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, 2005
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.)
100 Village Square Crossing, Suite 202
Palm Beach Gardens, Florida 33410
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(Address of principal executive offices)
(561) 207-6395
- -----------------------------------------------------------------------------
(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, 2005 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, 2005
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Independent Accountant's Report 3
Balance Sheets:
August 31, 2005 and 2004 (Unaudited) 4
Statements of Operations:
Three Months Ended August 31, 2005 and
2004 (Unaudited) 5
Statements of Shareholders' Deficit:
Years Ended May 31, 2005 and 2004 and the
Three Months Ended August 31, 2005 (Unaudited) 6
Statements of Cash Flows:
Three Months Ended August 31, 2005 and
2004 (Unaudited) 7
Notes to Financial Statements 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 22
ITEM 3 CONTROLS AND PROCEDURES 28
PART II OTHER INFORMATION
ITEMS 1-6 30
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, 2005 and 2004, and the related statements of operations, for the
three-month periods ended August 31, 2005 and 2004, the statement of
stockholders' deficit from May 31, 2004 through August 31, 2005, and the
statement of cash flows for the three month periods ended August 31, 2005 and
2004. 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.
/s/ Wieseneck, Andres & Company, P.A.
North Palm Beach, Florida
October 17, 2005
3
eCOM eCOM.COM, INC
BALANCE SHEETS
(Unaudited)
August 31, 2005 August 31, 2004
--------------- --------------
ASSETS
Current Assets
Cash and cash equivalents $ 24,436 $ 119
Accounts receivable other 0 0
Due from affiliated companies 1,279 227,462
Inventories 0 0
Prepaid expenses 73,045 55,884
------------ ------------
Total Current Assets 98,760 283,465
------------ ------------
Property and Equipment, net 275 494
------------ ------------
Other Assets
Other assets 0 2,250
------------ ------------
Total Other Assets 0 2,250
------------ ------------
Total Assets $ 99,035 $ 286,209
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 115,224 $ 109,092
Accrued expenses 44,000 44,000
Current portion of long-term debt 675,219 533,236
Interest accrued on current portion 39,029 22,512
------------ ------------
Total Current Liabilities 873,472 708,840
Notes Payable, Net of Current Portion - -
------------ ------------
Total Liabilities 873,472 708,840
------------ ------------
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 6,569,537 6,569,537
Dividends 0 (96,125)
Accumulated deficit (7,436,351) (6,901,038)
Accumulated Comprehensive Gain 87,382 -
------------ ------------
Total Stockholders' Deficit (774,437) (422,631)
------------ ------------
Total Liabilities and Stockholders' Equity $ 99,035 $ 286,209
============ ============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
4
ECOM ECOM.COM, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
August 31, 2005 August 31, 2004
______________ _______________
Revenues
Net Sales $ 0 $ 319
Cost of Sales (55) (81)
______________ _______________
Gross Profit (55) 239
______________ _______________
Other Operating Expenses
Sales and marketing - 64
General and administrative 30,055 25,167
Amortization - 333
______________ _______________
Total Operating Expenses 30,110 25,565
______________ _______________
Loss from Operations (30,110) (25,326)
Other Income (Expense)
Interest income - -
Interest expense (119) (10,525)
Comprehensive other Gain/Loss (225,966) -
______________ _______________
Net Other Expenses (226,085) (10,525)
______________ _______________
Net Loss $ (256,195) (35,851)
============== ===============
Net Loss Per Common Share $ (.005) (.001)
============== ===============
Weighted Average Shares Outstanding 49,955,112 49,955,112
============== ===============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
5
ECOM ECOM.COM, INC.
STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED MAY 31,
2004 AND 2005 AND THE THREE MONTHS ENDED August 31, 2005
(Unaudited)
---------- Common Stock --------------
Number At Add'l Retained Accum. Total
of Par Paid In Earnings Compreh. Stockholder
Shares Value Capital (Deficit) Gain (Deficit)
---------- ------ ---------- ----------- ------- -----------
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 - - - (495,788) - (495,788)
Accumulated Gain - - - - 87,382 87,382
---------- ------ ---------- ----------- -------- -----------
Balance,
May 31, 2004 49,955,112 4,995 6,579,537 (7,140,494) 87,382 (468,580)
Elimination of
Subsidiaries
Consolidated Losses
At Spin-Off - - (10,000) 187,925 - 177,925
---------- ------ ----------- ----------- ------- -----------
Restated 49,955,112 4,995 6,569,537 (6,952,569) 87,382 (290,655)
Assets Distributed
To Subsidiaries At
Spin-Off (96,124) (96,124)
Net Loss - - - (131,463) (131,463)
---------- ------ ----------- ----------- ------- -----------
Balance,
May 31, 2005 49,955,112 $4,995 $6,569,537 $(7,180,156) $87,382 $ (518,242)
Net Loss - - - (256,195) - (256,195)
---------- ------ ----------- ----------- ------- -----------
Balance,
Aug. 31, 2005 49,955,112 $4,995 $6,569,537 $(7,436,351) $87,382 $ (774,437)
=========== ======= ========== =========== ======== ===========
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, 2005 AND 2004
(Unaudited)
August 31, 2005 August 31, 2004
_______________ _______________
Cash Flows From Operating Activities
Cash received from customers $ 0 $ 319
Cash paid to suppliers and employees (91,274) (759)
Interest paid (119) (5,556)
_______________ _______________
Net Cash Flows Used in
Operating Activities (91,393) (5,996)
_______________ _______________
Cash Flows From Investing Activities
Purchase of equipment (0) (0)
_______________ _______________
Net Cash Flows Provided By
(Used In) Investing Activities (0) (0)
_______________ _______________
Cash Flows From Financing Activities
Proceeds from note receivable 115,194 0
Proceeds of loans from stockholders 635 11,496
Repayment of loans to stockholders 0 (5,518)
Issuance of note receivable 0 0
_______________ _______________
Net Cash Flows Provided By
(Used In) Financing Activities 115,829 5,978
_______________ _______________
Net Increase/(Decrease) in Cash 24,436 (18)
Cash and Cash Equivalents at
Beginning of Period 0 137
_______________ _______________
Cash and Cash Equivalents at
End of Period $ 24,436 $ 119
=============== ===============
Supplemental Disclosures
- ------------------------
Non-Cash transactions
Stock issued for payment of services 0 0
Stock issued for repayment of debt 0 0
See accompanying summary of accounting policies, notes to financial statements
and independent accountants' review report.
