<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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): September 18, 2000
(July 6, 2000)
e-commerce group, Inc.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nevada
--------------------------------------------------------------------------------
(State of other jurisdiction of incorporation)
000-27139 88-0293704
----------------------------- ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
3675 Pecos-McLeod, Suite 1400, Las Vegas, NV 89121
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (702) 866-2500
--------------
_________________________________________________________
(Former Name or Address, if changed since Last Report) (Zip Code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
This Form 8-K/A is being filed as an amendment to the Form 8-K filed by
e-commerce group, Inc. (the "Company") on July 18, 2000 in connection with the
acquisition by the Company on July 6, 2000 of all of the outstanding capital
stock of Sports Fitness & Leisure, Limited ("SFL"), a United Kingdom
corporation, to include the financial statements required by Item 2 of Form 8-K
and Regulation S-X.
-2-
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
-----------------------------------------------------------------
(a) & (b) Financial Statements & Pro Forma Financial Statements
(a) Financial Statements of the Business Acquired
Sports Fitness & Leisure Limited
<TABLE>
<S> <C>
Table of Contents............................................................................................... F-1
Report of Independent Auditors.................................................................................. F-2
Balance Sheets as of September 30, 1999 and 1998 and as of June 30, 2000 (Unaudited)............................ F-3
Statements of Operations for the Periods Ended September 30, 1999 and 1998 and
for the Nine Month Periods Ended June 30, 2000 and 1999 (Unaudited)........................................ F-4
Statements of Cash Flows for the Periods Ended September 30, 1999 and 1998 and
for the Nine Month Periods Ended June 30, 2000 and 1999 (Unaudited)........................................ F-5
Statements of Shareholders' Equity for the Periods Ended September 30, 1999 and
1998 and for the Nine Month Period Ended June 30, 2000 (Unaudited)......................................... F-6
Notes to Financial Statements September 30, 1999 and 1998 and June 30, 2000 (Unaudited)......................... F-7
(b) Pro Forma Financial Information
e-commerce group, Inc. and Subsidiaries
Unaudited Condensed Pro Forma Consolidated Financial Information................................................ F-13
Unaudited Condensed Pro Forma Consolidated Balance Sheet June 30, 2000.......................................... F-14
Unaudited Condensed Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2000....... F-15
Unaudited Condensed Pro Forma Consolidated Statement of Operations for Year Ended December 31, 1999............. F-16
Note to Unaudited Condensed Pro Forma Consolidated Financial Information....................................... F-17
</TABLE>
(c) Exhibits
10.7.1 Schedule 2 to Exhibit 10.7, Agreement between the Prudential
Assurance Company Limited and Sports Fitness Leisure Limited
dated August 13, 1999
-3-
<PAGE>
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.
e-commerce group, Inc.
By: /s/ Tony Arnold
----------------
Tony Arnold
Chief Executive Officer
Date: September 18, 2000
-4-
<PAGE>
<TABLE>
<S> <C>
Financial Statements of the Business Acquired
Sports Fitness and Leisure Limited
Report of Independent Auditors................................................................................... F-2
Balance Sheets as of September 30, 1999 and 1998 and as of June 30, 2000 (Unaudited)............................. F-3
Statements of Operations for the Periods Ended September 30, 1999 and 1998 and
for the Nine Month Periods Ended June 30, 2000 and 1999 (Unaudited)......................................... F-4
Statements of Shareholders' Equity for the Periods Ended September 30, 1999 and 1998
and for the Nine Month Period Ended June 30, 2000 (Unaudited)............................................... F-5
Statements of Cash Flows for the Periods Ended September 30, 1999 and 1998 and
for the Nine Month Periods Ended June 30, 2000 and 1999 (Unaudited)......................................... F-6
Notes to Financial Statements September 30, 1999 and 1998 and June 30, 2000 (Unaudited).......................... F-7
Pro Forma Financial Information
e-commerce group, Inc. and Subsidiaries
Unaudited Condensed Pro Forma Consolidated Financial Information................................................. F-13
Unaudited Condensed Pro Forma Consolidated Balance Sheet June 30, 2000........................................... F-14
Unaudited Condensed Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2000........ F-15
Unaudited Condensed Pro Forma Consolidated Statement of Operations for Year Ended December 31, 1999.............. F-16
Note to Unaudited Condensed Pro Forma Consolidated Financial Information......................................... F-17
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors
Sports Fitness & Leisure Limited
We have audited the accompanying balance sheets of Sports Fitness & Leisure
Limited as of September 30, 1999 and 1998, and the related statements of
operations, shareholders' equity, and cash flows for the year ended September
30, 1999 and the period from October 2, 1997 (inception) through September 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sports Fitness & Leisure
Limited at September 30, 1999 and 1998, and the results of its operations and
its cash flows for the year ended September 30, 1999 and the period from October
2, 1997 (inception) through September 30, 1998, in conformity with United States
generally accepted accounting principles.
