U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: June 30, 1999
Commission File Number: 000-24447
DRIVINGAMERICA.COM, INC.
------------------------
(Exact name of small business issuer as specified in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
84-1463449
(IRS Employer Identification No.)
18004 Skypark Circle, Suite 170
Irvine, CA
----------
(Address of principal executive offices)
92614
(Zip Code)
(949) 263-8890
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ____.
The number of shares of the registrant's only class of common stock issued and
outstanding, as of June 30, 1999, was 12,500,000 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the six month period ended June 30,
1999, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
unaudited financial statements and notes thereto included herein. In connection
with, and because it desires to take advantage of, the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Company cautions
readers regarding certain forward looking statements in the following discussion
and elsewhere in this report and in any other statement made by, or on the
behalf of the Company, whether or not in future filings with the Securities and
Exchange Commission. Forward looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond the Company's control and many of which, with respect
to future business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements made by, or on
behalf of, the Company. The Company disclaims any obligation to update forward
looking statements.
Overview
DrivingAmerica.com, Inc., f/k/a Mathy Corporation (the "Company" or "DRI"),
was incorporated under the laws of the State of Colorado on January 30, 1996. On
May 7, 1999, pursuant to the terms of an Agreement and Plan of Reorganization,
the Company undertook a forward split of its issued and outstanding common stock
whereby 2.5 shares of common stock were exchanged for every share then issued
and outstanding and thereafter, the Company acquired all of the issued and
outstanding securities of The Cooper Memphis Group, Inc., a California
corporation ("CMG"), in exchange for 11,250,000 (post forward split)
"restricted" common shares of the Company. As a result, the Company was the
surviving entity. As part of the terms of the aforesaid transaction, the Company
amended its Articles of Incorporation, changing its name to its present name, as
well as changing its fiscal year end to December 31 in order to coincide with
the fiscal year end of CMG.
2
The Company's principal business is as a marketer of database information
related to automotive marketing under the name "Automotive Consumer Services."
The initial database is comprised of new vehicle information, including
specifications and dealer vehicle costs, which are sold to consumers in the form
of printed vehicle reports. In turn, the consumers who purchase the reports,
along with their behavioral characteristics, become the source of a secondary,
marketed database of consumer information to several manufacturers of
automobiles, local dealer referral programs and affinity groups. DRI is based in
Irvine, California.
DRI intends to expand operations into other logically related and lucrative
services related to the acquisition of an automobile. At the same time, it
expects to develop Internet technology to facilitate the expansion of the list
of services to include other auto-related financial services.
RESULTS OF OPERATIONS
Comparison of Results of Operations for the Six Month Periods Ended June
30, 1999 and 1998
During the six month period ended June 30, 1999, the Company's revenues
were $93,750, compared to $171,303 for the six months ended June 30, 1998, a
decrease of $77,553 (45.3%). This decrease was attributable to a change in the
principal business of the Company, whereby the Company went from a "paper"
business to an Internet company. During 1998, the Company's business consisted
of data base marketing, based upon the sale of printed information. In September
1998, management acknowledged the downturn of the existing business and
thereafter, elected to cause the Company to refocus its resources and available
capital to becoming an Internet based company.
Cost of sales during the six month period ended June 30, 1999, were
$37,734, compared to $75,816 for the similar period in 1998, a decrease of
$38,082 (50.2%). This decrease was incurred primarily as a result of the change
in the Company's business as described in the preceding paragraph.
Selling, general and administrative costs increased during the six month
period ended June 30, 1999, to $730,281, compared to $225,331 for the similar
period in 1998, an increase of $504,950 (221.1%). This significant increase
arose as a result of the Company incurring $275,000 in website development
costs, as well as approximately $137,000 in professional fees relating to the
recent reverse merger and activity subsequent thereto, employee relocation costs
of approximately $35,000 and additional payroll expense of approximately
$22,000. Each of the aforesaid costs is expected to be a one time event and it
is anticipated that general and administrative costs incurred by the Company
will rise in
3
corresponding levels with anticipated increases in revenues, primarily as a
result of increased payroll costs.
