<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 000-27139
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e-commerce group, Inc.
----------------------
(Exact name of Small Business Issuer as specified in its charter)
Nevada 88-0293704
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(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
3675 Pecos-McLeod, Suit 1400, Las Vegas, NV 89121
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(Address of principal executive offices) (Zip Code)
(702) 866-2500
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(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of June 30, 2000, 6,005,000 shares of the registrant's Common Stock, $.001
par value, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
----------------------------
The response to Item 1 has been submitted as a separate section of this Report
beginning on page F-1.
Item 2. Management's Discussion and Analysis or Plan of Operation.
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Information contained in this Report contains forward-looking statements such as
statements of the Company's plans, objectives, expectations and intentions, that
can often be identified by the use of forward-looking terminology, such as
"may," "will," "expect," "anticipate," "believe," "plan," "intend," "could,"
"estimates," "is being" or "goal" or other variations of these terms or
comparable terminology. All forward-looking statements involve risks and
uncertainties, and actual results could differ materially from those set forth
in the forward-looking statements. Factors that could cause actual results to
materially differ include known and unknown risks, including, without
limitation, the early stage of the e-commerce market, the Company's ability to
manage its growth, the ability of the Company to develop and successfully market
new products, the Company's ability to successfully integrate the operations of
Sports Fitness & Leisure, Limited ("SFL"), the continuation of SFL's alliance
with The Prudential Assurance Company Limited, the retention of key technical
and other personnel, rapid technological change and intense competition, The
cautionary statements made in this Report should be read as being applicable to
all forward-looking statements wherever they appear in this Report. The
Company's actual results could differ materially from those discussed
herein.
Plan of Operation
The Company's plan of operation is to seek, investigate, and if such
investigation warrants, acquire an interest in one or more business
opportunities presented to it. Although the Company is not required to restrict
its search to any specific business, industry, or geographical location, it has
recently decided to focus its search on companies engaged in the electronic
commerce ("e-commerce") industry. Management is currently in the process of
identifying suitable candidates for acquisition and, on July 6, 2000, acquired
all of the outstanding shares of Sports Fitness & Leisure Limited ("SFL"). See
"Acquisition of Sports Fitness & Leisure Limited" below. However, if management
subsequently decides that any other companies under consideration are not
suitable acquisition candidates, or if a suitable candidate in another industry
is located, management may complete transactions with another company or
companies including those in other industries.
Since its inception on January 7, 1993, the Company has engaged in no
significant operations other than undertaking organisational activities, filing
a registration statement for small business issuers on Form 10-SB with the SEC,
complying with periodical SEC reporting requirements and attempting to identify
suitable merger or acquisition
-1-
<PAGE>
candidates. As of June 30, 2000, other than with respect to the acquisition of
SFL described below, the Company had not signed any letters of intent or entered
into any agreements with suitable acquisition candidates. The Company has
generated no revenue since its inception.
In the coming quarters, the Company intends to continue its efforts to identify
suitable acquisition candidates, and, when a suitable candidate is found, to
complete a business acquisition. The Company anticipates incurring a loss for
the fiscal year as a result of expenses associated with (1) locating and
evaluating acquisition candidates; (2) completing one or more business
acquisitions; (3) complying with the reporting requirements of the Securities
Exchange Act of 1934; and (4) attending to general and administrative matters.
Other than through the operations of SFL, the Company does not expect to
generate revenues until additional business acquisitions have been completed.
Further, the Company may continue to operate at a loss after completing any
acquisitions, depending on the performance of the acquired businesses.
In order to cover the costs described above, the Company believes that it will
require additional capital of approximately $3,500,000. This additional
capital will be required whether or not the Company is able to complete any
additional business acquisition during the current fiscal year. Further, once
additional acquisitions are completed, the Company's need for additional
financing is likely to increase substantially. Other than as set forth below,
the Company has no current plans, proposals or understandings to raise
additional capital through the sale or issuance of additional securities. To the
extent that additional funds are required to cover Company expenses, the Company
anticipates receiving funds in the form of loans from financial institutions.
