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, 2002
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.)
2700 PGA Boulevard, Suite 103
Palm Beach Gardens, Florida 33410
- ----------------------------------------------------------------------------
(Address of principal executive offices)
(561) 622-4395
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ]
As of August 31, 2002 the issuer had 29,551,512 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, 2002
INDEX
PAGE NO.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Independent Accountants' Report 3
Consolidated Balance Sheets:
August 31, 2002 and May 31, 2002 (Unaudited) 4
Consolidated Statements of Operations:
Three Months Ended August 31, 2002 and
2001 (Unaudited) 5
Consolidated Statements of Shareholders' Deficit:
Years Ended May 31, 2002 and 2001 and the
Three Months Ended August 31, 2002 (Unaudited) 6
Consolidated Statements of Cash Flows:
Three Months Ended August 31, 2002 and
2001 (Unaudited) 7
Notes to Consolidated Financial Statements 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 21
PART II OTHER INFORMATION
ITEMS 1-6 23
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 Accountants' 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, 2002 and May 31, 2002, and the related consolidated statements of
operations, for the three-month periods ended August 31, 2002 and 2001, the
consolidated statement of stockholders' deficit from May 31, 1999 through
August 31, 2002, and the consolidated statement of cash flows for the three
month periods ended August 31, 2002 and 2001. 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 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 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 $425,000 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.
October 28, 2002
3
eCOM eCOM.COM, INC
CONSOLIDATED BALANCE SHEETS
(Unaudited)
August 31, 2001 May 31, 2001
--------------- --------------
ASSETS
Current Assets
Cash and cash equivalents $ 234 $ 12,803
Accounts receivable, net of allowance for
doubtful accounts of $0 and $0
Accounts receivable other 1,473 1,473
Inventories 166,077 173,533
Prepaid expenses 140,450 154,408
Other current assets 187,000 187,000
Note receivable 15,000
------------ ------------
Total Current Assets 495,234 544,217
------------ ------------
Property and Equipment, net 81,082 92,345
------------ ------------
Other Assets
Intangible assets, net 89,048 4,010
Other assets 109,383 110,883
------------ ------------
Total Other Assets 198,431 114,893
------------ ------------
Total Assets $ 774,747 $ 751,455
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 293,209 $ 287,466
Accrued expenses 3,625 3,845
Unearned revenue 100,000 100,000
Current portion of long-term debt 515,312 469,344
Interest accrued on current portion 8,426 6,274
------------ ------------
Total Current Liabilities 920,572 866,929
Notes Payable, Net of Current Portion - -
------------ ------------
Total Liabilities 920,572 866,929
------------ ------------
Stockholders' Equity
Common stock, $.0001 par value, 50 million
shares authorized, 29,551,512 and
26,739,512 shares issued and outstanding 2,955 2,674
Paid-in capital 5,924,006 5,755,767
Accumulated deficit (6,072,786) (5,873,915)
Treasury stock - -
------------ ------------
Total Stockholders' Deficit (145,825) (115,474)
------------ ------------
Total Liabilities and Stockholders' Equity $ 774,747 $ 751,455
============ ============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
4
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
August 31, 2002 August 31, 2001
______________ _______________
Revenues
Net Sales $ 40,775 $ 54,928
Cost of Sales (35,243) (74,209)
______________ _______________
Gross Profit 5,532 (19,281)
______________ _______________
Other Operating Expenses
Sales and marketing 8,120 65,648
Product development 14,335 20,301
General and administrative 174,398 608,326
Amortization 5,062 650
______________ _______________
Total Operating Expenses 201,915 694,925
______________ _______________
Loss from Operations (196,383) (714,206)
Other Income (Expense)
Interest income - 1,562
Interest expense (2,487) (137)
Gain on disposal of asset - 687
______________ _______________
Net Other Expenses (2,487) 2,112
______________ _______________
Net Loss $ (198,870) $ (712,094)
============== ===============
Loss Per Common Share, Basic & Diluted $ (.01) $ (0.04)
============== ===============
Weighted Average Shares Outstanding 27,847,031 19,657,112
============== ===============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
5
ECOM ECOM.COM, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT FOR THE YEARS ENDED MAY 31,
2002 AND 2001 AND THE THREE MONTHS ENDED AUGUST 31, 2002
(Unaudited)
Number At Add'l Total
of Par Paid In Accum'd Treasury Stockholder
Shares Value Capital Deficit Stock Deficit
---------- ------ ---------- ----------- -------- -----------
Balance,
May 31, 2000 14,885,675 1,489 3,854,861 (4,928,154) (5,000) (1,076,804)
Issuance of
Common Stock 4,125,161 412 1,977,151 - - 1,977,563
Sale of Star Dot
Marketing - -(1,699,929) 1,876,158 - 176,229
Cancellation of
Treasury stock - - (5,000) - 5,000 -
Net Loss - - - (1,339,386) - (1,339,386)
---------- ------ ---------- ----------- -------- -----------
Balance,
May 31, 2001 19,010,836 $1,901 $4,127,083 $(4,391,382)$ - $ (262,398)
Issuance of
Common Stock 7,728,686 773 1,628,684 - - 1,629,457
Net Loss - - - (1,482,533) - (1,482,533)
---------- ------ ---------- ----------- -------- -----------
Balance,
May 31, 2002 26,739,512 $2,674 $5,755,767 $(5,873,915)$ - $ (115,474)
Issuance of
Common Stock 2,812,000 281 168,239 - - 168,520
Net Loss - - - (198,870) - (198,870)
---------- ------ ---------- ----------- -------- -----------
Balance,
Aug 31, 2002 29,551,512 $2,955 $5,924,006 $(6,072,785)$ - $ (145,824)
========== ====== ========== =========== ======== ===========
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
6
eCOM eCOM.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
(Unaudited)
August 31, 2002 August 31, 2001
