1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
AMENDMENT NO. 1 TO
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
March 27th, 2000
- --------------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
eVentures Group, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-19435 75-2233445
(State or Other Jurisdiction of Commission File (I.R.S. Employer
Incorporation or Organization) Number Identification No.)
300 Crescent Court, Suite 800
Dallas, Texas 75201
- ---------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
214-777-4100
--------------------------------------------------
Registrant's telephone number, including area code
One Evertrust Plaza, 8th Floor
Jersey City, New Jersey 07302
- --------------------------------------------------------------------------------
(Former Name or former Address, if Changed Since Last Report)
2
ITEM 5. OTHER EVENTS.
This amendment to our Form 8-K amends Item 7 of our Form 8-K as filed on
March 27th, 2000 (the "Form 8-K").
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
On March 27th, 2000, we filed the Form 8-K to report the completion of our
acquisition of all of the outstanding shares of Internet Global Services, Inc.
We are now filing this Amendment No. 1 in order to file the financial
information required by Item 7 of Form 8-K.
(a) Financial Statements.
See Index to Financial Statements
(b) Pro Forma Financial Information.
See Index to Financial Statements
(c) Exhibits
None
1
3
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
eVentures Group, Inc.
May 12th, 2000
By /s/ STUART J. CHASANOFF
------------------------------
Name: Stuart J. Chasanoff
Title: Senior Vice President, Corporate Development and Legal Affairs
4
INDEX TO FINANCIAL STATEMENTS
PAGE
----
INTERNET GLOBAL SERVICES, INC.
Report of Independent Certified Public Accountants............... F-2
Financial Statements:
Balance Sheets............................................ F-3
Statements of Loss........................................ F-4
Statements of Stockholders' Equity (Deficit).............. F-5
Statements of Cash Flows.................................. F-7
Notes to Financial Statements.................................... F-8
eVENTURES GROUP, INC. AND CONSOLIDATED SUBSIDIARIES
Unaudited Pro Forma Balance Sheet P-1
Unaudited Pro Forma Statements of Operations P-3
F-1
5
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
Internet Global Services, Inc.
Dallas, Texas
We have audited the accompanying balance sheets of Internet Global Services,
Inc. at June 30, 1998 and 1999 and the related statements of loss, stockholders'
equity (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internet Global Services, Inc.
at June 30, 1998 and 1999 and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Dallas, Texas
April 21, 2000
F-2
6
INTERNET GLOBAL SERVICES, INC.
BALANCE SHEETS
June 30,
---------------------------- December 31,
ASSETS (NOTE 4) 1998 1999 1999
----------- ----------- -----------
(Unaudited)
Current Assets
Cash and cash equivalents ................................... $ 12,277 $ 390,821 $ 142,386
Accounts receivable, net of allowance of $65,000,
$23,000 and $95,638 (unaudited) ......................... 35,756 24,840 78,815
Prepaid expenses ............................................ 1,477 106,996 149,079
----------- ----------- -----------
Total Current Assets .................................... 49,510 522,657 370,280
----------- ----------- -----------
Property, plant and equipment, net (Note 3) ...................... 392,290 2,073,072 1,910,379
----------- ----------- -----------
Intangible assets, net (Note 1) .................................. 22,275 19,733 18,838
Funds in escrow (Note 11) ........................................ -- 281,928 281,928
Deposits ......................................................... 2,150 5,000 5,000
----------- ----------- -----------
Total Other Assets ...................................... 24,425 306,661 305,766
----------- ----------- -----------
TOTAL ASSETS ............................................ $ 466,225 $ 2,902,390 $ 2,586,425
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Convertible notes payable (Note 6) .......................... $ 150,000 $ -- $ --
Notes payable - related (Note 4) ............................ -- 66,500 316,704
Accounts payable ............................................ 97,507 153,856 1,178,292
Accrued liabilities ......................................... 37,300 311,401 370,261
Deferred revenue ............................................ 83,525 94,588 71,852
Current maturities of long-term debt (Note 4) ............... -- 203,556 664,785
Current maturities of capital lease obligations (Note 7) .... 24,375 1,055,850 1,448,391
----------- ----------- -----------
Total Current Liabilities ............................... 392,707 1,885,751 4,050,285
Long-term debt, less current maturities (Note 4) ................. -- 296,444 255,662
Capital lease obligations, less current maturities (Note 7) ...... 49,573 1,589,452 1,096,997
----------- ----------- -----------
Total Liabilities ....................................... 442,280 3,771,647 5,402,944
----------- ----------- -----------
Commitments (Note 7)
Stockholders' Equity (Deficit)
Preferred stock (Note 8) .................................... -- 165,000 --
Common stock (Note 8) ....................................... 2,568 2,666 2,794
Additional paid-in capital .................................. 1,702,364 3,207,675 4,190,347
Deficit ..................................................... (1,680,987) (4,244,598) (7,009,660)
----------- ----------- -----------
Total Stockholders' Equity (Deficit) .................... 23,945 (869,257) (2,816,519)
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) .... $ 466,225 $ 2,902,390 $ 2,586,425
=========== =========== ===========
See accompanying notes to financial statements.
F-3
7
INTERNET GLOBAL SERVICES, INC.