ERNST & YOUNG
Reading, England
September 18, 2000
F-2
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
BALANCE SHEET
<TABLE>
<CAPTION>
June 30,
September 30, 2000
---------------------------- -----------
1999 1998 (Unaudited)
-------- --------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 353,589 $ 2 $ 17,250
VAT recoverable 161,015 8,974 236,365
Other current assets 4,743 388 4,003
------------- ------------- ----------
Total current assets 519,347 9,364 257,618
Plant and equipment, net 67,414 6,395 77,366
------------- ------------- ----------
TOTAL ASSETS $ 586,761 $ 15,759 $ 334,984
============= ============= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank loans and overdrafts $ - $ 34,714 $ 8,115
Accounts payable 64,393 - 215,323
Capital lease obligations - current portion 12,143 - 12,113
Amounts due to related parties - 19,917 -
Accrued expenses and other liabilities 106,350 18,307 64,426
------------- ------------- ----------
TOTAL CURRENT LIABILITIES 182,886 72,938 299,977
Long term debt 1,079,331 - 1,385,322
Capital lease obligations - non current portion 41,004 - 29,031
COMMITMENTS
SHAREHOLDERS' EQUITY:
Ordinary shares, (Pounds)1.00 par value: 1,000 shares
authorised at September 30, 1998; 1,300 shares 2,147 1,503 2,147
authorised at September 30, 1999; 900 shares
issued and outstanding at September 30, 1998;
1300 shares issued and outstanding at September 30, 1999
A ordinary shares, (Pounds)1.00 per value: no shares
authorised at September 30, 1998; 100 shares
authorised at September 30, 1999; 100 shares 161 - 161
issued and outstanding at September 30, 1999
Additional paid in capital 13,255 - 13,255
Accumulated deficit (737,191) (58,664) (1,485,593)
Other comprehensive income-currency translation adjustment 5,168 (18) 90,684
------------- ------------- ----------
TOTAL SHAREHOLDERS' EQUITY (716,460) (57,179) (1,379,346)
------------- ------------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 586,761 $ 15,759 $ 334,984
============= ============= ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
October 2,1997
Year ended (inception) Nine months ended
September 30, to September 30, June 30,
-----------------------
1999 1998 2000 1999
------ ------ ---------- ---------
(unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 4,613 $ - $ (2,608) $ (2,053)
------------ ------------ --------- ---------
GROSS PROFIT 4,613 - (2,608) (2,053)
Operating expenses:
Research and development 48,781 30,449 14,466 35,711
Sales, general and administrative 613,107 68,728 710,007 336,262
Loan forgiven - (92,235) - -
Amounts written off investments - 52,208 - -
------------ ------------ --------- ---------
Total operating expenses 661,888 59,150 724,473 371,973
OPERATING LOSS (657,275) (59,150) (721,865) (369,920)
Interest receivable and similar income 874 813 2,606 -
Interest expense 22,126 327 29,143 10,086
------------ ------------ --------- ---------
LOSS BEFORE INCOME TAXES (678,527) (58,664) (748,402) (380,006)
Income tax expense - - - -
------------ ------------ --------- ---------
LOSS $ (678,527) $(58,664) $(748,402) $(380,006)
============ ============ ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
STATEMENT OF SHAREHOLDERS' EQUITY
Period from October 2, 1997 (inception) to June 30, 2000
<TABLE>
<CAPTION>
Retained
deficit and
Additional compre-
Ordinary shares paid in hensive
Shares Amount capital income Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Issuance of ordinary shares on
inception in October 1997 at par value 900 $ 1,503 $ - $ - $ 1,503
Net loss for the period - - - (58,664) (58,664)
Currency translation adjustments (18) (18)
---------- ----------
Comprehensive income (58,682) (58,682)
------------ ------------ ------------ ------------ ------------
Balance at September 30, 1998 900 1,503 - (58,682) (57,179)