_______________ _______________
Cash Flows From Operating Activities
Cash received from customers $ 40,775 $ 54,928
Interest income - 1,562
Cash paid to suppliers and employees (112,143) (455,015)
Interest paid (2,170) (18)
_______________ _______________
Net Cash Flows Used in
Operating Activities (73,537) (398,543)
_______________ _______________
Cash Flows From Investing Activities
Cash received from sale of
1-800-Paintball - 300,000
Purchase of equipment - (6,329)
Sale of equipment - 687
_______________ _______________
Net Cash Flows Provided By
(Used In) Investing Activities 294,358
_______________ _______________
Cash Flows From Financing Activities
Proceeds from note receivable 15,000 -
Proceeds of loans from stockholders 52,378 -
Repayment of loans to stockholders (6,410) (46,500)
Issuance of note receivable (5,000)
_______________ _______________
Net Cash Flows Provided By
(Used In) Financing Activities 60,968 (51,500)
_______________ _______________
Net Decrease in Cash (12,569) (155,685)
Cash and Cash Equivalents at
Beginning of Period 12,803 206,271
_______________ _______________
Cash and Cash Equivalents at
End of Period $ 234 $ 50,586
=============== ===============
Supplemental Disclosures
- ------------------------
Non-Cash transactions
Stock issued for payment of services 78,520 471,900
Stock issued for purchase of intangibles 90,000 -
Stock issued for purchase of fixed assets - 1,220
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
7
eCOM eCOM.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
(Unaudited)
Reconciliation of Net Loss to Net Cash Flows Used in Operating Activities:
August 31, 2001 August 31, 2000
_______________ _______________
Net Loss $ (198,871) $ (712,094)
Add items not requiring outlay of cash:
Depreciation and amortization 16,325 12,798
Bad Debts - -
Expenses paid by issuing stock 89,905 471,341
Gain on sale of assets - (687)
Cash was increased by:
Decrease in accounts receivable - -
Decrease in inventory 7,456 29,886
Decrease in prepaid expenses 13,958 -
Decrease in deposits 1,500 1,260
Decrease in other assets - 560
Increase in accrued interest payable 2,152 -
Increase in accounts receivable - (26,566)
Increase in prepaid assets - (739)
Increase in other assets - (905)
Decrease in accounts payable (5,743) (169,372)
Decrease in accrued expenses (219) (4,025)
Decrease in accrued interest payable - -
_______________ _______________
Net Cash Flows Used In
Operating Activities (73,537) $ (398,543)
=============== ===============
See accompanying summary of accounting policies, notes to financial
statements and independent accountants' review report.
8
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE A - NATURE OF OPERATIONS
eCom eCom.com, Inc. ("eCom" or "the Company") was incorporated in the State
of Florida on June 14, 1994. ECom's current business plan is focused on the
development and marketing of applications for its unique software products,
the first of which is MyPhotoZip(tm). Marketing is scheduled to start in
November 2002. Several other software algorithims are under development.
Previously, the Company developed an e-commerce infrastructure that enables
the small business enterprise to carve its niche in the retail and business
to business Internet economy. We also have operated our own on-line business
as a test model, using our e-commerce concepts to sell paintball products.
However, we recently revised our business model in order to focus on the
design and resale of MyPhotoZip(tm) software applications that will compress,
store, protect and transmit large digital photo files. Our intention is to
divest all other product lines to concentrate on the development of the market
for this software. Our mission is to make this software available to reduce
bandwidth demand and increase storage capabilities through development of
custom applications that are not feasible using technology previously
available.
The Company was incorporated under the name US Amateur Sports, Inc. but
changed its name in January 1999 to better reflect its business operations.
eCom is the parent of US Amateur Sports Company, which is the parent of USA
Performance Products, Inc. US Amateur Sports Company (USASC) owns the rights
to: (1) the All American Bowl, a high school football all-star game, last
played in 1997, when it was broadcast to over 40 million households; (2) the
ProCard/ComCard, a prepaid phone card concept; and (3) USA SportsNet, which
was planned to be an Internet portal for access to sports information,
products and services with a focus on amateur athletes and local sports
organizations. In addition, USASC owned the rights to use of the toll-free
telephone number, 1-800-724-6822 (1-800-PAINTBALL) until it was sold as
described below.
USA Performance Products manufactures and distributes Viper M-1 line of
paintball guns and accessories. It has served as a test model for our e-
commerce business concepts and has generated the majority of our revenues to
date.
On January 21, 2000 the Company entered into a Stock Exchange Agreement with
the shareholders of Star Dot Marketing, Inc. ("SDMI"), which provided for the
transfer of all the outstanding common stock of SDMI to eCom eCom.com, Inc. in
exchange for 675,000 shares of common stock. The transaction was closed on May
31, 2000. SDMI uses the trade name "Treasures of Sports" to offer a complete
line of guaranteed authentic, hand signed sports memorabilia and other sports
products. These products are marketed through joint sales agreements with
professional sports franchises.
Consistent with the intent to divest all businesses and product lines
unrelated to MyPhotoZip (tm) compression software, the sale of one business
and one product line were consummated during the current year. On May 11,
2001 rights to use of the toll-free telephone number, 1-800-PAINTBALL, and
related website addresses were sold for a cash payment of $900,000. On May
31, 2001 the Company sold all of the stock of Star Dot Marketing, Inc. in
return for assumption of debt of $208,000 owed to the original owners of SDMI.