STATEMENTS OF LOSS
Years Ended Six Months Ended
June 30, December 31,
---------------------------- ----------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
(Unaudited)
Revenues ............................... $ 1,282,744 $ 1,445,907 $ 715,454 $ 753,610
Direct Costs ........................... 626,044 1,315,423 488,636 1,262,128
----------- ----------- ----------- -----------
Gross Profit ........................... 656,700 130,484 226,818 (508,518)
Selling, General and Administrative .... 1,762,251 2,703,838 802,472 2,142,062
----------- ----------- ----------- -----------
Net operating loss ................ (1,105,551) (2,573,354) (575,654) (2,650,580)
Other income (Note 12) ................. 8,887 443,632 -- --
Other expenses (Note 11) ............... (10,051) (433,889) (441,767) (114,482)
----------- ----------- ----------- -----------
Loss before taxes ................. (1,106,715) (2,563,611) (1,017,421) (2,765,062)
Income taxes (Note 5) .................. -- -- -- --
----------- ----------- ----------- -----------
Net loss ............................... $(1,106,715) $(2,563,611) $(1,017,421) $(2,765,062)
=========== =========== =========== ===========
See accompanying notes to financial statements.
F-4
8
INTERNET GLOBAL SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock Common Stock Additional
------------------------- ------------------------- Paid-In
Shares Amount Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
JULY 1, 1997 .................. -- $ -- 3,437,934 $ 1,718 $ 1,032,213 $ (574,272) $ 459,659
Net loss ...................... -- -- -- -- -- (1,106,715) (1,106,715)
Shares issued for cash ........ -- -- 1,484,832 742 245,259 -- 246,001
Shares issued for services .... -- -- 212,500 108 424,892 -- 425,000
----------- ----------- ---------- ----------- ----------- ----------- ------------
JUNE 30, 1998 ................. -- -- 5,135,266 2,568 1,702,364 (1,680,987) 23,945
Net loss ...................... -- -- -- -- -- (2,563,611) (2,563,611)
Preferred shares issued ....... 33,000 165,000 -- -- -- -- 165,000
Shares issued for cash ........ -- -- 635,470 318 1,075,246 -- 1,075,564
Options and warrants issued for
services ................. -- -- -- -- 431,739 -- 431,739
Shares redeemed ............... -- -- (439,184) (220) (1,674) -- (1,894)
----------- ---------- ---------- ----------- ----------- ----------- ------------
JUNE 30, 1999 ................. 33,000 165,000 5,331,552 2,666 3,207,675 (4,244,598) (869,257)
Net loss (unaudited) .......... -- -- -- -- -- (2,765,062) (2,765,062)
Shares issued for cash
(unaudited) .......... -- -- 184,444 92 487,708 -- 487,800
Preferred shares converted
(unaudited) .......... (33,000) (165,000) 72,600 36 164,964 -- --
Options issued for services
(unaudited) .......... -- -- -- -- 330,000 -- 330,000
----------- ---------- ---------- ---------- ----------- ----------- ------------
DECEMBER 31, 1999
(UNAUDITED).... ...... -- $ -- 5,588,596 $ 2,794 $4,190,347 $(7,009,660) $ (2,816,519)
=========== ========== ========= ========== =========== =========== ============
See accompanying notes to financial statements.
F-5
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10
INTERNET GLOBAL SERVICES, INC.
STATEMENTS OF CASH FLOWS
Years Ended Six Months Ended
June 30, December 31,
-------------------------- --------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
(Unaudited)
Cash Flows from operating activities:
Net loss ......................................... $(1,106,715) $(2,563,611) $(1,017,421) $(2,765,062)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization .................... 210,122 551,448 119,178 536,064
Amortization on intangibles ...................... 1,863 2,543 1,648 895
Provision for doubtful accounts .................. 45,356 -- -- --
Issuance of common stock and options for
services ..................................... 425,000 431,739 240,399 330,000
Loss on disposal of assets ....................... 6,852 -- -- --
Loss from theft of assets (Note 11) .............. -- 432,572 432,572 --
Changes in assets and liabilities:
Accounts receivable .......................... (60,280) 10,916 8,187 (53,975)
Prepaid expenses ............................. -- (105,519) (111,374) (42,083)
Accounts payable and accrued liabilities ..... 67,819 345,450 (33,428) 1,083,296
Deferred revenue ............................. 36,611 11,064 4,875 (22,737)
----------- ----------- ----------- -----------
Net cash used in operating activities ............ (373,372) (883,398) (355,364) (933,602)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of equipment ............................ (286,956) (332,260) (6,621) (50,003)
Other ............................................ 1,834 (2,851) 2,563 --
----------- ----------- ----------- -----------
Net cash used in investing activities ............ (285,122) (335,111) (4,058) (50,003)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock ........... 245,929 1,073,670 103,675 487,800
Proceeds from note payable - related party ....... -- 66,500 72,360 250,204
Proceeds from convertible notes payable .......... 150,000 -- -- --
Proceeds from long-term debt ..................... -- 500,000 250,000 420,448
Payments on capital lease obligations ............ (22,756) (43,117) (14,560) (423,282)
----------- ----------- ----------- -----------
Net cash provided by financing activities ........ 373,173 1,597,053 411,475 735,170
----------- ----------- ----------- -----------
Increase (Decrease) in cash ........................... (285,321) 378,544 52,053 (248,435)
Cash, beginning of year ............................... 297,598 12,277 12,277 390,821
----------- ----------- ----------- -----------
Cash, end of year ..................................... $ 12,277 $ 390,821 $ 64,330 $ 142,386
=========== =========== =========== ===========
See accompanying notes to financial statements.
F-6
11
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
Internet Global Services, Inc. (the "Company") was incorporated in the
state of Texas in 1996. The Company, based in Dallas, Texas aggregates
communications technologies that utilize and integrate voice, data, and video.