Issuance of ordinary shares at
$45.79 per share 300 483 13,255 - 13,738
Issuance of ordinary shares at par value 100 161 - - 161
Issuance of A ordinary shares at par value 100 161 - - 161
Net loss for the year - - - (678,527) (678,527)
Currency translation adjustments 5,186 5,186
---------- ----------
Comprehensive income (673,341) (673,341)
------------ ------------ ------------ ------------ ------------
Balance at September 30, 1999 1,400 2,308 13,255 (732,023) (716,460)
Net loss for the period (unaudited) - - - (748,402) (748,402)
Currency translation adjustments (unaudited) - - - 85,516 85,516
---------- ----------
Comprehensive income (unaudited) (662,886) (662,886)
------------ ------------ ------------ ------------ ------------
Balance at June 30, 2000 (unaudited) 1,400 $ 2,308 $ 13,255 $ (1,394,909) $ (1,379,346)
============ ============ ============ ============ ============
</TABLE>
F-5
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
October 2, 1997
(inception)
Year ended to Nine months ended
September 30, September 30, June 30,
--------------------------
1999 1998 2000 1999
------------- --------------- ----------- ----------
(unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (678,527) $ (58,664) $ (748,402) $ (380,006)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 16,740 335 16,337 11,815
Write off of borrowings from related parties (19,917) (92,235) - -
Write off of investment - 52,208 - -
Changes in operating assets and liabilities:
Amounts due to related parties - (11,598) - (19,917)
VAT recoverable (152,041) (8,974) (75,350) (69,227)
Other current assets (4,355) (388) 740 (42,722)
Accounts payable 64,393 - 150,930 69,556
Accrued expenses and other liabilities 101,288 18,307 (16,203) 23,101
------------- --------------- ----------- ----------
Cash used in operating expenses (672,419) (101,009) (671,948) (407,400)
INVESTING ACTIVITIES
Acquisitions of plant and equipment (10,215) (6,730) (26,289) (8,562)
Investments - (52,208) - -
------------- --------------- ----------- ----------
Cash used in investing activities (10,215) (58,938) (26,289) (8,562)
FINANCING ACTIVITIES
Borrowings from related parties - 123,750 - -
Capital lease repayments (14,397) - (12,003) (12,915)
Borrowings from long-term debt 1,066,167 - 354,850 510,496
Proceeds from issuance of common stock 14,060 1,503 - 13,416
------------- --------------- ----------- ----------
Cash provided by financing activities 1,065,830 125,253 342,847 510,997
Effect of exchange rates on cash 5,105 (18) 10,936 14,909
Increase (decrease) in cash and cash equivalents 388,300 (34,712) (344,453) 109,944
Cash and cash equivalents at beginning of period (34,712) - 353,589 (34,712)
------------- --------------- ----------- ----------
Cash and cash equivalents at end of period $ 353,589 $ (34,712) $ 9,135 $ 75,232)
============= =============== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 8,880 $ 327 $ 3,422 $ 7,483
============= =============== =========== ==========
Equipment acquired under capital leases $ 67,544 $ - $ - $ 67,544
============= =============== =========== ==========
Loan forgiven $ - $ 92,235 $ - $ -
============= =============== =========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(Information for the nine months ended June 30, 1999 and 2000 is unaudited)
1. BUSINESS ORGANIZATION
Sports Fitness & Leisure Limited (the Company) was incorporated in England
and Wales in October 1997. The Company undertakes a single activity, the
building and maintenance of an association of individuals and businesses
involved in the sports, fitness and leisure industry with the intention of
developing a web-based portal to allow access for its members to various
services. Currently, the Company only offers a single service, that is
access to personal pension plans by members of an association.