See accompanying independent accountants' review report.
9
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE A - NATURE OF OPERATIONS (CONTINUED)
In August 2001 eCom entered into a joint venture agreement with PremierSoft,
Inc. to form a new company called Zyndecom, Inc. Zyndecom intended to market
the "Z Box," a software utility that combines DryIce(tm) with PremierSoft's
Syndeos(tm) software. Syndeos(tm) integrates software and hardware systems
that have been created independently. This joint venture currently on holding
as the company is marketing it MyPhotoZip(tm) software.
In September 2001, ECOM entered into a Value Added Reseller agreement with
Impact Imaging, Inc. (III) of Columbia, Maryland to use III's Temporal
Differential Encoding (TDE) technology. This contract, which formalized and
amended earlier agreements, called for III to develop for ECOM the ability to
write to the Application Program Interface (API) or provide a full Software
Development Kit (SDK) for ECOM's use by December 31, 2001.
In November 2001, we announced the development of myPicZip(tm), a software
product designed to shrink virtually unlimited galleries of photos to
eliminate restraints on storage capability without degradation of picture
quality. Planned for release during the third fiscal quarter, myPicZip(tm)
was intended to serve as a demonstration of the broad range of products and
services that will benefit from application of encoding and reformatting
technology. We expected TDE to be the core compression technology that would
be used in all of our products including the Z-Box(tm), myPicZip(tm) and a
number of other applications that were planned for development. However, III
failed to deliver either the SDK or the software to enable us to write to the
API. By February 2002 it became apparent that III was unable or unwilling to
satisfy its obligations under the contract, so ECOM filed suit for breach of
contract, fraudulent inducement and negligent misrepresentation. This legal
action has been withdrawn. III and eCom have initiated legal action against
each other in another jurisdiction (see Note L).
On April 9, 2002 we announced that we had signed a new agreement for use of
high power compression encoding technology developed by a different vendor,
MeVis Technology of Germany, and that the first product to be released using
the new technology would be photo compression software dubbed MyPhotoZip(tm).
The new encoding technique provides a better quality image than JPEG and other
compression products now on the market. While we expect to prevail in our
litigation with III, we intend to move ahead as quickly as possible to develop
and market an array of compression products using this new technology while it
is still the state of the art.
On April 18, 2002 we announced that we had entered into a teaming agreement
with Image Soft, Inc. of Brooksville, Florida under which the two companies
will work together to market innovative compression technology. The agreement
included a structure for revenue sharing between the two companies.
On June 18, 2002 we signed a teaming agreement with World Data Group LLC, of
Boca Raton, Florida. The agreement provides revenue sharing in the amount of
10% of all World Data Group's income derived from MeVis Technology
integrations. In addition, any of the integrated products to be offered for
See accompanying independent accountants' review report.
10
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE A - NATURE OF OPERATIONS (CONTINUED)
commercial sale will be made available to eCom eCom to resell. eCom exercised
its right to terminate the agreement with Image Soft.
On July 15, 2002 we announced the availability of MyPhotoZip(tm) for download
from our new website, www.myphotozip.com. In addition, we provided details of
the primary marketing strategy for all of our company's compression products
which is based on an agreement signed with Plugin Technologies of the United
Kingdom. Using Plugin's network of thousands of sales affiliates, ECOM's
product lines will be promoted globally to a variety of market segments. While
broadening the target audience to international markets, this approach takes
advantage of the Internet without incurring the heavy cost of traditional
Internet-based advertising programs. This affiliate program is still active.
Baseball Hall of Fame candidate Jeff Reardon has been retained to assist with
our marketing efforts. His photograph will be placed on MyPhotoZip(TM) and will
be used for other advertising purposes.
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 generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Consolidation
The consolidated financial statements of the Company include the accounts of
USA Performance Products, Inc. The Company formed USA Performance Products,
Inc. as a separate wholly owned subsidiary on January 20, 1998 and
transferred all assets related to the manufacture and sale of the Viper M1
paintball marker and accessories to this new corporation. We expanded the
activities of USA Performance Products in 1999 by selling other paintball
products through use of the 800-PAINTBALL toll-free telephone number and
related website acquired by USASC.
Revenue Recognition
Revenue from the sale of paintball markers and accessories is recognized at
the time title is transferred which is normally on shipment of the goods.
Revenue from the sale of compression products also will be recognized at the
time the products are shipped. Revenue received from contracts for web site
development services is recorded as unearned revenue until development of
the related web site is complete and accepted by the client.
See accompanying independent accountants' review report.
11
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash
Cash consists of deposits in banks and other financial institutions having
original maturities of less than ninety days. The company maintained cash
balances in one bank in amounts in excess of federal insurance limits as of
May 31, 2001. The balance in this account fell below $100,000 during August
2001.
Allowance for Doubtful Accounts
It is the policy of management to review the outstanding accounts receivable
at year end, as well as the bad debt write-offs experienced in the past, and
establish an allowance for doubtful accounts for uncollectible amounts.
Depreciation
Property and equipment is recorded at cost and is depreciated over the
estimated useful lives of the related assets. Depreciation is computed using
the straight-line method.
Amortization
Intangible assets consisting of rights to technology and associated
trademarks are amortized using the straight-line method over five years.
Inventories
Inventories are stated at the lower of cost or market using the first in
first out method.
NOTE C - INVENTORIES
Inventories consist principally of paintball markers and paintball
accessories and sports-related memorabilia. Inventories are carried at cost,
which is considered to be less than market value.
