SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 19, 2000
FIRST ECOM.COM, INC.
(Exact Name of Registrant as Specified in Charter)
Nevada 0-27753 98-0206979
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
19th Floor, 80 Gloucester Road, Wan Chai, Hong Kong SAR
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code ( 852 ) 2801-5181
-------------------------------------------------------------
(Former Name or Former Address, if Changes Since Last Report)
Note: This amendment to the Current Report on Form 8-K filed on June 22, 2001 by
First Ecom.com, Inc. is being filed to provide the financial statements required
by Item 7
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses acquired.
See Index of Financial Statements on page F-1
(b) Pro forma financial information
See Index of Financial Statements on page F-1
(c) Exhibits
23 -- Consent of KPMG
Index To Financial Statements
(expressed in U.S. Dollars)
First Ecom.com, Inc. and subsidiaries
(a development stage company)
Unaudited pro forma condensed
consolidated balance sheets at December 31, 2000 F-3
Unaudited pro forma condensed consolidated
statements of operations for the year ended
December 31, 2000 F-5
Unaudited pro forma condensed
consolidated balance sheets at June 30, 2001 F-7
Unaudited pro forma condensed consolidated
statements of operations for the six months
ended June 30, 2001 F-9
Notes to unaudited pro forma condensed
consolidated financial data F-10
First Ecommerce Data Services Ltd.
(a development stage company)
Unaudited Interim Financial Statements:
Unaudited balance sheets at December 31,
2000 and June 30, 2001 F-12
Unaudited statements of operations for the
periods from January 1, 2001 to June 30, 2001
and from April 11, 2000 to June 30, 2000 F-14
Unaudited statements of cash flows for the
periods from January 1, 2001 to June 30, 2001
and from April 11, 2000 to June 30, 2000 F-15
Notes to unaudited financial statements F-17
Audited Financial Statements:
Independent auditors' report F-20
Balance sheet at December 31, 2000 F-21
Statement of operations for the period from
April 11, 2000 (commencement of development)
to December 31, 2000 F-22
Statement of cash flows for the period from
April 11, 2000 (commencement of development)
to December 31, 2000 F-23
F-1
Notes to financial statements F-24
F-2
First Eom.com, Inc. and subsidiaries
Unaudited pro forma condensed
Consolidated balance sheets
at December 31, 2000
(Expressed in US Dollars)
Historical Historical Pro Forma Pro Forma
FECC FEDS Adjustments Consolidated
------------ ----------- ----------- ------------
Assets
Current assets
Cash and cash equivalents $ 31,211,711 $ 1,286,834 $(4,289,542)(1) $ 28,209,003
Trade accounts receivable 71,015 20 (20)(2) 71,015
Accrued interest 85,586 (27,995)(2) 57,591
Marketable securities 367,648 367,648
Other prepaid expenses and receivables 546,464 1,499,263 (1,484,460)(3) 561,267
------------ ----------- ----------- ------------
Total current assets 32,282,424 2,786,117 (5,802,017) 29,266,524
Property and equipment 578,866 1,645,236 -- 2,224,102
Investment in FEDS 3,107,882 -- (3,107,882)(4,8) --
Goodwill -- -- 4,611,936(5,6,7) 4,611,936
------------ ----------- ----------- ------------
Total assets $ 35,969,172 $ 4,431,353 $(4,297,963) $ 36,102,562
============ =========== =========== ============
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 120,974 $ 323,625 $ (28,015)(2) $ 416,584
Accrued professional and consulting fees 208,654 208,654
Accrued salary 40,256 40,256
Other accrued liabilities 133,885 7,484 141,369
Deferred revenue 5,604 5,604
------------ ----------- ----------- ------------
Total current liabilities 509,373 331,109 (28,015) 812,467
Long term liabilities
Loans due to shareholders 1,068,007 (1,068,007)(7) --
------------ ----------- ----------- ------------
Total liabilities 509,373 1,399,116 (1,096,022) 812,467