However, there can be no assurance that any additional funds will be available
to the Company to allow it to cover its expenses.
Since March 2000, the Company has financed its operations almost exclusively
from the proceeds of a convertible loan facility from S.C. Management Ltd., as
amended, of up to $2.5 million, $2,070,000 of which remains available for
borrowing thereunder by the Company as of the date of this report. Borrowings
under this loan facility are repayable, together with interest at the rate of 9%
per annum, upon the earlier to occur of five days from the date the lender
demands repayment or February 28, 2002. Further, the lender has the option to
convert the outstanding principal amount of the note into up to 1,420,455 units,
each unit consisting of one share of the Company's common stock, $.001 par value
(the "Common Stock") and warrants to purchase one share of Common Stock at an
exercise price of $2.00 per share.
-2-
<PAGE>
Acquisition of Sports Fitness Leisure Limited
On July 6, 2000, pursuant to a Stock Purchase Agreement (the "Stock
Purchase Agreement"), the Company acquired all of the outstanding capital stock
of SFL, a United Kingdom corporation headquartered in Romsey, England, from the
holders of all of the issued and outstanding capital stock of SFL (the "SFL
Shareholders"). In consideration for the SFL shares, the Company (i) issued an
aggregate of 385,000 shares of its Common Stock to the SFL Shareholders, and
(ii) agreed to either (a) make a cash payment of $350,000 to the SFL
Shareholders on or before July 16, 2001 from the proceeds received by the
Company from a round or rounds of financing resulting in aggregate cash proceeds
of at least $350,000, or (b) if no such financing or financings have been
completed by July 6, 2001, issue 107,700 additional shares of Common Stock to
the SFL Shareholders.
In connection with the Stock Purchase Agreement, the Company has
granted the SFL Shareholders certain "piggyback" registration rights with
respect to the Common Stock issued to them, which rights terminate on the
earlier to occur of July 6, 2005 or the inclusion by the Company of such shares
in three registration statements under the Securities Act of 1933, as amended.
SFL and its subsidiaries are engaged in the business of the marketing
and electronic sales of a money purchase occupational Pension Scheme approved by
the United Kingdom Inland Revenue under Chapter I of the United Kingdom Income
and Corporation Taxes Act 1988, known as the Sports Fitness and Leisure Pension
Scheme (the "Scheme"). The Scheme is underwritten by The Prudential Assurance
Company Limited ("Prudential"), and is directed towards small and medium-sized
businesses in the sports, fitness and leisure industries in the United Kingdom
and their employees. SFL's objective is to become the dominant internet portal
in the United Kingdom serving the lifestyle, financial and health needs of small
and medium-sized businesses in the sports, fitness and leisure industries and
their employees. Since its formation, SFL has worked closely with government and
industry leaders in structuring the reform of social security systems and in
particular the introduction of stakeholder pensions. Pursuant to The Welfare
Reform and Pensions Act 1999 and The Stakeholder Pension Schemes Regulations
2000-SI1403 in the United Kingdom (together, the "Stakeholder Legislation"),
which goes into effect in April 2001, employers employing at least five persons
in the United Kingdom will be required to provide, as a benefit, participation
in a stakeholder pension plan beginning in October 2001. A stakeholder pension
is a money purchase pension that is established under trust and that meets the
requirements set forth in the Stakeholder Legislation. One such requirement
limits administration fees to one percent of the amount of the fund. The final
requirements for such stakeholder pension schemes are expected to be announced
in October 2000. Following such announcment SFL intends to qualify the Scheme as
a stakeholder pension scheme, and to enter into an administration agreement with
a third-party stakeholder trustee for such purpose. There can be no assurance,
however, that SFL will achieve its objectives, that the Scheme will qualify as a
stakeholder pension scheme or that such qualification will result in a
significant increase in the number of members participating in the Scheme.