At September 30, 1999 and at June 30, 2000, the Company had incurred
recurring net losses and, as of those dates, had an accumulated deficit of
approximately $737,191 and $1,485,593 respectively. Substantially all of
the losses have been financed through borrowings from the Prudential
Assurance Company Limited. Management believes that it will be able to
obtain additional funds from Prudential Assurance Company Limited (see note
5). In the event that adequate funds are not available from this source,
the Company will reduce its level of spending.
The condensed financial statements of the Company as of June 30, 2000, and
for the nine months ended June 30, 2000 and 1999 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.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of 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.
Revenue Recognition
The company sells services to subscribers of its membership scheme. Income
is recognised in the statement of operations when the subscription
commences. Bad debt write off and corresponding costs are expensed when
incurred.
Cash and cash equivalents
Cash equivalents consist of highly liquid financial instruments, original
maturities of ninety days or less at the time of purchase.
Plant and equipment
Plant and equipment is carried at cost less accumulated depreciation. Plant
and equipment is depreciated for financial reporting purposes using the
straight-line method over its estimated useful life of five years.
Plant and equipment consisted of the following:
September 30, June 30,
-----------------
1999 1998 2000
------- ------ --------
Plant and equipment $84,489 $ 6730 $110,778
Less accumulated depreciation 17,075 335 33,412
------- ------ --------
$67,414 $6,395 $ 77,366
======= ====== ========
F-7
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
(Information for the nine months ended June 30, 1999 and 2000 is unaudited)
Income taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109).
Under this method, deferred tax assets and liabilities are determined based
on the differences between the financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates that will be
in effect when the differences are expected to reverse.
Research and development expenditure
Research and development costs are expensed as incurred.
Significant concentrations
Financial instruments
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of investments in cash
equivalents. The Company invests in money market funds, commercial paper,
and certificates of deposit of high-credit quality institutions. The
Company is exposed to credit risks in the event of default by these
institutions to the extent of the amount recorded on the balance sheet.
Advertising
The cost of advertising is expensed as incurred. Advertising expenses
totalled $100,431 and $1,097 in 1999 and 1998 respectively, and $185,159
and $57,244 in the periods ended June 30, 2000 and June 30, 1999
respectively.
Comprehensive income
SFAS 130 "Reporting Comprehensive Income" requires an enterprise to
classify items of other comprehensive income by their nature in the
financial statements and display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-
in capital in the equity section of a statement of financial position.
Under SFAS 130, foreign currency translation adjustments are included in
other comprehensive income. As of September 30, 1998, September 30, 1999,
and June 30, 2000, the balance of accumulated other comprehensive income of
$(18), $5,168 and $90,684 respectively, was comprised entirely of
accumulated foreign currency translation adjustments. Cumulative
translation adjustments are not tax affected.
Foreign Currency Translation
The functional currency of Sports Fitness and Leisure Limited is the pound
sterling. These financial statements are translated into US dollars, in
accordance with SFAS No. 52 "Foreign Currency Translation", the reporting
currency of Sports Fitness and Leisure Limited using period-end rates for
the balance sheets and average rates for the period for the statements of
operations and cash flows. Translation gains and losses arising on
translation are recorded in shareholders' equity as other comprehensive
income.
There have been no transaction gains or losses in the periods presented.
Sports Fitness and Leisure Limited has not entered into any hedging
transactions or derivatives in the periods presented.
New Accounting Pronouncements
The Financial Accounting Standards Board had issued SFAS 133, which has not
yet been adopted by Sports Fitness and Leisure Limited. SFAS 133
"Accounting for Derivative Instruments and Hedging Activities" is effective
for fiscal years beginning after June 15, 2000. This standard requires all
derivatives to be recognized as either assets or liabilities on the balance
sheet at their fair values. It also prescribes the accounting to be
followed for the changes in the fair values of derivatives depending upon
their intended use and resulting designation. It supersedes or amends the
existing standards which deal
F-8
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
(Information for the nine months ended June 30, 1999 and 2000 is unaudited)
with hedge accounting and derivatives. Sports Fitness and Leisure Limited
does not expect that adopting this standard will have a material impact on
the US GAAP amounts reported in its financial statements.
In December 1999, the staff of the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin ("SAB") No.101, "Revenue
Recognition", which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. Adoption
of SAB No. 101 has been delayed until the 4th quarter of 2000 by the SEC.
