CONTINUED)
No provision for federal and state income taxes has been recorded because the
Company has incurred net operating losses since inception. The Company's net
operating loss carry-forward as of November 30, 2003 was approximately
$6,906,000. These carry-forwards, which will be available to offset future
taxable income, will expire through the year 2023.
The Company does not believe that the realization of the related net deferred
tax asset meets the criteria required by generally accepted accounting
principles and, accordingly, the deferred income tax asset arising from such
loss carry forward has been fully reserved.
NOTE O - EFFECTS OF INFLATION
To date, inflation has not had a material impact on the Company's
consolidated financial results.
NOTE P - RECENT ACCOUNTING PRONOUNCEMENTS
The FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations with
an effective date for financial statements issued for fiscal years beginning
after June 15, 2002. The statement addresses financial accounting and
reporting for obligations related with the retirement of tangible long-lived
assets and the costs associated with asset retirement. The statement requires
the recognition of retirement obligations which will, therefore, generally
increase liabilities; retirement costs will be added to the carrying value of
long-lived assets, therefore, assets will be increased; and depreciation and
accretion expense will be higher in the later years of an assets life than in
earlier years. The Company adopted SFAS No. 143 at January 1, 2002. The
adoption of SFAS No. 143 had no impact on the Company's operating results or
financial positions.
The FASB also issued SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets and is effective for financial statements issued for
fiscal years beginning January 1, 2002. This statement addresses financial
accounting and reporting for the impairment or the disposal of long-lived
asset. An impairment loss is recognized if the carrying amount of a long-
lived group exceeds the sum of the undiscounted cash flow expected to result
from the use and eventual disposition of the asset group. Long-lived assets
should be tested at least annually or whenever changes in circumstances
indicate that its carrying amount may not be recoverable. This statement
does not apply to goodwill and intangible assets that are not amortized.
The Company adapted SFAS No. 144 in the first quarter of 2002. The adoption
of SFAS No. 144 had no impact on the Company's operating results or
financial position.
See accompanying independent accountants' review report.
20
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED NOVEMBER 30, 2003 AND 2002
NOTE P - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In April 2002, the FASB issued SFAS No. 145, "Rescission of the FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections"
("SFAS No. 145"). SFAS No. 145 eliminates the requirement to classify gains and
losses from the extinguishment of indebtedness as extraordinary, requires
certain lease modifications to be treated the same as a sale-leaseback
transaction, and makes other non-substantive technical corrections to existing
pronouncements. SFAS No. 145 is effective for fiscal years beginning after May
15, 2002. SFAS No. 145 was adopted on June 1, 2003 and did not have a material
effect on the Company's financial position or results of operations.
Goodwill and intangible assets acquired prior to July 1, 2001 will continue to
be amortized and tested for impairment in accordance with pre- SFAS No. 142
requirements until adoption of SFAS No. 142. Under the provision of SFAS No.
142, intangible assets with definite useful lives will be amortized to their
estimated residual values over those estimated useful lives in proportion to
the economic benefits consumed. Such intangible assets remain subject to the
impairment provisions of SFAS No. 121. Intangible assets with indefinite
useful lives will be tested for impairment annually in lieu of being
amortized. The Company's current yearly amortization of intangible assets is
approximately $21,911. The impact of adopting SFAS Nos. 141 and 142 will not
cause a material change in the Company's consolidated financial statements as
of the date of this report.
See accompanying independent accountants' review report.
21
ECOM ECOM.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the accompanying
consolidated financial statements for the six-month periods ended November 30,
2003 and 2002 and the Form 10-KSB for the fiscal year ended May 31, 2003.
Special Note Regarding Forward-Looking Statements
Certain statements in this report and elsewhere (such as in other filings by
the Company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements. Factors that might cause or contribute to such differences
include, among others, competitive pressures, the growth rate of the
paintball industry and electronic commerce, constantly changing technology
and market acceptance of the Company's products and services. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
The results of its operations during the six months ended November 30, 2003 were
a reflection of the continued evolution of its new business model. Management
is also developing a debt reduction plan with the goal of reducing current debt
by at least 50% within the next reporting period.
eCom recently changed its direction to focus on locating target companies to
partner, merge with or acquire for three of its current business segments, USA
SportsNet, Inc., USA Performance Products, Inc., and MyZipSoft, Inc.
