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 August 31, 2004
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.)
8825 Monetary Drive, Suite H4
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 August 31, 2004 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 August 31, 2004
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Independent Accountant's Report 3
Consolidated Balance Sheets:
August 31, 2004 and May 31, 2004 (Unaudited) 4
Consolidated Statements of Operations:
Three Months Ended August 31, 2004 and
2003 (Unaudited) 5
Consolidated Statements of Shareholders' Deficit:
Years Ended May 31, 2003 and 2002 and the
Three Months Ended August 31, 2004 (Unaudited) 6
Consolidated Statements of Cash Flows:
Three Months Ended August 31, 2004 and
2003 (Unaudited) 7
Notes to Consolidated Financial Statements 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 20
ITEM 3 CONTROLS AND PROCEDURES 26
PART II OTHER INFORMATION
ITEMS 1-6 29
SIGNATURES AND CERTIFICATIONS 30
Exhibit 31.1 Certification required under Section 302 of 31
the Sarbanes-Oxley Act of 2002 by the CE0
Exhibit 31.2 Certification required under Section 302 of 32
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 33
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
August 31, 2004 and May 31, 2004, and the related consolidated statements of
operations, for the three-month periods ended August 31, 2004 and 2003, the
consolidated statement of stockholders' deficit from May 31, 2002 through
August 31, 2004, and the consolidated statement of cash flows for the three-
month periods ended August 31, 2004 and 2003. 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 $425,375 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.
October 25, 2004
3
eCOM eCOM.COM, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
August 31, 2004 May 31, 2004
--------------- --------------
ASSETS
Current Assets
Cash and cash equivalents $ 119 $ 1,253
Accounts receivable other 0 250
Due from affiliated companies 227,462 0
Inventories 0 190,019
Prepaid expenses 55,884 81,093
------------ ------------
Total Current Assets 283,465 272,615
------------ ------------
Property and Equipment, net 494 17,822
------------ ------------
Other Assets
Intangible assets, net 0 59,024
Other assets 2,250 8,757
------------ ------------
Total Other Assets 2,250 67.871
------------ ------------
Total Assets $ 286,209 $ 358,218
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 109,092 $ 241,977
Accrued expenses 44,000 44,000
Other current liabilities 0 1,416
Current portion of long-term debt 533,236 521,739
Interest accrued on current portion 22,512 17,646
------------ ------------
Total Current Liabilities 708,840 826,798
Notes Payable, Net of Current Portion - -
------------ ------------
Total Liabilities 708,840 826,798
------------ ------------
Stockholders' Equity
Common stock, $.0001 par value, 200 million
shares authorized, 49,955,112 and
49,955,112 shares issued and outstanding 4,995 4,995
Paid-in capital 6,579,537 6,579,537
Dividends (96,124) -
Accumulated deficit (6,911,038) (7,053,112)
------------ ------------
Total Stockholders' Deficit (422,630) (468,580)
------------ ------------
Total Liabilities and Stockholders' Equity $ 286,209 $ 358,218
============ ============
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 Three Months Ended
August 31, 2004 August 31, 2003
______________ _______________
Revenues
Net Sales $ 319 $ 12,809
Cost of Sales (81) (13,753)
______________ _______________
Gross Profit 239 (944)
______________ _______________
Other Operating Expenses
Sales and marketing 64 1,408
Product development - 4,500
General and administrative 25,167 55,613
Amortization 333 5,232
______________ _______________
Total Operating Expenses 25,565 66,753
______________ _______________
Loss from Operations (25,326) (67,697)
Other Income (Expense)
Interest income - -
Interest expense (10,525) (8,069)
______________ _______________
Net Other Expenses (10,525) (8,069)
______________ _______________
Net Loss $ (35,851) (75,766)
============== ===============
Net Loss Per Common Share $ (.001) (.002)
============== ===============
Weighted Average Shares Outstanding 49,955,112 37,692,373
