SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark one)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended October 31, 1999.
Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to _______________ to ______________.
Commission file number 0-011228
DIGITAL COMMERCE INTERNATIONAL INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 02-0337028
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
815 Hornby Street, Suite 404,
Vancouver, British Columbia V6Z 2E6
(Address of principal executive office) (Zip Code)
604.899.0411
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange
On Which Registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes[X] No ____, and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this Form 10-K/A.
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant. The aggregate market value
shall be computed by reference to the price at which the common equity was sold,
or the average bid and asked prices of such common equity, as of a specified
date within 60 days prior to the date of filing: $93,934,688.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 12,967,500.
Part I
Item 1. Business.
(a) General.
Digital Commerce International, Inc. ("The Company") is a financial
services holding company. The Company engaged in two primary types of business
activities during fiscal year 1999. First, it facilitated the issuance of a
merchant number, an identification number given to a merchant by an acquiring
bank which allows the merchant to accept credit card payments, to a company
listed on the Nasdaq bulletin board. It generally takes between one to seven
days to issue the merchant number, depending on the completeness of the
application and the expected monthly credit card volume. As of October 31, 1999
we had performed this service for I-Crystal since then we have also performed
this service for other companies including I-Shopper, Total I-Net, Grace
Software, and Tona Slym. Second, the Company acted as a sales agent for an
independent sales organization named Intercontinental Financial Services. In the
future, the Company intends to provide a variety of banking, bankcard
processing, and financial services through its wholly-owned, diversified
internet operating subsidiaries.
The Company's operations are conducted through its wholly-owned
subsidiaries, including Digital Commerce Inc., Digital Commerce Bank Inc.,
Digital Commerce Merchant Services Inc., and Digital Commerce Canada Ltd.
o Digital Commerce Bank Inc. During fiscal year 1999, Digital
Commerce Bank Inc. acted as a sales agent for an independent
sales organization named Intercontinental Financial Services. The
Company hopes that in the future, Digital Commerce Bank Inc. will
deliver international banking services through its Class I
Offshore Banking Charter, which it has obtained from the
government of Saint Vincent and the Grenadines. The Company
intends for the bank to focus on the settlement of merchant
accounts for international bankcard processing and private
banking for high net worth individuals.
o Digital Commerce Merchant Services Inc. Digital Commerce Merchant
Services Inc. did not generate revenues in fiscal year 1999.
However, Digital Commerce Merchant Services Inc. is now a
registered Independent Sales Organization and Merchant Services
Provider for Humboldt Bank. The Company anticipates that in the
future, Digital Commerce Merchant Services Inc. will provide
bankcard processing services to domestic and international
merchants on behalf of United States and international acquiring
banks.
o Digital Commerce Inc. Digital Commerce Inc. acts as a sales agent
for organizations engaged in the processing of credit card
transactions for international merchants.
o Digital Commerce Canada Ltd. Digital Commerce Canada Ltd., which
did not generate revenues during fiscal year 1999, is the
Company's technology development division. Through this division,
the Company attempts to expand its technological capabilities
through research and development. Digital Commerce Canada Ltd.
also provides administrative services to the Digital Commerce
International, Inc. group of companies.
The Company hopes to provide United States and international clients
with financial and banking services. To that end, the Company is currently
pursuing the acquisition of a federal/state banking charter. While the Company
cannot offer any assurance that the contemplated acquisition will be
consummated, it expects to conclude this acquisition during fiscal year 2000.
(b) Corporate History
The Company was incorporated in July, 1982, as Systems Assurance
Corporation. From 1992 through June 15, 1999, the Company did not conduct any
active business operations, but pursued business opportunities to merge with or
acquire other businesses. On June 15, 1999, the Company entered into an
agreement for the acquisition of all the outstanding capital securities of
Digital Commerce Inc., a banking and financial services organization ("DCI") in
exchange for 5,000,000 shares of the Company's common stock and 500,000 shares
of the Company's convertible Class A preferred stock. (Preferred stock has been
approved by the board of directors and shareholders, but the Company has not
amended its Articles of Incorporation and the preferred shares have not been
created and registered with the State of Delaware. The Company is in the process
of having such shares registered.) As a result of the acquisition, Digital
Commerce Inc. became the Company's wholly-owned subsidiary and the former
shareholders of DCI became the Company's minority shareholders. At that time,
the Company changed its name from Systems Assurance Corporation to Digital
Commerce International Inc., and obtained a new CUSIP number and trading symbol
(THBK) for its common stock.
The combination of Digital Commerce International Inc. and Digital
Commerce Inc. was recorded as a recapitalization of Digital Commerce
International Inc. In conjunction with the acquisition and recapitalization, a
prior director surrendered back to and the Company canceled 14,340,744 shares of
common stock. After the recapitalization there were 11,740,000 shares of common
stock outstanding with approximately 57 percent of those shares being held by
former stockholders of the Company.
Michael Kang, the Company's Chief Executive Officer and President,
and John W. Combs, the Company's Executive Vice President and Secretary, each
received 2,000,000 shares of the Company's common stock and 250,000 shares of
the Company's preferred stock as a result of the acquisition, representing 48%
of the Company's outstanding shares as of October 31, 1999, on a fully-diluted
basis. Each share of preferred stock issued to Messrs. Kang and Combs is
convertible into 10 shares of common stock if certain performance criteria are
met.
Pursuant to the acquisition of Digital Commerce Inc., Messrs. Kang
and Combs were appointed to the Company's Board of Directors, each of whom is to
serve until his respective successor has been duly elected and qualified, or
until their respective earlier resignation or retirement.
(c) Operations
The Company is a developing company. In the future the Company hopes to
provide a variety of banking and financial services through its wholly-owned,
diversified internet operating subsidiaries. Such services shall include, the
issuance of merchant accounts, the issuance of business bank accounts, and
online bank account management. The Company's banking functions will be offered
in conjunction with a registered U.S. Bank while its other operations are
conducted through its wholly-owned subsidiaries, including through Digital
Commerce Bank Inc., Digital Commerce Merchant Services Inc, Digital Commerce
Inc., and Digital Commerce Canada Ltd.
Digital Commerce Bank Inc.
Digital Commerce Bank Inc. ("DCB"), one of the Company's wholly-owned
subsidiaries, was incorporated on August 19th, 1999 in the country of Saint
Vincent and the Grenadines, where it is based. Digital Commerce Bank, Inc. was
incorporated as a subsidiary of Digital Commerce International, Inc. ("DCII")
and operates as a wholly-owned subsidiary of the Company. DCB was granted a
Class I Offshore Banking License by Saint Vincent and the Grenadines on August
23rd, 1999. The Class I Offshore Banking License that was granted to us by the
government of Saint Vincent and the Grenadines is permanent as long as we meet
certain requirements and regulations as defined by the government of the Saint
Vincent and the Grenadines. Under the conditions of the licensing agreement,
Digital Commerce Bank, Inc. was required to post a security deposit in the
amount of $100,000 with the Government of Saint Vincent. The deposit remains an
asset of DCB, to be released only upon cancellation or surrender of the license.
The deposit is held by the International Finance Authority of Saint Vincent in
an interest bearing account to the benefit of DCB.
DCB has been established to facilitate a broad range of banking, trust,
and merchant service functions on a fee for service basis for international
clients. Since the granting of its license, DCB has arranged for the facilities
and established the strategic relationships necessary to provide the full range
of services required by international merchant and private banking clients,
including internet banking. DCB also serves as an independent sales agent
for Intercontinental Financial Services, for whom the Company provide
third-party, online, real time processing for international merchants. The
Company hopes that Digital Commerce Bank, Inc will be fully operational within
the second fiscal quarter of the year 2000.