------------ ----------- ----------- ------------
Stockholders' equity
Common stock, $0.001 par value
Authorized
200,000,000 shares
issued and outstanding
19,210,037 shares 19,211 3,000,000 (3,000,000)(8) 19,211
Additional paid-in capital 60,038,934 645,656 (645,656)(8) 60,038,934
Deficit accumulated during the development stage (24,598,346) (613,419) 443,715(15) (24,768,050)
------------ ----------- ----------- ------------
Total stockholders' equity 35,459,799 3,032,237 (3,201,941) 35,290,095
F-3
------------ ----------- ----------- ------------
Total liabilities and stockholders' equity $ 35,969,172 $ 4,431,353 $(4,297,963) $ 36,102,562
============ =========== =========== ============
F-4
First Ecom.com, Inc. and subsidiaries
Unaudited pro forma condensed
Consolidated statements of operations
for the year ended December 31, 2000
(Expressed in US Dollars)
Historical Historical Pro Forma Pro Forma
FECC FEDS Adjustments Consolidated
------------ --------- ----------- ------------
Revenue
Payment processing $ 38,223 $ 20 $ -- $ 38,243
------------ --------- --------- ------------
Operating expenses
Sales and marketing 2,113,149 139,388 -- 2,252,537
General and administrative 8,297,692 324,262 530,573(5) 9,152,527
Systems and technology 1,489,056 109,733 -- 1,598,789
Charges for impairment of certain
long-lived and prepaid assets 949,418 -- 949,418
------------ --------- --------- ------------
Total expenses 12,849,315 573,383 530,573 13,953,271
------------ --------- --------- ------------
Loss from operations (12,811,092) (573,363) (530,573) (13,915,028)
Other income/(expenses)
Interest income 1,527,959 2,231 -- 1,530,190
Interest expense (2,121) (42,287) -- (44,408)
Loss on write down of marketable
securities (1,632,353) -- (1,632,353)
Equity in loss of affiliate (292,118) -- 292,118(9)
------------ --------- --------- ------------
Loss from continuing operations (13,209,725) (613,419) (238,455) (14,061,599)
Income (loss) from discontinued operations
Net loss (4,219,736) -- -- (4,219,736)
------------ --------- --------- ------------
Loss before cumulative effect
of accounting change (17,429,461) (613,419) (238,455) (18,281,335)
Cumulative effect of accounting change (380,000) -- -- (380,000)
------------ --------- --------- ------------
Net loss $(17,809,461) $(613,419) $(238,455) $(18,661,335)
============ ========= ========= ============
Basic and diluted loss per share
applicable to common stockholders
F-5
Continuing operations (0.72) (0.78)
Discontinued operations (0.23) (0.23)
Cumulative effect of accounting
changes (0.02) (0.02)
------------ ------------
(0.98) (1.03)
Weighted average shares used in
computing per share amounts 18,064,980 18,064,980
============ ============
F-6
First Ecom.com, Inc. and subsidiaries
Unaudited pro forma condensed
Consolidated balance sheets
at June 30, 2001
(Expressed in US Dollars)
Historical Historical Pro Forma Pro Forma
FECC FEDS Adjustments Consolidated
------------ ----------- ----------- ------------
Assets
Current assets
Cash and cash equivalents $ 23,761,060 $ 1,928,716 $(1,928,716)(10) $ 23,761,060
Trade accounts receivable 54,930 17,974 (17,974)(10) 54,930
Accrued interest 16,862 16,862
Marketable securities 345,589 345,589
Loan receivable 500,000 500,000
Other prepaid expenses and receivables 419,543 147,685 (147,685)(10) 419,543
------------ ----------- ----------- ------------
Total current assets 25,097,984 2,094,375 (2,094,375) 25,097,984
Property and equipment 1,879,239 1,556,881 (1,556,881)(10) 1,879,239
Goodwill 5,038,020 (793,405)(11,12) 4,244,615
------------ ----------- ----------- ------------
Total assets $ 32,015,243 $ 3,651,256 $(4,444,661) $ 31,221,838
============ =========== =========== ============
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 524,765 $ 129,135 $ (129,135)(10) $ 524,765