-3-
<PAGE>
Pursuant to its agreement with Prudential (the "Prudential Agreement"),
SFL is required to create, develop and administer an association (the
"Association") of employers principally in the sports, fitness and leisure
industries, to promote the Scheme to members of the Association and to perform
certain other marketing services relating thereto, including the preparation of
promotional materials, to maintain a web-site and database relating to the
Scheme and the Association and to design software which will enable online
access to information relating to the Scheme to members of the Association. The
Association has been formed and the Scheme became operational in January 2000.
Under the terms of the Prudential Agreement, Prudential agreed to pay
SFL a service fee equal to (pound)1,158,736, plus VAT, (pound)758, 736 of which
has been paid to date. Further, SFL is required to share with Prudential
membership fees paid by participants in the Scheme to a maximum of
(pound)1,626,875, payable on July 31 of each year. Further, Prudential has
agreed not to promote any similar pension scheme to employers and employees
within the sports, fitness and leisure industries, although it may provide
individual pension arrangements for individual employers and employees within
such industries and SFL has agreed not to promote any pension scheme that
competes with the Scheme. The Prudential Agreement is terminable under certain
circumstances, including upon a breach by either party of the agreement, or if
Prudential is replaced as the insurer or administrator of the Scheme, or if SFL
fails to substantially meet certain targets.
As a result of the SFL acquisition, the Company currently has 12
full-time employees and two part-time employees. Also in connection with the SFL
transaction, effective July 11, 2000, the Company appointed Richard Nichols, the
Managing Director of SFL, to serve on its Board of Directors and entered into an
Employment Agreement with Mr. Nichols pursuant to which he will serve as the
Chief Operating Officer of the Company and the Managing Director of SFL for an
annual base salary of (pound)75,000, plus a bonus of up to (pound)25,000 under
the Company's bonus scheme. After the first anniversary of his employment
with the Company, Mr. Nichols will be entitled to receive options under a stock
option plan to be adopted by the Company. Under the agreement, the Company may
terminate Mr. Nichols' employment without cause upon 12 months notice and may,
in lieu of continuing his employment after such notice of termination is given,
pay Mr. Nichols a severance payment equal to his base salary for the remainder
of the unexpired notice period. Further, Mr. Nichols has agreed not to compete
with the Company, solicit any of the Company's customers or employees or
disclose any confidential information or trade secrets during the term of his
employment and for certain periods of time following the termination of such
employment.
-4-
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
-------------------------
The Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.
Item 2. Changes in Securities.
-----------------------------
On June 28, 2000, the Company issued an aggregate of 5,000 shares of its Common
Stock to its former lawyers in payment of legal services provided by such
individuals. These shares were issued pursuant to a Registration Statement on
Form S-8 filed under the Securities Act of 1933, as amended (the "Act").
On July 25, 2000, the Company issued a warrant exercisable through July 24, 2001
to purchase 25,000 shares of its Common Stock at an exercise price of $1.00 per
share to Greenfield Ventures Ltd. pursuant to the terms of a Termination
Agreement. These warrants were issued in reliance upon an exemption from the
registration requirements of the Act provided by Section 4(1) of the Act as a
transaction not involving a public offering.
On July 6, 2000, pursuant to a stock purchase agreement, the Company issued an
aggregate of 385,000 shares of Common Stock to the shareholders of Sports
Fitness & Leisure Limited at a price equivalent to $3.25 per share. These shares
were issued in reliance upon an exemption from the registration requirements of
the Act provided by Regulation S promulgated thereunder.
On July 31, 2000 the Company issued an Amended and Restated Convertible
Promissory Note to S.C. Management Ltd. ("SCM") in the amount of up to
$2,500,000, which note is convertible into up to 1,420,455 Units for the
principal amount of the note, each Unit consisting of one share of Common Stock
and a warrant to purchase one share of Common Stock through February 28, 2002 at
an exercise price of $2.00. On August 10, 2000, the Company agreed to issue
300,000 shares of Common Stock to SCM in exchange for prior consulting services
rendered by SCM to the Company, and agreed to issue options to purchase up to
200,000 shares of Common Stock to SCM, 100,000 of which shall be granted on
January 1, 2001 and immediately exercisable for a five-year period at an
exercise price of $2.00 per share and 100,000 of which shall be granted on
January 1, 2002 and immediately exercisable for a five-year period at an
exercise price of $2.50 per share.