============== ===============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
5
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED MAY 31,
2003 AND 2004 AND THE THREE MONTHS ENDED AUGUST 31, 2004
(Unaudited)
Common Stock
Number At Add'l Retained Total
of Par Paid In Earnings Stockholder
Shares Value Capital Dividends Deficit Deficit
---------- ------ ---------- --------- ----------- ---------
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 1,356 530,915 - - 532,271
Net Loss - - - - (408,406) (408,406)
---------- ------ ---------- --------- ----------- ---------
Balance,
May 31, 2004 49,955,112 4,995 6,579,537 - (7,053,112) (468,580)
Assets distributed
as dividends to
spin-offs on
June 4, 2004
USAPP - - (10,000) - 187,624 177,624
aSuperdeal - - - (32,000) - (32,000)
AAB National - - - (1,444) - (1,444)
ProCard Corp - - - (1,011) - (1,011)
aClassified - - - (1,412) - (1,412)
USAS Digital - - - (1,114) 150 (964)
Swap and Shop - - - (941) - (941)
eSecureSoft - - - (58,201) 150 (58,051)
Net Loss - - - - (35,851) (35,851)
---------- ------ ---------- --------- ----------- ---------
Balance,
Aug 31, 2004 49,955,112 $4,995 $6,569,537 $(96,124)$(6,901,038) $(422,630)
=========== ====== ========== ========= ============ ========
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
6
eCOM eCOM.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
(Unaudited)
August 31, 2004 August 31, 2003
_______________ _______________
Cash Flows From Operating Activities
Cash received from customers $ 319 $ 12,809
Cash paid to suppliers and employees (759) (21,807)
Interest paid (5,556) (6,532)
_______________ _______________
Net Cash Flows Used in
Operating Activities (5,996) (15,530)
_______________ _______________
Cash Flows From Investing Activities
Purchase of equipment (0) (701)
_______________ _______________
Net Cash Flows Provided By
(Used In) Investing Activities (0) (701)
_______________ _______________
Cash Flows From Financing Activities
Proceeds from note receivable 0 0
Proceeds of loans from stockholders 11,496 16,653
Repayment of loans to stockholders (5,518) 0
Issuance of note receivable 0 0
_______________ _______________
Net Cash Flows Provided By
(Used In) Financing Activities 5,978 16,653
_______________ _______________
Net Decrease in Cash 18 421
Cash and Cash Equivalents at
Beginning of Period 137 111
_______________ _______________
Cash and Cash Equivalents at
End of Period $ 119 $ 532
=============== ===============
Supplemental Disclosures
- ------------------------
Non-Cash transactions
Stock issued for payment of services 0 10,421
Stock issued for repayment of debt 0 4,590
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 THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
(Unaudited)
Reconciliation of Net Loss to Net Cash Flows Used in Operating Activities:
August 31, 2004 August 31, 2003
_______________ _______________
Net Loss (35,851) (75,766)
Add items not requiring outlay of cash:
Depreciation and amortization 388 12,868
Expenses paid by issuing stock 0 10,421
Cash was increased by:
Decrease in inventory 33,444 0
Decrease in prepaid expenses 0 191
Decrease in deposits 0 0
Increase in accrued interest payable 4,968 5,468
Increase in accounts payable 0 46,494
Increase in inventory 0 (18,359)
Decrease in accounts payable (6,267) 0
Decrease in accrued expenses (2,678) (2,678)
Decrease in other current liabilities 0 364
Decrease in accrued interest payable 0 5,468
_______________ _______________
Net Cash Flows Used In
Operating Activities (5,996) (15,530)
=============== ===============
See accompanying summary of accounting policies, notes to financial statements
and independent accountants' review report.
8
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
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 recently changed its direction to focus on
separating all ten of its current business segments, USA SportsNet, Inc., USA
Performance Products, Inc., eSecureSoft Corp., USAS Digital, Inc., Pro Card
Corporation, AAB National Company, A Classified Ad, Inc., Swap and Shop.net
Corp., A Super Deal.com, Inc. and MyZipSoft, Inc. which was established on
March 3, 2003.