Accrued professional and consulting fees 118,474 118,474
Other accrued liabilities 154,144 25,453 (25,453)(10) 154,144
------------ ----------- ----------- ------------
Total current liabilities 797,383 154,588 (154,588) 797,383
Long term liabilities
Loans due to shareholders 1,336,014 (1,336,014)(10) --
------------ ----------- ----------- ------------
Total liabilities 797,383 1,490,602 (1,490,602)(10) 797,383
------------ ----------- ----------- ------------
Stockholders' equity
Common stock, $0.001 par value
Authorized
200,000,000 shares
issued and outstanding
19,210,037 shares 19,211 3,000,000 (3,000,000)(10) 19,211
Additional paid-in capital 57,868,124 645,656 (645,656)(10) 57,868,124
Accumulated other comprehensive income-
unrealized investment loss (22,059) -- (22,059)
Deficit accumulated during the development stage (26,647,416) (1,485,002) 691,597 (27,440,821)
------------ ----------- ----------- ------------
Total stockholders' equity 31,217,860 2,160,654 (2,954,059) 30,424,455
F-7
------------ ----------- ----------- ------------
Total liabilities and stockholders' equity $ 32,015,243 $ 3,651,256 $(4,444,661) $ 31,221,838
============ =========== =========== ============
F-8
First Ecom.com, Inc. and subsidiaries
Unaudited pro forma
Consolidated statements of operations
for the six months ended June 30, 2001
(Expressed in US Dollars)
Historical Historical Pro Forma Pro Forma
FECC FEDS Adjustments Consolidated
------------ --------- ----------- ------------
Revenue
Payment processing $ 36,908 $ 20,496 $ (13,016)(13) $ 44,388
------------ --------- --------- ------------
Operating expenses
Sales and marketing 188,262 120,720 (14,940)(13) 294,042
General and administrative 3,258,963 369,621 216,244 (11,12,13) 3,844,828
Systems and technology 180,675 451,464 (71,612)(13) 560,527
Restructuring cost 198,821 198,821
------------ --------- --------- ------------
Total expenses 3,826,721 941,805 129,692 4,898,218
Loss from operations (3,789,813) (921,309) (142,708) (4,853,830)
Other income/(expenses)
Interest income 634,300 55,056 535(13) 689,891
Interest expense -- (5,331) -- (5,331)
Equity in loss of affiliate (390,052) -- 390,052(14) --
------------ --------- --------- ------------
Loss from continuing operations (3,545,565) (871,584) 247,879 (4,169,270)
Income (loss) from discontinued operations
Net income (229,056) -- -- (229,056)
Gain on disposal 1,725,551 -- -- 1,725,551
------------ --------- --------- ------------
1,496,495 -- -- 1,496,495
------------ --------- --------- ------------
Net loss $ (2,049,070) $(871,584) $ 247,879 $ (2,672,775)
============ ========= ========= ============
Basic and diluted loss per share
applicable to common stockholders
Continuing operations (0.18) (0.22)
Discontinued operations 0.08 0.08
------------ ------------
(0.10) (0.14)
Weighted average shares used in
computing per share amounts 19,210,037 19,210,037
============ ============
F-9
First Ecom.com, Inc. and subsidiaries
Notes to unaudited pro forma condensed consolidated financial data
1. Basis of Presentation
The unaudited pro forma condensed consolidated financial data is based upon
the historical consolidated financial statements of First Ecom.com, Inc. and
subsidiaries ("FECC") as adjusted to give effect to the acquisition of the
remaining 50% interest in First Ecommerce Data Services Limited ("FEDS") as if
the transaction had occurred on April 11, 2000, the date when FEDS commenced
development.
However, it does not include adjustments that would be necessary to present
pro forma financial position or operating results assuming FECC's purchase of
Series A Preferred Stock of Gasco Energy, Inc., which occurred in July 2001 as
described in the FECC's Form 8-K filed on July 23, 2001. Pro forma information
relating to such acquisition will be provided by FECC at a future date.