7
eCOM eCOM.COM, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
(Unaudited)
Reconciliation of Net Loss to Net Cash Flows Used in Operating Activities:
August 31, 2005 August 31, 2004
_______________ _______________
Net Loss $ (256,195) $ (35,851)
Add items not requiring outlay of cash:
Depreciation and amortization 55 388
Write-off of related party receivable 225,966 0
Cash was increased by:
Decrease in inventory 0 33,444
Increase in accrued interest payable 0 4,968
Cash was decreased by:
Increase in prepaid expenses (58,119) 0
Decrease in accounts payable (3,100) (6,267)
Decrease in accrued expenses 0 (2,678)
_______________ _______________
Net Cash Flows Used In
Operating Activities $ (91,393) $ (5,996)
=============== ===============
See accompanying summary of accounting policies, notes to financial statements
and independent accountants' review report.
8
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE A - NATURE OF OPERATIONS
eCom eCom.com, Inc. ("eCom" or "the Company") was incorporated in the State of
Florida on June 14, 1994. During the prior fiscal year eCom 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.
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 December 1, 2003, the Board of Directors of eCom approved the spin-off of
eCom's ten (10) operating subsidiary companies, pursuant to SEC Staff Legal
Bulletin No. 4. On December 18, 2003, USA SportsNet, Inc. entered into a
definitive Asset Acquisition Agreement with American Capital Holdings, Inc.,
("ACHI") The Date of Record for the first spin-off, USA SportsNet,
Inc. (later renamed American Capital Holdings, Inc., Cusip No. 02503V 10 9/SEC
CIK No. 0001288010)was January 5, 2004. The Date of Record for the second
spin-off, MyZipSoft, Inc. (Standard & Poor's Cusip No. 628703 10 0/SEC CIK No.
9
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE A - NATURE OF OPERATIONS - (CONTINUED)
0001290785) was February 23, 2004, and the shares of MyZipSoft were distributed
to its shareholders on June 2, 2005.
On March 2, 2004, the Board of Directors of eCom approved the spin off of the
remaining eight (8) spin off companies in which the Board of Directors voted to
issue to their shareholders one (1) share of the company for every one (1)
share of eCom owned with a record date to be announced, pursuant to the advice
of SEC Staff Legal Bulletin No. 4.
On March 29, 2004, eCom Chairman and CEO David Panaia prepared and issued a
Press Release announcing the appointment of Barney A. Richmond as President of
eCom. A copy of this press release is appended hereto as Exhibit No. 99.1.
Paragraph two (2) of this release stated the following:
"The plan to spin-off eCom's ten wholly owned subsidiaries has been completed
and the Company is now in the process of acquiring certain businesses for each
spin-off. To date, the Company has accomplished two (2) acquisitions and has
four (4) more under agreement. When announced, eCom shareholders as of the
Date of Payment (distribution of stock) for each spin-off will receive new
shares in that company."
On May 24, 2004, American Capital Holdings, Inc., formerly known as USA
SportsNet, Inc., filed a Form 10SB, file number 000-50776, accession number
0001288012-04-000001,SEC CIK number 0001288012,with the United States
Securities & Exchange Commission ("SEC"). On July 27, 2004, American Capital
Holdings, Inc.'s Form 10SB was ruled effective by the SEC.