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 considering a partnership arrangement or spin-off
for each division. The major business segments 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. It also owns the National High School All American
Football Bowl and ComCard/ProCard concept.
2. USA Performance Products, Inc., Riviera Beach, Florida
Product Line: Manufacture and distribution of the Viper M1 paintball gun line.
An M16 look alike gun which fires in all weather and is made entirely in the
USA.
3. 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 2000 to 1 without loss of quality. This has increased from
1500 to 1. The Company is also developing other cutting edge applications
including video compression which could be introduced later this year. The
Company has entered into a marketing agreement with Digital River for its
on-line sales of MyPhotoZip (TM).
Our intention is to roll out all of the divisions for the purposes of attracting
management and operational staff. Our mission is to make each of our divisions
profitable and to grow on their own.
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.
See accompanying independent accountants' review report.
9
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE A - NATURE OF OPERATIONS (CONTINUED)
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 2003.
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.
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.
See accompanying independent accountants' review report.
10
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Consolidation
The consolidated financial statements of the Company at August 31, 2003 and May
31, 2004 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. As of August 31, 2004 the following
companies have been distributed and are no longer consolidated in the financial
statements:
1. USA Performance Products, Inc.
2. eSecureSoft Company
3. USA SportsNet Company
4. MyZipSoft, Inc.
5. USAS Digital, Inc.
6. Pro Card Corporation
7. AAB National Company
8. A Classified Ad, Inc.
9. Swap and Shop.net Corp
10. A Super Deal.com, Inc.
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.
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.
See accompanying independent accountants' review report.
11
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. Maintenance, operating and
office supplied are not inventoried.
At August 31, 2004 and May 31, 2004 inventory consisted of the following:
August 31, 2004 May 31, 2004
Finished goods $ 0 $ 36,910
Work in process 0 153,109
Raw materials 0 0
----------- -----------
Total inventory $ 0 $ 190,019
=========== ===========
All inventory was distributed to the spin-offs on June 4, 2004.
NOTE D - PREPAID EXPENSES
Prepaid expenses consist principally of amounts paid for rent, subscriptions
and domain name registrations.
The Company issued one million five hundred thousand shares of common stock as a
retainer for future consulting fees during November 2003. The consulting
contract was valued at $37,500 and is being expensed over three years. The
remaining value of the consulting contract is $18,750 as of August 31, 2004.
See accompanying independent accountants' review report.
12
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
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 August 31, 2004 and May
31, 2004:
August 31, 2004 May 31, 2004
-------------- --------------
Computer hardware $ 85,074 $ 151,471
Computer software 13,633 56,308
Furniture, fixtures and equipment 4,330 47,760
Tools, dies and fixtures 0 57,401
Leasehold improvements 0 0
--------- ---------
Total cost 103,037 312,940
Accumulated depreciation 102,543 295,119
--------- ---------
Net Property and Equipment $ 494 $ 17,822
========= =========
Depreciation expense included in the cost
of sales for the years ended are: $ 55 $ 30,830
========= =========
Reductions in Computer hardware, computer software, furniture, and Tools and
dies was due to the distribution to the spin-off companies on June 4, 2004.
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 $11,200 as of
May 31, 2004.
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 $22,500 as of May 31, 2004. This asset was distributed
to eSecureSoft on June 4, 2004.
On July 1, 2002, the Company paid Peter Tamayo, Jr. to work with MeVis
See accompanying independent accountants' review report.
13
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE F - INTANGIBLE ASSETS - (CONTINUED)
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 $13,500 as of May 31, 2004. This asset
was distributed to eSecureSoft on June 4, 2004.
On September 18, 2002, the Company issued 25,000 shares of stock as an
initial payment towards the purchase of FotoCrazy software. This initial
deposit was recorded as $1,125. This asset was distributed to eSecureSoft on
June 4, 2004.