The unaudited pro forma condensed consolidated financial data have been
prepared using the purchase method of accounting in which the total cost of the
FEDS acquisition is allocated to the tangible and intangible assets acquired and
liabilities assumed based on their respective fair market values at the
effective date of the acquisition, assumed for purposes of the pro forma
information to be approximated by historical values. Such allocations ultimately
will be based on further management studies and due diligence and consequently
are preliminary and subject to revision. We do not expect the final allocation
of purchase price to differ materially from that presented in the pro forma
data.
The unaudited pro forma condensed consolidated financial data have been
adjusted to eliminate intercompany accounts between FECC and FEDS. No pro forma
effect has been given to any operational or other synergies that may be realized
from the acquisition.
The unaudited pro forma condensed consolidated financial data are presented
for illustrative purposes only and are not necessarily indicative of the
operating results or financial position that might have been achieved had the
transaction occurred as of an earlier date, and they are not necessarily
indicative of future operating results or financial position. These pro forma
amounts do not, therefore, project our financial position or results of
operations for any future date or period. You should read the unaudited pro
forma condensed consolidated financial data with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our historical
consolidated financial statements and related notes included in our annual
report on Form 10-K for the fiscal year ended December 31, 2000 and our
quarterly report on Form 10-Q for the quarter ended June 30, 2001.
2. Pro Forma Adjustments
(1) To record acquisition of remaining 50% interest in FEDS for $4.25
million plus acquisition costs of $39,542.
(2) To eliminate inter-company balance.
(3) To eliminate subscription receivable of $1,484,460 due from FECC
to FEDS.
(4) To eliminate investment in FEDS balance.
(5) To record amortization of goodwill for the period from April 11,
2000 (date of commencement of FEDS) to December 31, 2000.
(6) To record goodwill relating to the FEDS acquisition.
(7) To eliminate the shareholder loan and the related receivable
balance.
F-10
(8) To eliminate FEDS capital and FECC's related investment.
(9) To eliminate equity in loss of FEDS in FECC accounts.
(10) To eliminate the FEDS balance sheet items already recorded in the
historical consolidated financial statements of FECC at June 30,
2001.
(11) To remove the amortization of goodwill originally recorded in the
historical financial statements of FECC.
(12) To record the amortization of goodwill relating to the FEDS
acquisition for the period from January 1, 2001 to June 30, 2001.
(13) To exclude the loss of FEDS for the period from June 19 to June
30, 2001 recorded in the historical consolidated financial
statements of FECC.
(14) To remove the equity in loss of FEDS for the period from January
1 to June 18, 2001 originally recorded by FECC in its historical
consolidated financial statements.
(15) To eliminate FEDS accumulated deficit as of the acquisition date
and record the effects of pro forma statements of operations
adjustments.
F-11
FIRST ECOMMERCE DATA SERVICES LTD.
(a Development Stage Company)
Balance Sheets
June 30, 2001 and December 31, 2000
(Expressed in US Dollars)
Unaudited
- --------------------------------------------------------------------------------
30-Jun-01 31-Dec-00
Assets
Cash $ 1,928,716 $ 1,286,834
Accounts Receivable 17,974 20
Prepaid Expenses 147,685 14,803
Subscription Receivable for share capital -- 1,484,460
----------- -----------
Total Current Assets 2,094,375 2,786,117
Capital Assets, net (Note 4) 1,556,881 1,645,236
----------- -----------
Total Assets $ 3,651,256 $ 4,431,353
=========== ===========
Liabilities
Accounts payable & Accrued Liabilities (Note 5) $ 129,135 $ 303,114
Interest Payable (Note 5) 25,453 27,995
----------- -----------
Total Current Liabilities 154,588 331,109
Loans Due to Shareholders (Note 5) 1,336,014 1,068,007
----------- -----------
Total Liabilities 1,490,602 1,399,116
----------- -----------
Shareholders' Equity
Common share capital, $1 par (Note 6):
Authorized 5,000,000 shares
Outstanding 3,000,000 shares 3,000,000 3,000,000
Additional Paid-in Capital 645,656 645,656
Accumulated Deficit during Development Stage (1,485,002) (613,419)
----------- -----------
Total Shareholders' Equity 2,160,654 3,032,237
----------- -----------
F-12
Total Liabilities and Shareholders' Equity $ 3,651,256 $ 4,431,353
=========== ===========
See notes to financial statements.