At August 31, 2002, inventory consisted of the following:
Finished goods $ 6,829
Work in process 159,248
Raw materials 0
----------
Total inventory $ 166,077
==========
NOTE D - PREPAID EXPENSES
Prepaid expenses consist principally of amounts paid for rent, subscriptions
and domain name registrations.
See accompanying independent accountants' review report.
12
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE E - NOTE RECEIVABLE
As part of settlement of the Saeilo and Renick litigation, on May 15, 2002,
Saeilo agreed to pay cash, inventory and forgive indebtedness, totaling
$127,494 for the right to manufacture a paintball gun similar to the Viper
M-1. Cash in the amount of $25,000 was received at closing with an
additional $15,000 due June 15, 2002. The note did not state any interest
or collateralization. The payment was received in a timely manner.
NOTE F - 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, 2002 and May
31, 2002:
August 31, 2002 May 31, 2002
--------------- ------------
Computer hardware $ 150,111 $ 150,111
Computer software 56,308 56,308
Furniture, fixtures and
equipment 47,760 47,760
Tools, dies and fixtures 57,401 57,401
------------ ------------
Total Cost 311,580 311,580
Accumulated
Depreciation 230,498 219,235
------------ ------------
Total Net Property and
Equipment $ 81,082 $ 92,345
============ ============
Depreciation expense included
in the cost of sales for the
periods ended are: $ 11,263 $ 48,790
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 G - INTANGIBLE ASSETS
In February 1999, the Company acquired two Internet websites, AclassifiedAd
and Swapandshop, for a total cost of $11,200. These assets are amortized over
five years. Accumulated amortization related to these assets was $7,750 and
$7,190 as of August 31, 2002 and May 31, 2002, respectively.
On July 1, 2002, the Company acquired the licensing rights to Pandora and
Virtual Protect from Internet Security Solutions, for a total cost of $56,250.
This asset is being amortized over five years. Accumulated amortization
related to this asset is $2,813 as of August 31, 2002.
See accompanying independent accountants' review report.
13
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE G - INTANGIBLE ASSETS (CONTINUED)
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 $1,688 as of August 31, 2002.
NOTE H - OTHER ASSETS
Other assets consist primarily of security deposits on the lease of office
facilities, an employee advance and utility deposits.
NOTE I - LONG-TERM DEBT
Long-term debt at August 31, 2002 and May 31, 2002 consisted of:
August 31, May 31,
2002 2002
-------- --------
A non-interest bearing, non-collateralized loan
from an offshore corporation that is due on
demand. 184,220 184,220
Three non-interest bearing, non-collateralized
loans from stockholders. The loans are due on
demand. 331,092 285,123
---------- ----------
Total Long-Term Debt 515,312 469,344
Less Current Portion 515,312 469,344
---------- ----------
Net Long-term Debt $ 0 $ 0
========== ==========
The long-term loans payable mature as follows:
May 31, 2003 515,312 469,344
---------- ----------
$ 515,312 $ 469,344
========== ==========
NOTE J - UNEARNED REVENUE
The Company has received a total of $100,000 in cash as a non-refundable,
good faith down payment for services that include delivery of a special
application of the DryIce software. Development of this software application
has not yet been completed, so the cash payment has been recorded as unearned
revenue.
See accompanying independent accountants' review report.
14
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE K - COST OF SALES
Included in the cost of sales are the following:
May 31, 2002 May 31, 2002
Shipping and handling costs $ 28 $ 109,190
Packaging costs 1,103 19,830
----------- -----------
Total $ 125,990 $ 125,990
Included in the cost of sales are the following:
August 31, 2002 May 31, 2002
_______________ ____________
Shipping and handling costs $ 0 $ 28
Packaging costs 0 1,103
------------ ------------
Total $ 0 $ 1,131
============ ============
Shipping income $ 2,696 $ 9,706
============ ============
NOTE L - COMMITMENTS AND CONTINGENCIES
The Company leases office facilities under an operating lease one which
expires on March 31, 2004 and one that expires June 30, 2003. The Company
leases its manufacturing facility under an operating lease which expired
June 30, 2002. Future minimum lease payments including sales tax as of
August 31, 2002 are:
Fiscal Years ending:
May 31, 2003 $ 34,379
May 31, 2004 31,700
May 31, 2005 0
-------
Total Minimum Lease Payments $ 66,079
Rent expense for the three month period ending August 31, 2002 and 2001 are
$19,705 and $12,665 respectively.
We are party to lawsuits in the normal course of our business. Litigation
can be expensive and disruptive to normal business operations; the results
of legal proceedings are difficult to predict. All of our cases were
settled with the exception of our dispute with Impact Imaging Inc.
On March 12, 2002 Impact Imaging, Inc. (III) filed suit in the United States
District Court for the District of Maryland to establish a temporary
restraining order preventing eCom eCom.com from selling myPicZip(TM) and
DryIce(TM) so long as these products use III software and technology. The
suit further demands that eCom eCom.com pay $250,000 plus interest, costs
and attorneys' fees for the February 4, 2002 delivery of myPicZip(TM).
See accompanying independent accountants' review report.
15
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE L - COMMITMENTS AND CONTINGENCIES (CONTINUED)
ECOM intends to defend itself against this suit. On May 20, 2002 ECOM filed a
counterclaim against III, alleging breach of contract, breach of warranty,
breach of implied covenant of good faith and fair dealing, fraud, and negligent
misrepresentation.
Four companies had similar suits of non-payment against either eCom eCom.com or
it's subsidiary USA Performance Products. Each of these suits were settled
during the fiscal year ending May 31, 2002.