This plan was undertaken to allow management and employees the opportunity to
operate each segment independently. Also, to have the ability for each segment,
to raise its own funding for growth and expansion.
The Company previously developed an e-commerce infrastructure that provided an
affordable, user-friendly technological platform and professional resources to
facilitate web business development. It also operated an on-line business as a
test model, using Company developed e-commerce concepts to sell paintball
products.
However, the current business model was revised with the intention of eventually
separating all ten (10) business segments into independent operating public
companies. The first three are described above, the remaining seven (7) are
listed within this section.
22
ECOM ECOM.COM, INC.
As previously stated, the company realized that it did not have the proper
resources to develop all ten (10) of its business segments in a timely manner.
Thus decided to look towards a spin-off or partnership so that it may obtain
the necessary outside resources. Also, there were indications that potential
business partners desired to be involved with only one of eCom's many business
segments.
The Company's new mission is to find prospective companies which will allow all
business segments to grow, expand and become profitable through an affiliation
or partnership with other successful companies and become of more value to
shareholders. There are two firm and three pending prospects to report at this
time. However, if and when these spin offs are accomplished, it is the
company's intention to make them independent public companies and to use a pro-
rata basis to distribute any new shares to current eCOM shareholders.
The two business segments that have firm prospects are described below.
1. USA SportsNet Company, Palm Beach Gardens, Florida
Product Line: e-Commerce business through Internet auction, sale and swapping
of sports memorabilia. Articles are both company owned as well as those listed
by private parties.
2. MyZipSoft, Inc., Palm Beach Gardens, Florida
Product Line: Development and distribution of software. Its first product is
a high-compression software called MyPhotoZip (TM). The Company considers this
product "the ultimate image compression tool", that enables compression of
still images up to 2500 to 1 with very little loss of quality.
eCom eCom's subsidiaries are listed below indicating agreements either
completed or pending, along with the prospective target company.
1. USA Performance Products, Inc.
2. eSecureSoft Corp.
3. USA SportsNet Company* American Capital Holding, Inc.
4. MyZipSoft, Inc. * Freedom 4 Wireless, Inc.
5. USAS Digital, Inc.** Smart Pill Diagnostics, Inc.
6. Pro Card Corp. ** Cornerstone Energy Partners
7. AAB Company ** 21st Century Exploration Corp.
8. A Classified Ad, Inc.
9. Swap and Shop Corp
10. A Super Deal, Inc.
* Agreement
** Pending
Shareholders who maintain their shares in ECEC will be entitled to a prorata
share of each spin off as it occurs. Meaning you must own ECEC stock on the
Date of Record. The Company wishes to stress that each spin off will have a
different Date of Record. It urges all shareholders to be patient as this type
of transaction has many steps and takes time.
These spin offs will bring additional value to all ECEC shareholders when
completed. Not only will each new spin off company be an additional holding for
23
ECOM ECOM.COM, INC.
every shareholder but as an additional benefit the Company is applying to the
IRS for it to be treated as a tax free distribution.
The Company plans to apply for listing on the AMEX as soon as it can qualify
which incidentally requires a minimum stock price of $3.00 per share. As you
can see there are many steps that the Company must take, so again, all investors
are asked to be patient as the spin off plan was undertaken for your benefit.
Fractional shares, if any, will be paid to you in cash.
Over the past several years, two realities have been made clear: 1) investor
appetite for technology stocks diminished; and 2) e-commerce spending declined.
eCom restructured its business operations to preserve the Company's future in
these difficult markets. This transformation continues today. As a result of
this focused execution, we believe we have set the stage to propel eCom's
future business. The restructuring consists of creating business segments by
seeking management and operational partners for each either through a merger
or spin-off.
The Company cancelled almost all of its existing partnerships and teaming
agreements. It has settled all but two legal actions. Both the Renick and
National Paintball cases were settled but were reopened by the plaintiffs. The
Company feels that neither case will have a major adverse effect and will be
settled soon.