In 1998, the Company created Telares, the country's largest revenue-sharing
consortium of independent ISPs, providing a broad range of communication
services to independent ISPs including DSL, long distance, virtual ISP services,
video streaming, unified messaging, prepaid calling cards and other value-added
services.
During March 2000, the Company completed a series of equity transactions
thereby becoming a wholly owned subsidiary of eVentures Group, Inc. (see Note
13).
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of December 31, 1999 and for the
six months ended December 31, 1998 and 1999 are unaudited, and have been
prepared on the same basis as the audited financial statements included herein.
In the opinion of management, such unaudited financial statements include all
adjustments consisting of normal recurring accruals necessary to present fairly
the information set forth therein. Results for interim periods are not
indicative of results to be expected for an entire year.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents are carried at cost, which approximates fair market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method based upon the estimated useful
lives of the assets as follows:
Office equipment and software........................3 years
Computer equipment under capital lease........ 2 to 3 years
Leasehold improvements..........................3 to 5 years
Furniture and fixtures...............................5 years
Vehicles.............................................5 years
The Company periodically reviews the carrying value of property and
equipment for possible impairment. In management's opinion, there is no
impairment of such assets at June 30, 1999.
F-7
12
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
INTANGIBLE ASSETS
Intangible assets, primarily goodwill, relate to purchase transactions
and are amortized on a straight-line basis over 15 years. As of June 30, 1998
and 1999, accumulated amortization was $3,344 and $5,887, respectively. On a
periodic basis, the Company estimates the future undiscounted cash flows of the
business to which goodwill relates in order to ensure that the carrying value of
goodwill has not been impaired. In management's opinion, there is no impairment
of such assets at June 30, 1998 and 1999.
REVENUE RECOGNITION
Revenue Recognition - Revenues from subscription services as an
internet service provider are recognized over the period that the service is
provided. Other revenues, which consist of web design and hosting services are
recognized as the services are performed. Deferred revenue consists primarily of
prepaid subscription fees billed in advance.
ADVERTISING
The Company expenses all costs of advertising as incurred. Included in
selling, general and administrative expense are advertising expenses of
approximately $27,000 and $32,000 for the years ended June 30, 1998 and 1999,
respectively.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The net deferred tax assets
and liabilities represent the future tax consequences of those differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled.
COMPREHENSIVE INCOME
The Company has adopted the accounting treatment prescribed in
Financial Accounting Statement No. 130, "Comprehensive Income." The adoption of
the statement had no impact on the Company's financial statements for the
periods presented, as net loss equals comprehensive loss.
SEGMENT DISCLOSURES
In fiscal 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) 131, "Disclosures about Segments of an Enterprise and Related
Information". The adoption of SFAS 131 did not affect results of operations,
financial position or disclosure of segment information as management believes
they are one operating segment, as defined by SFAS 131.
STOCK-OPTIONS
The Company has elected to account for stock-based compensation to
employees using the intrinsic value method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related Interpretations. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market value of the Company's stock
at the date of the grant over
F-8
13
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
the amount an employee must pay to acquire the stock. See Note 9 regarding the
pro forma net loss information as required by the alternative fair value
accounting provided for under Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123).
MANAGEMENT'S ESTIMATES AND ASSUMPTIONS
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 reported
periods. Actual results could differ from those estimates. The Company reviews
all significant estimates affecting the financial statements on a recurring
basis and records the effect of any necessary adjustments prior to their
issuance.
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
The Company's financial instruments, consisting of cash, accounts
receivable, accounts payable, and long term debt, are reflected at their
respective carrying values, which approximates fair values. Unless otherwise
noted, it is management's opinion that the Company is not exposed to significant
interest, currency and credit risks arising from these financial instruments.
The Company maintains its cash in bank deposit and money market
accounts which, at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts and believes it is not exposed to
any significant credit risks on cash.
All of the sales of the Company are to customers located in North
America. The Company experienced no significant exchange restrictions related to
consolidated foreign subsidiaries.
NEW ACCOUNTING STANDARDS
In July 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities.",
which establishes accounting and reporting standards for derivative instruments
and hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. Management does not believe this will have a material effect on
the operations. Implementation of this standard has recently been delayed by the
FASB for a 12-month period through the issuance of SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - deferral of the effective date
of FASB Statement No. 133". The Company will adopt SFAS 133 as required for its
first quarterly filing of fiscal year 2001.
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With
Respect to Certain Transactions" was issued in December 1998 and addresses
software revenue recognition as it applies to certain multiple-element
arrangements. SOP 98-9 also amends SOP 98-4, "Deferral of the Effective Date of
a Provision of SOP 97-2", to extend the deferral of application of certain
passages of SOP 97-2 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. Complying with the requirements of
this SOP has not had a material effect on the Company's revenues and earnings.
F-9
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INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes
certain of the SEC's views in applying generally accepted accounting principles
to revenue recognition in financial statements. It is effective for the first
fiscal quarter beginning after December 15, 1999. The Company does not expect
the adoption of SAB No. 101 to have a material effect on its results of
operations or financial condition.
NOTE 2 - FINANCIAL CONDITION
The Company has sustained substantial operating losses during 1998 and
1999. The Company's core business during those years was as an internet service
provider. Early in fiscal 1998, the Company commenced development of a voice
over Internet protocol strategy through the development of a national voice
network to provide to customers of independent internet service providers
various telecommunication services. During 1998 and 1999, this change in core
strategy placed a significant strain on the Company's financial resources.
During 1998 and 1999, the Company was able to raise private equity and senior
debt to fund operating and development losses.
In fiscal 2000, the Company has continued to raise private equity and
was acquired on March 10, 2000 (see Note 13).