On November 29, 2004 eCom became party to the involuntary bankruptcy
proceedings of American Capital Holdings, Inc. a petitioning creditor of eCom
due to the financial stance it assumed when eCom failed to pay its accountants,
Wieseneck & Andres,P.A. American Capital was forced to pay the auditing firm
in order to complete its audits, since American Capital is a spin-off company
of eCom. This liability cost American Capital's shareholders approximately
$75,000. Additionally, American Capital was forced to continue financial
assistance to eCom to bring all of the spinoff companies current with their
SEC-qualified accountants and other creditors. Prior to this particular debt,
American Capital had advanced eCom funds to cover operating expenses due to
declining business conditions for eCom and the declining health of eCom's CEO,
David Panaia. Mr. Panaia refused to acknowledge the debt by signing promissory
notes, as required by GAAP accounting. The most critical aspect of eCom's
financial crisis was that eCom was not able to pay its transfer agent, Florida
Atlantic Stock Transfer, the amounts required to send out the stock
certificates of the spin-off companies to the shareholders, and accordingly,
the shares were not issued as stated.
Since late June 2004, the management of American Capital Holdings, Inc. has
10
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE A - NATURE OF OPERATIONS - (CONTINUED)
received hundreds of telephone calls from eCom shareholders, requesting
delivery of their promised spin-off shares. Numerous shareholders have made
demands to be sent their promised shares, many of them threatening legal action
against eCom. Because of the aforementioned financial difficulties, eCom's
telephone lines were disconnected. eCom's shareholders contacted American
Capital Holdings, Inc. in an effort to garner information on the status of
their situation as American Capital was their only source for information.
During the period from late December 2004 thru mid-March 2005, American
Capital and the other petitioning creditors sympathized with the declining
health of eCom's CEO, David Panaia. These petitioning creditors have also
incurred considerable additional costs by providing continued financial
assistance to eCom. These costs included expenses to bring all of the spin-off
companies current with their SEC filings, Federal Tax Returns, State Income Tax
Returns, State Filing Fees, Accounting Expenses, SEC Auditing Expenses, Legal,
Administrative and other business-related expenses. This process included
utilizing American Capital employees, as well as hiring outside assistance,
i.e. additional accountants, tax assistance, and outside attorneys to expedite
the process.
In order protect its $250,000+ equity investment in eCom, and in order to
fulfill its fiduciary duty to American Capital shareholders, American Capital
proceeded with a plan to recapture the lost shareholder value of eCom. All eCom
shareholders are a part of American Capital's shareholder base, but American
Capital also has shareholders who acquired shares outside of the spinoff
transaction. These shareholders have no vested interest in eCom outside of
American Capital's debt and equity positions, and are therefore owed an even
greater fiduciary duty in protecting their interests. American Capital plans
to issue a rights offering of shares of the spinoff companies to American
Capital shareholders at a date to be announced.
The management of American Capital and eCom Directors Barney A. Richmond and
Richard Turner began to realize that the CEO of eCom, David Panaia, was not
abiding by his publicly stated agreements to accomplish what was originally set
forth in press releases regarding the previously announced spin-off plan.
Also, it is estimated that over $13.5 million of eCom shares had been traded
based on prior press releases concerning the spin-off announcement. It was
then determined by many of the shareholders that eCom was more than in
financial turmoil, and that Mr. Panaia did not have the resources to complete
that which he had publicly stated. In late August and September of 2004,
Chairman and CEO David Panaia quit taking calls from anyone, including the
management of American Capital. Additionally, eCom was not taking calls from
other creditors who were owed hundreds of thousands of dollars, including
eCom's SEC accounting firm.
11
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE A - NATURE OF OPERATIONS - (CONTINUED)
Due to the dilemma caused as a direct result of Mr. Panaia's refusal to address
the monies advanced to eCom by American Capital, on November 22, 2004, Barney
A. Richmond resigned as an Officer and Director of eCom. Mr.Panaia refused to
file an 8-K statement regarding Mr. Richmond's resignation. In the absence of
other options, on November 29, 2004 an involuntary petition was filed against
eCom eCom.com, Inc. in the United States Southern District Bankruptcy Court (In
Re: Case No. 04-34535 BKC-SHF)under Title 11, Chapter 11 of the United States
Bankruptcy Code by petitioning creditors, American Capital Holdings, Inc.,
Richard Turner, Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings
were initiated in an effort to implement a viable plan for reimbursement of
costs incurred by American Capital Holdings, Inc., the petitioning creditors,
and all other creditors/vendors who have not been paid. Most importantly, the
proceedings will enable Mr. Richmond to initiate reorganization plans in an
effort to restore the shareholder value lost by approximately 6,000
shareholders. The aforementioned creditors are owed in excess of $1 million
dollars. A copy of the June 2, 2005 Chapter 11, Title 11 Amended Involuntary
Petition of eCom is posted on eCom's website, www.ecomecom.net.
On March 20, 2005, the Chairman/CEO and majority shareholder of eCom, David J.
Panaia, died from health complications.
On May 16, 2005, eCom and its creditors attended the first status conference in
the United States Bankruptcy Court - Southern District of Florida (In Re: Case
No. 04-34535 BKC-SHF) in front of the Honorable Judge Steven Friedman.
An order was granted to the petitioning creditors adjudicating eCom as a debtor
under Chapter 11, Title 11 of the United States Bankruptcy Code. The Order
included specific instructions for eCom to retain bankruptcy counsel by June 4,
2005.