Digital Commerce Merchant Services Inc. (D/B/A. "Bankthat.com")
Digital Commerce Merchant Services, Inc. ("DCMS"), another of the
Company's wholly owned subsidiaries, was incorporated in the State of Delaware
in November 1999. It operates under the trade name of "Bankthat.com" and
maintains its principal business operations in Salt Lake City, Utah. The Company
intends to develop DCMS in the near term into an Independent Sales Organization,
assembling merchant portfolios on behalf of United States acquiring banks to
facilitate bankcard processing for domestic merchants.
On November 8, 1999, the Company entered into an agreement with Humboldt Bank of
Eureka, California to be an Independent Sales Organization on their behalf.
Under the terms of the agreement, commission revenues are to be split equally
between the parties.
We currently have four key "strategic relationships." The first is with Humboldt
Bank of Eureka to facilitate the issuance of merchant accounts. The second is
with First National Bank of Omaha to facilitate the issuance of merchant
accounts. The third is with En-Cynk Services to facilitate online payment
processing via a payment gateway. The fourth is with Planet Payment to
facilitate multi-currency payment and settlement for merchants globally.
Digital Commerce Merchant Services, Inc. did not generate revenues in fiscal
year 1999. The Company hopes that during fiscal year 2000, Digital Commerce
Merchant Services, Inc. will provide a broad array of merchant services,
generating fees and commissions from bankcard transactions and from sales of
bankcard processing equipment to United States and international merchants.
Digital Commerce Inc.
Digital Commerce Inc. was incorporated on November 17, 1998 in the island nation
of Nevis and is based in the province of British Columbia, Canada. On June 15,
1999 the Company acquired this subsidiary through the issuance of 5,000,000
shares of its common stock and 500,000 shares of its preferred stock in exchange
for all of the outstanding common stock of Digital Commerce Inc. (Preferred
stock has been approved by the board of directors and shareholders, but the
Company has not amended its Articles of Incorporation and the preferred shares
have not been created and registered with the State of Delaware. The Company is
in the process of having such shares registered.)
This subsidiary acts as a sales agent for organizations engaged in the
processing of credit card transactions for international merchants. Due to the
formation of additional subsidiaries, the Company is currently in the process of
liquidating this subsidiary.
Digital Commerce Canada Ltd.
Digital Commerce Canada Ltd. was incorporated on October 18, 1999 in the
province of British Columbia, Canada, where it is based. This subsidiary
provides administrative and technological services for the Company and its
subsidiaries.
(d) Operations
Currently, the Company acts as an Independent Sales Agent for Intercontinental
Financial Services and provides third-party, on-line, real time processing for
international merchants. In the U.S., the Company is a registered ISO for
Humboldt bank of Eureka, California, and with First National Bank of Omaha of
Omaha, Nebraska. Together with Humboldt, FNBO and its third-party providers, the
Company is able to offer U.S. online merchants solutions to the challenges of
e-commerce transaction processing. Upon completion of the initial phases of its
operation, the Company believes that its control over third-party providers will
increase, time-to-delivery will improve, and its operating margins will widen;
however, all of this will be transparent to the Company's merchant-customers.
For them, the key benefits of the Company's anticipated services may include:
o Fast time-to-market. The Company's third-parties' services and
technical support may enable online merchants to begin processing
transactions without lengthy or costly integration efforts. The
Company is able to do this by combining such services as a
merchant account, an internet payment gateway, and a bank
account, thus simplifying the process for the merchant. Services
are invoked by a single common interface, installed on a
merchant's commerce server. Typically, new merchants can be
approved, have their software installed, and be operating online,
generating revenues in as little as 72 hours from the time that
their completed applications are received.
o Access to comprehensive suite of services. The Company may be
able to deliver to merchants on-demand, online access to services
that address a broad spectrum of e-commerce transaction
processing issues related to global payment processing, fraud
prevention, tax calculation, export compliance, delivery address
verification, and fulfillment management.
o Simplify the Merchant's Operations. The Company hopes to provide
a suite of e-commerce transaction services designed to simplify
merchants' operations and allow them to focus on marketing and
merchandising tasks required for their online businesses. Many of
the Company's services are designed to add value without drawing
attention to the mechanics of the provision of that specific
service.
o Global reach. The Company hopes to obtain access to
third-parties' services used by merchants in many countries
around the globe. Through them, the Company hopes to obtain
access to an established network of virtual network access points
in various countries on multiple continents including Europe,
Asia, South America and Australia. In addition, the Company hopes
to be able to support over 100 currencies and provide sales
tax/VAT calculations for all United States jurisdictions,
Canadian provinces and all countries in the European Union.
o Reduced overall costs. The Company hopes that its services will
enable merchants to effectively process online transactions
without the cost of developing and maintaining their own complex
transaction processing systems and infrastructure.
(d) Banking Regulations Generally
International Banking Regulation. Digital Commerce Bank Inc. is
currently authorized to provide international banking services through its Class
I Offshore Banking Charter obtained from the government of Saint Vincent and the
Grenadines ("Saint Vincent"). Under the International Banks Act, 1996 of Saint
Vincent, offshore banking business may be transacted from within Saint Vincent,
only upon obtaining a license from the Saint Vincent and the Grenadines Offshore
Finance Authority (the "Authority"). The Company's ability to continue to
conduct an offshore banking business depends upon its ability to maintain its
license. This requires the Company to have a resident director in Saint Vincent;
to be incorporated, subsisting or continued under the Companies Act, 1994 or
under the International Business Companies Act of 1996; and to be engaged solely
in the offshore banking business. As an offshore banking business, the Company
is prohibited from taking a deposit from any resident of Saint Vincent,
investing in any asset which represents a claim on any resident of Saint
Vincent, and purchasing bonds or other securities issued by the Government of
Saint Vincent.
The Company operates under a Class I Offshore Banking License for the
purpose of carrying on its offshore banking business. In order to maintain its
license the Company must have and maintain a fully paid-up capital of not less
than five hundred thousand dollars ($500,000) or its equivalent in another
currency, or such greater sum as may be determined by the Authority. In
addition, the Company must have deposited or invested the sum of one hundred
thousand ($100,000) or its equivalent in another currency, in such manner as the
may be prescribed.
As an offshore banking business, the Company is required to send an
annual audit to the Authority within three months of the end of its financial
year. The Company has not yet sent an annual audit to the Authority for fiscal
year 1999 but is in the process of having such audit prepared and intends to
provide it to the Authority as soon as it has been completed. In addition, the
Company is required to have no fewer than two directors, who must be approved by
the Authority. The Authority could withhold the approval of its directors, which
would result in its inability to continue to do business as an offshore banking
business in Saint Vincent.
As an offshore banking business under the Bank Act, the Company is not
required to pay income tax, capital gains tax or other direct tax to the State
of Saint Vincent or any political subdivision thereof.
U.S. Banking Regulation. Revisions to existing or adoption of new laws
or regulations could subject the Company to more demanding regulatory compliance
requirements and could adversely affect its ability to conduct, or its cost of
conducting, business. If the Company is successful in obtaining a banking
charter, it will be subject to certain restrictions imposed by the Federal or
State banking regulators. Digital Commerce Bank, Inc. (the Company's banking
subsidiary) will be regulated by the FDIC. The Company will also be subject to
various laws and regulations relating to commercial and consumer transactions
generally, such as the Uniform Commercial Code, as well as the electronic funds
transfer rules which are contained in Regulation E, issued by the Federal
Reserve Board. Any of these agencies, or other governmental or regulatory
authorities, could revise existing regulations or adopt new regulations at any
time. Legislation and regulatory initiatives containing wide-ranging proposals
for altering the structure, regulation and competitive relationships of
financial institutions are introduced regularly. The Company cannot predict
whether or in what form a proposed statute or regulation will be adopted or the
extent to which it may affect its business. Furthermore, given the rapid
expansion of the electronic commerce market, many regulatory bodies are adopting
measures to ensure that their regulations are keeping pace. For example,
Congress has held hearings on whether to regulate the electronic commerce
market, while numerous states are considering adopting their own laws to
regulate internet banking. Furthermore, bank regulators are considering
proposing new laws relating to customer privacy. If enacted, these laws, rules
and regulations could force the Company to comply with more complex and perhaps
more burdensome regulatory requirements, which could materially adversely affect
the Company's business, financial condition, results of operations, and cash
flows.