Saeilo Manufacturing Industries filed a complaint against USA Performance
Products Inc. in the Fifteenth Judicial Circuit, Palm Beach County, FL, on
April 20, 2001. The complaint involved non-payment of $126,632.22 that Saeilo
contends has been due since April 10, 2001. USA Performance Products moved to
dismiss the case on the grounds that the claim is based upon an oral agreement
without any terms and conditions of the agreement. USA Performance Products
had only received delivery of $29,190.87 worth of products, which were
accounted for in both inventory and accounts payable as of May 31, 2001. This
case was settled on May 15, 2002 along with the following complaint from Renick
Enterprises Inc.
Renick Enterprises, Inc. filed a complaint against USA Performance Products and
eCom eCom.com, Inc. in the Fifteenth Judicial Circuit, Palm Beach County, FL on
April 30, 2001. The complaint involved non-payment of $180,865.22 for the
design of the Viper I Paintball Marker, including various re-designs, working
on advertising, and developing new products. Management contended that Renick
had not satisfactorily completed production of the product and had not
delivered the product to USA Performance Products Inc. USA Performance
Products had only received delivery of $16,574.75 worth of products, which was
accounted for in both inventory and accounts payable as of May 31, 2001.
On May 15, 2002 a settlement was reached with Saeilo Manufacturing Industries
and Renick Enterprises, Inc. As part of the settlement USAPP received cash,
notes receivable, inventory, and cancellation of the accounts payable, totaling
$127,493.59. USA Performance products gave up raw material located at both
Saeilo and Renick totaling $37,919. USAPP and Saeilo then entered into an
agreement where Saeilo would be allowed to manufacture a gun similar to the
Viper-M1 and USAPP would be able to purchase parts from Saeilo for use in its
Viper-M1.
National Paintball Supply, Inc. filed a complaint against USA Performance
Products and eCom eCom.com, Inc. in the State of South Carolina, Greenville
County Court of Common Pleas on May 14, 2001. The complaint alleged that an
amount of $85,743.35 is owed to the complainant. National Paintball Supply
handled paintball fulfillment requests for USA Performance products. USA
Performance Products contended that many requests for fulfillment were not
completed while some requests were shipped twice. USA Performance Products has
recorded a balance due of $69,373.36 as of May 31, 2001. As part of the SB-2
dated August 8, 2002, stock was registered to pay-off this debt. As of August
31, 2002 the stock was being held in an Attorney escrow account, waiting for
registration.
See accompanying independent accountants' review report.
16
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE L - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Lycos, Inc. filed a complaint against eCom eCom.com, Inc. in the State of
Massachusetts, United States District Court on November 13, 2001. The
complaint alleged that an amount of $159,500.00 plus attorneys' fees, costs and
interest is owed to the complainant. Lycos, Inc. provided advertising
impressions to eCom eCom.com on the Lycos Network. eCom eCom.com contended
that Lycos was advised that the contract was cancelled. The shares issued as
part of the SB-2 dated August 8, 2002 constitute full settlement of that suit.
The case will be voluntarily dismissed.
NOTE M - RELATED PARTY TRANSACTIONS
On January 10, 1998, the Company's Board of Directors approved an agreement
with Axis Enterprises, Ltd., a Bahamian corporation of Nassau, Bahamas, to
retain Axis for a period of three years to provide certain financing, marketing
and management services in support of the Company's subsidiary, USA Performance
Products, Inc. In exchange for performance of these services, Axis was granted
1,500,000 shares of common stock. The final marketing and management agreement
was executed on April 8, 1998. Derek D. Panaia, son of David J. Panaia, CEO of
the Company, was retained as a consultant to provide management oversight of
USAPP in connection with this agreement. In 1999, Axis loaned the Company
$296,000, and this indebtedness was reduced by $111,780 through the issuance of
150,000 shares of the Company's common stock. The Company is currently indebted
to Axis for $184,220.
The Company has received cash advances from David J. Panaia, Chairman and CEO
of the Company, in varying amounts and at various times subsequent to the
inception of the Company. These shareholder loans were non-interest bearing,
non-collateralized and due on demand.
On May 10, 2001, 1,286,359 shares of restricted stock were issued to Mr. Panaia
in return for cancellation of $437,362 ($.34 per share) of the debt owed to
him. The balance owed to Mr. Panaia at August 31, 2002 was $198,497.
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, 2002 is $25,000.
NOTE N - BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. The Company has three reportable segments:
paintball products, electronic commerce and sports memorabilia. The paintball
segment manufactures and distributes paintball guns and accessories. The
electronic commerce segment has provided an e-commerce infrastructure to
enable small businesses to expand to the Internet and is now focused on the
design and resale of software applications for compression and transmission
of large data files. The sports memorabilia segment acquires various signed
sports related items from individuals in the various professional leagues for
resale. The business related to this segment, Star Dot Marketing, was sold on
May 31, 2001.
See accompanying independent accountants' review report.
17
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE N - BUSINESS SEGMENTS (CONTINUED)
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. There have been no
intersegment sales or transfers. Revenues from sales of the Company's
paintball products over the Internet are reported within the paintball
segment.
The following is a summary of segment activity:
Electronic
Paintball Commerce Totals
---------- -------- -----------
August 31, 2002
- -----------------
Revenues $ 37,718 $ 3,057 40,775
Interest expense 169 2,318 2,487
Depreciation 5,786 5,477 11,263
Amortization - 5,062 5,062
Segment loss (18,202) (180,669) (198,871)
Segment assets 402,569 372,179 774,748
Three Months Ended:
August 31, 2001
- -----------------
Revenues $ 54,116 $ 812 $ 54,928
Interest revenue - 1,562 1,562
Interest expense 137 - 137
Depreciation 6,819 5,419 12,238
Amortization - 560 560
Segment loss (60,667) (651,427) (712,094)
Segment assets 366,460 129,325 495,785
NOTE O - 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 $425,338 at August 31, 2002 and that the
Company has incurred net operating losses since inception.