F-13
FIRST ECOMMERCE DATA SERVICES LTD.
(a Development Stage Company)
Statements of Operations
For the Periods from January 1, 2001 to June 30, 2001 and from April 11, 2000
(commencement of development) to June 30, 2000 (Expressed in US Dollars)
Unaudited
June-01 Jun-00
Revenues
Processing Fees $ 15,810 $ --
EIP Fees 4,686 --
Interest Income 55,056 --
75,552 --
Expenses
Consulting Fees 262,671 23,782
Premises 68,136 32,629
Salaries and Payroll Expenses 189,940 2,413
Amortization of Capital Assets 179,642 1,830
Marketing 12,900 718
Interest Expense 5,331 --
Business & Professional Development 52,848 9,713
Communications 13,825 2,895
Office Supplies & Equipment 7,818 5,958
Professional Fees 15,926 1,320
Bank Charges 1,425 30
Insurance 43,969 --
Other Systems Costs 60,150 231
Corporate Fees & Licenses 32,555 --
Total Expenses 947,136 81,519
Net Loss $(871,584) $(81,519)
See notes to financial statements.
F-14
FIRST ECOMMERCE DATA SERVICES LTD.
(a Development Stage Company)
Statements of Cash Flows
For the Periods from January 1, 2001 to June 30, 2001 and from April 11, 2000
(commencement of development)
to June 30, 2000
(Expressed in US Dollars)
(Unaudited)
- --------------------------------------------------------------------------------
30-Jun-01 30-Jun-00
Cash Flows from Operating Activities
Net Loss $ (871,584) $ (81,519)
Adjustments to Reconcile Net Loss to Net Cash
Used in Operating Activities:
Amortization of Capital Assets 179,642 1,830
Accounts Receivable (17,954) --
Prepaid Expenses (132,882) --
Accounts Payable & Accrued Expenses (173,979) 509,342
Interest Payable -- --
----------- ---------
Net Cash Provided by (Used in) Operating
Activities (1,016,757) 429,653
----------- ---------
Cash Flows from Investing Activities
Purchase of Capital Assets (91,287) (611,832)
----------- ---------
Net Cash Used in Investing Activities (91,287) (611,832)
----------- ---------
Cash Flows from Financing Activities
Due from Shareholder 1,484,460 --
Loans Due to Shareholders 265,466 400,000
Share Capital -- 31,080
----------- ---------
Net Cash Provided by Financing Activities 1,749,926 431,080
----------- ---------
Net Increase in Cash & Cash Equivalents 641,882 248,901
----------- ---------
Cash & Cash Equivalents - Beginning of Period 1,286,834 --
Cash & Cash Equivalents - End of Period $ 1,928,716 $ 248,901
=========== =========
F-15
See notes to financial statements.
F-16
First Ecommerce Data Services Limited
(A Development Stage Company)
Notes to Financial Statements
For the Periods Ended June 30, 2001 and June 30, 2000
(Unaudited)
1. Organization & Nature of the Business
First Ecommerce Data Services Ltd. (the "Company") was originally
incorporated as Rosebank Investments Ltd. on September 10, 1957, under the laws
of Bermuda. The Company's name was changed on November 12, 1999, and commenced
development on April 11, 2000. The Company was a joint venture established by
the Bank of Bermuda Limited and First Ecom.com, Inc. On June 18, 2001, First
Ecom.com, Inc. purchased the outstanding shares held by the Bank of Bermuda
Limited and, therefore, became the sole shareholder of the Company. The Company
provides third party multi-currency processing solutions for Banks, other
Processors and Internet-based Merchants.