Internet Regulation. The Company's ability to conduct and/or its cost
of conducting business may also be adversely affected by a number of legislative
and regulatory proposals concerning other aspects of the internet, which are
currently under consideration by federal, state, local and foreign governmental
organizations. These proposals include, but are not limited to, the following
matters: on-line content, user privacy, taxation, access charges, liability of
third-party activities and jurisdiction. Moreover, the Company does not know how
existing laws relating to these issues will be applied to the internet. The
adoption of new laws or the application of existing laws could decrease the
growth in the use of the internet, which could in turn decrease the demand for
the Company's anticipated products and services, increase its cost of doing
business, or otherwise have a material adverse effect on its business, financial
condition, results of operations, or cash flows. Furthermore, government
restrictions on internet content could slow the growth of internet use and
decrease acceptance of the internet as a communications and commercial medium
and thereby have a material adverse effect on our business, financial condition
and results of operations. Some local telephone carriers have asserted that the
growing popularity and use of the internet has burdened the existing
telecommunications infrastructure and caused interruptions in telephone service
in areas with high internet use. These carriers have petitioned the Federal
Communications Commission to impose access fees on internet service providers
and commercial on-line service providers. If the Federal Communications
Commission imposes access fees, the costs of transacting business over the
internet could increase substantially, potentially slowing the growth in use of
the internet. This could in turn decrease demand for the Company's anticipated
services or increase its cost of doing business, and thus have a material
adverse effect on the Company's business, financial condition, results of
operations, and cash flows.
Internet Privacy. Internet user privacy has become an issue both in the
United States and abroad. The Federal Trade Commission has proposed model
legislation that would force companies to comply with specified core information
practices. It is possible that Congress could adopt either legislation similar
to that proposed by the Federal Trade Commission or other privacy legislation
that could have a material adverse effect on the way in which the Company is
allowed to conduct its business, especially those aspects that involve the
collection or use of personal information. At the international level, the
European Union has adopted a directive that permits European Union member
countries to impose restrictions on the collection and use of personal data.
This directive could, among other things, affect United States companies that
collect information over the internet from individuals in European Union member
countries and may impose restrictions that are more stringent than current
internet privacy standards in the United States. In response to this directive,
on November 4, 1998, the United States Department of Commerce published for
comment a set of safe harbor principles regarding privacy protection for
personally identifiable data. These principles were revised on April 19, 1999.
(e) Future Marketing Strategies
The Company hopes to employ a multifaceted marketing strategy to
aggressively market its products and services to both domestic and international
markets. Our marketing strategy will include the following: acquisition of
merchant portfolios from an independent sales organization; establishing an
internal business development/sales staff; building relationships with acquiring
banks that will have the ability to resale our services; and building
relationships with various Internet Service Providers (web hosting companies,
application service providers, etc.) that will resale our services. The Company
expects its revenue-generating products and services to include online retail,
commercial, and private banking services, as well as merchant services. This
strategy will utilize the internet platform as its primary means of integrating
and marketing these offerings.
The use of the internet as the Company's common delivery channel
supports its commitment to providing 24 hours, 7 days a week access and
availability of its products and services to its domestic and international
clients. To complement this, the Company anticipates using alternative delivery
channels including the telephone, automated banking machines and the postal
services as a means of increasing the availability and convenience of its
products and services.
The Company intends to develop a flagship web site at
www.thatbank.com. The Company hopes that this site will serve as a comprehensive
multipurpose hub or portal site providing access to the services described
above. The Company is attempting to create a site that will be appealing,
versatile, and informative to its existing and potential clients by offering a
number of complimentary value-added services including free email accounts, web
site personalization features, timely Industry specific news, investment
portfolio tools, and internet search engine capabilities. The Company's
anticipated direct marketing activities may include the use of an internal sales
force as well as outsourced sales activities and direct advertising. The
Company's anticipated indirect marketing activities would include the use of
strategic partnership and alliance agreements with suitable businesses as well
as co-branding activities.
The Company considers its ongoing attempts to develop and provide
complimentary services such as those described above to be an important to its
future growth. We anticipate that these services shall include loyalty programs,
customer relationship management services, intra-sector comparison sales
reporting tools, online banking, online shopping portal, registration in
multiple portals, micropayment, recurring billing, and alternative forms of
payment such as debit card, smart card, and e-check. The Company further
anticipates that such services, if the Company is able to provide them, will
help build customer loyalty, web site traffic, and help grow its database of
subscribers, which will be integrated into its direct marketing efforts.
(f) Employees
At October 31, 1999, the Company had 7 full-time employees and no
part-time employees. The Company considers its relations with its employees to
be excellent. The Company's employees are not represented by any collective
bargaining group, and the Company is not aware of any efforts among its
employees to organize. The Company's future success depends in significant part
upon the continued service of its key technical and senior management personnel
and its continuing ability to attract and retain highly qualified technical and
managerial personnel.
(g) Competition
The Company believes that the principal competitive factors in the banking
industry are market presence, customer service, convenience, interest rates and
product offerings. While the banking industry is highly competitive, the Company
believes it can compete effectively with its principal competitors, which are
traditional banks, internet banks, and other financial services providers. The
Company believe that its low cost structure, which will allow it to offer
attractive interest rates and low fees, gives us a competitive advantage over
traditional banks, which must support a physical branch structure. Furthermore,
the Company hopes to be able to offer a broader array of products and services
than many non-bank financial services providers. However, most of the Company's
competitors have larger customer bases, greater name recognition and brand
awareness, greater financial and other resources, and longer operating histories
than the Company does. Additionally, new competitors and competitive factors are
likely to emerge, particularly in view of the rapid development of internet
commerce.
Our key business is in facilitating payment processing over the Internet.
Businesses that supply the technology to facilitate payment processing over the
Internet are known as Payment Gateways. Payment Gateways are our closest direct
competitors and we estimate that there are between 50-70 of them in the United
States. These payment gateways generally fall into three categories. First,
those who process credit cards over the Internet. Second, those who issue
Merchant Accounts (via a relationship with a Bank) and process credit cards over
the Internet. Third, those who process alternative forms of payment over the
Internet (e.g., electronic check). Our business model is based on aggregating
all the financial & payment needs of merchants plus providing additional value
added services. Specifically, we will issue Merchant Accounts, process credit
cards over the Internet, process alternative forms of payment over the Internet,
as well as provide various banking services (via a yet to be negotiated banking
alliance). These banking services will include online banking, multicurrency
payment and settlement, and integrated financial statements. Other value added
services will include loyalty program, customer relationship managment programs,
and access to a shopping portal.
In summary, our current business consists of issuing merchant accounts and
processing credit cards over the Internet. In this, we currently do not have an
advantage over many of our competitors. However, no company that we know of
presently aggregates or has the intention to aggregate the products and services
that are outlined above. We are working aggresively to aggregate the named
products and services for merchants and our competitive advantage will become
apparent as we accomplish this
Item 2. Description of Properties
The Company occupies 2,500 square feet of commercial space at 815
Hornby Street, Suite 404, Vancouver, British Columbia. The terms of the leasing
agreement are on a month-to-month basis, renewable under the same terms upon
notice. The Company's current monthly rent for this facility is US $3,100.
The Company also occupies 2,000 square feet of commercial space at 4049
South Highland Drive, Salt Lake City, Utah. The terms of the leasing agreement
are on a month-to-month basis, renewable under the same terms upon notice. The
Company's current monthly rent for this facility is US $1,000.