SAB No. 101 outlines the basic criteria that must be met in order to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. Although management has not fully assessed the impact
of adopting SAB No. 101 on the Company's financial position and results of
operations in 2001 and thereafter, management does not expect the effect,
if any, to be material.
3. WRITE-OFF OF INVESTMENT
The Company purchased the name `Sports Fitness and Leisure Financial
Services' in 1998 for $52,208. Management subsequently determined that the
value of this investment was impaired and as a result during the period
ended September 30, 1998 the investment was written down to $ nil.
4. COMMITMENTS
At September 30, 1999, the Company's aggregate commitment under
noncancelable lease arrangements for cars were as follows:
Capital leases Operating
Leases
-------------- ---------
Year ending September 30,
2000 $16,380 $7,382
2001 16,380 1,845
2002 28,711 -
-------------- ---------
Total minimum payments required 61,471 $9,227
=========
Less amount representing interest (8,324)
--------------
Present value of future payments 53,147
Less current portion (12,143)
--------------
Long-term portion $ 41,004
--------------
The cost of the assets under capital lease arrangements was $67,544 at
September 30, 1999 and June 30, 2000 (none at September 30, 1998) and the
related accumulated depreciation was $10,351 at September 30, 1999 and
$21,940 at June 30, 2000 (none at September 30, 1998).
Total car lease expense for operating leases was $7,428 and $6,907 in the
periods ended September 30, 1999 and September 30, 1998 respectively and
$5,435 and $5,606 in the nine month periods ended June 30, 2000 and June
30, 1999, respectively. The Company leases premises under a month by month
agreement. Total rent expense for operating leases was $10,072 and $15,728
in the periods ended September 30, 1999 and September 30, 1998,
respectively and $56,361 and $29,840 in the nine month periods ended June
30, 2000 and June 30, 1999, respectively.
F-9
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
(Information for the nine months ended June 30, 1999 and 2000 is unaudited)
5. BORROWINGS
Arrangement with Prudential Assurance Company Limited
In August 1999, the Company entered into an agreement with the Prudential
Assurance Company Limited (the `Prudential'). Under the agreement, the
Prudential agreed to provide $2,205,654 to the Company in various
instalments through February 1, 2001 to support the Company's development
of the web portal to market a pension scheme being underwritten by the
Prudential, together with certain sales and marketing resources.
Under the agreement with the Prudential, at September 30, 1999 the Company
had received $1,066,167. In the nine month period ended June 30, 2000, an
additional $354,850, was received by the Company, giving a total of
$1,421,017 received as at June 30, 2000 under this agreement. A further
$352,850 is receivable in each of fiscal 2000 and fiscal 2001. In return,
the Company agreed to build the web portal and to repay, plus interest, the
support payments made by the Prudential. The timing of the repayments is
based upon the Company's achievement of certain membership number
milestones.
Based on the membership plan agreed with the Prudential, the following
repayments will be made:
Year ended September 30,
2000 $ 56,700
2001 174,960
2002 526,500
2003 907,200
2004 970,177
-----------
2,635,537
Amounts yet to be drawn (1,142,100)
Assumed interest (427,270)
-----------
$ 1,066,167
===========
Interest of $13,245 and $25,721 has been expensed in relation to this
arrangement during the year ended September 30, 1999 and the nine months
ended June 30, 2000, respectively.
Loan from former parent company
An interest-free loan of $123,750 was made to the Company by its former
parent during the period ended September 30, 1998. Of this loan, $92,235
was subsequently forgiven by its parent, which has been reflected in the
statement of operations for the period ended September 30, 1998.
F-10
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
(Information for the nine months ended June 30, 1999 and 2000 is unaudited)
6. INCOME TAXES
Due to operating losses and the inability to recognize a corporation tax
benefit therefrom, there is no provision for income taxes for the periods
ended September 30, 1999 and September 30, 1998.
Deferred income taxes reflect the net tax affects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
September 30,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
UK net operating loss carry forwards $ (220,322) $ (18,447)
Other 854 906
Valuation allowance 219,468 17,541
----------- -----------
Net deferred tax assets $ - $ -
=========== ===========
</TABLE>
Realisation of deferred tax assets is dependent on future earnings, if any,
the timing and the amount of which are uncertain. Accordingly, a valuation
allowance in an amount equal to the deferred tax assets at September 30,
1999 and 1998 has been established to reflect these uncertainties. The
change in the valuation allowance was a net of approximately $17,541 for
the fiscal year ended September 30, 1998 and $202,246 for the fiscal year
ended September 30, 1999.