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<PAGE>
Item 3. Defaults Upon Senior Securities.
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None.
Item 4. Submission of Matters to a Vote of Security Holders.
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None.
Item 5. Other Information.
-------------------------
On July 6, 2000, under a Stock Purchase Agreement dated as of June 30, 2000, the
Company acquired all of the outstanding capital stock of SFL. For more
information regarding this transaction, see "Management's Discussion and
Analysis of Results of Operations and Financial Condition - Acquisition of
Sports Fitness & Leisure Limited", herein.
On July 5, 2000, Barry L. Friedman resigned his engagement as the Company's
independent auditor. As a result of the acquisition of SFL, the Company's Board
of Directors authorized management of the Company to engage Ernst & Young as the
Company's principal independent auditors for the fiscal year ended December 31,
2000 for the purposes of rendering an audit opinion for the Company's
consolidated financial statements as well as conducting an audit of SFL's
operations located in England and on July 12, 2000, Ernst & Young was engaged
for such purposes.
On April 4, 2000, Tony Arnold, the Chief Executive Officer of the Company, was
appointed President and a Director.
On July 11, 2000, Richard C. Nichols was appointed Chief Operating Officer of
the Company, Managing Director of SFL and a Director and Jeremy Payne was
appointed Chief Financial Officer and a Director.
On July 31, 2000 the Company issued an Amended and Restated Convertible
Promissory Note (the "Note") to S.C. Management Ltd. ("SCM") in the amount of up
to $2,500,000. Borrowings under the Note are repayable, together with interest
at the rate of 9% per annum, upon the earlier to occur of five days from the
date SCM demands repayment or February 28, 2002. Further, SCM has the option to
convert the outstanding principal amount of the note into up to 1,420,455 units,
each Unit consisting of one share of Common Stock and a warrant exercisable
through February 28, 2002 to purchase one share of Common Stock at an exercise
price of $2.00. If the Company seeks to prepay the Note, SCM has the right to
convert the Note and to require the Company to further borrow so much of the
principal amount of the Note as has already been advanced and to permit it to
convert such additional principal amount. Pursuant to the terms of the Note, the
Company cannot issue additional shares of its Common Stock without the consent
of SCM, which consent shall not be unreasonably withheld. Further, the Company
has granted SCM a security interest in all of its assets to secure repayment of
the Note.
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<PAGE>
On August 10, 2000, the Company agreed to issue 300,000 shares of Common Stock
to SCM in exchange for prior consulting services rendered by SCM to the Company,
and entered into a Contractor Agreement with SCM pursuant to which SCM has
agreed to provide certain financial advisory services to the Company in exchange
for the issuance to SCM of options (the "Options") to purchase up to 200,000
shares of Common Stock, 100,000 of which shall be granted on January 1, 2001 and
immediately exercisable for a five-year period at an exercise price of $2.00 per
share and 100,000 of which shall be granted on January 1, 2002 and immediately
exercisable for a five-year period at an exercise price of $2.50 per share.
In addition, the Company has agreed to register all of the shares issued to SCM,
together with the shares underlaying the Note and the Options, under the Act no
later than April 30, 2001 and to keep such registration statement effective
until all of the shares of Common Stock beneficially owned by SCM have been
disposed of. The Company will be liable to SCM for damages for the period from
May 1, 2001 until the date such registration statement becomes effective at a
per diem amount equal to $10,000 per day for each of the first 30 days following
May 1, 2001; $15,000 per day for each of the next 30 days; and $20,000 per day
for each day thereafter.
-7-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
----------------------------------------
Financial Statements.
--------------------
Page
----
Table of Contents................................................... F-1
Balance Sheet....................................................... F-2
Statement of Operations............................................. F-3
Statements of Cash Flows............................................ F-4
Notes to Financial Statements....................................... F-5
(a) Exhibits.
