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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-3
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 27, 1999
XML - GLOBAL TECHNOLOGIES, INC.
------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 0-23391 84-1434313
- ----------------------- ----------- ------------------
(State or other juris- (Commission file number) (IRS Employer
diction of incorporation Identification No.)
or organization)
1038 Homer Street, Vancouver, British Columbia, Canada V6B 2W9
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (800) 201-1848
INTERNATIONAL CAPITAL FUNDING, INC.
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(Former name or former address, if changed since last report)
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ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Pursuant to Item 7(a)(4), the Registrant files herewith the following
financial statements of the acquired business:
Report of Independent Certified Public Accountants
XML - Global Technologies, Inc. and Subsidiaries Consolidated Balance
Sheet as of June 30, 1999
XML - Global Technologies, Inc. and Subsidiaries Consolidated Statement
of Operations for the period May 18, 1999 (Date of Inception) to June 30,
1999
XML - Global Technologies, Inc. and Subsidiaries Consolidated Statement
of Stockholders' Deficit for the period May 18, 1999 (Date of Inception)
to June 30, 1999
XML - Global Technologies, Inc. and Subsidiaries Consolidated Statement
of Cash Flows for the period May 18, 1999 (Date of Inception) to June 30,
1999
Notes to Financial Statements June 30, 1999
(b) Pro Forma Financial Information
Pursuant to Item 7(b) and Item 7(a)(4), the Registrant files herewith the
Financial Statements identified in Item 7(a) above, which satisfy the
requirements of Item 7(b) and Item 310(c) and (d) of Regulation S-B.
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XML-Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Table of Contents
June 30, 1999
Page
Auditor's Report F-1
Consolidated Financial Statements
Balance Sheet F-2
Statement Operations F-3
Statement Stockholders' Deficit F-4
Statement of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
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Moss-Adams LLP
Certified Public Accountants
114 West Magnolia Street, Suite 301
Bellingham, WA 98225-4318
(360) 676-1920 (tel) (360) 671-5411 (fax)
Independent Auditor's Report
To the Board of Directors and Stockholders
XML - Global Technologies, Inc.
We have audited the accompanying consolidated balance sheet of XML - Global
Technologies, Inc. and Subsidiaries (a development stage company) as of June
30, 1999, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the period May 18, 1999 (date of inception) to
June 30, 1999. 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 generally accepted auditing
standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of XML - Global Technologies, Inc. and Subsidiaries as of June 30, 1999, and
the results of its operations and its cash flows for the period May 18, 1999
(date of inception) to June 30, 1999 in conformity with generally accepted
accounting principles.
MOSS ADAMS LLP
Bellingham, Washington
October 6, 1999, except for Note 1, as to
which the date is November 8, 1999
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XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current Assets
Cash $ 9,581
Trade accounts receivable 8,232
Other receivable 3,509
Prepaid expenses 4,658
Total current assets 25,980
Property and Equipment, net 54,938
Trademarks and Patents 7,134
------------
Total Assets $ 88,052
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Trade accounts payable and accrued liabilities $ 55,182
Advances due to directors 8,755
Note payable 135,135
------------
Total liabilities 199,072
------------
Stockholders' Deficit
Common stock ($.0001 par value, 500,000,000
shares authorized, 17,500,000 shares issued
and outstanding) 1,750
Additional paid-in capital 8,079
Deficit accumulated during the development stage (120,849)
------------
Total stockholders' deficit (111,020)
------------
Total Liabilities and Stockholders' Deficit $ 88,052
============
</TABLE>
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XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Operations
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 2,137
------------
Operating Expenses
Research and development 49,809
General and administrative 70,091
Depreciation 3,086
------------
Total operating expenses 122,986
------------
Net Loss Before Provision for Income Taxes (120,849)
Provision For Income Taxes -------------
Net Loss $ (120,849)
============
Earnings (Loss) Per Share
Basic $ (0.01)
============
Diluted $ (0.01)
============
</TABLE>
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XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Stockholders' Deficit
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------------------- Paid-in Development
Shares Amount Capital Stage Total
------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE, May 18,
1999 (date of
inception) - $ - $ - $ - $ -
Share issuances 12,500,000 1,250 11,250 - 12,500
Net loss - - - (120,849) (120,849)
Assumption of
liabilities of
International