As of September 30, 1999 the Company has net operating loss carry forwards
of approximately $738,938 which have no expiry date.
7. EMPLOYEE BENEFIT PLAN
The Company operates a defined contribution pension scheme. Contributions
payable are charged to the Statement of Operations. Total contributions in
the year ended September 30, 1999 were $7,260 and $771 for the period from
October 2, 1997 (inception) to September 30, 1998, $5,366 for the nine
month period ended June 30, 2000 and $5,501 for the nine month period ended
June 30, 1999.
F-11
<PAGE>
SPORTS FITNESS & LEISURE LIMITED
NOTES TO THE FINANCIAL STATEMENTS-(Continued)
(Information for the nine months ended June 30, 1999 and 2000 is unaudited)
8. RELATED PARTY TRANSACTIONS
The following related party transactions were entered into during the year:
<TABLE>
<CAPTION>
Expense Payable
----------- -----------
<S> <C> <C>
Dale and Co $ 19,536 -
Leisure Corporation $ 208,332 $ 22,831
</TABLE>
Dale and Co and Leisure Corporation are related parties as the proprietors
of these businesses, M Dale and R Paton, respectively, are also directors
of the Company.
9. SUBSEQUENT EVENTS
On July 6, 2000 the Company closed a Stock Purchase Agreement for the sale
of all of the outstanding stock of the Company to e-Commerce Group Inc.
Consideration received consisted of 385,000 shares of common stock in e-
Commerce Group, plus $350,000 in cash to be received within 375 days of the
closing. However, in the event that e-Commerce Group does not raise at
least $350,000 in future share offerings, 107,700 shares of common stock in
e-Commerce Group will be issued instead of the cash payment.
F-12
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF E-COMMERCE GROUP, INC
The following information, which is unaudited, gives pro forma effect to the
acquisition of Sports Fitness and Leisure Limited ("SFL") by e-commerce group,
Inc.
The acquisition of SFL has been accounted for using the purchase method of
accounting. Under this method of accounting, the purchase price of the
acquisition is allocated to the net assets acquired based on their fair values
at the date of acquisition.
In consideration for the SFL shares, e-commerce group, Inc.:
- issued an aggregate of 385,000 shares of its Common Stock, and
- agreed to either
- make a cash payment of $350,000 to the SFL shareholders on or before
July 16, 2001 from the proceeds received by e-commerce group, Inc.
from a round or rounds of financing resulting in aggregate cash
proceeds of at least $350,000, or
- if no such financing or financings have been completed by July 6,
2001, issue 107,700 additional shares of Common Stock.
The cost of the acquisition of SFL is based on the average e-commerce group,
Inc. share price taking an average of the share price for a period of two days
before and two days after the acquisition was announced. It also includes the
cash consideration payable of $350,000 as, in the estimation of e-commerce
group, Inc. management, it is probable that the additional consideration will be
paid in cash rather than shares. The acquisition was announced on 6 July, 2000
and a price of US$3.25 has been used. The allocation of the purchase price of
SFL has not yet been determined. All of the excess of the purchase price over
the book value of assets purchased is being treated as goodwill. Accordingly,
the amounts reflected below may differ from the amounts that would have been
determined had the final allocation of the purchase price been known.
The following information is not necessarily indicative of the results of
operations and financial position of e commerce group, Inc. as they may be in
the future or as they might have been had the acquisition occurred on the date
assumed.
The unaudited condensed pro forma consolidated financial information should be
read in conjunction with the historical financial statements of SFL included
elsewhere in this Form 8-K/A.
F-13
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF E-COMMERCE GROUP, INC
Unaudited Condensed Pro Forma Consolidated Balance Sheet of e-commerce group,
Inc., June 30, 2000
The following unaudited condensed pro forma consolidated balance sheet at June
30, 2000, gives pro forma effect to the acquisition of SFL as if this
transaction had occurred on June 30, 2000. The historical financial information
for e-commerce group, Inc. is derived from its unaudited historical consolidated
balance sheet at June 30, 2000. The historical information for SFL is derived
from its unaudited historical balance sheet at March 31, 2000.