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 at August 31, 2004 and May 31, 2003 consisted of:
August 31, 2004 May 31, 2004
------------ ------------
Loans from stockholders and affiliated companies:
The loans are due on demand. 533,236 521,739
---------- ----------
Total Long-Term Debt 533,236 521,739
Less Current Portion (533,236) (521,739)
---------- ----------
Net Long-term Debt $ 0 $ 0
========== ==========
The long-term loans payable mature as follows:
May 31, 2005 533,236 521,739
---------- ----------
$ 533,236 $ 521,739
========== ==========
NOTE I - COST OF SALES
Included in the cost of sales are the following:
August 31, 2004 May 31, 2004
------------ ------------
Shipping and handling costs $ 0 $ 1,977
Packaging costs 0 246
------------ ------------
Total $ 0 $ 2,223
============ ============
Shipping income $ 0 $ 3,708
============ ============
See accompanying independent accountants' review report.
14
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE J - COMMITMENTS AND CONTINGENCIES
The Company maintains office facilities leased by USA Performance products
leases office and manufacturing facilities under an operating lease one which
expired June 30, 2001. Since July 1, 2003 the Company has been leasing under a
monthly basis. Future minimum lease payments including sales tax as of May 31,
2005 are:
Fiscal Years ending:
May 31, 2005 1,855
--------
Total Minimum Lease Payments $ 1,855
========
Rent expense for the three month period ending August 31, 2004 and 2003 are
$0 and $15,466. Rent expense for the three month period ending August 31, 2004
will be accrued for the office space by USA Performance Products.
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 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.
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 August 31, 2003 is 59,475.83 recorded on
the balance sheet of USA Performance Products.
See accompanying independent accountants' review report.
15
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE K - RELATED PARTY TRANSACTIONS
On January 10, 1998, the Company's Board of Directors approved an agreement
with Axis Enterprises, Ltd., a corporation located in Nassau, Bahamas. Axis
has an equity interest in the Company. Axis was retained 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. During the prior fiscal
year the debt to Axis was eliminated.
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, CEO in return for cancellation of $437,362 of the debt owed to him.
The amount of stockholder loans that were reduced was based on the quoted
market price ($.68) on the date the common shares were issued and adjusted
by a discount of 50% due to the restrictions placed on the stock. The balance
owed to Mr. Panaia at August 31, 2004 and May 31, 2004 is $376,296 and $373,413.
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 August
31, 2004 and May 31, 2004 is $35,000.
NOTE L - BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. The Company has 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.
See accompanying independent accountants' review report.
16
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE L - BUSINESS SEGMENTS - (CONTINUED)
The following is a summary of segment activity:
Electronic
Paintball Commerce Totals
Three Months Ended: ---------- --------- -----------
August 31, 2003
- ------------------
Revenues $ 12,023 $ 786 12,809
Interest expense 163 7,906 8,069
Depreciation 3,844 3,793 7,637
Amortization - 5,232 5,232
Segment loss (18,799) (56,967) (75,766)
Segment assets 193,235 98,311 291,547
As of August 31, 2004 the company no longer had consolidated business segments.
The Paintball segment has been distributed to USA Performance Products, Inc.,
the software segment has been distributed to eSecureSoft Company.
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 $774,688 at August 31, 2003 and
by $425,375 at August 31, 2004 and that the Company has incurred net operating
losses since inception.
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. The company continues to manufacture and sell the Viper paintball
gun. The Company is currently focusing its efforts on the design
and resale of MyPhotoZip (tm) software that compresses, stores, protects and
transmits large data files.
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:
August 31, 2004
--------------
Loss carry forward for tax purposes $ 6,890,390
==============
Deferred tax asset (34%) 2,342,733
Valuation allowance (2,342,733)
--------------
Net deferred tax asset -
==============
See accompanying independent accountants' review report.