------------
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1. Stock Purchase Agreement among e-commerce group, Inc., Sports
Fitness & Leisure Ltd., Fortress Management Services Ltd., Brian Ridsdale,
Paul Bagshawe, Michael Withers, Paul Callus & LG Multimedia Services Ltd.
dated as of June 30, 2000 (schedules and exhibits to the Agreement are
omitted and will be supplementally provided to the Commission upon
request).*
(3) Articles of Incorporation and By-Laws.
3.1A Original Articles of Incorporation*
3.1B Amended Articles of Incorporation*
3.1C Amended Articles of Incorporation*
3.2 By-Laws*
3.3 Articles of Association of Sports Fitness & Leisure Limited
3.4 Memorandum of Association of Sports Fitness & Leisure Limited
(4) Instruments Defining the Rights of Security Holders, Including
Indentures.**
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<PAGE>
(10) Material Contracts
10.1 Memorandum of Agreement Between e-commerce group, Inc. and
Greenfield Ventures Ltd. for e-commerce group, Inc. Corporate
Introduction Services, dated 25th October 1999.*
10.2 Memorandum of Agreement Between e-commerce group, Inc. and
Greenfield Ventures Ltd. for e-commerce group, Inc. Recruitment
Services, dated 25th October 1999.*
10.3 Agreement Between e-commerce group, Inc. and Tony Arnold dated
March 5, 2000. *
10.4 Amended and Restated Convertible Promissory Note, in the
Original Principal Amount of $352,500, Payable to S.C.
Management Ltd., dated March 7, 2000. *
10.5 General Security Agreement Between e-commerce group, Inc. and
S.C. Management Ltd., dated March 7, 2000. *
10.6 Employment Agreement between e-commerce group, Inc. and Richard
Nichols dated as of July 11, 2000 *
10.7 Agreement between the Prudential Assurance Company Limited and
Sports Fitness & Leisure Limited dated August 13, 1999
10.8 Termination Agreement between e-commerce group, Inc. and
Greenfield Ventures Ltd. dated as of July 20, 2000
10.9 Warrant to purchase Common Stock issued to Greenfield Ventures
Ltd. dated July 25, 2000
10.10 Amended and Restated Convertible Promissory Note, in the
Original Principal Amount of $2,500,000, payable to S.C.
Management Ltd., dated July 31, 2000
10.11 Subscription Agreement between e-commerce group, Inc. and S.C.
Management Ltd., dated August 10, 2000
10.12 Contractor Agreement between e-commerce group, Inc. and S.C.
Management Ltd., dated August 10, 2000
10.13 Registration Rights Agreement between e-commerce group, Inc. and
S.C. Management Ltd., dated August 10, 2000
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule.
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<PAGE>
* In accordance with Rule 12b-32 under the Securities Exchange Act of 1934, as
amended, reference is made to the documents previously filed with the Securities
and Exchange Commission, which documents are hereby incorporated by reference.
** Instruments defining the rights of Security Holders have been included in
3.1A, 3.1B, 3.1C and 3.2 above.
Reports on Form 8-K.
-------------------
The Company did not file any current reports on Form 8-K during the quarter
ended June 30, 2000. The following reports on Form 8K were filed by the Company
subsequent to June 30, 2000 but prior to the date of this Quarterly Report on
Form 10Q-SB:
(a) Form 8K dated July 5, 2000 reporting under Item 4 a change in the
Company's certifying accountants.
(b) Form 8K/A dated July 5, 2000 reporting under Item 4 a change in the
Company's certifying accountants.
(c) Form 8K dated July 6, 2000 reporting under Item 2 regarding the
acquisition of SFL.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the issuer
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorised.
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e-commerce group, Inc.
By /s/ Tony Arnold
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Tony Arnold, President & CEO
Date August 14, 2000
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<PAGE>
E-COMMERCE GROUP INC
(FORMERLY DALTON INTERNATIONAL RESOURCES INC.)
(FORMERLY ADVANCED SUSPENSION TECHNOLOGIES INC.)