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------ -----------------------------------
e-commerce SFL Adjustments Consolidated
group (note)
------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,497 $ 259,066 $ - $ 263,563
VAT receivable 202,933 - 202,933
Other current assets - 5,498 - 5,498
Prepayments 129,900 - - 129,900
------------ ----------- ----------- -------------
Total current assets 134,397 467,497 - 601,894
Plant and equipment, net - 78,374 - 78,374
Goodwill - - 2,952,693 (a) 2,952,693
------------ ----------- ----------- -------------
TOTAL ASSETS $ 134,397 $ 545,871 $ 2,952,693 $ 3,632,961
============ =========== =========== =============
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Bank loans and overdrafts $ - $ - $ - $ -
Promissory note 240,000 - - 240,000
Accounts payable 129,900 86,469 - 216,369
Current portion of capital leases - 11,841 - 11,841
Accruals and other creditors 129,855 81,517 650,000 (b) 861,372
------------ ----------- ----------- -------------
TOTAL CURRENT LIABILITIES 499,755 179,827 $ 650,000 1,329,582
------------ ----------- ----------- -------------
Long term debt - 1,385,322 - 1,385,322
Capital leases - 32,165 - 32,165
SHAREHOLDERS' EQUITY
Issued and outstanding shares 6,005 2,308 (1,923) (c) 6,390
Additional paid in capital 12,745 13,255 1,237,610 (d) 1,263,610
Currency translation adjustment - 68,719 (68,719) (e) -
Accumulated deficit (384,108) (1,135,725) 1,135,725 (f) (384,108)
------------ ----------- ----------- -------------
TOTAL SHAREHOLDERS' EQUITY (365,358) (1,051,443) 2,302,693 885,892
------------ ----------- ----------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 134,397 $ 545,871 $ 2,952,693 $ 3,632,961
============ =========== =========== =============
</TABLE>
See Note to the Unaudited Condensed Pro Forma Consolidated Financial Information
F-14
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF E-COMMERCE GROUP, INC
Unaudited Condensed Pro Forma Consolidated Statements of Operations
Six months ended June 30, 2000
The following unaudited condensed pro forma consolidated statement of operations
for the six months ended June 30, 2000, gives pro forma effect to the
acquisition of SFL as if the transaction had occurred on January 1, 2000. The
historical financial information for e-commerce group, Inc. is derived from its
unaudited statement of operations for the six months ended June 30, 2000. The
historical information of SFL is derived from its unaudited historical statement
of operations for the six months ended March 31, 2000.
The allocation of the purchase price of SFL has not yet been determined. All of
the excess of the purchase price over the book value of assets purchased is
being treated as goodwill.
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------- ------------------------------------
e-commerce SFL Adjustments Consolidated
group (note)
----------------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue $ - $ 1,967 $ - $ 1,967
------------ ---------- ------------ --------------
Gross profit $ - 1,967 - 1,967
Operating expenses:
Research and development - 1,524 - 1,524
Sales, general and administration 286,868 373,027 492,116 (g) 1,152,011
------------ ---------- ------------ --------------
Total operating expenses 286,868 374,551 492,116 1,153,553
------------ ---------- ------------ --------------
Operating loss (286,868) (372,584) (492,116) (1,151,586)
Interest receivable and similar income - 1,807 - 1,807
Interest Expense - (27,756) (27,410)(h) (55,166)
------------ ---------- ------------ --------------
Loss before income taxes (286,868) (398,533) (519,526) (1,204,945)
Income tax expense - - - -
------------ ---------- ------------ --------------
Net loss $ (286,868) $ (398,533) $ (519,526) $ (1,204,945)
============ ========== ============ ==============
Loss per share - basic and diluted $ (0.048) $ (0.19)
============ ==============
Shares used in per share calculation
- basic and diluted 6,000,000 385,000 (i) 6,385,000
============ ============ ==============
</TABLE>
See Note to the Unaudited Condensed Pro Forma Consolidated Financial Information
F-15
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF E-COMMERCE GROUP, INC
Year ended December 31, 1999
The following unaudited condensed pro forma consolidated statement of operations
for the year ended December 31, 1999, gives pro forma effect to the acquisition
of SFL as if the transaction had occurred on January 1, 1999. The historical
financial information for e-commerce group, Inc. is derived from its audited
statement of operations for the year ended December 31, 1999. The historical
information of SFL is derived from its audited historical statement of
operations for the year ended September 30, 1999.