On June 6, 2005, eCom and its creditors attended the second status conference
in the United States Bankruptcy Court - Southern District of Florida (In Re:
Case No. 04-34535 BKC-SHF) in front of the Honorable Judge Steven Friedman.
Orders were granted to employ the legal services of Kluger, Peretz, Kaplan &
Berlin to represent eCom in its aforementioned reorganization plans, and
to provide debtor in possession financing for $100,000. These motions were
presented in the first status conference which took place on May 16, 2005.
Additional orders were granted authorizing Barney A. Richmond to hold the
position of Chief Executive Officer, despite the potential conflict of interest
due to his position as Chairman and CEO of American Capital Holdings, Inc.,a
petitioning creditor. Additionally, Mr. Richmond has been ordered by the court
to reorganize eCom and the spinoff companies of eCom. The Board of American
Capital Holdings, Inc. approved a resolution authorizing Mr. Richmond to
temporarily divert his attention from the management of American Capital
Holdings in order to please the court by implementing the reorganization plans
for eCom and the spinoffs of eCom. The Board of American Capital recognizes
12
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE A - NATURE OF OPERATIONS - (CONTINUED)
the role Mr. Richmond has assumed in these proceedings, and agrees that his
continued assistance is in the best interests of the shareholders of eCom,
American Capital, and the spinoffs of eCom.
On July 25, 2005, a third bankruptcy hearing was held in front of the Honorable
Judge Steven Friedman, during which two (2) orders were granted by the court.
The first order granted the Debtor permission to obtain post-petition financing
in the amount of $100,000 from American Capital Holdings, Inc. on the terms and
conditions set forth in the motion. The second order granted authorization for
the Debtor-in-Possession to (I) Provide Electronic Service Upon Equity Security
Holders and (II) Utilize Executive Mail Service for Purposes of Coordinating
and Effectuating Service Upon Equity Security Holders.
Electronic copies of the May 16, June 6, and July 25 2005 court transcripts are
available on the eCom website, www.ecomecom.net.
A group of several of American Capital Holdings, Inc.'s and other outside
shareholders have designated resources to capitalize and complete viable
business plans for the all of the above referenced spin-off companies. On May
31, 2005 several new shareholders of American Capital Holdings invested
$400,000 in eight (8) of the above referenced companies to enable the companies
to pay expenses relating to the initial funding of these companies to achieve
their respective business purposes. This funding will be reflected in each
company's Form 10SB audits and filings. This initial funding is to cover legal,
accounting and other expenses, including due diligence costs related to
proposed forthcoming acquisitions. More funding is planned for each company
from June 1, 2005 through November 30, 2005 in accordance with 506 Reg. D
Private Placement procedures, which will become available only to accredited
investors. Additionally, a plan is being formulated, subject to bankruptcy
court approval, which will provide a 100% payout to all of eCom's outstanding
creditors. The new management is committed to the plan, and believes these
efforts, combined with execution of the new business plans, will not only
recapture the lost shareholder value of eCom, but will enhance future long term
shareholder value as well.
Acquisition negotiations are underway and will be separately announced upon
completion. Management is confident in their ability to execute these
forthcoming plans.
The Company does not have any off-balance sheet arrangements.
Employees. The Company has no employees.
13
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
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.
Restatement of Prior Years Numbers to Conform to Current Year Presentation:
eCom eCom.com, Inc. presented comparative consolidated financial statements at
May 31, 2004. Since the Company spun off all of its subsidiaries on or about
June 4, 2004 there are no subsidiaries to be consolidated at May 31, 2005. The
basic financial statements presented herein at May 31, 2004 have been restated,
eliminating all subsidiary assets, liabilities, equity and operations in order
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.
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.
14
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)
Inventories:
Inventories are stated at the lower of cost or market using the first in
first out method.
NOTE C - INVENTORIES
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, 2005 and August 31, 2004 inventory consisted of the following:
August 31, 2005 August 31, 2004
Finished goods $ 0 $ 0
Work in process 0 0
Raw materials 0 0
----------- -----------
Total inventory $ 0 $ 0
=========== ===========
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 $15,625 as of August 31, 2005.
15
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
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, 2005 and 2004:
August 31, 2005 August 31, 2004
-------------- --------------
Computer hardware $ 85,074 $ 85,074
Computer software 13,633 13,633
Furniture, fixtures and equipment 4,330 4,330
Tools, dies and fixtures 0 0
Leasehold improvements 0 0
--------- ---------
Total cost 103,037 103,037
Accumulated depreciation 102,762 102,543
--------- ---------
Net Property and Equipment $ 275 $ 494
========= =========
Depreciation expense included in the cost
of sales for the years ended are: $ 55 $ 55
========= =========
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 the website, A Classified Ad for a total
cost of $10,000. This assets has been amortized over five years. Accumulated
amortization related to this assets was $10,000 as of May 31, 2004. This asset
was distributed to A Classified Ad, Inc. on June 4, 2004.
In February 1999, the Company acquired the website, Swap and shop, for a total
cost of $1,200. This asset has been amortized over five years. Accumulated
amortization related to this assets was $1,200 as of May 31, 2004. This asset
was distributed to Swap and Shop.net Corp. on June 4, 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 Company on June 4, 2004.