Capital Funding,
Inc. 5,000,000 500 (3,171) - (2,671)
------------ ----------- ---------- ----------- ----------
BALANCE, June
30, 1999 17,500,000 $ 1,750 $ 8,079 $ (120,849) $ (111,020)
============ =========== ========== =========== ==========
</TABLE>
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XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Statement of Cash Flows
For the Period May 18, 1999 (Date of Inception) to June 30, 1999
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
<S> <C>
Cash Flows From Operating Activities
Net loss $ (120,849)
Adjustments to reconcile net loss to
net cash used in operating activities
Stock issued in exchange for intellectual
property rights and for services 12,500
Depreciation 3,086
Changes in operating assets and liabilities
Trade accounts receivable (1,661)
Other receivable (3,509)
Prepaid expenses (4,658)
Trade accounts payable and accrued liabilities 50,389
Advances due to directors 1,223
------------
Net cash used in operating activities (63,479)
------------
Cash Flows From Investing Activities
Purchases of property and equipment (55,552)
Acquisition of trademarks and patents (7,134)
Acquisition of subsidiary, net of cash acquired 611
------------
Net cash used in investing activities (62,075)
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Cash Flows From Financing Activities
Proceeds from issuance of note payable 135,135
------------
Net Change In Cash 9,581
Cash, beginning of period -
------------
Cash, end of period $ 9,581
============
Supplemental Disclosure of Cash Flow Information
Interest paid $ -
============
Income taxes paid $ -
============
Supplemental Schedule of Noncash Transaction
Assumption of liabilities of International
Capital Funding, Inc. $ 2,671
============
</TABLE>
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XML - Global Technologies, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 1999
Note 1 - Organization, Reverse Acquisition and Subsequent Financing, and
Operations
Organization and Development Stage Operations
Effective August 27, 1999, XML-Technologies, Inc. (XML-Technologies) and
International Capital Funding, Inc. (ICF) entered into an Agreement and Plan
of Reorganization (the Agreement). In accordance with the Agreement, the
shareholders of XML-Technologies received 12.5 million shares of ICF stock in
exchange for the 12.5 million outstanding shares of XML-Technologies. The
shareholders of ICF retained 5 million shares in exchange for no assets and
the assumption of $2,671 of liabilities of ICF by XML-Technologies. The
transaction was accounted for as a recapitalization of XML-Technologies and
the accompanying consolidated financial statements present the financial
position, results of operations, and cash flows of XML-Technologies.
ICF was organized in 1991 for the purpose of consummating a merger or
acquisition with a private entity. Prior to entering into the Agreement, it
had no material amount of assets or liabilities and no operations. Subsequent
to completing the Agreement, ICF changed its name to XML-Global Technologies,
Inc. (XML-Global Technologies or the Company) and changed its year-end to June
30.
The capital structure in the accompanying consolidated financial
statements reflects a ten for one forward stock split of ICF shares authorized
on August 3, 1999 in anticipation of entering into the Agreement. The
activity of ICF for the period July 1, 1999 and August 27, 1999 (date of the
Agreement) was not significant and will be included in the Company's
consolidated financial statements for the three months ended September 30,
1999.
XML-Technologies is a Nevada corporation organized May 18, 1999 to hold
either directly or indirectly all outstanding shares of XML-Global Research,
Inc. and Walkabout Website Designs, Ltd., both of which are British Columbia
corporations. The Company and its subsidiaries engage in the business of
developing internet-based software applications using XML (Extensible Markup
Language). XML is an abbreviated version of SGML (Standard General Markup
Language), the international standard for defining descriptions of the
structure and content of electronic documents.
For the period May 18, 1999 through June 30, 1999, the Company and its
subsidiaries' efforts have been devoted to legal formation; financial
planning; recruiting directors, advisors and employees; and raising additional
financing. Development stage operations during this period have been financed
with a loan from a director of the Company.
Subsequent Financing
Concurrent with completing the Agreement, the Company issued 2,330,000
units to investors at $1 per unit for total proceeds of $2,330,000. Costs
associated with issuance were not material. Units issued consist of one
common share and a purchase warrant entitling the holder to acquire one common
share at an exercise price of $4 within the first six months following the
issue date, or $6 within the second six months following the issue date. The
shares issued are exempt from registration in reliance on Rule 506 of
Regulation D of the Securities Act 1933. Net proceeds from the issuance will
be used to help fund the Company's working capital needs until such time as
development stage operations cease and profitable operations are achieved.