The allocation of the purchase price of SFL has not yet been determined. All of
the excess of the purchase price over the book value of assets purchased is
being treated as goodwill.
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------------------------------------------------------
e-commerce SFL Adjustments Consolidated
group (note)
---------- ----------- ----------- --------------
<C> <C> <C> <C>
<S>
Revenue $ - $ 4,613 $ - $ 4,613
---------- --------- ----------- -----------
Gross profit 4,613 - 4,613
Operating expenses:
Research and
Development - 48,781 - 48,781
Sales, general and
administration 3,755 613,107 984,231(g) 1,601,093
Total operating ---------- --------- ----------- -----------
expenses 3,755 661,888 984,231 1,649,874
---------- --------- ----------- -----------
Operating loss (3,755) (657,275) (984,231) (1,645,261)
Interest receivable and
similar income - 874 - 874
Interest expense - (22,126) (51,550)(h) (73,676)
---------- --------- ----------- -----------
Loss before
income taxes (3,755) (678,527) (1,035,781) (1,718,063)
Income tax expense - - - -
---------- --------- ----------- -----------
Net loss $ (3,755) $(678,527) $(1,035,781) $(1,718,063)
========== ========= =========== ===========
Loss per share - basic
and diluted $ - $ (0.27)
========== ===========
Shares used in per share
calculation - basic and
diluted 6,000,000 385,000(i) 6,385,000
---------- --------- -----------
</TABLE>
See Note to the Unaudited Condensed Pro Forma Consolidated Financial Information
F-16
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDTAED FINANCIAL
INFORMATION OF E-COMMERCE GROUP, INC
Note - Pro Forma Adjustments
Balance Sheet
The unaudited condensed pro forma consolidated balance sheet gives effect to the
transactions as follows:
<TABLE>
<CAPTION>
Transaction
Allocations
<S> <C>
Share consideration of 385,000 shares at $3.25 per share,
the average share price for a period of two days before and
two days after the acquisition was announced:
Ordinary shares ($0.001 par value) $ 385
Additional Paid in Capital 1,250,865
----------
Total share consideration 1,251,250
Cash consideration 350,000
Legal and other costs 300,000
----------
Total cost of investment 1,901,250
Add total net liabilities acquired 1,051,443
----------
Goodwill $2,952,693
==========
</TABLE>
The pro forma adjustments as a result of the above transaction can be summarized
as follows:
<TABLE>
<CAPTION>
Adjustments
<S> <C>
(a) Intangible fixed assets:
Goodwill $2,952,693
==========
(b) Accruals:
Cash consideration due $ 350,000
Legal fees 300,000
----------
$ 650,000
==========
(c) Common Stock:
Shares issued as partial consideration for SFL $ 385
Elimination of SFL (2,308)
----------
Total $ (1,923)
==========
(d) Additional Paid in Capital:
Excess over par value of $1,250,865 arising on shares $1,250,865
issued as partial consideration of SFL
Elimination of SFL (13,255)
----------
Total $1,237,610
==========
(e) Currency translation adjustment
Elimination of SFL $ (68,719)
==========
(f) Retained deficit
Elimination of SFL $1,135,725
==========
</TABLE>
F-17
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF E-COMMERCE GROUP, INC
Statements of Operations
The unaudited condensed pro forma consolidated statement of operations gives
effect to the following pro forma adjustments:
<TABLE>
<CAPTION>
Six months Year ended
ended June, December 31,
30, 2000 1999
<S> <C> <C>
(g) Amortization of goodwill:
Goodwill arising on the acquisition of SFL of
$2,952,693 amortized over its estimated useful life
of three years $492,116 $984,231
======== ========
(h) Interest expense:
Interest on borrowed funds to fund operations $ 27,410 $ 51,550
======== ========
(i) Number of shares used in calculating per share amounts:
Common shares issued in connection with the
acquisition of SFL 385,000 385,000
======== ========
</TABLE>
F-18