16
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
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 $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, 2005 and 2004 consisted of:
August 31, 2005 August 31, 2004
------------ ------------
Loans from stockholders and affiliated companies:
The loans are due on demand. 675,217 533,236
---------- ----------
Total Long-Term Debt 675,217 533,236
Less Current Portion (675,217) (533,236)
---------- ----------
Net Long-term Debt $ 0 $ 0
========== ==========
The long-term loans payable mature as follows:
May 31, 2005 675,217 533,236
---------- ----------
$ 675,217 $ 533,236
========== ==========
NOTE I - COST OF SALES
Included in the cost of sales are the following:
August 31, 2005 August 31, 2004
------------ ------------
Shipping and handling costs $ 0 $ 0
Packaging costs 0 0
------------ ------------
Total $ 0 $ 0
============ ============
Shipping income $ 0 $ 0
============ ============
17
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE J - COMMITMENTS AND CONTINGENCIES
The Company maintains office facilities leased by American Capital Holdings,
Inc. American Capital Holdings has not charged any rent to eCom eCom.com
during the twelve months ending May 31, 2005. Rent expense for the three month
period ending August 31, 2005 was $0.
On November 29, 2004, an involuntary petition was filed against eCom eCom.com,
Inc. in the United States Southern District Bankruptcy Court (In Re: Case No.
04-34535 BKC-SHF)under Title 11, Chapter 11 of the United States Bankruptcy
Code by petitioning creditors, American Capital Holdings, Inc., Richard Turner,
Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings were initiated
in an effort to restore the shareholder value lost by approximately 6,000+
shareholders as well as implement a viable plan for reimbursement of costs
incurred by American Capital Holdings, Inc., the petitioning creditors, and all
other creditors/vendors who have not been paid. The aforementioned creditors
are owed in excess of $1 million dollars. A copy of the June 2, 2005 Chapter
11, Title 11 Amended Involuntary Petition of eCom is posted on the eCom's
website, www.ecomecom.net.
NOTE K - RELATED PARTY TRANSACTIONS
The Company has received cash advances from David J. Panaia, Chairman and CEO
of the Company, until he passed away on March 20, 2005, in varying amounts and
at various times subsequent to the inception of the Company. These shareholder
loans were 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 and his estate at August 31, 2005 and August 31, 2004 is
$395,640 and $376,295.
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, 2005 is $35,000.
As part of the debtor-in-possession financing, eCom received $100,000 in
financing from American Capital Holdings on June 8, 2005 and an additional
$15,186 on July 25, 2005.
18
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE L - BUSINESS SEGMENTS
As of August 31, 2005 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 on June 4,
2004.
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 $774,711 at August 31, 2005 and
by $425,375 at August 31, 2004 and that the Company has incurred net operating
losses since inception.
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, 2005
--------------
Loss carry forward for tax purposes $ 7,061,024
==============
Deferred tax asset (34%) 2,400,748
Valuation allowance (2,400,748)
--------------
Net deferred tax asset -
==============
Through August 31, 2005, the Company had a federal income tax net
operating loss carry forward of approximately $7,000,000 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, 2005 was approximately
$7,000,000. 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.
19
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE O - EFFECTS OF INFLATION
To date, inflation has not had a material impact on the Company's
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.
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
20
ECOM ECOM.COM, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2005 AND 2004
NOTE P - RECENT ACCOUNTING PRONOUNCEMENTS - (CONTINUED)
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 $333. 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.
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.
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
financial statements for the three-month periods ended August 31, 2005 and 2004
and the Form 10-KSB for the fiscal year ended May 31, 2005.
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.
On December 1, 2003, the Board of Directors of eCom approved the spin-off
eCom's ten (10) operating subsidiary companies.
On December 18, 2003, USA SportsNet, Inc. entered into a definitive Asset
Acquisition Agreement with American Capital Holdings, Inc.("American Capital.")
The Date of Record for the first spin-off, USA SportsNet, Inc. (later renamed
American Capital Holdings, Inc., Cusip No. 02503V 10 9/SEC CIK No. 0001288010)
was January 5, 2004. The Date of Record for the second spin-off, MyZipSoft,
Inc. (Standard & Poor's Cusip No. 628703 10 0/SEC CIK No. 0001290785) was
February 23, 2004, and the shares of MyZipSoft were distributed to its
shareholders on June 2, 2005.
On March 2, 2004, the Board of Directors of eCom approved the spinoff of the
remaining eight (8) spin off companies in which the Board of Directors voted to
issue to their shareholders one (1) share of the company for every one (1)
share of eCom owned with a record date to be announced, pursuant to the advice
of SEC Staff Legal Bulletin No. 4.
On March 29, 2004, eCom Chairman and CEO David Panaia prepared and issued a
Press Release announcing the appointment of Barney A. Richmond as President of
eCom. Paragraph two (2) of this release stated the following:
22
ECOM ECOM.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATION - (CONTINUED)
"The plan to spin-off eCom's ten wholly owned subsidiaries has been completed
and the Company is now in the process of acquiring certain businesses for each
spin-off. To date, the Company has accomplished two (2) acquisitions and has
four (4) more under agreement. When announced, eCom shareholders as of the
Date of Payment (distribution of stock) for each spin-off will receive new
shares in that company. "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.