2. Financial Statement Presentation
The company's efforts to date have been focussed on development of its
software, acquiring property, equipment and staff, and developing markets and
sales opportunities for its product. The Company has not yet generated
significant revenues and, accordingly, the financial statements are presented in
accordance with Statement of Financial Accounting Standards No. 7 Accounting and
Reporting by Development Stage Enterprises.
The Company's ability to emerge from the development stage is dependent
upon its operations, including developing sufficient markets.
3. Summary of Significant Accounting Policies
The accompanying financial statements are prepared in accordance with
accounting principles generally accepted in the United States. The following are
the significant accounting policies adopted by the Company:
a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the period. Actual results may differ from these estimates.
b) Amortization of Capital Assets
Amortization is charged annually on a straight line basis over the
estimated useful life of the assets as follows:
Ecommerce platform 33%
Office Equipment and furniture 20% - 33%
Network and Telephone System 33%
F-17
3. Summary of Significant Accounting Policies (continued)
c) Computer Software
In 1998, The Accounting Standards Executive Committee issued Statement of
Position ("SOP") 98-1 Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 requires companies to
capitalise qualifying computer software costs incurred during the
application development stage. All other costs in connection with internal
use software must be expensed as incurred. The useful life assigned to such
software is based on the period it is expected to provide full utility to
the Company. The Company amortises the capitalised software costs once the
software is placed in service.
4. Capital Assets
Capital assets are comprised of the following:
Accumulated
Cost Amortisation June 30, 2001
---------- ------------ -------------
Ecommerce Platform $1,623,103 $213,365 $1,409,738
Office Equipment & Furniture 158,666 30,214 128,452
Network & Telephone Systems 28,035 9,344 18,691
---------- -------- ----------
$1,809,804 $252,923 $1,556,881
---------- -------- ----------
5. Loans Due to Shareholders
At June 30, 2001 the Company had a loan due to the shareholder in the
amount of $1,336,014.00. $400,000 of the amount due accrued interest at a rate
of 9.75% for the period from April 11, 2000 until December 29, 2000. From
December 29, 2000, this loan is non-interest bearing and has no fixed terms of
repayment.
6. Share Capital
At March 31, 2001 the total authorized share capital of the Company is $5
million, made up of 5,000,000 shares at a par value of $1.00.
7. Additional Paid-in Capital
During the period ended December 31, 2000, the Bank of Bermuda Limited
contributed assets with a carrying value of $645,656 to the Company. The amount
has been recorded as additional paid-in capital.
F-18
8. Rental Expense
The Company is obligated to pay future minimum lease payments under long
term leases at June 30, 2001 as follows:
2001 $58,186
2002 116,373
2003 48,489
---------
$223,048
---------
9. Related Party Transactions
Until June 18, 2001 the Bank of Bermuda Limited, a 50% shareholder in the
Company, had seconded staff members to act as employees of the Company. The
shareholder passed on the cost of these employees to the Company on a monthly
basis. These costs are included in consulting fees, and amounted to $262,670
during the current period. As of June 19, 2001, all Bank of Bermuda staff
working for FEDS either resigned from the Bank and became FEDS employees or
remained with the Bank and no longer perform any duties as FEDS employees.
10. Taxation
Under current Bermuda law, the Company is not required to pay any taxes in
Bermuda on either income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda that in the event any such
taxes being imposed, the Company will be exempted from taxation until the year
2016.
F-19
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
First Ecommerce Data Services Ltd.
We have audited the accompanying balance sheet of First Ecommerce Data Services
Ltd. (a development stage company) as of December 31, 2000, and the related
statements of operations and cash flows for the period from April 11, 2000
(commencement of development) to December 31, 2000. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about 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 audit provides 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 First Ecommerce Data Services
Ltd. (a development stage company) as of December 31, 2000, and the results of
its operations and cash flows for the period from April 11, 2000 (commencement
of development) to December 31, 2000, in conformity with accounting principles
generally accepted in the United States.