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
Years Ended
June 30,
---------------------------
1998 1999
---------- -----------
Computer equipment under capital lease ..................... $ 121,844 $ 2,021,814
Equipment and software ..................................... 619,654 791,346
Leasehold improvements ..................................... 2,132 82,422
Office furniture and fixtures .............................. 6,856 44,509
Vehicles ................................................... -- 7,804
---------- -----------
750,486 2,947,895
Less: Accumulated depreciation and
amortization .......................................... 358,196 874,823
---------- -----------
$ 392,290 $ 2,073,072
========== ===========
The Company's depreciation and amortization expense for computer
equipment under capital lease obligations for the years ended June 30, 1998 and
1999 totaled $31,753 and $351,576, respectively.
NOTE 4 - NOTES PAYABLE
In December 1998, in connection with equipment leasing arrangements,
the Company signed a $750,000 secured promissory note with a supplier of
communications equipment. This note is collateralized by essentially all assets
of the Company and bears interest at a rate of 9%. Initial advances under the
note allow for two months of deferred payments, followed by six months of
interest only payments. After the initial deferral periods the note is payable
in 24 equal installments of principal and interest. At June 30, 1999, the
principal amount outstanding under this note payable is $500,000. Amounts due
under this promissory note were subsequently paid in full (see Note 12).
F-10
15
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
In November 1998, the Company entered into an oral agreement with a
shareholder to borrow $66,500. This unsecured borrowing bears interest at 6.5%
interest annually. No repayment terms were specified in the agreement.
Subsequent to June 30, 1999 the shareholder agreed to accept payment of
principal and interest in the form of common shares of the Company.
NOTE 5 - INCOME TAXES
The income tax benefit was as follows:
Years Ended
June 30,
-------------------------
1998 1999
--------- ---------
Current tax benefit .............................. $ 217,000 $ 607,000
Deferred tax benefit ............................. 31,000 186,000
Valuation allowance .............................. (248,000) (793,000)
--------- ---------
Total tax benefit ........................... $ -- $ --
========= =========
Deferred taxes are determined based on temporary differences between
the financial statement and income taxes bases of assets and liabilities as
measured by the currently enacted tax rates.
Net deferred income tax asset (liability) consisted of the following:
June 30,
-----------------------------
1998 1999
----------- -----------
Net operating loss carryforwards ................................ $ 375,000 $ 981,000
Accrued lease payments .......................................... -- 28,000
Deferred compensation ........................................... -- 40,000
Deferred rent ................................................... -- 7,000
Allowance for doubtful accounts ................................. 22,000 8,000
Capital lease liability ......................................... 25,000 899,000
Deferred revenues ............................................... 28,000 32,000
----------- -----------
Deferred tax asset .............................................. 450,000 1,995,000
Valuation allowance ............................................. (433,000) (1,226,000)
----------- -----------
Net deferred tax asset .......................................... 17,000 769,000
Deferred tax liability - capital lease equipment ................ (17,000) (769,000)
----------- -----------
Net deferred income tax asset ................................... $ -- $ --
=========== ===========
Utilization of the deferred tax asset is dependent on future taxable
profits in excess of profits arising from existing taxable temporary
differences. Because the Company sustained a substantial operating losses in the
past and the Company changed ownership subsequent to year end, Management does
not believe it is more likely than not that the deferred tax assets will be
utilized in the foreseeable future, accordingly, the Company establish a 100%
valuation allowance on their deferred tax asset.
F-11
16
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
The income tax benefit differs from the amount of income tax benefit
determined by applying the statutory income tax rate to pre-tax loss as follows:
Years Ended
June 30,
--------------------
1998 1999
-------- -------
Statutory rate .................................................. $ 34% $ 34%
Increase in valuation allowance ................................ (32)% (33)%
Other - net ..................................................... (2)% (1)%
---- ----
$ -- $ --
==== ====
As of June 30, 1999, the Company has net operating loss carryforwards
of approximately $2,886,000, which expire in years through 2019.
NOTE 6 - CONVERTIBLE NOTES PAYABLE
In April 1998, the Company issued Convertible Notes Payable in the
amount of $150,000, bearing interest at 10% and maturing within one year. These
notes, and accrued interest, were convertible into Class A 5% Preferred Shares
at $5.00 per share, with the subsequent right to acquire additional preferred
shares. During fiscal 1999 the Convertible Notes Payable were converted to
preferred shares as specified (see Note 8).
NOTE 7 - COMMITMENTS
CAPITAL LEASES
The Company leases certain equipment under capital leases expiring in
various years through June 30, 2002. The assets and liabilities under capital
leases are recorded at the lower of the net present value of the future minimum
lease payments or the fair value of the asset. The assets are amortized over the
lower of their related lease terms or their estimated productive lives.
Amortization of assets under capital leases is included in depreciation expense
for 1999.
Minimum future lease payments under capital lease as of June 30, 1999,
and for each of the next five years and in the aggregate are:
Amount
-----------
2000 ............................................................ $ 1,251,294
2001 ............................................................ 1,421,290
2002 ............................................................ 243,770
2003 ............................................................ 14,302
2004 ............................................................ 1,192
-----------
Total minimum lease payments .................................... 2,931,848
Less amount representing interest ............................... 286,546
-----------
Present value of net minimum lease payments ..................... 2,645,302
Less current maturities ......................................... 1,055,850
-----------
Total long-term obligations under capital leases ................ $ 1,589,452
===========
F-12
17
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
OPERATING LEASES
The Company has various noncancellable operating leases, primarily for
office space. Lease expense for years ended June 30, 1998 and 1999 was $37,000
and $68,000, respectively.