As a result, the Company incurred a net loss of $(675,067) during the six
month period ended June 30, 1999, compared to a net loss during the similar
period in 1998, of $(70,342), an increase of $604,725 (859.7%).
LIQUIDITY AND CAPITAL RESOURCES
At the end of the six month period ended June 30, 1999, the Company had
$303 in cash and cash equivalents. It also decreased its accounts receivable to
$16,763 from $28,911 since December 31, 1998, a decrease of $12,148 (42%), which
management attributes to the change in the Company's business emphasis, as
described under "Results of Operations" above.
The Company has an outstanding note payable to a non-affiliate in the
principal amount of $20,000, which accrues interest at the rate of 10% per annum
and which is due upon demand. In addition, the Company also has received loans
from two of its directors, John Davis and Daryl Travis, in the principal amounts
of $15,000 and $10,000, respectively. Each of these loans accrues interest at
the rate of 8% per annum and are also due upon demand. Management does not
believe that any demand will be made by these note holders in the foreseeable
future. The Company also obtained a loan in the principal amount of $100,000
from a non-affiliate. This loan accrues interest at the rate of 12% per annum
and is due upon demand. While no assurances can be provided, it is anticipated
that this loan will be converted into equity in accordance with the Company's
private offering described hereinbelow.
In order to effectuate the Company's business plan, management has
recognized the Company's need for additional operating capital. In response
thereto, during the third calendar quarter of 1999, the Company intends to
commence a private offering of its common stock wherein it is offering up to
3,500,000 shares of the Company's common stock (post forward split) at a price
of $1.00 per share, for aggregate gross proceeds of up to $3,500,000. The
offering provides for the sale of Units, each Unit consisting of 100,000 shares
of the Company's common stock, on a 10 Unit minimum, 35 Unit maximum basis.
Gilford Securities Incorporated, a licensed NASD brokerage firm, has agreed to
act as the Placement Agent for this offering on a "best efforts" basis. The
offering will be made only to "accredited investors" as such term is defined in
Rule 501(a) of Regulation D under the Securities Act of 1933, as amended.
However, there can be no assurances that the minimum number of Units offered
will be sold, or that the Company will receive any funding from this offering.
Failure to obtain this funding will have a significant negative impact on the
Company's proposed plan of operation.
4
Prior to undertaking the aforesaid private offering, in August 1999 the
Company signed various agreements, including an investment banking agreement
with Deere Park Capital LLC, Northbrook, Illinois, ("Deere Park") wherein Deere
Park did agree to provide the Company with $125,000 in the form of a Convertible
Debenture. The principal balance and all interest as accrued shall be due and
payable upon the earlier of (i) 75 days from the date of the Debenture, or (ii)
within three (3) business days following closing of the Company's Private
Placement Offering referenced hereinabove. In its sole discretion, Deere Park
may convert all or any portion of the principal and any interest as accrued
thereon as of the date of such notice of conversion into (i) the Company's
private offering in an amount equal to the balance of the principal and interest
then due, or (ii) 50,000 "free trading" shares of the Company's common stock
presently held in escrow, which were placed into escrow by nonaffiliate
shareholders of the Company. In the event Deere Park elects to convert pursuant
to (ii) above, any further obligation owed to Deere Park by the Company shall be
deemed to have been fully satisfied and the Company will have no further
obligation to Deere Park applicable to the Debenture.
TRENDS
Management believes that the Company will continue to operate the Company's
business at a loss for the foreseeable future, but is optimistic that the
Company will begin generating profits from its operations beginning in the
second calendar quarter of 2000, and possibly earlier if sufficient working
capital discussed in "Liquidity and Capital Resources," above, is raised. This
will occur as a result of anticipated increased revenues derived from website
traffic, the Company obtaining additional contracts for data based marketing and
from direct sales of related automobile products, including loan and lease
products and insurance products. In regard to obtaining additional contracts for
data based marketing, the Company is currently engaged in discussions with
various parties and expects that these discussions will result in the Company
entering into additional contracts with these parties. However, there can be no
assurances that the Company will become profitable within the time parameters
described herein, or at all.