The Company maintains 2000 square feet of premises in Kingstown, Saint
Vincent, West Indies. The terms of the leasing agreement are on a month-to-month
basis, renewable under the same terms upon notice. The Company's current monthly
rent for this facility is US $3,000.
The Company believes its office space is adequate for its current
needs.
Item 3. Legal Proceedings.
On January 5, 2000, the Company and Directors Kang and Combs were made
defendants to a lawsuit by a former business partner. In that case, the
plaintiff, the former business partner, alleged breach of a statutory duty owed
by Kang and Combs to the plaintiff. He claims that he was not made part of
certain corporate opportunities and was not included in certain corporate
changes and the benefits therefrom. The Company believes the claims of the
plaintiffs regarding the Company are without merit. In addition, the Company
believes that any decision granted in favor of the plaintiff would only affect
the shares held by Kang and Combs and would not affect Digital Commerce
International, Inc. directly.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's stockholders
during the fourth quarter of the fiscal year ended October 31, 1999.
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Market Information.
Prior to the acquisition of Digital Commerce, Inc., the Company's
common stock traded on the Nasdaq Over-The-Counter Bulleting Board under the
symbol "SYAE." Systems Assurance did not have any trading volume for FY 1998 and
the first two quarters of FFY 1999. On June 17, 1999, the Company's common stock
commenced trading on the Nasdaq Over-The-Counter Bulletin Board under the symbol
"THBK". The following table sets forth the range of high and low bid quotations
for the Company's common stock for each of the periods indicated as reported by
the Nasdaq Over-The-Counter Bulletin Board. Bid quotations reflect inter-dealer
prices, without retail markup, markdown or commission and may not necessarily
represent actual transactions. on June 17, 1999.
Quarter Ended High Low
July 31, 1999(1) $12 $0.125
October 31, 1999 $12 $10
(1) For the period commencing on June 17, 1999, and concluding on July 31,
1999.
On January 24, 1997, the Company's stockholders approved a
one-for-seventy (1:70) reverse common stock split, and on December 19, 1997, the
Company's stockholders approved a one-for-five (1:5) reverse common stock split,
and changed the par value of the common shares from $.01 to $.001. In January,
1997, the Company's stockholders approved the creation of three classes of
preferred stock, par value $.001, with rights and privileges to be set by the
Board of Directors. The Board of Directors authorized 500,000 shares of Class A
Preferred Stock on February 9, 2000. When and if the Board declares a dividend
or distribution with respect to the then outstanding shares of Common Stock, the
holders of the Series A Preferred shares shall be entitled to the amount of
dividends per share in an amount equal to ten times the amount, and in the same
form, as they would have received if they held an equal number of Common Shares.
(Preferred stock has been approved by the board of directors and shareholders,
but the Company has not amended its Articles of Incorporation and the preferred
shares have not been created and registered with the State of Delaware. The
Company is in the process of having such shares registered.)
(b) Security Holders
The approximate number of record holders of shares of the Company's
common stock as of October 31, 1999 was 1555.
<PAGE>
(c) Dividends
The Company has not paid dividends within the last three years and does
not anticipate or contemplate paying cash dividends in the foreseeable future.
The Company presently intends to utilize all available funds for the development
and growth of its business and operations.
(d) Recent Sales of Unregistered Securities
The Company has entered into six transactions in the past three years
involving the issuance of its securities under certain exempt transactions under
the Securities Act of 1933.
On February 4, 1997, the Company issued 80,000 shares of its common
stock to an investment firm to in order to pay a $52,829 promissory note.
On January 5, 1998, the Company issued 20,000,000 shares of its common
stock to its sole officer and director in exchange for services rendered. These
shares were valued at $90,000.
On January 9, 1998, the Company issued 900,000 shares of its common
stock in exchange for $9,000 cash consideration.
On June 15, 1999, the Company issued to Messrs. Kang and Combs
5,000,000 shares of its common stock and 500,000 shares of its Series A
Preferred Stock in exchange for all of the issued and outstanding capital
securities of Digital Commerce Inc. (Preferred stock has been approved by the
board of directors and shareholders, but the Company has not amended its
Articles of Incorporation and the preferred shares have not been created and
registered with the State of Delaware. The Company is in the process of having
such shares registered.)
In May and June, 1999, the Company issued l,227,500 shares of its
common stock at a price of $1.00 per share, for a total purchase price of
$1,227,500, to twenty two investors. The Company believes that each of these
twenty two investors was an "accredited investor."
In February, 2000, the Company issued 200,000 shares of its common
stock to Theodore Swindells, for a total purchase price of $500,000.
In connection with each of these isolated issuances of securities, each
purchaser represented and warranted to the Company that it (i) was aware that
the securities had not been registered under federal securities laws, (ii)
acquired the securities for its own account for investment purposes and not with
a view to or for resale in connection with any distribution for purposes of the
federal securities laws, (iii) understood that the securities would need to be
indefinitely held unless registered or an exemption from registration applied to
a proposed disposition, (iv) was aware that the certificate representing the
securities would bear a legend restricting their transfer, and (v) was aware
that there was no public market for the securities. The Company believes that,
in light of the foregoing, and in light of the sophisticated nature of each of
the acquirers, the sale of its securities to the respective acquirers did not
constitute the sale of an unregistered security in violation of the federal
securities laws and regulations by reason of the exemption provided under
Section 4(2) and Regulation S of the Securities Act, and the rules and
regulations promulgated thereunder.
Item 7. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
Special Note Regarding Forward-Looking Statements. Certain statements in this
report and elsewhere (such as in our other filings with the Securities and
Exchange Commission ("SEC"), press releases, presentations by our management and
oral statements) may constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
and "should," and variations of these words and similar expressions, are
intended to identify these forward-looking statements. The Company's actual
results could differ materially from those anticipated in these forward-looking
statements. Factors that might cause or contribute to such differences include,
among others, competitive pressures, the growth rate of the banking, merchant
services and electronic commerce industries, constantly changing technology and
market acceptance of our products and services. The Company does not undertake
any obligation to publicly release the result of any revisions to these
forward-looking statements, which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Overview
The Company did not conduct any active business operations from 1992 through
June 15, 1999. The Company is a developing company. It hopes to become an
internet banking and financial services company, specializing in providing a
variety of banking and financial services, including the integration of banking
services, both commercial and private, bankcard processing, and merchant
services with an emphasis on the internet as the common platform for delivery.
The Company operates through four wholly owned subsidiaries, two of which
generated revenues during fiscal year 1999. In November 1999, the Company
incorporated Digital Commerce Merchant Services, Inc., a Delaware corporation,
as its domestic based Independent Sales Organization (ISO) to provide merchant
bankcard transactions for domestic clients in settling credit card transactions.
In the future, the Company hopes to establish domestic banking operations and
hopes to offer a full range of retail banking services.
Results of Operations
The Company earned operating revenues of $255,000 in the year ended
October 31st, 1999. These revenues consisted primarily of commission revenues
from the Company's role as a sales agent for credit card transactions. The
Company received $190,000 of such revenues through its issuance of a merchant
numbers and $65,000 of such revenues as commissions received in its capacity as
sales agent for organizations engaged in the processing of credit card
transactions for international merchants. The Company hopes to recognize an
increase in commission revenue in the future due to the establishment and
integration of its operating divisions together with increased sales and
marketing efforts.
Operating Expenses
The Company's operating expenses have increased in each quarter since
its acquisition of Digital Commerce Inc. in June, 1999. The Company believes
that operating expenses will continue to increase in the future as the Company
continues to develop, implement, and deploy its services and operations.
General and administrative expenses for the year ended October 31, 1999
totaled $806,861. General and administrative expenses for the year were
comprised primarily of compensation for personnel, fees for outside
professionals, telecommunications, bank licensing fees and other overhead costs,
including travel and entertainment expenses.