On April 14, 2004, eCom filed Form 10QSB, file number 000-23617, accession
number 0001000459-04-000005. As stated in ITEM 2, Management's Discussion and
Analysis, 'All ten (10) business subsidiaries have been spun off into
independent operating public companies.'
On May 24, 2004, American Capital Holdings, Inc., a spin-off of eCom formerly
known as USA SportsNet, Inc., filed a Form 10SB, file number 000-50776,
accession number 0001288012-04-000001,SEC CIK number 0001288012,with the United
States Securities & Exchange Commission ("SEC"). On July 27, 2004 American
Capital Holdings, Inc.'s Form 10SB was ruled effective by the SEC.
On June 4, 2004, a corporate resolution was proposed, passed and signed by
David Panaia, Chairman/Secretary/CEO, Richard C. Turner, Director and Treasurer
and Barney A. Richmond, Director and President. Based on Mr. Richmond's past
restructuring experience, the new Board of Directors re-adopted the December 1,
2003 spin-off plan, pursuant to SEC Staff Legal Bulletin No.4, for the
remaining subsidiaries of eCom. The plan was to create individual public
corporations, and take whatever actions necessary to complete the process of
enhancing shareholder value, including acquisitions and/or mergers. The
individual companies are listed below:
USA Performance Products, Inc. FL Corp. No. P98000006586 Fed. ID. 65-0812050
eSecureSoft Company FL Corp. No. P03000138385 Fed. ID. 20-1068608
USAS Digital, Inc. FL Corp. No. P03000147667 Fed. ID. 20-1069232
Pro Card Corporation FL Corp. No. P04000015631 Fed. ID. 20-1442373
AAB National Company FL Corp. No. P04000019818 Fed. ID. 20-1442771
A Classified Ad, Inc. FL Corp. No. P04000038403 Fed. ID. 20-1447963
A Super Deal.com, Inc. FL Corp. No. P04000040174 Fed. ID. 20-1449410
Swap and Shop.net Corp. FL Corp. No. P04000040176 Fed. ID. 20-1449332
The motion in the above described June 4, 2004 Board Resolution included the
instructions for the distribution of stock by its Transfer Agent, Florida
Atlantic Stock Transfer (FAST) to the proper entities when the share
certificates were properly exercised and costs relating to the issuance of
these shares were paid in full. Notwithstanding, contrary to what board
members Richard Turner and Barney A. Richmond had been previously advised by
Chairman Panaia, eCom was not able to pay FAST the amounts required to send
23
ECOM ECOM.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATION - (CONTINUED)
out the Stock certificates to the shareholders, and accordingly, the shares
were not issued as stated.
On November 29, 2004, an involuntary petition was filed against eCom eCom.com,
Inc. in the United States Southern District Bankruptcy Court (In Re: Case No.
04-34535 BKC-SHF)under Title 11, Chapter 11 of the United States Bankruptcy
Code by petitioning creditors, American Capital Holdings, Inc., Richard Turner,
Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings were initiated
in an effort to restore the shareholder value lost by approximately 6,000+
shareholders as well as implement a viable plan for reimbursement of costs
incurred by American Capital Holdings, Inc., the petitioning creditors, and all
other creditors/vendors who have not been paid. The aforementioned creditors
are owed in excess of $1 million dollars. A copy of the June 2, 2005 Chapter
11, Title 11 Amended Involuntary Petition of eCom is posted on the eCom's
website, www.ecomecom.net.
Due to Mr. Panaia's health-related issues, during the period of January through
mid-March 2005, eCom requested three (3) extensions to reply to the above
described Involuntary Chapter 11, Title 11 United States Southern District
Bankruptcy Petition In Re: eComeCom.com, Inc. Case No. 04-34535 BKC-SHF. With
consideration to Mr. Panaia's declining health, all of the petitioning
creditors voluntarily consented to these extensions. Notwithstanding these
voluntary extensions, and due to the extensive ongoing telephone inquiries from
eCom shareholders who had bought shares in the public marketplace based on the
past public press release representations of Mr. Panaia, the management of
American Capital and the petitioning creditors had no choice but to make past
promises good beginning with getting the spin-off companies in full regulatory
compliance. This endeavor included the preparation of (a) thirty (30) 10QSB's;
(b); ten (10) 10K's; (c) ten (10) Form 10SB's SEC Registration Statements; (d)
twenty six (26) total State and Federal Tax Returns; (e) ten (10) applications
for the required SEC EDGAR CIK Numbers; (f) and ten (10) of the Transfer Agent-
required Standard & Poor's Cusip Numbers. Additionally, there has been a
tremendous administrative effort in bringing all the spin-off companies current
with respect to public company reporting requirements, including the Sarbanes-
Oxley Act. American Capital's management and the petitioning creditors
accomplished these tasks to eliminate any further liabilities to eCom
shareholders.
On March 20, 2005, the Chairman/CEO and majority shareholder of eCom, David J.