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
NOTE N - INCOME TAXES - (CONTINUED)
Through August 31, 2004, the Company had a federal income tax net
operating loss carry forward of approximately $6,890,000 which will expire
through the year 2023.
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 August 31, 2004 was approximately
$6,890,000. 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.
18
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2004 AND 2003
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 $20,927. 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.
19
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 three-month periods ended August
31, 2004 and 2003 and the Form 10-KSB for the fiscal year ended May 31, 2004.
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 three months ended August 31, 2004
were a reflection of the continued evolution of its business model.
eCom recently changed its direction to focus on locating target companies to
partner, merge with or acquire for its ten business segments. USA SportsNet,
Inc. and MyZipSoft, Inc. have signed Asset Purchase Agreements and are in the
process of acquiring new names as a result. USA SportsNet will be known as
American Capital Holdings, Inc. and MyZipSoft will be known as
Freedom4Wireless, 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. This business model will be transferred to its subsidiary
eSecureSoft.
All ten (10) business subsidiaries have been spun off into independent
operating public companies. They are described within this section.
20
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 has identified prospective companies which will allow several
business segments to grow, expand and become profitable through an acquisition,
affiliation or partnership 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 full trading 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, has signed an Asset
Purchase Agreement with American Capital Holdings, Inc.
2. MyZipSoft, Inc., Palm Beach Gardens, Florida, has signed an Asset Purchase
Agreement with Freedom4Wireless, Inc.
eCom eCom's subsidiaries which have been spun off are listed below indicating
agreements either completed or pending, along with the prospective target
company.
1. USA Performance Products, Inc.
2. eSecureSoft Company
3. USA SportsNet Company * American Capital Holding, Inc.
4. MyZipSoft, Inc. * Freedom 4 Wireless, Inc.
5. USAS Digital, Inc.
6. Pro Card Corporation
7. AAB National Company
8. A Classified Ad, Inc.
9. Swap and Shop.net Corp
10. A Super Deal.com, Inc.
* Agreement
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 Payment. The Company wishes to stress that each spin off will have a
different Date of Payment. For clarity purposes, the Date of Record which is
set first, determines the outstanding shares eligible for the spin-off shares by
attaching a "Due Bill" to them (this will be done by the transfer agent.) If
shares are transferred or sold before the Date of Payment, the new shares belong
to the new owner. 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
21
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 listings on the AMEX as soon as each company 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 all
shareholder's benefit. Fractional shares, if any, will be paid for in cash to
each shareholder entitled.
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.
About American Capital Holdings, Inc. (formerly USA SportsNet)
History. American Capital Holdings, Inc.(ACH) was incorporated in the State of
Florida on January 25,1999 as US Amateur Sports Company, a wholly owned
subsidiary of eCom eCom.com, Inc.("eCom") which trades on the OTC/Bulletin Board
under the symbol 'ECEC.' On March 24, 2003, the Company changed its name to USA
SportsNet, Inc. (USASN), and recently changed its name to American Capital
Holdings, Inc. in connection with its spin off by eCom and its acquisition of
certain assets of a company formerly known as American Capital Holdings, Inc.
(now known as ACHI, Inc.) The Company's main office is located at 100 Village
Square Crossings, Suite 202, Palm Beach Gardens, Florida 33410, and the
telephone number is (561) 622-4395.
On December 1, 2003, the Board of Directors of eCom approved the spin-off of
USASN. They voted to issue to the shareholders of eCom one share of the Company
for every one share of eCom owned as of the record date of January 5, 2004.
Fractional shares will be purchased by the Company. No payment was required of
the eCom shareholders.
Acquisition from American Capital Holdings. After the spin off of the Company
was completed, the Company was presented with an opportunity to acquire certain
assets of American Capital Holdings, Inc. (now known as, and referred to
hereafter as ACHI) On January 12, 2004, the Company entered into an Asset
Purchase Agreement with ACHI whereby the Company acquired certain assets of ACHI
in return for the issuance of common stock of the Company in an amount equal to
83.3% of the total ownership of the Company. In order to accomplish this
transaction, the Company effected a 20 to 1 reverse stock split, which reduced
its outstanding stock to 2,497,756 shares, and issued to ACHI 12,457,356 shares.