In April of 1999, the Company entered into a financing agreement with a third
party whereby the Company may sell to the third party and that third party must
buy, a number of the Company's shares of common stock, subject to restrictions
(the "Put Option"). The more salient of the restrictions under the Put Option
includes that the Company must first register the shares which may be subject
to the put, and the price and number of shares which may be put to the third
party in any 30 day period is dependent upon the Company's share price as
determined on the OTC Bulletin Board and volume of trading activity. On April
10, 2000 the Company filed a registration statement on Form S-1 with the
Securities and Exchange Commission.
See accompanying independent accountants' review report.
18
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
NOTE O - RECOVERABILITY OF ASSETS AND GOING CONCERN (CONTINUED)
The registration statement was declared effective by the Commission on April
28, 2000, which allows the Company to exercise its rights under the agreement.
The financing agreement was terminated in April 2002.
Without the private placement from Swartz Private Equity, LLC, eCom will have
to fund future software development and operations through product sales, asset
sales, shareholder loans and private sales of company stock. The sales of
MyPhotoZip began on July 31, 2002, the product was released with a 30 day free
trial. We anticipate sales volume to increase once the 30 day trial is over.
eCom is continuing to look for buyers for the USA Performance Products
division.
NOTE P - INCOME TAXES
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, 2002 was approximately
$6,064,000. These carry-forwards, which will be available to offset future
taxable income, expire beginning in 2010.
The Company does not believe that the realization of the related net deferred
tax asset meets the criteria required by generally accepted accounting
principles and, accordingly, the deferred income tax asset arising from such
loss carry forward has been fully reserved.
NOTE Q - EFFECTS OF INFLATION
To date, inflation has not had a material impact on the Company's
consolidated financial results.
NOTE R - RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 ("SAB 101"). SAB 101 summarizes certain areas
of the Staff's views in applying generally accepted accounting principles to
revenue recognition in financial statements. We adopted SAB 101 in our fiscal
quarter beginning June 1, 2000. The adoption of SAB 101 had no impact to our
operating results and financial position.
The FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS No. 133", as amended by SFAS No. 138). This statement
establishes accounting and reporting standards requiring that every derivative
instrument, including certain derivative instruments embedded in other
contracts, be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement also requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. We adopted SFAS No. 133 in our fiscal quarter
beginning June 1, 2000. The adoption of SFAS No. 133 had no impact to our
operating results and financial position, since we currently do not invest in
derivative instruments or engage in hedging activities. In July 2001, the FASB
issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and
See accompanying independent accountants' review report.
19
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2001 AND 2000
NOTE R - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Other Intangible Assets. These standards, among other things, eliminate the
pooling of interests method of accounting for future acquisitions and require
that goodwill no longer be amortized, but instead be subject to impairment
testing at least annually. SFAS No. 142 must be adopted in fiscal years
beginning after December 15, 2001 as of the beginning of the fiscal year.
Companies with fiscal years beginning after March 15, 2001 may early adopt
provided they have not yet issued their first quarter financial statements.
Goodwill and intangible assets acquired prior to July 1, 2001 will continue to
be amortized and tested for impairment in accordance with pre- SFAS No. 142
requirements until adoption of SFAS No. 142. Under the provision of SFAS No.
142, intangible assets with definite useful lives will be amortized to their
estimated residual values over those estimated useful lives in proportion to
the economic benefits consumed. Such intangible assets remain subject to the
impairment provisions of SFAS No. 121. Intangible assets with indefinite useful
lives will be tested for impairment annually in lieu of being amortized. The
Company's current yearly amortization of intangible assets is approximately $
21,067. 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.
NOTE S - PRIVATE EQUITY LINE
In April of 1999, the Company entered into a three-year agreement for a Private
Equity Line of Common Stock pursuant to Regulation D with Swartz Private
Equity, LLC for $30 million with a $20 million option.
For each Put, Swartz shall receive an amount of warrants equal to 8% of the
number of shares purchased under the Equity Line at an Exercise Price equal to
110% of the Closing Bid Price on the Put Date. Warrants shall have piggyback
registration rights and reset provisions.
As compensation to enter in to the Equity Line Commitment, Swartz received a
warrant convertible into 490,000 shares of eCom Common Stock. The Commitment
Warrants' exercise price shall equal the average closing bid price for the 5
trading days prior to execution of this Equity Line Letter of Intent. Warrants
shall have a 5-year term, piggyback registration rights and reset provisions.
The Company filed a registration statement on Form S-1 with the Securities and
Exchange Commission which was declared effective by the Commission on April 28,
2000, and which allowed the Company to exercise its rights under the agreement.
However, the Company could make no assurances that the market in the Company's
stock would remain adequate to allow the Company to raise necessary funds
through the use of the Put Option. The price and number of shares which could
be put to Swartz in any 30 day period was dependent upon the Company's share
price as determined on the OTC Bulletin Board and volume of trading activity.
The agreement ended in April 2002. As a result of a decline in the volume and
share price of the Company's stock during the period between execution of the
agreement and the declaration of effectiveness of the registration statement,
only minor amounts of funds were raised from use of the Private Equity Line.
See accompanying independent accountants' review report.
20
ECOM ECOM.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 2002 AND 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the accompanying
consolidated financial statements for the three-month periods ended August
31, 2002 and 2001 and the Form 10-KSB for the fiscal year ended May 31, 2002.