(A DEVELOPMENT STAGE COMPANY)
CONDENSED FINANCIAL STATEMENTS
------------------------------
June 30, 2000
December 31, 1999
TABLE OF CONTENTS
-----------------
PAGE
----
BALANCE SHEET F-2
STATEMENT OF OPERATIONS F-3
STATEMENT OF CASH FLOWS F-4
NOTES TO FINANCIAL STATEMENTS F-5
F-1
<PAGE>
E-COMMERCE GROUP INC
(FORMERLY DALTON INTERNATIONAL RESOURCES INC)
(FORMERLY ADVANCED SUSPENSION TECHNOLOGIES INC)
(A Development Stage Company)
BALANCE SHEET
-------------
ASSETS
June 30,
2000
CURRENT ASSETS
- Cash 4,497
- Prepayments 129,900
---------
TOTAL ASSETS $ 134,397
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
2000
CURRENT LIABILITIES
Promissory note 240,000
Officers Advances 4,855
Accounts Payable 129,900
Accruals 125,000
---------
TOTAL CURRENT LIABILITIES 499,755
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
Authorized 100,000,000 shares
Issued and outstanding at
June 30 2000 - 6,005,000 shs 6,005
Additional paid in Capital 12,745
Deficit accumulated during the
development stage (384,108)
---------
TOTAL STOCKHOLDERS' EQUITY 365,358
---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 134,397
=========
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
E-COMMERCE GROUP INC
(FORMERLY DALTON INTERNATIONAL RESOURCES INC)
(FORMERLY ADVANCED SUSPENSION TECHNOLOGIES INC)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Three months ended Six months ended January 7 1993
June 30 June 30 (inception) to
June 30 2000
------- -------- ------- ------- --------------
2000 1999 2000 1999
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
General and
administrative $(286,868) - $ (376,753) - $ (384,108)
Total Expenses $ (286,868) - $ (376,753) - $ (384,108)
============ =========== ============
Net Profit (Loss) $ (286,868) - $(376,753) - $ (384,108)
============ =========== ============
Net loss per share-
Basic and diluted $ (0.048) - $ (0.063) -
============ ====== =========== ======
Weighted average
number of common
shares outstanding
-basic and diluted 6,000,000 6,000,000 6,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
E-COMMERCE GROUP INC
(FORMERLY DALTON INTERNATIONAL RESOURCES INC)
(FORMERLY ADVANCED SUSPENSION TECHNOLOGIES INC)
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
------------------------
Six months ended January 7 1993
June 30 (inception) to
June 30 2000
------------------ --------------- ---------------
2000 1999
Cash Flows from
Operating Activities
Net Loss $(376,753) - $(384,108)
Adjustment to
reconcile net loss
to net cash
provided by operating
activities
Stock issued in
exchange for services 16,250 - 16,250
Changes in assets and
liabilities
Officers Advances - - 4,855
Accruals 125,000 125,000
--------- -------------- ---------
Net cash used in
operating activities (235,503) - (238,003)
Financing Activities
Issuance of common
Stock 2,500
Promissory notes 240,000 - 240,000
--------- -------------- ---------
Net increase (decrease)
in cash 4,497 - 4,497
Cash at
beginning of period - - -
--------- -------------- ---------
Cash at
end of period $ 4,497 $ - $ 4,497
========= ============== ==========
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
E-COMMERCE GROUP INC
(FORMERLY DALTON INTERNATIONAL RESOURCES INC)
(FORMERLY ADVANCED SUSPENSION TECHNOLOGIES INC)
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
June 30, 2000 and December 31, 1999
NOTE 1 - HISTORY AND ORGANISATION OF THE COMPANY
e-commerce group (the "Company") was incorporated in the State of Nevada on
January 7, 1993 as Advanced Suspension Technologies Inc. The Company intends to
acquire companies primarily in the electronic commerce industry. To date the
Company has not undertaken any operations and accordingly is considered a
development stage company.