Liquidity and Capital Resources
The Company financed its operations primarily through private
placements of its common stock which provided net proceeds of approximately
$1,227,500. At October 31st, 1999, the Company had approximately $431,000 in
cash and cash equivalent in short-term investments. The Company has no debt
facilities.
The Company has no material commitments, other than those employment
agreements described elsewhere herein. The Company hopes to realize an increase
in its working capital, and anticipates a substantial increase in its capital
expenditures due to the anticipated expansion of its business units, in the year
2000.
Net cash used by operating activities during the year ended October
31st, 1999 was $769,000. The Company's principal uses of cash were to fund its
net loss from operations and to finance the increases in receivables and other
assets.
Net cash used by investing activities consisted of $27,535 paid
principally for acquisition of capital assets.
Net cash provided by financing activities was $1,227,500 derived
primarily from capital contributions. Of the capital contributions, $1,227,500
was recorded from private sales of restricted stock.
Management believes that the combination of revenues and capital
contributions will be sufficient to fund operations for the upcoming fiscal
year. To the extent that the Company requires additional funds to support its
operations or the expansion of its business, the Company may sell additional
equity, issue debt, or obtain credit facilities through financial institutions.
Any sale of additional equity securities will result in dilution to the
Company's stockholders. There can be no assurance that additional financing, if
required, will be available to the Company in amounts or on terms acceptable to
us. If the Company is unable to secure additional financing, our operating will
be adversely affected and are likelihood of success could be significantly
impaired.
Impact of Inflation
The impact that inflation may have upon the Company differs from the
potential impact of inflation upon an industrial company, because substantially
all of the Compay's assets and liabilities will be monetary in nature, and
interest rates and inflation rates do not always move in concert. The Company
believes that the impact of inflation on financial results depends upon its
ability to manage interest rate sensitivity and, by such management, reduce the
inflationary impact upon performance. The most direct impact of an extended
period of inflation would be to increase interest rates and to place upward
pressure on the Company's operating expenses. The actual effect of inflation on
the Company's net interest income, however, would depend on the extent to which
the Company was able to maintain a spread between the average yield on its
interest-earning assets and the average cost of its interest-bearing
liabilities, which would depend to a significant extent on the Company's
asset-liability sensitivity. As discussed above, the Company will seek to manage
the relationship between interest-sensitive assets and liabilities to protect
against wide interest rate fluctuations, including those resulting from
inflation. The effect of inflation on the Company's results of operations for
the past three years has been minimal.
Year 2000 Issue
Many existing computer programs, hardware, and peripherals use only two
digits to identify a year in the date field. These programs and systems were
designed without considering the impact of the upcoming change in the century.
If not corrected, these computer applications and systems could fail or create
erroneous results by, at, or after the year 2000. Based on the preliminary
review of the computer programs the Company currently uses, management does not
anticipate that the Company will incur material operating expenses or be
required to incur material costs to be year 2000 compliant. To the extent the
Company's systems are not fully year 2000 compliant, there can be no assurance
that potential systems interruptions or the cost necessary to update software or
hardware would not have a material effect on its business, financial condition,
results of operations, or business prospects. In addition, in the event that the
Company's significant suppliers do not successfully and timely achieve year 2000
compliance, its business or operations could be adversely affected.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Reference is made to "Interest Rate Sensitivity Management" in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Item 8. Financial Statements and Supplementary Data.
<PAGE>
DIGITAL COMMERCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
OCTOBER 31, 1999
<PAGE>
C O N T E N T S
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEET 3
STATEMENT OF OPERATIONS 4
STATEMENT OF STOCKHOLDERS' EQUITY 5
STATEMENT OF CASH FLOWS 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Directors and Stockholders of
Digital Commerce International, Inc.
We have audited the accompanying consolidated balance sheet of Digital
Commerce International, Inc. and Subsidiaries as of October 31, 1999, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the period from November 17, 1998 (inception) through October 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the 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 Digital
Commerce International, Inc. and Subsidiaries as of October 31, 1999, and the
consolidated results of their operations and their consolidated cash flows for
the period from November 17, 1998 (inception) through October 31, 1999, in
conformity with generally accepted accounting principles.
Salt Lake City, Utah
January 14, 2000
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
Digital Commerce International, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEET
October 31, 1999
ASSETS
Current assets
<S> <C> <C>
Cash $ 430,803
Accounts receivable, no allowance deemed necessary (Note G)
Trade 244,358
Other 9,099
Receivable from shareholders 18,587
--------------
Total current assets 702,847
equipment, at cost $ 27,535
Less accumulated depreciation (7,083) 20,452
--------------
DEPOSITS 203,731
--------------
$ 927,030
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 177,891
Accrued liabilities 73,587
--------------
Total current liabilities 251,478
COMMITMENTS AND CONTINGENCIES (Notes C and E) -
STOCKHOLDERS' EQUITY (Notes B, E and I)
Preferred stock to be issued $ -
Common stock, $0.001 par value; 30,000,000 shares
authorized, 12,967,500 shares issued and outstanding 12,967
Additional paid-in capital 1,214,404
Accumulated deficit (551,819)
--------------
Total stockholders' equity 675,552
--------------
$ 927,030
==============
</TABLE>
The accompanying notes are an integral
part of this statement.
3
<PAGE>
<TABLE>
<CAPTION>
Digital Commerce International, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
For the period November 17, 1998 (inception) through October 31, 1999
<S> <C> <C>
Revenues $ 255,042
Operating expenses
Salaries $ 198,654
Professional services 195,425
Travel 97,842
Licensing fees 92,300
Occupancy and telecommunications 50,230
Advertising 21,919
Depreciation and amortization 15,873
Website 11,691
Other 122,928 806,861
----------- ------------
Loss before income taxes (551,819)
Income taxes (Note F) -
------------
NET LOSS $ (551,819)
============
Loss per common share (Note D)
Basic $ (0.06)
Diluted (0.06)
Weighted-average common and dilutive
common equivalent shares outstanding
Basic 9,111,579
Diluted 9,111,579
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
<TABLE>
<CAPTION>
Digital Commerce International, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the period from November 17, 1998 (inception) through October 31, 1999
Common stock Additional
------------------------- paid-in Accumulated
Number Amount capital deficit Total
------------ --------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at November 17, 1998 (inception) 10 $ - $ 371 $ - $ 371
Recapitalization of Company (Note B) 11,739,990 11,740 (12,240) - (500)
Issuance of common stock for cash 1,227,500 1,227 1,226,273 - 1,227,500
Net loss - - - (551,819) (551,819)
------------ --------- ------------ -------------- ----------
Balance at October 31, 1999 12,967,500 $ 12,967 $ 1,214,404 $ (551,819) $ 675,552
============ ========= ============ ============== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
Digital Commerce International, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period from November 17, 1998 (inception) through October 31, 1999
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (551,819)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 15,873
Changes in assets and liabilities
Accounts receivable (253,457)
Receivable from shareholders (18,587)
Deposits (203,731)
Accounts payable 168,972
Accrued liabilities 73,587
-------------
Total adjustments (217,343)
-------------
Net cash used in
operating activities (769,162)
Net cash flows from investing activities -
Purchase of property and equipment (27,535)
Cash flows from financing activities
Proceeds from issuance of common stock 1,227,500
-------------
Net increase in cash 430,803
Cash at beginning of period -
-------------
Cash at end of period $ 430,803
=============
Supplemental disclosures of cash flow information
The Company did not pay interest expense or income taxes during 1999.
Noncash investing and financing activities
On June 15, 1999, the Company acquired Digital Commerce, Inc. in a
transaction accounted for as a reverse acquisition (Note B).
The accompanying notes are an integral part of this statement.
6
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows.