Special Note Regarding Forward-Looking Statements
Certain statements in this report and elsewhere (such as in other filings by
the Company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements. Factors that might cause or contribute to such differences
include, among others, competitive pressures, the growth rate of the
paintball industry and electronic commerce, constantly changing technology
and market acceptance of the Company's products and services. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
ECOM is the value-added reseller of proprietary software which we have named
MyPhotoZip(tm). MyPhotoZip(tm) software revolutionizes the compression,
storage, protection, transmission and use of large digital image files.
MyPhotoZip(tm) is capable of compressing electronic images to ratios previously
thought to be impossible. During the prior fiscal year, we recognized that the
market potential of this software and its applications far exceeded any other
opportunity available to us. We retooled our company's mission, the related
business model and our corporate structure to focus solely on development of
applications and markets for MyPhotoZip(tm) software.
Course corrections necessarily create some disruption, but we believe that our
company's transition is being accomplished as smoothly as possible. Our
original path taken at the beginning of the year centered around developing
software called DryIce(tm). This development of DryIce(tm) was progressing
until a dispute arose between ECOM and Impact Imaging Inc. of Baltimore MD.
This dispute is now being litigated in Maryland as discussed above in the
litigation section. Not to be deterred, a substitute developer of compression
technology was found. Our new developer Mevis Technology is working with ECOM
to develop MyPhotoZip(tm).
We have made significant progress during the current quarter in the
transition to implement the new business model. In July 2002 we announced
that Peter Tamayo, Jr. Ph.D. was appointed President and Chief Technology
Officer. On July 31, 2002 the company announced the initial launch of its
affiliate marketing program to sell MyPhotoZip.
21
Our company's reengineering dictated the need to sell or spin off all of our
non-software product lines. With the sale during last year of our 1-800-
PAINTBALL business and the Star Dot Marketing subsidiary, the only
significant revenue-generating product line left from our previous business
model was the Viper M1 paintball marker. As discussed below, our current
operating results reflect this temporary cessation of revenues. However, we
believe that the potential revenue and profit to be realized from our focus
on MyPhotoZip(tm) will confirm that the current lull in revenue generation is
a minor inconvenience.
Results of Operations
Comparison of the three months ended August 31, 2002 with the three months
ended August 31, 2001
Revenue for the three-month period ended August 31, 2001 was $40,775 compared
to $54,928 of revenue recorded during the same period of the prior year.
Current year revenues were recorded from sales of the Viper M1 paintball
marker and accessories and the initial sales of MyPhotoZip. Our USA
Performance Products subsidiary had entered into a proposed sale of the Viper
product line during February 2001. In order to comply with the terms of the
sales contract, all Viper inventory was taken out of production in preparation
for shipment during April 2001. The sale subsequently was canceled. We intend
to rebuild Viper sales volume in anticipation of the eventual sale of this
product line.
Gross profit improved from $(19,281) in the prior year period to $5,532 in
the current three month period. Amounts charged to cost of sales in the
prior year included costs associated with rebuilding our Viper M1 production
line.
The company continues to make improvements in cutting its operating costs.
Cost reduction was achieved in all major expense categories. Sales and
marketing expense dropped from $65,648 in the three months ended August 31,
2001 to $8,120 in the current three month period. Product development
expense was cut from $20,301 in the prior year period to $14,335 in the
current three month period. General and administrative costs dropped from
$608,326 in prior year to $174,398 in the current quarter. Most of this
cost savings was generated from a reduction in personnel and overhead.
Amortization expense increased from $650 to $5,062 as a result of increases
in intangible assets. During the current quarter, the company acquired the
rights to license Virtual Protect and Pandora from Internet Security
Solutions, Inc.. The company also acquired the rights to the www.fotocrazy.com
internet domain name. The fotocrazy.com web site will be an online digital
photo album site were customers will be able to store and share their pictures.
The company incurred net interest expense of $2,487 in the current quarter
compared to a net interest income of $2,112 in the prior year quarter. This was
primarily due to being able to invest the proceeds from the May, 31 2001 sale
of the 1-800-PAINTBALL name for $900,000.
Our operations for the three months ended August 31, 2002 resulted in a net
loss of $198,871, a $513,223 improvement over the net loss of $712,094
recorded during the three months ended August 31, 2001.
22
Liquidity and Capital Resources
At August 31, 2002, current assets totaled $495,234 compared to $349,160 at
the end of the prior fiscal year. Of the $146,074 increase in total current
assets, with prepaid assets accounting for $134,318 of the increase. On May
1, 2002 1,000,000 shares of common stock were issued to our attorney to pay
for future legal costs.
A decrease in cash of $50,352 and in inventories of $73,560 helped to reduce
accounts payable still remaining from our discontinued lines of business.
Accounts payable decreased $312,450 from August 31, 2001 to August 31, 2002.
Current liabilities fell from $997,157 at the end of the prior fiscal year
to $920,572 at the end of the current quarter, a decrease of $76,585. This
decrease was a result of our intention to minimize debt and strengthen our
balance sheet as we begin operations under the new business model. A $312,450
drop in accounts payable was offset by a $230,124 increase in stockholder
loans accounted for the reduction in current liabilities.
Net cash used in operating activities was $398,543 during the current three-
month period compared to $219,914 during the same period of the prior year.
The principal use of cash in both periods was to fund our net loss from
operations in addition to achieving a significant reduction in accounts
payable and other debt during the current period.
Investing activities provided $294,358 in cash during the prior years three-
month period compared to $15,000 for the current three-month period. During
the prior year period, $300,000 was received from collection of the note
receivable recorded from the sale of 1-800-PAINTBALL.