Future minimum least payments are as follows:
Amount
---------
2000 ............................................................ $ 91,579
2001 ............................................................ 131,807
2002 ............................................................ 125,829
2003 ............................................................ 131,280
2004 ............................................................ 128,358
Thereafter ...................................................... 9,604
---------
Total ........................................................... $ 618,457
=========
NOTE 8 - CAPITAL ACCOUNTS
Preferred Stock - During 1999 the Company issued 33,000 shares of Class
A 5% Preferred Shares in connection with conversion of outstanding Convertible
Notes Payable. Theses shares, redeemable at the discretion of the Company, were
convertible into Common Stock of the Company at 110% of the number of preferred
shares held. See Note 6. Additionally the preferred shareholders were awarded
the right to purchase additional shares in the amount of 50% of the preferred
shares converted, at a price of $10 per share. Subsequent to year-end the
preferred shareholders converted the preferred shares to common shares and
exercised their right to purchase the additional shares allotted.
Capital Stock - On May 28, 1999, by resolution of the shareholders, the
Company effected a two-for-one stock split increasing the authorized common
shares from 10,000,000 to 20,000,000 and decreasing the par value of common
shares from $.001 to $.0005. At June 30, 1998 and 1999, the Company's $.0005 par
value stock included 5,331,552 and 5,135,266 shares issued and outstanding,
respectively, after retroactively reflecting the effect of the stock split.
During 1998 the Company issued 1,484,832 shares of common stock for
cash, including 657,416 shares issued for nominal value pursuant to a court
order settling litigation among the co-founders of the Company regarding shares
that were to have been issued at the inception of the Company. Also during 1998
the Company issued 212,500 shares valued at $425,000 to employees in exchange
for services.
During 1999 the Company issued 635,470 shares of common stock for cash
and redeemed 439,184 shares of common stock pursuant to agreements with
stockholders and former owners.
F-13
18
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - STOCK OPTIONS AND WARRANTS
(a) EMPLOYEE
In June 1998, the Board of Directors adopted and approved the 1998 Equity
Incentive Plan ("the Plan"). The Plan provides for the grant of incentive stock
options to purchase shares. Under the Plan, the Company is authorized to grant
2,800,000 shares. The exercise price of stock options granted must not be less
than 100% of fair market value of the common stock on the date of grant, as
determined by the Board of Directors. Options generally expire 5 years from the
date of grant and are vested and exercisable one year from the date of grant.
Options available for grant at June 30, 1999 represented 1,458,000 shares. At
June 30, 1999, 524,564 options outstanding were vested.
A summary of the stock option activity for the years ended June 30, 1998
and 1999 is as follows:
1998 1999
-------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
---------- ---------- ---------- ----------
Outstanding at beginning
of year ................. -- $ -- 524,564 $ 2.00
Granted ...................... 524,564 2.00 817,350 2.00
Exercise ..................... -- -- -- --
Forfeited .................... -- -- -- --
---------- ---------- ---------- ----------
Outstanding at end of year ... 524,564 $ 2.00 1,341,914 $ 2.00
========== ========== ========== ==========
Options exercisable at
year end ................ -- $ -- 524,564 $ 2.00
========== ========== ========== ==========
Weighted average fair
value of options
granted during the
year .................... $ .50 $ .50
========== ==========
The following table summarizes information about stock options outstanding
as of June 30, 1999:
Number
Outstanding Weighted-Average
Exercise Prices at 6/30/99 Exercise Price
--------------- ----------- ----------------
$2.00 1,341,914 $2.00
The Company applied APB Opinion 25 and related interpretations in
accounting for the above plan. Accordingly, no compensation cost has been
recognized for its plan during fiscal 1999. The fair value of each option grant
was estimated on the date of grant using the Black-Scholes option-pricing model
F-14
19
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
with the following assumptions: risk-free interest rate of 5.5%, expected life
of five years; volatility of 0%; and dividend yield of 0%.
Pro forma disclosures of the effects of the Plan on the years ended June
30, 1998 and 1999:
1998 1999
---------- ----------
Net income .................. As reported (735,000) (2,564,000)
Pro forma (735,000) (3,019,000)
Compensation expense of $127,500 was recorded during 1999 in connection
with 85,000 options issued to a member of management under a separate employment
agreement.
(b) NON EMPLOYEES
During 1999 the Board of Directors authorized the issuance to outside Board
members options to purchase common stock totaling 404,388. In December 1999, in
connection with a secured promissory note with a supplier of communications
equipment, the Company issued warrants to purchase 107,143 shares of common
stock. In addition, the Company issued warrants to purchase 6,000 shares of
common stock to a consulting group during 1999. As a result of the above, the
Company recognized expense of $224,000 and recorded deferred financing costs of
$80,000.
NOTE 10 - SUPPLEMENTAL CASH FLOW
For the years ended June 30, 1998 and 1999, the Company paid interest
totaling approximately $43,000 and $104,000, respectively.
For the years ended June 30, 1998 and 1999, the Company acquired computer
equipment under capital leases totaling $40,377 and $2,614,470, respectively.
The Company exchanged notes payable and accrued interest of $150,000 and
$15,000, respectively, for preferred stock totaling $165,000 during year ended
June 30, 1999.
NOTE 11 - THEFT LOSS
In or around November 1998, the Company entered into an equipment lease
with a provider of communications equipment ("Lessor"), pursuant to which the
Company received possession of approximately $2.5 million of communications
equipment. On December 4, 1998, 90 items of this equipment, having a total value
of $714,000, were stolen from one of the Company's network operating centers.