1. Organization and business activity
Digital Commerce International Inc. (the Company) is a
Delaware corporation that has been inactive from October 31, 1991 through June
15, 1999. On June 15, 1999 the Company acquired Digital Commerce Inc. This
acquisition was accounted for as a reverse acquisition (Note B). The Company is
headquartered in Vancouver, Canada and currently processes credit card
transactions. One subsidiary, Digital Commerce Bank, Inc., holds a class I
banking license in St. Vincent and the Grenadines.
2. Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Digital Commerce Inc., Digital
Commerce Bank, Inc., Digital Commerce Canada Ltd. and MBS Acquisition Corp. On
January 6, 2000, MBS Acquisition Corp. changed its name to Digital Commerce
Merchant Services, Inc. (d.b.a. "Bankthat.com"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
3. Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenditures during the
reporting period. Actual results could differ from those estimates.
4. Cash and cash equivalents
The Company considers all highly liquid debt instruments with original
maturity dates of three months or less when purchased, to be cash
equivalents.
5. Revenue recognition
The Company recognizes transaction processing revenues and merchant
set-up fees as the related services are performed.
6. Depreciation and amortization
Depreciation of property and equipment is provided on the straight-line
method over the estimated useful lives of the assets of two years.
<PAGE>
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
7. Fair value of financial instruments
The carrying value of the Company's accounts and related party
receivables, accounts payable and accrued liabilities approximate their
fair values.
8. Income taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases
of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect, when the differences are expected to
reverse. An allowance against deferred tax assets is recorded, when it is
more likely than not that such tax benefits will not be realized.
9. Advertising costs
Advertising and marketing costs are expensed as incurred.
10. Net earnings (loss) per share
Basic earnings (loss) per common share (BEPS) is based on the weighted
average number of common shares outstanding during each period. Diluted
earnings (loss) per common share are based on shares outstanding
(computed as under BEPS) and dilutive potential common shares. Potential
common shares included in the dilutive earnings (loss) per share
calculation include stock options awarded.
NOTE B - RECAPITALIZATION
In June 1999 the Company changed its name from Systems Assurance
Corporation to Digital Commerce International Inc. On June 15, 1999 the
Company acquired Digital Commerce Inc. (DCI), a Nevis Corporation based
in Vancouver, Canada. DCI was originally formed on November 17, 1998. DCI
was acquired through the issuance of 5,000,000 shares of the Company's
common stock and 500,000 shares of the Company's preferred stock to the
shareholders of DCI in exchange for all of the outstanding common stock
of DCI. Preferred stock has been approved by the board of directors and
shareholders, but the Company has not amended its Articles of
Incorporation and the preferred shares have not been created and
registered with the State of Delaware. The acquisition agreement
indicates that each preferred share will carry 10 votes at shareholder
meetings, and will have the same rights to dividends and other
distributions as a common share. Once the Company has achieved gross
transaction volume of $240 million (the "Trigger Event"), each preferred
share will be convertible at the option of its holder into 10 common
shares. The conversion right will expire if the "Trigger Event" has not
occurred by the end of the Company's second complete fiscal year
following the acquisition.
<PAGE>
NOTE B - RECAPITALIZATION - CONTINUED
Upon issuance of the preferred stock, certain reclassifications may be
made within the stockholders' equity section to reflect the terms of the
preferred stock issued.
The combination of Digital Commerce International Inc. and Digital
Commerce Inc. was recorded as a reverse acquisition of Digital Commerce
International Inc. As such, the historical financial statements of
Digital Commerce, Inc., the accounting acquirer, are presented. After the
reverse acquisition there were - 11,740,000 shares of common stock
outstanding with approximately 57 percent of those shares being held by
former stockholders of the Company.
NOTE C - COMMITMENTS AND CONTINGENCIES
1. Employment agreements
The Company has employment agreements with certain officers of the
Company. Total salaries covered by these agreements increase from
$250,000 in the first year to $450,000 annually over five years. The
agreements are exclusive of bonuses, benefits, and other compensation.
The agreements may be modified until a secondary offering of the Company
is completed and the Company receives funds totaling $20,000,000 or the
Company achieves a market capitalization of $150,000,000. The modified
salary would be $10,000 a month with a deferral of the remaining balance
until the underwriting or market capitalization occur.
2. Litigation
The Company is engaged in certain litigation in the ordinary course of
business. In the opinion of management, based upon the advice of counsel,
the ultimate outcome of this litigation should not have a material impact
on its financial position.
<TABLE>
<CAPTION>
NOTE D - LOSS PER COMMON SHARE
The following data show the shares used in computing loss per
common share including dilutive potential common stock.
<S> <C>
Common shares outstanding during the entire period 6,740,010
Weighted-average common shares issued during the period 2,371,569
-----------------
Weighted-average number of common shares used in basic EPS 9,111,579
Dilutive effect of options -
-----------------
Weighted-average number of common shares and dilutive potential common
stock used in diluted EPS 9,111,579
=================
</TABLE>
<PAGE>
NOTE D - LOSS PER COMMON SHARE - CONTINUED
Shares from the exercise of the outstanding options (Note E)
were not included in the computation of diluted loss per share because their
inclusion would have been antidilutive for the period ended October 31, 1999.
NOTE E - OPTIONS
During 1999, the board of directors approved a stock option plan. The
maximum number of shares of common stock that may be issued under the
plan is 4,000,000 shares. All employees, directors, officers and
consultants of the Company are eligible. Awards of options are given to
eligible participants at the discretion of the board of directors and
will be based on present and potential contributions of a particular
individual to the success of the Company and other factors, which the
Board may deem proper and relevant. The plan is a non-qualified plan, and
the options granted thereunder are non-qualified stock options.
Under the plan, options vest in the following manner:
directors and advisory board members vest 50 percent upon grant and 50
percent one year after grant date, senior officers, to vice president
vest three percent at the end of each calendar month from grant date,
employees vest nine percent at the end of the later of the first three
months or the stated probation period and three percent at the end of
each calendar month thereafter. Other holders vest 10 percent at the
end of the first 30 days of their engagement, 20 percent upon
completion of 50 percent of the term, where there is a particular term,
or upon 50 percent of the project completion, where project specific,
and the remainder upon completion, and for a period of 90 days
thereafter.
Options granted to an officer, director, or more than 10
percent shareholder of the Company shall not become exercisable until
at least six months following the date of grant.
The Company has granted options to purchase 1,530,000 shares
of the Company's common stock.
The options were granted to the following:
Shares
------------
Advisory board 100,000
Executive officers, including officers who are directors 1,150,000
Other employees 280,000
------------
1,530,000
============
<PAGE>
NOTE E - OPTIONS - CONTINUED
The Company has adopted only the disclosure provisions of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation"
(FAS 123). Therefore, the Company continues to account for stock based
compensation under Accounting Principles Board Opinion No. 25, under
which no compensation cost has been recognized. Had compensation cost for
the stock based compensation been determined based upon the fair value of
the awards at the grant date consistent with the methodology prescribed
by FAS 123, the Company's net loss and loss per share would have been
increased to the following pro forma amounts:
Net loss As reported $ (551,819)
Pro forma (607,324)
Loss per share - basic and
diluted As reported (0.06)
Pro forma (0.07)
The fair value of these options was estimated at the date of grant using
the modified Black-Scholes American option-pricing model with the
following weighted-average assumptions for 1999: expected volatility of
52 percent; risk-free interest rate of 5.75 percent; and expected life of
10 years. The weighted-average fair value of options granted was $0.68.
Option pricing models require the input of highly subjective assumptions
including the expected stock price volatility. Also, the Company's
employee stock options have characteristics significantly different from
those of traded options, and changes in the subjective input assumptions
can materially affect the fair value estimate. Management believes the
best input assumptions available were used to value the options and that
the resulting option values are reasonable.