KPMG
Chartered Accountants
Hamilton, Bermuda
January 23, 2001
F-20
First Ecommerce Data Services Ltd
(a Development Stage Company)
Balance Sheet
December 31, 2000
(Expressed in United States Dollars)
Assets 2000
----
Cash $ 1,286,834
Accounts receivable 20
Prepaid expenses 14,803
Subscription receivable for share capital (Note 6) 1,484,460
-----------
Total current assets 2,786,117
Capital assets, net (Note 4) 1,645,236
-----------
Total assets $ 4,431,353
===========
Liabilities
Accounts payable and accrued liabilities $ 303,114
Interest payable (Note 5) 27,995
-----------
Total current liabilities 331,109
Loans due to shareholders (Note 5) 1,068,007
-----------
Total liabilities 1,399,116
-----------
Shareholders' equity
Common share capital, $1 par (Note 6):
Authorized 5,000,000 shares
Outstanding 3,000,000 shares 3,000,000
Additional Paid-in Capital (Note 7) 645,656
Deficit accumulated during development stage (613,419)
-----------
Total shareholders' equity 3,032,237
-----------
Total liabilities and shareholders' equity $ 4,431,353
===========
See accompanying notes to the financial statements
F-21
First Ecommerce Data Services Ltd.
(a Development Stage Company)
Statement of Operations
Period from April 11, 2000
(commencement of development) to
December 31, 2000
(Expressed in United States Dollars)
2000
----
Revenues
Processing fees $ 20
Interest income 2,231
---------
2,251
Expenses
---------
Consulting fees (Note 9) 183,676
Premises 91,030
Salaries 85,105
Amortization of capital assets 73,281
Marketing 46,228
Interest expense 42,287
Business and professional development 30,411
Communications 17,482
Office supplies and equipment 17,061
Professional fees 12,202
Bank charges 11,275
Insurance 5,302
Other systems costs 330
---------
Total expenses 615,670
---------
Net loss, being deficit accumulated during development stage $(613,419)
=========
See accompanying notes to the financial statements
F-22
First Ecommerce Data Services Ltd.
(a Development Stage Company)
Statement of Cash Flows
Period from April 11, 2000
(commencement of development) to
December 31, 2000
(Expressed in United States Dollars)
2000
----
Cash flows from operating activities
Net loss $ (613,419)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of capital assets 73,281
Accounts receivable (20)
Prepaid expenses (14,803)
Accounts payable and accrued expenses 303,114
Interest payable 27,995
-----------
Net cash used in operating activities (223,852)
-----------
Cash flows from investing activities
Purchase of capital assets (1,718,517)
-----------
Net cash used in investing activities (1,718,517)
-----------
Cash flows from financing activities
Loans due to shareholders 1,068,007
Increase in additional paid-in capital 645,656
Proceeds from issuance of common shares 1,515,540
Net cash provided by financing activities 3,229,203
-----------
Net increase in cash and cash equivalents,
being cash and cash equivalents at end of period $ 1,286,834
===========
Supplemental disclosure of cash flow information
Interest paid during period $ 14,292
===========
See accompanying notes to the financial statements
F-23
First Ecommerce Data Services Ltd.
(a Development Stage Company)
Notes to Financial Statements
December 31, 2000
(Expressed in United States Dollars)
1. Organization and nature of the Business
First Ecommerce Data Services Ltd. (the "Company") was originally
incorporated as Rosebank Investments Ltd. on September 10, 1957, under the
laws of Bermuda. The Company's name was legally changed on November 12,
1999, and commenced development on April 11, 2000. The Company is a joint
venture established by the Bank of Bermuda Limited and First Ecom.com Ltd.
The Company intends to provide third party processing solutions for banks
and Internet-based merchants.
2. Financial statement presentation
The Company's efforts to date have been focussed on development of its
software, acquiring property, equipment and staff, and developing markets
and sales opportunities for its product. The Company has not yet generated
significant revenues and, accordingly, the financial statements are
presented in accordance with Statement of Financial Accounting Standards
No. 7 Accounting and Reporting by Development Stage Enterprises.