The Company asserted a claim against its insurance carrier ("Insurer"), for
the full amount of the loss. In April 1999, after an investigation involving a
number of statements under oath by Company employees, Insurer denied the claim
in part, and issued a check to the Company in the amount of $282,000 to cover
the approved portion of the claim. That check was endorsed by both the Company
and Lessor and deposited into a trust account held by the Company's attorney.
Insurer's partial denial left an outstanding claim of $432,000. This amount is
included in other expenses in the Statement of Loss.
F-15
20
INTERNET GLOBAL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 12 - OTHER INCOME
During fiscal 1999, the Company was offered an incentive to move one of its
network operating centers from a building owned by Southwestern Bell Telephone
("SWB"). Under an agreement with SWB the Company was paid $497,000 to relocate
the network operating center. The relocation fee, net of relocation expenses, of
$440,000 is included in other income in the Statement of Loss.
NOTE 13 - SUBSEQUENT EVENTS
During July and September 1999, the Company leased equipment valued at
approximately $320,000 from various suppliers under capital leases.
During October 1999, the Company borrowed $75,000 from a third party. This
amount was subsequently repaid.
During November 1999, the Company signed a promissory note with the founder
and chairman in exchange for financing of $245,000.
During December 1999, the Company entered into a Bridge Loan Facility with
eVentures, which allowed for financing up to $1,500,000. The Company
subsequently made draws of $1,250,000 and repayments of $500,000 in connection
with this financing.
During February 2000, the Company entered into an agreement with a separate
supplier of communications equipment to provide financing of up to $12,000,000.
From this financing the Company made draws of approximately $1,780,000 for the
purchase of communications equipment and $500,000 for working capital. Amounts
owed to the previous equipment supplier were paid in full.
Effective March 10, 2000, eVentures Group, Inc., in a series of
transactions, exchanged 2,551,087 shares of its common stock for 100% of the
issued and outstanding shares of the Company. As a result of these transactions,
the Company became a wholly owned subsidiary of eVentures Group, Inc.
NOTE 14 - UNCERTAINTY DUE TO THE YEAR 2000 ISSUE (UNAUDITED)
Like other companies, the Company could be adversely affected if the
computer systems the Company, its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the "Year
2000" or "Y2K" issue. Additionally, this issue could impact non-computer systems
and devices such as production equipment, elevators, etc. While the Company's
project to assess and correct Y2K related issues regarding the year 2000 has
been completed, and the Company has not experienced any significant Y2K related
events, interactions with other companies' systems make it difficult to conclude
there will not be future effects. Consequently, at this time, management cannot
provide assurances that the Year 2000 issue will not have an impact on the
Company's future operations. Since January 1, 2000 through April 21, 2000, the
Company has had no material impact from the Y2K issue.
F-16
21
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
The following unaudited pro forma consolidated balance sheet (the
"Unaudited Pro Forma Consolidated Balance Sheet") has been derived from the
application of pro forma adjustments to eVentures' consolidated historical
balance sheet as of December 31, 1999 included in the Form 10/A filed on March
8, 2000.
The Unaudited Pro Forma Consolidated Balance Sheet gives effect to the
purchase of 100% of Internet Global Services, Inc.("iGlobal"), which occurred on
March 10, 2000, as if the purchase occurred on December 31, 1999. The pro forma
adjustments are described in the accompanying notes. There are no adjustments
pertaining to the acquisitions of e.Volve, eVentures and AxisTel, since these
events were already reflected in the historical balance sheet at December 31,
1999.
The Unaudited Pro Forma Consolidated Balance sheet is presented for
informational purposes only and does not purport to represent what eVentures'
financial position would actually have been if the aforementioned event had
occurred on the date specified or to project eVentures's financial position at
any future date. The Unaudited Pro Forma Consolidated Balance sheet should be
read in conjunction with eVentures' consolidated historical financial
statements, and the notes thereto, included in the Form 10/A filed on March 8,
2000.
P-1
22
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999
MARCH 10, 2000 EVENT
-------------------------------------
ASSETS (1)
HISTORICAL iGLOBAL ADJUSTMENTS PRO FORMA
--------------- --------------- --------------- ---------------
Current Assets
Cash and cash equivalents $ 6,269,893 $ 142,386 $ (239,000)(4) $ 7,524,279
-- -- 1,351,000(2) --
Accounts receivable 1,574,165 78,815 -- 1,652,980
Other receivables 63,124 -- -- 63,124
Prepaid expenses and other 136,814 149,079 -- 285,893
Deposits 603,752 -- -- 603,752
VAT receivable 1,781,354 -- -- 1,781,354
--------------- --------------- --------------- ---------------
10,429,102 370,280 1,112,000 11,911,382
--------------- --------------- --------------- ---------------
Long-term Assets
Restricted cash 750,000 281,928 -- 1,031,928
Property and equipment, net 12,880,498 1,910,379 -- 14,790,877
Investments 2,758,531 -- -- 2,758,531
Goodwill, net 30,695,787 18,838 79,865,603(3) 110,819,228
239,000(4)
Other 521,800 5,000 526,800
--------------- --------------- --------------- ---------------
47,606,616 2,216,145 80,104,603 129,927,364
--------------- --------------- --------------- ---------------
$ 58,035,718 $ 2,586,425 $ 81,216,603 $ 141,838,746
=============== =============== =============== ===============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 4,228,708 $ 1,178,292 $ -- $ 5,407,000
Accrued other 1,423,101 370,261 -- 1,793,362
Accrued interest payable 569,042 -- -- 569,042
Customer deposits and deferred revenues 634,532 71,852 -- 706,384
Notes payable 26,875 981,489 -- 1,008,364
Capital leases, current portion 2,937,621 1,448,391 -- 4,386,012
--------------- --------------- --------------- ---------------
9,819,879 4,050,285 -- 13,870,164
--------------- --------------- --------------- ---------------
Long-term Liabilities
Debentures -- 255,662 -- 255,662
Capital leases, net of current portion 5,250,370 1,096,997 -- 6,347,367
--------------- --------------- --------------- ---------------
5,250,370 1,352,659 -- 6,603,029
--------------- --------------- --------------- ---------------
Stockholders' Equity
Common stock 917 2,794 (2,743)(3) 968
Preferred stock -- -- -- --
Additional paid-in capital 64,339,007 4,190,347 2,400,000(2) 143,788,040
(2,400,000)(3) --
79,449,033(3) --
(4,190,347)(3) --
Accumulated deficit (19,284,726) (7,009,660) 7,009,660(3) (19,284,726)
Deferred compensation (2,089,729) -- -- (2,089,729)
Notes Receivable from stockholders -- -- (1,049,000)(2) (1,049,000)
--------------- --------------- --------------- ---------------
42,965,469 (2,816,519) 81,216,603 121,365,553
--------------- --------------- --------------- ---------------
$ 58,035,718 $ 2,586,425 $ 81,216,603 $ 141,838,746
=============== =============== =============== ===============
(1) Reflects the consolidation of iGlobal's balance sheet as of December 31,
1999.