<TABLE>
<CAPTION>
Changes in the Company's stock options are as follows:
Weighted-
average
Stock Exercise exercise
options price price
------------- ---------------- -------------
<S> <C> <C> <C>
Outstanding at November 1, 1998 - $ - $ -
Granted 1,530,000 0.50 - 3.00 0.68
Exercised - - -
Canceled or expired - - -
-------------
Outstanding at October 31, 1999 1,530,000 0.50 - 3.00 0.68
=============
Exercisable at October 31, 1999 83,600 $0.50 - 3.00 $ 1.80
=============
</TABLE>
<PAGE>
NOTE E - OPTIONS - CONTINUED
<TABLE>
<CAPTION>
A summary of the status of the options outstanding under the Company's
stock option plan at October 31, 1999 is presented below:
Weighted-
average Weighted- Weighted-
remaining average average
Number contractual exercise Number exercise
Range of exercise prices outstanding life (years) price exercisable price
------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 0.50 1,420,000 1.69 $ 0.50 40,000 $ 0.50
3.00 110,000 1.69 3.00 43,600 3.00
------------ -----------
$ 0.50 - $3.00 1,530,000 83,600
============ ===========
</TABLE>
NOTE F - INCOME TAXES
The Company has sustained a net operating loss in the period
presented. There were no deferred tax assets or income tax benefits recorded in
the financial statements for net deductible temporary differences or net
operating loss carryforwards because the likelihood of realization of the
related tax benefits cannot be established. Accordingly, a valuation allowance
has been recorded to reduce the net deferred tax asset to zero and consequently,
there is no income tax provision or benefit for the period presented. The
increase in the valuation allowance was $122,365 for the period ended October
31, 1999.
As of October 31, 1999, the Company had net operating loss
carryforwards for tax reporting purposes of approximately $385,000 in various
taxable jurisdictions. The taxable jurisdictions, estimated net operating
losses, and expiration dates are as follows: United States, $345,000, 2019,
Canada, $40,000, 2006. Utilization of approximately $39,000 of the total net
operating loss is dependent on the profitable operation of Digital Commerce
International, Inc. in the future under the separate return limitation rules and
limitations on the carryforward of net operating losses after a change in
ownership according to the US Internal Revenue Code.
Income tax expense differs from the amounts computed by
applying the U.S. Federal income tax rate of 34 percent to pretax income from
continuing operations as a result of the following:
Computed tax benefit $ (187,618)
Foreign net operating losses with no current tax benefit 65,253
Change in valuation allowance 122,365
-------------
$ -
=============
<PAGE>
NOTE F - INCOME TAXES - CONTINUED
Deferred income tax assets and liabilities are as follows:
Deferred tax assets
Benefit of net operating loss carryforwards - U.S. $ 117,584
Benefit of net operating loss carryforwards - Foreign 18,144
--------------
135,728
Less valuation allowance (135,728)
--------------
Net deferred tax asset (liability) $ -
==============
NOTE G - CONCENTRATIONS AND PRIMARY CUSTOMERS
The Company's financial instruments that are exposed to concentration of
credit risk consist primarily of accounts receivable.
Approximately 96 percent of accounts receivable are with two
different customers. The Company routinely evaluates the financial strength of
its customers and monitors each account to minimize the risk of loss.
The Company has two customers which account for more than 10 percent of
revenues. The Company's major customers and revenue received therefrom
are as follows:
Company A $ 190,000
Company B $ 59,742
NOTE H - BUSINESS SEGMENTS
The Company has two reportable segments for the period ended
October 31, 1999, namely processing services and banking services. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance of
each segment based on earnings or loss from operations. Identifiable assets by
segment are reported below. The Company allocates certain general and
administrative expenses, consisting primarily of management and utilities.
<TABLE>
<CAPTION>
Processing Banking Consolidated
services services balance
------------- ------------ --------------
<S> <C> <C> <C>
Revenues $ 255,042 $ - $ 255,042
Operating loss (132,028) (45,947) (177,975)
Administration expense - - (373,844)
--------------
--------------
Net loss $ (551,819)
==============
</TABLE>
<PAGE>
NOTE H - BUSINESS SEGMENTS - CONTINUED
<TABLE>
<CAPTION>
Identifiable assets
Processing Banking Consolidated
services services Corporate balance
------------ ------------ ----------- --------------
<S> <C> <C> <C> <C>
Current assets $ 206,036 $ 69,122 $ 237,690 $ 512,848
Non-current assets 290,000 103,730 - 393,730
Capital assets 10,450 - 10,002 20,452
------------ ------------ ----------- --------------
Total assets $ 506,486 $ 172,852 $ 247,692 $ 927,030
============ ============ =========== ==============
</TABLE>
NOTE I - SUBSEQUENT EVENTS
In 2000, the Company initiated two private placements. The Company has
received approximately $500,000 toward the purchase of 200,000 common
shares at $2.50 per share. The Company has also received approximately
$195,000 toward the purchase of 50,000 common shares at $3.00 per share.
<PAGE>
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
On December 6, 1999, the Company's Board of Directors authorized the engagement
of Grant Thornton LLP ("GT") as its auditor for the fiscal year ended October
31, 1999. ThE decision to change accountants was prompted by the ability of GT
to provide audit services to the Company on an international scale. GT entered
into an engagement letter with the Company on December 7, 1999 and concurrently
with that engagement, the Company dismissed Crouch Bierwolf & Chisholm, P.C.
("Crouch Bierwolf"), which had served as the Company's independent accountants
since 1998, as its auditor within the meaning of Item 304(a)(1)(i) of Regulation
S-K of the Securities and Exchange Commission.
The reports of Crouch Bierwolf on the financial statements for fiscal
year 1998 contained no adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope, or accounting principles.
The Board of Directors participated in and approved the decision to change
independent accountants. In connection with its audit for the fiscal year ended
1998, and through December 6, 1999, there were no disagreements with Crouch
Bierwolf on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Crouch Bierwolf would have caused Crouch
Bierwolf to make reference thereto in their report on the financial statements
for such year. During the fiscal year ended October 31, 1998, and through
December 6, 1999, there were no reportable events as that term is defined in
Item 304 (a)(1)(v)of Regulation S-K.
During the fiscal year ended October 31, 1998, and through December 6,
1999, the Company had not consulted with GT regarding either: (i) the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report was provided to
us nor oral advice was provided that GT concluded was an important factor
considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304 (a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, or a reportable
event, as that term is defined in Item 304 (a) (1) (v) of Regulation S-K.
Part III
Item 10. Directors and Executive Officers of the Registrant
The Company's directors, executive officers and key employees, as of
the date hereof, and their respective ages and positions with the Company, are
set forth below. Biographical information for each of the senior management
members and directors is also presented below. There are no family relationships
between or among any of the Company's directors or executive officers. The
Company's board of directors is currently comprised of two members. Executive
officers are chosen by, and serve at the discretion of, the board of directors:
(a) Directors and Executive Officers
MICHAEL Y. H. KANG - CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT. Michael
Y.H. Kang, 39, a resident of Vancouver, British Columbia, is the Company's
Chairman and Chief Executive Officer, and is a cofounder of Digital Commerce
Inc., which the Company acquired in June, 1999. Born in Korea, Mr. Kang spent
his early years in Korea and Brazil, then moved to Toronto where he earned a
Bachelor of Commerce degree from the University of Toronto in 1981. He was hired
by Continental Illinois National Bank and Trust Company of Chicago to the
position of foreign exchange trader and credit analyst, stationed in Seoul,
Korea. Subsequently, Mr. Kang returned to Canada to assume the position of
General Manager of his family's chain of convenience stores. When the stores
were eventually sold, Mr. Kang moved to Phoenix, Arizona and purchased Prisma
Graphics Inc., a sheet feed printer in the State of Arizona. In 1995, Mr. Kang
returned to Vancouver to co-found several private investment and capital
management firms, subsequently leading to the development of Digital Commerce
International, Inc.
Mr. Kang's term of office as a director is until the next annual
meeting of stockholders. He has served as a director since June 15, 1999.