Financing activities provided net cash of $45,968 during the first three
months of the current year, consisting primarily of loans from stockholders.
Repayment of stockholder loans resulted in the use of cash in the amount of
$51,500 during the prior three-month period.
The Company continues to be reliant on the combination of revenues, loans from
stockholders and capital contributions to fund operations. The equity line
agreement that was established with Swartz Private Equity, LLC was scheduled
to end 36 months being registered on April 28, 2003. The agreement was
terminated on October 15, 2001 with a final sale of stock to Swartz to cover
the outstanding account payable due to Swartz of $77,000.
To the extent that additional funds are required to support operations or to
expand our business, we may sell additional equity, issue debt or obtain other
credit facilities through financial institutions. Any sale of additional
equity securities will result in dilution to our shareholders.
Until the Company obtains sufficient funds necessary to capitalize the growth
of its existing operations, expenditures required to increase revenues,
including advertising and promotion of compression software and Viper M1
paintball products, will be substantially limited. Should the Company be unable
to obtain continued funding, its operations may be adversely affected.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
We are party to lawsuits in the normal course of our business. Litigation can
be expensive and disruptive to normal business operations; the results of legal
proceedings are difficult to predict. All of our cases were settled with the
exception of our dispute with Impact Imaging Inc.
23
On March 12, 2002 Impact Imaging, Inc. (III) filed suit in the United States
District Court for the District of Maryland to establish a temporary
restraining order preventing eCom eCom.com from selling myPicZip(TM) and
DryIce(TM) so long as these products use III software and technology. The suit
further demands that eCom eCom.com pay $250,000 plus interest, costs and
attorneys' fees for the February 4, 2002 delivery of myPicZip(TM).
ECOM intends to defend itself against this suit. On May 20, 2002 ECOM filed a
counterclaim against III, alleging breach of contract, breach of warranty,
breach of implied covenant of good faith and fair dealing, fraud, and negligent
misrepresentation.
Four companies had similar suits of non-payment against either eCom eCom.com or
it's subsidiary USA Performance Products. Each of these suits were settled
during the fiscal year ending May 31, 2002.
Saeilo Manufacturing Industries filed a complaint against USA Performance
Products Inc. in the Fifteenth Judicial Circuit, Palm Beach County, FL, on
April 20, 2001. The complaint involved non-payment of $126,632.22 that Saeilo
contends has been due since April 10, 2001. USA Performance Products moved to
dismiss the case on the grounds that the claim is based upon an oral agreement
without any terms and conditions of the agreement. USA Performance Products
had only received delivery of $29,190.87 worth of products, which were
accounted for in both inventory and accounts payable as of May 31, 2001. This
case was settled on May 15, 2002 along with the following complaint from Renick
Enterprises Inc.
Renick Enterprises, Inc. filed a complaint against USA Performance Products and
eCom eCom.com, Inc. in the Fifteenth Judicial Circuit, Palm Beach County, FL on
April 30, 2001. The complaint involved non-payment of $180,865.22 for the
design of the Viper I Paintball Marker, including various re-designs, working
on advertising, and developing new products. Management contended that Renick
had not satisfactorily completed production of the product and had not
delivered the product to USA Performance Products Inc. USA Performance
Products had only received delivery of $16,574.75 worth of products, which was
accounted for in both inventory and accounts payable as of May 31, 2001.
On May 15, 2002 a settlement was reached with Saeilo Manufacturing Industries
and Renick Enterprises, Inc. As part of the settlement USAPP received cash,
notes receivable, inventory, and cancellation of the accounts payable, totaling
$127,493.59. USA Performance products gave up raw material located at both
Saeilo and Renick totaling $37,919. USAPP and Saeilo then entered into an
agreement where Saeilo would be allowed to manufacture a gun similar to the
Viper-M1 and USAPP would be able to purchase parts from Saeilo for use in its
Viper-M1.
National Paintball Supply, Inc. filed a complaint against USA Performance
Products and eCom eCom.com, Inc. in the State of South Carolina, Greenville
County Court of Common Pleas on May 14, 2001. The complaint alleged that an
amount of $85,743.35 is owed to the complainant. National Paintball Supply
handled paintball fulfillment requests for USA Performance products. USA
Performance Products contended that many requests for fulfillment were not
completed while some requests were shipped twice. USA Performance Products has
recorded a balance due of $69,373.36 as of May 31, 2001. As part of the SB-2
dated August 8, 2002, stock was registered to pay-off this debt. As of August
31, 2002 the stock was being held in an Attorney escrow account, waiting for
registration.
24
Lycos, Inc. filed a complaint against eCom eCom.com, Inc. in the State of
Massachusetts, United States District Court on November 13, 2001. The
complaint alleged that an amount of $159,500.00 plus attorneys' fees, costs and
interest is owed to the complainant. Lycos, Inc. provided advertising
impressions to eCom eCom.com on the Lycos Network. eCom eCom.com contended
that Lycos was advised that the contract was cancelled. The shares issued as
part of the SB-2 dated August 8, 2002 constitute full settlement of that suit.
The case will be voluntarily dismissed.
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
ITEM 5. Other Events.
None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- ----------------------- ------------------------------
27 Financial Data Schedule Filed herewith electronically
(b) Reports on Form 8-K:
None
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 4 and 5 of the
Company's Form 10-QSB for the quarter ended August 31, 2002, and is qualified
in its entirety by reference to such financial statements.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there under duly authorized.
eCom eCom.com, Inc.
October 21, 2001 By: /s/ David J. Panaia
David J. Panaia,
Chief Executive Officer
October 21, 2001 By: /s/ Richard C. Turner
Richard C. Turner,
Chief Financial Officer