Our company's reengineering dictated that time be directed towards implementing
the new business strategy. As discussed below, our current operating results
reflect this temporary cessation of revenues. However, we believe that the
potential revenue and profit to be realized from our focus on the spin off plan
will confirm that the current lull in revenue generation is a minor
inconvenience.
Results of Operations
Comparison of the six months ended November 30 2003 with the six months
ended November 30, 2002.
Revenue for the six-month period ended November 30, 2003 was $34,309
compared to $83,823 of revenue recorded during the same period of the prior
year. Current year revenues were recorded from sales of the Viper M1 paintball
marker and accessories and sales of MyPhotoZip (TM). Our USA Performance
Products subsidiary had entered into a proposed sale of the Viper product line
during February 2001. In order to comply with the terms of the sales contract,
all Viper inventory was taken out of production in preparation for shipment
during April 2001. The sale subsequently was canceled. We intend to rebuild
Viper sales volume in anticipation of the eventual sale of this product line.
Gross profit decreased from $17,406 in the prior year period to $748 in
the current six-month period. Depreciation expense contributed $15,331 to the
current deficit in gross profit. Depreciation expense amounted to 45% of
revenue in the current year and only 27% of revenue in the prior year.
24
ECOM ECOM.COM, INC.
The company continues to make improvements in cutting its operating costs.
Cost reduction was achieved in all major expense categories. Sales and
marketing expense dropped from $21,764 in the six months ended November 30,
2003 to $2,848 in the current six-month period. Product development
expenses were cut from $14,667 in the prior year period to $9,750 in the
current six-month period. General and administrative costs dropped from
$312,142 in prior year to $231,626 in the current six-month period. Most
of this cost savings was generated from a reduction in personnel and overhead.
Amortization expense increased from $10,127 to $10,792 as a result of
increases in intangible assets. During the current six-month period, the
company began amortizing the development costs associated with allowing Digital
River to distribute MyPhotoZip (TM).
The company incurred net interest expense of $17,999 in the current six month
period compared to a net interest expense of $4,937 in the prior year six
month period. This was primarily due to the increased need to borrow funds to
finance current operations.
Our operations for the six months ended November 30, 2003 resulted in a net
loss of $271,857, a $51,785 improvement over the net loss of $323,642
recorded during the six months ended November 30, 2002.
Liquidity and Capital Resources
As of November 30, 2003, current assets totaled $330,014 compared to $151,471 at
the end of the prior fiscal year. Of the $178,543 increase in total current
assets, inventory accounted for $47,646 of the increase and prepaid assets
accounted for $122,298. The investment in prepaid assets will be used for
future consulting related to our evolving business model.
Accounts Payable increased $49,865 to $320,450 during the current six months.
This increase in accounts payable helped fund the operating loss of the company.
Current liabilities increased from $875,569 at the end of the prior fiscal
year to $959,652 at the end of the current quarter, an increase of $84,083.
Net cash used in operating activities was $20,419 during the current six-
month period compared to $88,021 during the same period of the prior year.
The principal use of cash in both periods was to fund our net loss from
operations. The issuance of stock contributed $251,189 towards our operating
deficit during the current six-month period.
Financing activities provided net cash of $33,302 during the first six
months of the current year, consisting primarily of loans from stockholders.
The Company continues to be reliant on the combination of revenues, loans from
stockholders and capital contributions to fund operations. The equity line
agreement that was established with Swartz Private Equity, LLC was scheduled
to end on April 28, 2003. The agreement was terminated on October 15, 2001
with a final sale of stock to Swartz to cover the outstanding account payable
due to Swartz of $77,000.
25
ECOM ECOM.COM, INC.
To the extent that additional funds are required to support operations or to
expand our business, we may sell additional equity, issue debt or obtain other
credit facilities through financial institutions. Any sale of additional
equity securities will result in dilution to our shareholders.
Until the Company obtains sufficient funds necessary to capitalize the growth
of its existing operations, expenditures required to increase revenues,
including advertising and promotion of compression software and Viper M1
paintball products, will be substantially limited. Should the Company be
unable to obtain continued funding, its operations may be adversely affected.