Note 2 - Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements
include the accounts of XML-Global Technologies, Inc. and its wholly-owned U.
S. and Canadian subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
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 amounts reported in the consolidated
financial statements. Actual results could differ from those estimates.
Allowance for Doubtful Accounts - The Company considers all trade
accounts receivable to be fully collectible. Accordingly, no allowance for
doubtful accounts has been recorded.
Property and Equipment - Property and equipment is recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets.
Intangible Assets - Legal costs associated with obtaining and protecting
trademarks and patents are capitalized. Once a trademark or patent is
perfected, the related costs are amortized over five years using the straight-
line method.
Valuation of Long-Lived Assets - The Company periodically reviews long-
lived assets, including identifiable intangible assets, whenever events or
changes in circumstances indicate that the carrying amount of an asset may be
impaired and not recoverable. Adjustments are made if the sum of the expected
future undiscounted operating cash flows is less than the carrying amount.
Research and Development Costs - Research and development costs are
expensed as incurred. Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed, does not materially affect the Company.
Income Taxes - The Company accounts for income taxes using the liability
method. Deferred taxes are recognized for temporary differences between the
basis of assets and liabilities for financial and income tax purposes at
enacted tax rates. Deferred tax amounts represent the future tax consequences
of those differences, which will be either deductible or taxable when the
assets and liabilities are recovered or settled. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be realized. The Company files a consolidated tax return in the
United States. It files separate tax returns for each of its Canadian
subsidiaries in Canada. Additionally, the Canadian subsidiaries are subject to
provincial income taxes in Canada.
Foreign Currency Translation - All asset and liability accounts of
Canadian operations are translated into U.S. dollars at current exchange
rates. Revenues and expenses are translated using the average exchange rate
prevailing during the period. Foreign currency translation adjustments were
not material during the period May 18, 1999 (date of inception) to June 30,
1999.
Earnings Per Share - The Company reports earnings per share in accordance
with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share.
Segment Information - The Company reports segment information in
accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information. SFAS No. 131 requires that reportable segments be
designated using a management approach, which relies on the internal
organization used by management for making operational decisions and assessing
performance. SFAS No. 131 also requires certain disclosures about products and
services, geographic areas, and major customers.
New Accounting Standard - In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. Among other provisions, SFAS No. 133 requires that
entities recognize all derivatives as either assets or liabilities in the
balance sheet and measure those financial instruments at fair value.
Accounting for changes in fair value is dependent on the use of the
derivatives and whether such use qualifies as hedging activity. The new
standard, as amended, becomes effective for the Company in fiscal 2001, and
management is currently assessing the impact, if any, it may have on financial
position and results of operations.
Note 3 - Mergers and Acquisitions
XML-Global Research, Inc.
Effective May 20, 1999, XML-Technologies, Inc. completed the acquisition
of XML-Global Research, Inc. (Global) by purchasing all outstanding shares of
common stock of Global for a nominal amount. Global is a British Columbia
corporation organized February 4, 1999 for the purpose of engaging in software
development. The acquisition has been accounted for using the purchase method
of accounting for business combinations. Prior to the acquisition, Global had
no significant operations, and no goodwill was recorded in connection with the
combination.
Walkabout Website Designs, Ltd.
Effective May 27, 1999, XML-Global Research, Inc. completed the
acquisition of Walkabout Website Designs, Ltd. (Walkabout) by purchasing all
outstanding shares of common stock of Walkabout for a nominal amount.
Walkabout is a British Columbia corporation organized September 1, 1998 for
the purpose of engaging in software development. The acquisition has been
accounted for using the purchase method of accounting for business
combinations; and, accordingly, the operating results of Walkabout have been
included in the Company's financial statements from the date of acquisition.
No goodwill was recorded in connection with the combination.
Note 4 - Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Computer hardware $ 50,685
Office equipment 7,339
------------
58,024
Accumulated depreciation (3,086)
------------
$ 54,938
============
</TABLE>
Note 5 - Note Payable
XML-Technologies, Inc. has a $135,000 unsecured note payable to a
director of the Company. The note is denominated in Canadian dollars, bears
interest at 9.25%, and is due on the earlier of demand or September 30, 1999.