The Company then changed its name to American Capital Holdings, Inc., and ACHI
changed its name to ACHI, Inc. In addition, the Company agreed to reserve
35,000,000 of its authorized, but unissued shares, for issuance pursuant to a
public offering, this includes an issue of 2,093,351 shares to Spaulding
Ventures, LLC, or its shareholders, in replacement of the shares of ACHI issued
22
ECOM ECOM.COM, INC.
or to be issued to Spaulding in connection with a prior acquisition of assets by
ACHI from Spaulding (see "Acquisition of Spaulding"). The proceeds of the
public offering are to be used to acquire additional interests in some of the
companies in which the Company currently holds an ownership interest, to provide
capital to those companies, and to acquire interests in other businesses of
interest to the Company, which have not yet been identified.
Assets Acquired from American Capital Holdings. The assets acquired from ACHI
consist primarily of approximately $10.8 million of investment interests in ten
developing companies (described below), approximately $5.3 million of restricted
securities, approximately $233,000 of marketable securities, approximately
$100,000 in cash, and proprietary investment programs known as Energy Tax
Incentive Preferred Securities ("ETIPS")and Guaranteed Principal Insured
Convertible Securities ("GPICS") which ACHI had developed and specifically
designed to facilitate investment in oil and gas exploration in the United
States, and in developing companies. See the American Capital Holdings balance
sheet included in the Financial Statements section of this report.
Acquisition of Spaulding. On December 30, 2003, prior to the Company's
acquisition from ACHI, ACHI entered into a letter agreement with Spaulding
Ventures, LLC, pursuant to which ACHI agreed to acquire all of Spaulding's
assets in return for 2,093,351 shares of ACHI common stock, plus warrants to
purchase a total of 209,335 additional shares of ACHI common stock at a purchase
price of $6.00 per share. As part of its acquisition from ACHI of the assets
ACHI acquired from Spaulding, the Company has agreed to replace the shares and
warrants issued by ACHI with shares and warrants of the Company. In order to
facilitate the distribution of these securities by Spaulding to its
shareholders, the Company intends file a Registration Statement with the
Securities and Exchange Commission registering the distribution to Spaulding's
shareholders of both the acquisition shares and the shares to be issued upon
exercise of the warrants.
About Freedom4Wireless, Inc. (formerly MyZipSoft)
History. Freedom4Wireless, Inc.(F4W)was incorporated in the State of Florida on
February 23, 2003 as MyZipSoft, Inc., a wholly owned subsidiary of eCom
eCom.com, Inc.("eCom") which trades on the OTC/Bulletin Board under the symbol
'ECEC.' On December 12, 2003, the Company changed its name to Freedom4Wireless,
Inc. F4W's main office is located at 100 Village Square Crossings, Suite 202,
Palm Beach Gardens, Florida 33410, and the telephone number is (561) 622-4395.
It also has a branch office at 14 East Washington Strret, Orlando, FL.
On December 1, 2003, the Board of Directors of eCom approved the spin-off of
MZS. They voted to issue to the shareholders of eCom one share of the Company
for every one share of eCom owned as of the record date of February 23, 2004.
Fractional shares will be purchased by the Company. No payment was required of
the eCom shareholders.
An Asset Purchase Agreement was signed on January 22, 2004 between MyZipSoft,
Inc. hereinafter "MZS" and Freedom 4 Wireless, Inc. herein after "F4W".
23
ECOM ECOM.COM, INC.
Whereas, Pursuant to an Agreement between parties on 11/28/03, MZS was desirous
to purchase certain assets of Freedom 4 Wireless, Inc. in order to avail itself
of F4W's expertise, background and knowledge of, but not limited to, creative
management, spin offs, MESH wireless technology, securities, structuring of
joint ventures and acquisitions.