ITEM 3. CONTROLS AND PROCEDURES
Evaluation of the Company's Disclosure Controls and Internal Controls:
Within the 90 days prior to the date of this Quarterly Report on Form 10-QSB,
the Company evaluated the effectiveness of the design and operation of its
'disclosure controls and procedures'("Disclosure Controls"). This 'evaluation'
("Controls Evaluation") was done under the supervision and with the
participation of management, including the Chief Executive Officer ("CEO")and
Chief Financial Officer ("CFO"). As a result of this review, the Company
adopted guidelines concerning disclosure controls and the establishment of a
disclosure control committee made up of senior management.
Limitations on the Effectiveness of Controls:
The Company's management, including the CEO and CFO, does not expect that its
Disclosure Controls or its 'internal controls and procedures for financial
reporting' ("Internal Controls")will prevent all error and all fraud. A control
system, no matter how well conceived and managed, can provide only reasonable
assurance that the objectives of the control system are met. The design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.
Conclusions:
Based upon the Controls Evaluation, the CEO and CFO have concluded that, subject
to the limitations noted above, the Disclosure Controls are effective to timely
alert management to material information relating to the Company during the
period when its periodic reports are being prepared.
26
ECOM ECOM.COM, INC.
In accordance with SEC requirements, the CEO and CFO note that, since the date
of the Controls Evaluation to the date of this Quarterly Report, there have
been no significant changes in Internal Controls or in other factors that could
significantly affect Internal Controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Our dispute with four companies had similar suits of non-payment against either
eCom eCom.com or it's subsidiary USA Performance Products. Each of these suits
were initially settled during the fiscal year ending May 31, 2002. However two
matters have recently come to light. The first matter concerning National
Paintball which has notified us through their attorney that the issuance of
stock agreed upon in the settlement was insufficient to cover the settlement.
The company is currently trying to determine the circumstances which lead to the
shortfall. The second matter is the attorney for Renick Enterprises Inc. has
notified us of his contention that the company failed to complete its agreement
by the appropriate date. Management feels that the claim is unfounded and that
the company met its obligation timely.
On May 15, 2002 a settlement was reached with Renick Enterprises, Inc. As part
of the settlement USAPP received cash, notes receivable, inventory, and
cancellation of accounts payable. USA Performance products gave up raw material
located at Renick. At the time of this filing the court ruled in favor of the
Company. Please refer to Subsequent Events for more information on this matter.
National Paintball Supply, Inc. filed a complaint against USA Performance
Products and eCom eCom.com, Inc. in the State of South Carolina, Greenville
County Court of Common Pleas on May 14, 2001. The complaint alleged that an
amount of $85,743.35 is owed to the complainant. National Paintball Supply
handled paintball fulfillment requests for USA Performance products. USA
Performance Products contended that many requests for fulfillment were not
completed while some requests were shipped twice. USA Performance Products
has recorded a balance due of $69,373.36 as of May 31, 2001. As part of the
SB-2 dated August 8, 2002, stock was registered to pay-off this debt. As of
February 28, 2003 all stock that had previously been held in an Attorney
escrow account, had been sold and transferred to National Paintball. The
balance owed National Paintball as of February 28, 2003 is 59,475.83.
ITEM 2. Changes in Securities.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
27
ECOM ECOM.COM, INC.
ITEM 5. Other Events.
The company is in the process of replacing its attorney, Carol Anne Plowman who
had notified the company that she will no longer be practicing in the
securities field. Several attorneys are under consideration.
The company was notified that its lead market maker, Equitrade Securities Inc.
of Lake Forest CA was shutting down its operations. The company is presently
looking for a replacement, however there are currently over 40 broker/dealers
making markets in our stock.
The company signed an agreement with Digital River to provide e-marketing
services for on-line sales of all of its software products. Results thus far
have been minimal. A software partner is being sought to assist in this
portion of the Company.
On December 24, 2003 the Board of Directors of eCom eCom.com amended the
Articles of Incorporation. Article Four now was changed to increase the
authorized shares of the corporation from fifty million shares to two hundred
million shares.
On January 12, 2004, the Board of Directors of USA SportsNet Company
(USASN) approved the following resolutions:
A motion was made and passed agreeing to the terms and conditions of the Asset
Agreement between USASN and American Capital Holdings, Inc. (ACH) regarding the
acquisition of certain assets of ACH.