Note 6 - Income Taxes
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Deferred Canadian federal and provincial tax benefit $ 48,300
Increase in valuation allowance (48,300)
-------------
$ -
=============
</TABLE>
The total provision differs from the amount computed using U.S. federal
statutory income tax rates as follows:
<TABLE>
<CAPTION>
<S> <C>
Net loss before provision for income taxes $ (120,849)
U.S. statutory rate 34%
Tax benefit at statutory rate (41,100)
Excess income tax benefit in Canada (7,200)
Increase in valuation allowance 48,300
--------------
$ -
==============
</TABLE>
Tax effects of temporary differences that give rise to deferred tax
assets, based on a 40% Canadian tax rate, consist solely of a $48,300 net
operating loss carryforward, which expires in 2006. Management currently
believes uncertainty exists surrounding realization of the deferred tax asset
and has recorded a $48,300 valuation allowance to offset completely the value
of the asset.
Note 7 - Earnings per Share
The numerators and denominators of basic and diluted earnings per share
are as follows:
<TABLE>
<CAPTION>
<S> <C>
Numerator - net loss $ (120,849)
==============
Denominator - weighted average number of shares
outstanding 17,500,000
==============
</TABLE>
At June 30, 1999, the Company had no potential common shares that would
have had a dilutive effect.
Note 8 - Stockholders' Equity
Preferred Stock
The Company has 100,000,000 authorized shares of $0.01 par value
preferred stock. The Board of Directors may authorize issuance of any number
of shares in series and assign specific rights and preferences to each series
without limitation. As of June 30, 1999, no shares have been issued.
Common Stock and Stock Warrants
The Company has a single class of $0.0001 par value common stock.
Authorized shares total 500 million. After giving effect to the reverse
acquisition discussed in Note 1 and a ten for one stock split authorized on
August 3, 1999, the Company has 17.5 million shares outstanding.
Subsequent to June 30, 1999, and concurrently with the reverse
acquisition discussed in Note 1, the Company issued 2,330,000 units to
investors at $1.00 per unit for total proceeds of $2,330,000. Costs
associated with issuance were not material. Units issued consist of one
common share and a purchase warrant entitled the holder to acquire one common
share at an exercise price of $4.00 within the first six months following the
issue date or $6.00 within the second six months following the issue date.
The shares issued are exempt from registration in reliance on Rule 506 of
Regulation D of the Securities Act of 1933.
Note 9 - Related Party Transactions
During the period May 18, 1999 (date of inception) to June 30, 1999, the
Company paid $6,100 of management fees to directors and to companies
controlled by directors.
Note 10 - Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and trade accounts
receivable. The Company places its temporary cash investments with major
Canadian financial institutions. The Company extends credit to customers
based on evaluation of customers' financial condition and credit history.
Collateral is generally not required. Customers include Canadian and U.S.
entities engaged in electronic commerce and software development.
Note 11 - Segment and Geographic Information
The Company's primary operations consist of the development and sale of
internet-based software applications and software engineering contracts.
Management assesses the operations of its software sales and engineering
activities as separate segments. However, through June 30, 1999, the
Company's efforts were focused primarily on development stage operations, and
no material activities occurred within these segments. Currently, the Company
also has no major customers. At June 30, 1999, essentially all of the
Company's long lived assets were located in British Columbia, Canada.
Note 12 - Fair Value of Financial Instruments
The fair values of cash, trade accounts receivable and payable, accrued
liabilities, advances due to directors, and note payable all approximate their
fair value due to the short-term nature of the instruments.
Note 13 - Year 2000 Issue
Currently, management is reviewing the Company's software programs and
hardware components to determine whether or not modifications will be required
to prevent problems related to the Year 2000 Issue. In connection with this
process, management is currently making an assessment of potential expense, if
any, to be incurred to ensure all of the Company's computer systems and
various other subsystems, are Year 2000 compliant.
Because of the unprecedented nature of the Year 2000 Issue, its effects
and the success of related remediation efforts, if any are required, will not
be fully determinable until the year 2000 and thereafter. Management cannot
assure that the Company is or will be Year 2000 ready, that the Company's
remediation efforts will be successful in whole or in part, or that parties
with whom the Company does business will be Year 2000 ready.
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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 hereunto duly authorized.
XML - GLOBAL TECHNOLOGIES, INC. fka
INTERNATIONAL CAPITAL FUNDING, INC.
Date: November 10, 1999 By: /s/ Peter Shandro
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Peter Shandro, Chief Executive Officer