The condensed financial statements of e-commerce group as of June 30, 2000, for
the three and six months ended June 30, 2000 and 1999 and for the period from
inception (January 7, 1993) to June 30, 2000, are unaudited and, in the opinion
of management, contain all adjustments, consisting only of normal recurring
items, necessary for the fair presentation of the financial position and results
of operations for the interim periods. These condensed financial statements
should be read in conjunction with the Financial Statements and Notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999. The results of operations for the three and six months ended
June 30, 2000 and for the period from inception (January 7, 1993) to June 30,
2000 are not necessarily indicative of the results to be expected for the entire
year.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek additional capital
through equity or debt financing.
NOTE 3 - RELATED PARTY TRANSACTION
Office services are provided without charge by a director. Such costs are
immaterial to the condensed financial statements.
The officer of the company has advanced funds to the Company to pay for any
costs incurred by it. These funds are interest free.
F-5
<PAGE>
E-COMMERCE GROUP INC
(FORMERLY DALTON INTERNATIONAL RESOURCES INC)
(FORMERLY ADVANCED SUSPENSION TECHNOLOGIES INC)
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
June 30, 2000, December 31, 1999
NOTE 4 - CONVERTIBLE PROMISORY NOTE
On March 7, 2000, the Company issued a promissory note for $352,500.
The note is repayable either on demand or on February 28, 2002, whichever is the
sooner and incurs interest at 9% per annum. As security for the note the company
has issued a floating charge over its assets.
The promissory note may be converted by the lender into units up to the limit of
200,000 units. If some of the note has been repaid the units will be issued in
proportion to the amounts outstanding.
A unit consists of one share of common stock at $0.001 par value and a warrant
to purchase one share at $2.00. The warrant will expire on 28 February 2002 and
is exercisable on a "cashless" basis.
NOTE 5 - SUBSEQUENT EVENTS
Under a Stock Purchase Agreement, which closed on July 6, 2000, the Company
purchased all of the outstanding stock of Sports, Fitness and Leisure Limited
("SFL"), a company incorporated in England and Wales, for consideration of
385,000 shares. The total consideration consists of 385,000 shares of common
stock in the Company at a price of $3.25 a share.
In addition, a further $350,000 in cash will be paid by the Company within 375
days of the closing of the agreement, provided that at least this amount is
raised through future stock issuances. If this is not achieved a further 107,700
shares of common stock will be issued. As management believes that it is
probable that the further cash payment will be made, this will also be included
in the total consideration.
The transaction will be accounted for as a purchase. The allocation of the
excess of consideration over the fair value of the net assets acquired is
currently being assessed by management.
On July 20, 2000, the Company entered into a Termination Agreement with a
recruitment firm pursuant to which it issued such firm warrants to purchase
25,000 shares of Common Stock and agreed to pay such firm $25,000 and to issue
additional warrants to purchase 70,000 shares of Common Stock on or before
August 20, 2000. The warrants are exercisable for a period of one year from the
date of issuance at an exercise price of $1.00 per share.
On July 31, 2000, the Company issued an amended and restated convertible
promissory in the amount of up to $2,500,000, which note replaces the note
described in Note 4 above. The restated note has substantially similar terms to
the original note and may be converted by the lender into units up to the limit
of 1,420,455. In addition, the Company has agreed to issue 300,00 shares of
Common Stock to the lender in exchange for services rendered by the lender to
the Company and has entered into a contractor agreement with the lender pursuant
to which it has agreed to issue to the lender an aggregate of 200,000 options to
purchase Common Stock, 100,000 of which shall be issued on January 1, 2002 and
immediately exercisable for a five-year period at an exercise price of $2.00 per
share and 100,000 of which shall be issued on January 1, 2002 and immediately
exercisable for a five-year period at an exercise price of $2.50 per share. The
Company has agreed to register the shares of Common Stock issuable to the lender
under the Securities Act of 1933 no later than April 30, 2001 and will be liable
to the lender in damages for the period from May 1, 2001 until the date such
registration statement becomes effective at a per diem amount equal to $10,000
per day for each of the first 30 days following May 1, 2001; $15,000 per day for
each of the next 30 days; and $20,000 per day for each day thereafter.
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