Business Description
Freedom 4 Wireless (F4W) is a provider of 4th Generation Mobile Broadband
Wireless Services and Products. F4W's unique 4G mobile broadband wireless system
provides data, video, audio, and voice services to subscribers on the move, at
highway speeds.
F4W generates revenue from the selling of subscriber services, vertical product
sales equipment sales and contracting to deploy turnkey wide area network
wireless solutions. F4W is building a national high speed mobile broadband
wireless network as well as building tactical networks for Homeland Security and
Law Enforcement agencies. F4W's services and products fall into three broad
categories. Freedom 4 Emergency Alert Display Services TM, Freedom 4 Mobile
Services TM and Freedom 4 Smart Equipment Services TM. F4W's focus is on the
public safety market in 2004 and 2005, by in 2006 F4W believes that the demand
for mobile broadband services from business customers will begin to generate
significant incremental revenue from the network infrastructures that originally
were deployed to provide services to the Public Safety Market.
Freedom 4 Emergency Alert Display Services TM networks are networks of
plasma and LCD displays that provide Emergency Alert System (EAS) and
Community Alert System TM (CAS) messaging to the public in times of community
crisis and distress. Such services will allow both federal and local
governmental authorities to communicate with the public about imminent and
immediate events that may require a quick response to save lives or improve
public well-being. Built into these displays are 2-way video and voice
capability so that an individuals and first responders in a crisis can
communicate with emergency organizations. Freedom 4 Mobile Services TM and
Freedom 4 Smart Equipment Services TM are offered through a unique mobile
broadband wireless network. It is the first affordable mobile broadband wireless
system, and it will offer data, voice, and media services. It will be used to
provide mobile, broadband, wireless services to the Department of Homeland
Service, local governments (police, fire/rescue, code enforcement, permitting,
and traffic management), state departments of transportation (to meet
intelligent transportation system needs), health care institutions (mobile
telemedicine), corporate enterprises, small businesses, and consumers.
The vision of Freedom 4 Wireless is to provide broadband wired and wireless
network services to enhance the safety and well-being of the public and to
enable government agencies to increase their effectiveness and efficiency. F4W
will do so through Freedom 4 Emergency Display Services, Mobile Services, and
Smart Equipment Services. By 2007, Freedom Zone Networks envisions its initial
local and regional service networks merging with one another to become a
national network capable of delivering nationally coordinated, but location
specific public safety information relevant to the local community and providing
government agencies with the mobile broadband wireless communications capability
that they so badly need.
24
ECOM ECOM.COM, INC.
In conclusion, the Company cancelled almost all of its existing partnerships and
teaming agreements. The Company's reengineering dictated that time be directed
towards implementing the new business strategy. As discussed below, the 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 three months ended August 31, 2004 with the three months
ended August 31, 2003.
Revenue for the three month period ended August 31, 2004 was $319 compared to
$12,809 of revenue recorded during the same period of the prior year. Prior
year revenues were recorded from sales of the Viper M1 paintball marker and
accessories and sales of MyPhotoZip (TM). Our USA Performance Products
subsidiary was distributed on June 4, 2004 therefore sales for the three
months ending August 31, 2004 are not included in the current year financial
results.
Gross profit increased from -$944 in the prior year period to $239 in the
current three month period. Depreciation expense contributed $7,636 to the
prior years deficit in gross profit.
Due to the distribution of the Company's paintball segment, sales and
marketing expense dropped from $1,408 in the three months ended August 31,
2003 to $64 in the current three month period. General and administrative costs
dropped from $55,613 in prior year to $25,167 in the current three month period.
Our operations for the three months ended August 31, 2004 resulted in a net
loss of $35,851, a $39,915 improvement over the net loss of $75,766 recorded
during the three months ended August 31, 2003.