(2) Reflects the exercise of employee stock options and purchase of iGlobal
shares prior to the acquisition.
(3) Represents the purchase of 100% of iGlobal for 2,551,087 shares of the
Company at $29.00 per share, which is the closing stock price on March 8,
2000, the first date the acquisition was announced plus a valuation of
$5,467,561 for the stock options issued in consideration for the vested
stock options of iGlobal.
(4) Reflects the Professional fees incurred in connection with the iGlobal
acquisition.
P-2
23
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following unaudited pro forma consolidated statements of operations
(the "Unaudited Pro Forma Consolidated Statements of Operations") have been
derived from the application of pro forma adjustments to eVentures'
consolidated historical audited statements of operations for the year ended
June 30, 1999 and the unaudited historical statement of operations for the six
months ended December 31, 1999 included in the Form 10/A filed on March 8,
2000.
The Unaudited Pro Forma Consolidated Statements of Operations give effect
to the acquisition of AxisTel, the acquisition of the remaining 33.3% of
e.Volve, and the purchase of 100% of iGlobal as if each had occurred on July 1,
1998. There is no adjustment to minority interest relative to the purchase of
the remaining 33.3% of e.Volve since 100% of the losses were already recorded in
the historical financial statements. The pro forma adjustments are described in
the accompanying notes.
The Unaudited Pro Forma Consolidated Statements of Operations are presented
for informational purposes only and do not purport to represent what eVentures'
results of operations would actually have been if the aforementioned events had
occurred on the date specified or to project eVentures's results of operations
for any future periods. The Unaudited Pro Forma Consolidated Statements of
Operations should be read in conjunction with eVentures' consolidated historical
financial statements, and the notes thereto, included in the Form 10/A filed on
March 8, 2000.
P-3
24
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1999
SEPTEMBER 22, 1999 EVENTS PURCHASE OF
------------------------------------------ THE REMAINING
(1) 33.3% OF
HISTORICAL AXISTEL ADJUSTEMTS e.VOLVE
------------ ------------ ----------- ------------
Revenues $ 27,248,273 $ 7,967,643 $ -- $ --
Direct costs 23,311,584 6,997,133 -- --
------------ ------------ ------------ ------------
Gross profit 3,936,689 970,510 -- --
Selling, general & administrative
expenses 7,551,131 2,309,538 1,213,997(2) 1,166,251(7)
450,000(3)
------------ ------------ ----------- ----------
Less from operations, before
other (income) expense (3,614,442) (1,339,028) (1,663,997) (1,166,251)
Other (income) expense
Interest expense, net 1,704,459 285,457 (555,574)(4) --
Equity in loss of affiliate 33,776 -- (958,667)(5) --
Foreign currency (gain) loss 126,575 -- -- --
Debt discount -- -- 2,000,000 (6) --
Other (16,930) 100,000 -- --
------------ ------------ ------------ -----------
1,847,880 385,457 483,759 --
------------ ------------ ------------ -----------
Net loss before provision for taxes (5,462,322) (1,724,485) ( 2,147,756) (1,166,251)
Provision for taxes -- 300 -- --
------------ ------------ ------------
Net loss $ (5,462,322) $ (1,724,785) $ (2,147,756) $ (1,166,251)
============ ============ ============ ===========
MARCH 10, 2000 EVENT
------------------------------
(8)
iGLOBAL ADJUSTMENTS PRO FORMA
------------- ------------- ------------
Revenues $ 1,445,907 $ -- $ 36,661,823
Direct costs 1,315,423 -- 31,624,140
------------ ------------ ------------
Gross profit 130,484 -- 5,037,683
Selling, general & administrative
expenses 2,703,838 15,973,121 (9) 31,367,876
----------- ------------ ------------
Less from operations, before
other (income) expense (2,573,354) (15,973,121) (26,330,193)
Other (income) expense
Interest expense, net -- -- 473,675
Equity in loss of affiliate -- -- 33,776
Foreign currency (gain) loss -- -- 126,575
Debt discount -- -- 2,000,000
Other (9,743) -- 73,327
----------- ------------ ------------
(9,743) -- 2,707,353
----------- ------------ ------------
Net loss before provision for taxes (2,563,611) (15,973,121) (29,037,546)
Provision for taxes -- -- 300
------------ ------------ ------------
Net loss $ (2,563,611) $(15,973,121) $(29,037,846)
============ ============ ============
- -------------------------
(1) Reflects the consolidation of the results of operations of AxisTel for the
period July 1, 1998 to June 30, 1999.