Panaia, died from health complications. The Company made application to the
United States Bankruptcy Court to appoint Barney A. Richmond as its new Chief
Executive Officer, whose official appointment was granted by the court on June
6, 2005. Although the process of restoring shareholder value is well underway,
both Mr. Richmond and Mr. Turner plan to stay with the company without
compensation until the proposed reorganization plans of all the companies are
complete.
24
ECOM ECOM.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATION - (CONTINUED)
On March 23, 2005, the aforementioned spin-off companies received
their respective SEC CIK Acceptance Filings, which are outlined below:
Name of SEC/EDGAR Standard & Poor's
Spin-off Company CIK No. Cusip No.
USA Performance Products, Inc. CIK 0001321509 90341L 10 2
eSecureSoft Company CIK 0001321511 296423 10 6
USAS Digital, Inc. CIK 0001321508 90341K 10 4
Pro Card Corporation CIK 0001321500 74270Q 10 0
AAB National Company CIK 0001321506 000303 10 7
A Classified Ad, Inc. CIK 0001321499 00089Y 10 9
A Super Deal.com, Inc. CIK 0001321507 00210R 10 6
Swap and Shop.net Corp. CIK 0001321510 869894 10 5
In order to facilitate a more reasonable share structure based on the company's
existing financial assets, on May 26, 2005 the Board approved a resolution
authorizing a 100-to-1 Reverse Split of the outstanding 49,955,112 shares of
the spin-off companies. Each company will purchase all fractional shares at
market price, thereby resulting in total outstanding shares of 499,503 as of
May 27, 2005. The Record Date for the remaining spin-offs was set as May 27,
2005, and all share certificates due to the shareholders of the above
referenced companies were mailed on June 2, 2005.
A group of several of American Capital Holdings, Inc.'s and other outside
shareholders have designated resources to capitalize and complete viable
business plans for the all of the above referenced spin-off companies. To begin
the process of paying expenses relating to the commencement of their respective
business purposes, on May 31, 2005 several new shareholders provided initial
funding of $400,000 to eight (8) of the above referenced companies. This
funding will be reflected in each company's forthcoming respective Form 10SB
audits and filings, which are planned to be filed by July 8, 2005. This initial
funding is to cover legal, accounting and other expenses, including due
diligence costs related to proposed forthcoming acquisitions. More funding is
planned for each company throughout the June 1, 2005 through August 30, 2005
quarter in accordance with 506 Reg. D Private Placement procedures, which will
become available only to accredited investors. Additionally, a plan is being
formulated, subject to bankruptcy court approval, which will provide a 100%
payout to all of eCom's outstanding creditors. The new management believes
these efforts combined with execution of the new business plans not only will
recapture the lost shareholder value of eCom, but will also enhance the
viability of future long term shareholder value as well. Acquisitions
negotiations are underway and will be separately announced upon completion.
Management is confident in their ability to execute these forthcoming plans.
25
ECOM ECOM.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATION - (CONTINUED)
On May 16, 2005, eCom and its creditors attended the first status conference in
the United States Bankruptcy Court - Southern District of Florida (In Re: Case
No. 04-34535 BKC-SHF) in front of the Honorable Judge Steven Friedman.
An order was granted to the petitioning creditors adjudicating eCom as a debtor
under Chapter 11, Title 11 of the United States Bankruptcy Code. The Order
included specific instructions for eCom to retain bankruptcy counsel by June 4,
2005.
Pursuant to SEC Staff Legal Bulletin No.4, the issuance of the all the share
certificates of the above referenced spin-off companies were sent via certified
mail on June 2, 2005 to the shareholders of record as of May 27, 2005. The
shareholder list and Certified Mail numbers are appended hereto as exhibit
99.2.
On June 3, 2005, eCom, through a $100,000 Debtor In Possession Financing
Agreement with American Capital Holdings, Inc., entered into an engagement
agreement to retain the legal services of Kluger, Peretz, Kaplan & Berlin to
represent the Company in its aforementioned reorganization plans. Both of the
financing and legal representation agreements were ordered by the Bankruptcy
Court at a hearing which took place June 6, 2005.
On behalf of eCom, American Capital Holdings has filed the requisite filings to
bring eCom current. The accession number eCom's November 30, 2004 Form 10-QSB
is 0001000459-05-000003, and the accession number for eCom's February 28, 2005
Form 10-QSB is 0001000459-05-000004 eCom's file number is 000-23617.
On June 6, 2005, a second bankruptcy status conference was held in front of the
Honorable Judge Steven Friedman. Two (2) motions were heard with resulting
court approval. One was an Court Order for eCom to retain the legal services
of Kluger, Peretz, Kaplin & Berlin P.L. The second Court Order was the
approval of Barney A. Richmond as the new Chief Executive Officer of eCome
Com.com, Inc. Mr. Richmond has significant experience in corporate and
bankruptcy reorganizations. Judge Friedman's court order included instructions
for Mr. Richmond and Kluger Peretz to commence with the preparation a viable
plan of reorganization for eCom and all of the above described spinoff
companies, which process is significantly underway including the completion of
the May 31, 2005 audits and preparation of the Forms 10-SB for all the above-
referenced spinoff companies.