The Company's ability to emerge from the development stage is dependent
upon its operations, including developing sufficient markets.
3. Summary of significant accounting policies
The accompanying financial statements are prepared in accordance with
United States generally accepted accounting principles. The following are
the significant accounting policies adopted by the Company:
(a) Use of estimates
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, the
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.
(b) Amortisation of capital assets
Amortisation is charged annually on a straight-line basis over the
estimated useful like of the assets as follows:
Ecommerce platform 33%
Office equipment and furniture 20% - 30%
Network and telephone systems 33%
F-24
First Ecommerce Data Services Ltd.
(a Development Stage Company)
Notes to Financial Statements
December 31, 2000
(Expressed in United States Dollars)
3. Summary of significant accounting policies (continued)
(c) Computer software
In 1998, The Accounting Standards Executive Committee issued Statement of
Position ("SOP") 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 requires companies to
capitalize qualifying computer software costs incurred during the
application development stage. All other costs incurred in connection with
internal use software must be expensed as incurred. The useful life
assigned to such software is based on the period it is expected to provide
future utility to the Company. The Company amortises the capitalised
software costs once the software is place in service.
4. Capital assets
Capital assets are comprised of the following:
Accumulated
Cost amortisation 2000
---------- ------------ ----------
Ecommerce platform $1,601,711 $ 53,805 $1,547,906
Office equipment and furniture 88,771 14,804 73,967
Network and telephone systems 28,035 4,672 23,363
---------- -------- ----------
$1,718,517 $ 73,281 $1,645,236
========== ======== ==========
5. Loans due to shareholders
At December 31, 2000, the Company had loans due to shareholders as follows:
Bank of Bermuda Limited $668,007
First Ecom.com Ltd. 400,000
----------
$1,068,007
==========
Amounts due the Bank of Bermuda Limited are non-interest bearing, and have
no fixed terms of repayment. The amount due to First Ecom.com Ltd. accrued
interest at a rate of 9.75% for the period from April 11, 2000 to December
29, 2000. Interest expense for the period of $27,995 was incurred on this
loan. From December 29, 2000 this loan is non-interest bearing and has no
fixed terms of repayment.
F-25
6. Share capital
On December 20, 2000, the Board of Directors authorized a restructuring of
common shares, changing the par value from $2.40 per share to $1.00 per
share. In addition, the Board of Directors authorized the creation of an
additional 4,966,400 shares. This increase brought the Company's total
authorized share capital of $5 million, which is made up of 5,000,000
shares of par value $1.00 per share.
Subscriptions receivable at year end of $1,484,460 were received on January
23, 2001.
7. Additional Paid-in Capital
During the period ended December 31, 2000, the Bank of Bermuda Limited
contributed assets with a carrying value of $645,656 to the Company. This
amount has been recorded as additional paid-in capital.
8. Rental expense
The Company is obligated to pay future minimum lease payments under long
term leases at December 31, 2000 as follows:
2001 $69,660
2002 17,415
-------
$87,075
=======
9. Related party transactions
The Bank of Bermuda Limited, a 50% shareholder in the Company, has seconded
staff members to act as employees of the Company. The shareholder passes on
the costs of these employees to the Company on a monthly basis. These costs
are included in consulting fees, and amounted to $167,765 during the
period.
The Company's banking transactions are with The Bank of Bermuda Limited. No
special terms or conditions apply to these transactions.
10. Taxation
Under current Bermuda law the Company is not required to pay any taxes in
Bermuda on either income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda that in the event of
any such taxes being imposed the Company will be exempted from taxation
until the year 2016.
F-26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST ECOM.COM, INC.
---------------------------
(Registrant)
Date: September 5, 2001 By /S/ Kenneth G.C. Telford
---------------------------
(Signature)
Kenneth G.C. Telford, Secretary and
Chief Financial Officer
F-27