(2) Reflects the amortization of the goodwill arising from the purchase of 50%
of AxisTel from the founding shareholders on September 22, 1999, over a
period of 10 years.
(3) Reflects the amortization of the goodwill arising from the conversion of
the Major Shareholders' 1,499 options in AxisTel on September 22, 1999,
over a period of 10 years.
(4) Reflects the reversal of the interest expense relating to the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(5) Reflects the reversal of amortization relating to the Original Issue
Discount on the e.Volve debentures for which the related Notes Receivable
were exchanged for stock of eVentures by one of the Major Shareholders on
September 22, 1999.
(6) Reflects the write off of the Original Issue Discount on the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(7) Reflects the amortization of the goodwill arising from the purchase of the
remaining 1/3 of e.Volve on October 19, 1999 over a period of 10 years.
(8) Reflects the consolidation of the results of operations of iGlobal for the
period July 1, 1998 to June 30, 1999.
(9) Reflects the amortization of the goodwill arising from the purchase of
100% of the outstanding common stock of iGlobal on March 10, 2000,
over a period of 5 years.
P-4
25
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1999
SEPTEMBER 22, 1999 EVENTS
------------------------------------------ PURCHASE OF THE
(1) REMAINING 33.3%
HISTORICAL AXISTEL ADJUSTMENTS OF e.VOLVE
------------ ----------- ----------- ---------------
Revenues $22,661,838 $ 5,741,801 $ -- $ --
Direct costs 21,759,782 5,900,284 -- --
------------ ----------- ----------- ---------------
Gross profit (loss) 902,056 (158,483) -- --
Selling, general &
administrative expenses 10,354,808 1,226,737 276,891(2) 291,563(7)
102,637(3)
------------ ----------- ----------- ---------------
Loss from operations, before
other (income) expense (9,452,752) (1,385,220) (379,528) (291,563)
Other (income) expense
Interest expense, net 598,062 138,153 (160,800)(4) --
(293,437)(5)
Write off of unamortized
debt discount 917,615 -- (917,615)(6) --
Equity in loss of affiliate 31,819 -- -- --
Foreign currency (gain) loss (2,032) -- -- --
Other 1,074 -- -- --
------------ ----------- ----------- ---------------
1,546,538 138,153 (1,371,852) --
------------ ----------- ----------- ---------------
Net loss before provision for
taxes (10,999,290) (1,523,373) 992,324 (291,563)
Provision for taxes -- -- -- --
------------ ----------- ------------ ---------------
Net income (loss) $(10,999,290) $(1,523,373) $ 992,324 $ (291,563)
============= ============ ============ ==================
MARCH 10, 2000 EVENT
----------------------------
(8)
iGLOBAL ADJUSTMENTS PRO FORMA
------------ ----------- ------------
Revenues $ 753,610 $ -- $ 29,157,249
Direct costs 1,262,128 -- 28,922,194
------------ ----------- ------------
Gross profit (loss) (508,518) -- 235,055
Selling, general &
administrative expenses 2,142,062 7,986,560(9) 22,381,258
------------ ----------- ------------
Loss from operations, before
other (income) expense (2,650,580) (7,986,560) (22,146,203)
Other (income) expense
Interest expense, net 114,482 -- 396,460
Write off of unamortized
debt discount -- -- --
Equity in loss of affiliate -- -- 31,819
Foreign currency (gain) loss -- -- (2,032)
Other -- -- 1,074
------------ ----------- ------------
114,482 -- 427,321
------------ ----------- ------------
Net loss before provision for
taxes (2,765,062) (7,986,560) (22,573,524)
Provision for taxes -- -- --
------------ ----------- ------------
Net income (loss) $ (2,765,062) $(7,986,560) $(22,573,524)
============ =========== =======+====
(1) Reflects the consolidation of the results of operations of AxisTel for the
period July 1, 1999 to September 22, 1999.
(2) Reflects the amortization of the goodwill arising from the purchase of 50%
of AxistTel from the founding shareholders on September 22, 1999, over a
period of 10 years.
(3) Reflects the amortization of the goodwill arising from the conversion of
the Major Shareholders' 1,499 options in AxisTel on September 22, 1999,
over a period of 10 years.
(4) Reflects the reversal of the interest expense relating to the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(5) Reflects the reversal of amortization relating to the Original Issue
Discount on the e.Volve debentures for which the related Notes Receivable
were exchanged for stock of eVentures by one of the Major Shareholders on
September 22, 1999.
(6) Reflects the write off of the Original Issue Discount on the e.Volve
debentures for which the related Notes Receivable were exchanged for stock
of eVentures by one of the Major Shareholders on September 22, 1999.
(7) Reflects the amortization of the goodwill arising from the purchase of the
remaining 1/3 of e.Volve on October 19, 1999 over a period of 10 years.
(8) Reflects the consolidation of the results of operations of iGlobal for the
period July 1, 1999 to December 31, 1999.
(9) Reflects the amortization of the goodwill arising from the purchase of 100%
of the outstanding common stock of iGlobal on March 10, 2000, over a period
of 5 years.
P-5