INFLATION
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation had a material affect on
the results of operations during the six month period ended June 30, 1999.
5
YEAR 2000 DISCLOSURE
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. As a result, many companies will be required to undertake major projects
to address the Year 2000 issue. The Company presently owns approximately $65,000
worth of computers, all of which have been recently purchased by the Company.
Relevant to the Company's computers, the Company primarily utilizes Window98
based programs, and, particularly, Microsoft "Office 97" applications for its
database as well as all other data support information, which the Company
believes is Y2K compliant. Additionally, the Company intends to upgrade its
present Microsoft software to the recently released "Office 2000" version. At
the present time, the Company does not rely on any major vendor for its services
and, therefore, does not anticipate any outside Y2K interference in its internal
business operations. However, there can be no assurance that the computer
systems necessary to maintain the viability of the Internet or any of the web
sites that direct consumers to the Company's website will be Year 2000
compliant. As part of the Company's overall Year 2000 compliance plan, the
Company intends to monitor systems performance and plans to develop a rapid
response program in the event of significant disruption as a result of the Year
2000 issues. To date, the Company has not developed a formal contingency plan.
The Company believes it is taking all necessary steps to ensure Year 2000
compliance with respect to matters within its control. While no assurances can
be provided, management believes that any cost undertaken by the Company to
ensure that it is Y2K compliant will not be material to the Company.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
In May 1999, the Company's shareholders unanimously approved the Agreement
and Plan of Reorganization between the Company and The Cooper Memphis Group,
Inc. In addition, as part of this action, the Company's shareholders also
approved an amendment to the Company's Articles of Incorporation, changing the
name of the Company from Mathy Corporation to its current name,
DrivingAmerica.com, Inc.
ITEM 5. OTHER INFORMATION - NONE.
6
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
On July 7, 1999, the Company filed an amendment to its Form 8-K report
which was filed in May 1999, whereby the Company advised of a change in the
Company's independent accountants, from Kish, Leake & Associates, P.C., to
Hollander, Lumer & Co. This change in independent accountants was approved by
the Board of Directors of the Company. There were no disagreements within the
last two fiscal years and subsequent periods with Kish, Leake & Associates, P.C.
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope of procedure, which disagreement(s), if not
resolved to the satisfaction of Kish, Leake & Associates, P.C., would have
caused that firm to make reference in connection with its reports to the subject
matter of the disagreement(s) or any reportable events.
In addition, the amendment also included (i) audited financial statements
for The Cooper Memphis Group, Inc. ("CMG"), the predecessor to the Company, for
the fiscal year ended December 31, 1998, along with the unaudited financial
statements of CMG for the three month period ended March 31, 1999; and (ii)
notice of a change in the Company's fiscal year from March 31 to December 31 in
order to coincide with the fiscal year of CMG.