Liquidity and Capital Resources
As of August 31,2004 current assets totaled $283,465 compared to $272,615 at the
end of the prior fiscal year. Of the $10,850 increase in total current assets
was the result of distributing inventory of 190,019 and recording a receivable
due from USA Performance products of $227,462.
Accounts Payable decreased from $241,977 to $109,092 during the current three
months. This decrease in accounts payable was due to the distribution of USA
Performance Products on June 4, 2004. Accounts payable distributed from USA
Performance Products was $126,637 on June 4, 2004.
Current liabilities decreased from $826,798 at the end of the prior fiscal
year to $708,840 at the end of the current quarter, a decrease of $117,958.
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 Renick Enterprises, Inc. has been favorably settled. The matter
concerning National Paintball in which they notified us through their attorney
that the issuance of stock agreed upon in the settlement was insufficient to
cover the settlement. This matter was brought before the courts by Renick and
the judge ruled in favor of the Company.
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 $69,373.36 as of May 31, 2001. As part of the
SB-2 dated August 8, 2002, stock was registered to pay-off this debt. As of
February 28, 2003 all stock that had previously been held in an Attorney
escrow account, had been sold and transferred to National Paintball. The
balance owed National Paintball as of February 28, 2003 is 59,475.83. The
Company is in the process of reaching a settlement with National Paintball, Inc.
ITEM 2. Changes in Securities.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
27
ECOM ECOM.COM, INC.
ITEM 5. Other Events.
Board of Directors Votes
On June 4, 2004, a motion was made and passed to Spin off eight of their wholly
owned companies under Staff Legal Bulletin 4, as listed below;
1. USA Performance Products, Inc.
2. eSecureSoft Corp.
3. USAS Digital, Inc.
5. Pro Card Corp.
6. AAB Company
7. A Classified Ad, Inc.
8. Swap and Shop Corp
9. A Super Deal, Inc.
On March 25, 2004 a motion was made and passed to appoint Barney A. Richmond to
the office of President of eCom eCom.com, Inc.
On March 2, 2004 a motion was made and passed to confirm and complete the spin
off USA SportsNet, Inc. and MyZipSoft,Inc.
On January 20, 2004 a motion was made and passed to offer Warrants for 6,000,000
shares of eCom common stock to ACH for an exercise price of fifty cents ($.50)
per share. The offer period if for one year ending January 20, 2005.
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. David J. Panaia is a Director and Secretary, Harry Timmons id a
Director and Matt Salmon is a Director.
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.
28
ECOM ECOM.COM, INC.
On December 1, 2003, the Board of Directors of eCom approved the spin-off of ACH
and MZS. They voted to issue to the shareholders of eCom one share of the
Company for every one share of eCom owned as of the record date of January 5,
2004. Fractional shares will be purchased by the Company. No payment was
required of the eCom shareholders.
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
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 replaced its attorney with Attorney Gerald Gritter of Boca
Raton, Fl and Attorney James Volpi of Riviera Beach, FL.
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 18 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.
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 31
Exhibit 31.2 Certification required under Section 302 of
the Sarbanes-Oxley Act of 2002 by the CFO on page 32
Exhibit 32 Certification of CEO and CFO Pursuant to
Section 906 of the Sarbanes-Oxley Act on page 33
(b) Reports on Form 8-K:
None
29
ECOM ECOM.COM, INC.
SIGNATURES
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.
October 25, 2004 By: /s/ David J. Panaia
David J. Panaia,
Chief Executive Officer
October 25, 2004 By: /s/ Richard C. Turner
Richard C. Turner,
Chief Financial Officer
30
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: October 25, 2004
/s/ David J. Panaia
- --------------------------
David J. Panaia
Chief Executive Officer
31
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: October 25, 2004
/s/ Richard C. Turner
- ---------------------------
Richard C. Turner
Chief Financial Officer
32
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 August 31,
2004, 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
October 25, 2004
/s/ Richard C. Turner
Richard C. Turner
Chief Financial Officer
October 25, 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.