Section 1145 of the United States Bankruptcy Code allows the Court to use the
Exemption of Securities Laws with respect to a qualified reorganization plan,
which the Debtor and aforementioned subsidiary spinoff companies plan to use,
which was discussed during the aforementioned June 6, 2005 Court Hearing. The
above described June 6, 2005 Court Orders are appended herein as Exhibit 99.7.
Electronic copies of the May 16, 2005 and June 6, 2005 court transcripts are
available on the eCom website, www.ecomecom.net.
26
ECOM ECOM.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATION - (CONTINUED)
On July 25, 2005, a third bankruptcy hearing was held in front of the Honorable
Judge Steven Friedman. Two (2) orders were granted by the court. The first
order granted was: the Debtor is authorized to obtain post-petition financing
inthe amount of $100,000.00 from American Capital Holdings, Inc. on the terms
and conditions set forth in the motion. The second order granted was: Debtor-
in-Possession's Motion for Authorization to: (I) Provide Electronic Service
Upon Equity Security Holders and (II) Utilize Executive Mail Service
forPurposes of Coordinating and Effectuating Service Upon Equity Security
Holders. Electronic copies of the July 25, 2005 transcripts are available on
the eCom eCom.com, Inc. website.
Comparison of Results of Operations - Three Months Ended August 31, 2005 vs.
Three Months Ended August 31, 2004.
Revenue for the three months ended August 31, 2005 was $0 compared to $319 of
revenue recorded during the same period of the prior year.
Cost of sales decreased from $81 to $55 in the current three month period.
Total operating expenses for the three months ended August 31, 2005 was $30,055
compared to $25,565 for the three months ended August 31, 2004.
The operations for the three months ended August 31, 2004 resulted in a net
loss of $25,326 versus a net loss of $30,110 recorded in the three months ended
August 31, 2005.
The comprehensive loss incurred during the three months ended August 31, 2005
of $225,966 was due to the write-down of debt due from USA Performance
Products. Management has determined that the debt is no longer collectable.
No provision for federal and state income taxes has been recorded because the
Company has incurred net operating losses since inception. The net operating
loss carry-forwards as of August 31, 2005 totals approximately $7,000,000.
These carry-forwards will be available to offset future taxable income. If not
used, the operating loss carry-forwards will expire from 2010 to 2019. The
Company does not believe that the realization of the related deferred income
tax assets meets the criteria required by generally accepted accounting
principles and, accordingly, deferred income tax assets have remained at $0 as
of May 31, 2005.
Liquidity and Capital Resources
As of August 31, 2005, current assets totaled $98,760 compared to $283,465 at
August 31, 2004. Prepaid increased from $55,884 at August 31, 2004 to $73,045
at August 31, 2005. Due from affiliates decreased from $227,462 at August 31,
2004 to $1,279 at August 31, 2005 due to the write-down of the receivable from
USA Performance Products.
27
ECOM ECOM.COM, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATION - (CONTINUED)
Net cash used in operating activities was $91,393 and $5,996 for the three
months ended August 31, 2005 and 2004 respectively.
Financing activities provided net cash of $115,829 during the current three
year period due to financing received from American Capital Holdings as debtor
in possession financing.
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.
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.
28
ECOM ECOM.COM, INC.
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.
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.
On November 29, 2004, an involuntary petition was filed against eCom eCom.com,
Inc. in the United States Southern District Bankruptcy Court (In Re: Case No.
04-34535 BKC- SHF)under Title 11, Chapter 11 of the United States Bankruptcy
Code by petitioning creditors, American Capital Holdings, Inc., Richard Turner,
Barney A. Richmond, and ACHI, Inc. The Bankruptcy proceedings were initiated
in an effort to restore the shareholder value lost by approximately 6,000+
shareholders as well as implement a viable plan for reimbursement of costs
incurred by American Capital Holdings, Inc., the petitioning creditors, and all
other creditors/vendors who have not been paid. The aforementioned creditors
are owed in excess of $1 million dollars. A copy of the June 2, 2005 Chapter
11, Title 11 Amended Involuntary Petition of eCom is posted on the eCom's
website, www.ecomecom.net. See Item 2. Management's Discussion and Analysis
(pages 23 though 27 for the current information on the Bankruptcy proceedings.
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
29
ECOM ECOM.COM, INC.
ITEM 5. Other Events.
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.
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
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 17, 2005 By: /s/ Barney A. Richmond
Barney A. Richmond,
Chief Executive Officer
October 17, 2005 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, Barney A. Richmond, 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 17, 2005
/s/ Barney A. Richmond
- --------------------------
Barney A. Richmond
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 17, 2005
/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,
2005, as filed with the Securities and Exchange Commission (the "Report"),
Barney A. Richmond, 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/ Barney A. Richmond
Barney A. Richmond
Chief Executive Officer
October 17, 2005
/s/ Richard C. Turner
Richard C. Turner
Chief Financial Officer
October 17, 2005
[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., 100 Village Square
Crossing, Suite 202, Palm Beach Gardens, Florida 33410. 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.