In addition the Board of Directors agrees to change the company name to American
Capital Holdings, Inc.
A motion was made and passed agreeing to a reverse split of 20 to 1 of the final
outstanding shares of USA SportsNet, Inc. of 49,955,112. The Company will
purchase all fractional shares at market price. It also agrees that the Date of
Record for USASN shareholder ownership was January 5, 2004 for the spin off.
A motion was made and passed to appoint Barney Richmond to the Board of
Directors and President and Richard Turner to the Board of Directors and
Treasurer.
The Board of Directors of eCom has passed the following resolution:
Pursuant to the Advisory Board's Report of October 4, 2003, eCom will spin-off
its subsidiary MyZipSoft, Inc. The Board views this spin-off in the best
interest of its shareholders and it complies with SEC Staff Legal Bulletin No.
4. Further, it voted to issue one share of the spin-off for every share of eCom
owned as of the record date which will be announced.
On May 15, 2002 a settlement was reached with Renick Enterprises, Inc. As
part of the settlement USAPP received cash, notes receivable, inventory, and
cancellation of accounts payable. USA Performance products gave up raw material
located at Renick. At the time of this filing the court ruled in favor of the
28
ECOM ECOM.COM, INC.
Company. The judge hearing the case verbally ruled that the grounds for the
claim were insufficient and dismissed the action. The Company has not received
the official court paperwork. The Company is also considering further legal
action against the plaintiff to recover its legal costs to defend this case.
The Company has decided to relocate its executive offices at 2700 PGA Blvd.,
Palm Beach Gardens, FL. Several locations are under consideration. If a site
is not found by January 31, 2004, the Company will temporarily use its facility
at 8125 Monetary Drive, Riviera Beach, FL.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 31.1 Certification required under Section 302 of
the Sarbanes-Oxley Act of 2002 by the CE0 on page 30
Exhibit 31.2 Certification required under Section 302 of
the Sarbanes-Oxley Act of 2002 by the CFO on page 31
Exhibit 32 Certification of CEO and CFO Pursuant to
Section 906 of the Sarbanes-Oxley Act on page 32
(b) Reports on Form 8-K:
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
eCom eCom.com, Inc.
January 21, 2004 By: /s/ David J. Panaia
David J. Panaia,
Chief Executive Officer
January 21, 2004 By: /s/ Richard C. Turner
Richard C. Turner,
Chief Financial Officer
29
Exhibit 31.1
CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David J. Panaia, certify that:
1. I have reviewed this quarterly report on Form 10-Q of eCom eCom.com Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls.
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 21, 2004
/s/ David J. Panaia
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David J. Panaia
Chief Executive Officer
30
Exhibit 31.2
CERTIFICATION REQUIRED UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard C. Turner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of eCom eCom.com Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls.
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 21, 2004
/s/ Richard C. Turner
- ---------------------------
Richard C. Turner
Chief Financial Officer
31
Exhibit 32
CERTIFICATIONS OF CEO AND CFO PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of eCom eCom.com Inc., a Florida
corporation (the "Company"), on Form 10-QSB for the period ending Novemer 30,
2003, as filed with the Securities and Exchange Commission (the "Report"),
David J. Panaia, Chief Executive Officer of the Company and Richard C. Turner,
Chief Financial Officer of the Company, respectively, do each hereby certify,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350),
that to his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ David J. Panaia
David J. Panaia
Chief Executive Officer
January 21, 2004
/s/ Richard c. Turner
Richard C. Turner
Chief Financial Officer
January 21, 2004
[A signed original of this written statement required by Section 906 has been
provided to eCom eCom.com Inc. and will be retained by eCom eCom.com Inc.
and furnished to the Securities and Exchange Commission or its staff upon
request.]
Exhibits to Form 10-QSB will be provided to shareholders of the Registrant
upon written request addressed to eCom eCom.com, Inc., Post Office Box 32044,
Palm Beach Gardens, Florida 33420. Any exhibits furnished are subject to a
reasonable photocopying charge.
The Securities and Exchange Commission has not approved or disapproved of
this Form 10-QSB and Annual Report to Shareholders nor has it passed upon its
accuracy or adequacy.