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DRIVINGAMERICA.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
1999 1998
----------- ------------
ASSETS
CURRENT ASSETS
Cash $ 303 $ -
Accounts receivable 16,763 28,911
----------- -----------
TOTAL CURRENT ASSETS 17,066 28,911
PROPERTY AND EQUIPMENT, Net 7,573 9,439
----------- -----------
$ 24,639 $ 38,350
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Bank overdraft $ 8,480 $ 6,672
Accounts payable 314,023 166,261
Settlement payable 275,000 -
Bridge loans payable 110,000 -
Loans payable 46,707 30,167
----------- -----------
TOTAL CURRENT LIABILITIES 754,210 203,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.001 par value;
authorized - 25,000,000 shares;
issued and outstanding - none - -
Common stock, $.001 par value;
authorized - 100,000,000 shares;
issued and outstanding - 12,500,000 shares 12,500 12,500
Additional paid-in capital 585,517 434,228
Due from officer (136,961) (95,918)
Accumulated deficit (1,190,627) (515,560)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIENCY (729,571) (164,750)
----------- -----------
$ 24,639 $ 38,350
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
F-1
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DRIVINGAMERICA.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
------------------------- ------------------------
1999 1998 1999 1998
----------- ----------- ----------- ----------
REVENUE $ 24,592 $ 64,557 $ 93,750 $ 171,303
OPERATING EXPENSES 576,752 96,738 757,872 231,704
----------- ----------- ----------- ----------
LOSS FROM OPERATIONS (552,160) (32,181) (664,122) (60,401)
OTHER EXPENSES (8,219) (5,498) (10,945) (9,941)
----------- ----------- ----------- ----------
NET LOSS $ (560,379) $ (37,679) $ (675,067) $ (70,342)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,500,000 12,500,000 12,500,000 12,500,000
=========== =========== =========== ===========
BASIC LOSS PER SHARE $ (0.04) $ (0.00) $ (0.05) $ (0.01)
=========== =========== =========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
F-2
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DRIVINGAMERICA.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30,
-------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (675,067) $ (70,342)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 1,866 4,514
Changes in operating assets and liabilities:
Accounts receivable 12,148 21,301
Accounts payable 147,762 -
Settlement payable 275,000 -
NET CASH PROVIDED BY (USED IN) ----------- -----------
OPERATING ACTIVITIES (238,291) (44,527)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Due from officer, net (41,043) (28,586)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (41,043) (28,586)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft 1,808 7,831
Contributed capital 151,289 -
Proceeds from loans payable
and bridge financing 126,540 60,028
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 279,637 67,859
----------- -----------
NET INCREASE (DECREASE) IN CASH 303 (5,254)
CASH, BEGINNING OF PERIOD - 5,254
----------- -----------
CASH, END OF PERIOD $ 303 $ -
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements.
F-3
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DRIVINGAMERICA.COM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been
prepared by DrivingAmerica.com, Inc. (the "Company") without audit and,
in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of (a) the results of
operations for the three and six months ended June 30, 1999 and 1998,
(b) the financial position at June 30, 1999, and (c) cash flow for the
six months ended June 30, 1999 and 1998. Interim results are not
necessarily indicative of results for a full year.
The balance sheet presented as of December 31, 1998 has been derived
from the financial statements that have been audited by the Company's
independent public accountants. The financial statements and notes are
condensed and do not contain certain information included in the annual
financial statements and notes of the Company. The financial statements
and notes included herein should be read in conjunction with the
audited financial statements and notes for the years ended December 31,
1998 and 1997 included in the Company's Form 8-K/A 1 filed on July 6,
1999.
2. BRIDGE FINANCING
During the six months ended June 30, 1999, the Company received
$110,000 bridge financing in the form of a Convertible Debenture. The
principal balance and all interest as accrued shall be due and payable
upon the earlier of (i) 75 days from the date of the Debenture, or (ii)
within three (3) business days following closing of the Company's
Private Placement Offering described under "Liquidity and Capital
Resources" above herein. In its sole discretion, the debenture holder,
Deere Park Capital LLC, may convert all or any portion of the principal
and any interest as accrued thereon as of the date of such notice of
conversion into (i) the Company's private offering in an amount equal
to the balance of the principal and interest then due, or (ii) 50,000
"free trading" shares of the Company's common stock presently held in
escrow, which were placed into escrow by nonaffiliate shareholders of
the Company. In the event Deere Park elects to convert pursuant to (ii)
above, any further obligation owed to Deere Park by the Company shall
be deemed to have been fully satisfied and the Company will have no
further obligation to Deere Park applicable to the Debenture.
3. STOCKHOLDERS' DEFICIENCY
During the six months ended June 30, 1999, a stockholder of the Company
contributed $151,289 to the capital of the Company.
F-4
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DRIVINGAMERICA.COM, INC.
(Registrant)
Dated: August 26, 1999
By:/s/ Charles M. Davis
-----------------------------------
Charles M. Davis,
President
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DRIVINGAMERICA.COM, INC.
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1999
EXHIBITS Page No.
EX-27 Financial Data Schedule.....................................14
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