JOHN W. COMBS - DIRECTOR, EXECUTIVE VICE PRESIDENT AND SECRETARY. Jack Combs,
54, a resident of Vancouver, British Columbia, is the Company's Executive
Vice-President and Secretary and is a co-founder of Digital Commerce Inc., which
the Company acquired in jUNE, 1999. In collaboration with Mr. Kang, Mr. Combs
co-founded several private investment and capital management firms and is a
shareholder in Combs Group, a family commercial real estate corporation in
Toronto. He is also the owner of Brockton Realty Inc., a Vancouver based real
estate and development Company which has been involved in all phases of the
development process, including planning, financing, development, construction
management and marketing. Born in New York, Mr. Combs moved with his family to
Toronto where he earned a Bachelor of Arts degree from the University of Toronto
in 1969. Prior to joining Mr. Kang in the founding of Digital Commerce
International Inc. Mr. Combs has been active in the real estate development
business in Ontario and British Columbia since the early 1970's. Throughout this
time Mr. Combs has developed for his own and investors' interests and maintained
a high level of contract services for such companies as Quadrant Development
Corp., a division of Weyerhauser Canada Ltd. and Webb & Knapp Canada Ltd.
Mr. Combs' term of office as a director is until the next annual
meeting of the Company's stockholders. He has served as a director since June
15, 1999.
(b) Advisory Board
The Company has formed an advisory board for the purpose of assisting
it in the identification of market and product development opportunities,
reviewing with management the progress of its specific projects, recruiting and
evaluating its management and operational systems and, in general, assisting the
Company in its regulatory and strategic planning. Members of the advisory board
are leaders in the fields of business, banking, and internet commerce, and
generally meet with the Company's management on an informal basis.
Andrew G. Smith, 28, has served on the advisory board of the Company
since June 1999. He has been the President of DietSmart.com since November of
1999. DietSmart.com is a leading online weight loss and fitness destination,
offering consumers diet and fitness programs tailored to their individual needs.
Prior to founding DietSmart.com, Mr. Smith was the Vice President of
Sponsorships and Strategic Development for iVillage.com, a top 25 site and the
number one women's network on the internet. Mr. Smith was responsible for a
number of the iVillage's largest strategic relationships, including those with
AT&T, Visa, First USA, and PNC Bank. He holds a B.A. in Religion from Dartmouth
College, 1994.
George Reznik, 34, has served on the Company's advisory board since
June 1999. He is currently the Director of Finance, Pivotal Corporation, where
he is responsible for all finance activities for Pivotal including regulatory
filings, preparation of financial information, business plans and budgets and
treasury management functions. Mr. Reznik was instrumental in Pivotal's
successful initial public offering on the Nasdaq Stock Market on August 5, 1999.
Prior to joining Pivotal in early 1999, Mr. Reznik was a Senior Manager in the
Corporate Finance practice with Deloitte & Touche leading the business valuation
practice based from the Vancouver office in Canada. Mr. Reznik has significant
international corporate finance experience having worked on numerous
international projects in various industries. Mr. Reznik has a Bachelor of
Commerce Degree (Honours) from the University of Manitoba (1988) and was a
medallist in obtaining his Chartered Accountant ("CA") designation in 1990. Mr.
Reznik also obtained the Chartered Business Valuator ("CBV") designation in
1995.
Brian Flynn, 30, has served on the Company's advisory board since June,
1999. He has nine years of experience in marketing and communications, including
product development, branding, advertising/public relations, database marketing,
and interactive communications. Brian has been the Chief Executive Officer of
Annotate.net, an internet company that develops software to enhance and simplify
the web user experience, since August, 1999. Prior to joining Annotate.net, he
was a Senior Vice President, Management Director at Foote, Cone & Belding (FCB)
in New York, a top worldwide advertising and communications company. During the
previous three years, Brian was Vice President, Director of Marketing
Communications for Citibank in North America. Brian developed and launched
Citibank's internet Banking product. He also serves as the Marketing Advisor for
SOHOnet, a provider of web content management solutions. Brian holds a degree in
business from Georgetown University in Washington, D.C.
Kevin Fortuna, 28, has served on the Company's Advisory Board since
January of 1999. He is currently Director of Business Development at NBC
internet, where he manages NBCi's east coast business development group and is
responsible for several of NBCi's largest strategic alliances. He has also held
senior business development and electronic commerce positions at Juno Online
Services, and has worked in the internet industry for the past five years. He
graduated summa cum laude from Georgetown University with a degree in English
and History.
<PAGE>
(c) Involvement in Certain Legal Proceedings
On January 5, 2000, the Company and Directors Kang and Combs were made
defendants to a lawsuit by a former business partner. The plaintiff, the former
business partner, alleged breach of a statutory duty owed by Kang and Combs to
the plaintiff (a fellow director and shareholder). He claims that he was not
made part of certain corporate opportunities and was not included in certain
corporate changes and the benefits therefrom. The Company believes the claims of
the plaintiffs regarding the Company are without merit. In addition, the Company
believes that any decision granted in favor of the plaintiff would only affect
the shares held by Kang and Combs and would not affect the Company directly.
Aside from the above mentioned action, the Company is not aware of any
other material legal proceedings involving any director, director nominee,
promoter, or control person including criminal convictions, pending criminal
matters, pending or concluded administrative or civil proceedings limiting one's
participation in the securities or banking industries, or finding of securities
or commodities law violations.
(d) Section 16(a): Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons owning ten percent of the Company's common stock (collectively,
"Reporting Persons") to file reports of ownership with the Securities and
Exchange Commission. Reporting Persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed. Based solely
on a review of the copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes that
all Reporting Persons during fiscal year 1999 complied on a timely basis with
all applicable filing requirements under Section 16(a) of the Exchange Act, with
the exception of Mr. Kang, a member of the Board of Directors and the Company's
Chief Executive Officer, and Mr. Combs, a member of the Board of Directors and
the Company's Executive Vice President, each of whom, the Company believes, was
delinquent in the filing of a report covering the issuance of shares of our
common and preferred stock and options to purchase shares of common stock in
connection with the acquisition of Digital Commerce, Inc. The Company believes
that each Reporting Person is now making efforts to effect such filings and
satisfy all reporting obligations.
<PAGE>
Item 11. Executive Compensation
Summary Compensation Table
The Company did not conduct active business operations from 1992
through June 15, 1999. The following table summarizes the total compensation of
the Chief Executive Officer and the Company's other most highly compensated
executive officers (collectively, the Named Executive Officers") earning in
excess of $100,000 for the year ended October 31, 1999.
<TABLE>
<CAPTION>
Name and Principal Year Salary $ Other Annual Securities Underlying
Position Compensation Options/SARS
<S> <C> <C> <C> <C>
Michael Y H Kang 1999 $120,000 $10,932 575,000
CEO
John W Combs 1999 $120,000 $10,882 575,000
Executive VP
</TABLE>
The additional compensation received reflects an automobile allowance.
The salary and other annual compensation amounts in the table above represent
annualized amounts for the period between June 15, 1999 to October 31, 1999.
Stock Option Grants
The following table provides information relating to stock options
awarded to each of the Named Executive Officers during the fiscal year ended
October 31, 1999.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Potential Realizable
Value at Assumed Annual
Number of Percent of Total Rate of Stock Appreciation
Securities Options for
Underlying Granted Exercise Option Term(3)
Name Options to Employees in Price Per Expiration
Granted (#) Fiscal Year(1) Share(2) Date 5%($) 10%($)
-------------------------- ---------------- ---------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael Y H Kang 575,000 37.58% $.50 June 18, 2009, $223,003 $302,257
-------------------------- ---------------- ---------------- ------------- ------------- ------------- -------------
John W Combs 575,000 37.58% $.50 June 18, 2009 $223,003 $302,257
-------------------------- ---------------- ---------------- ------------- ------------- ------------- -------------
</TABLE>
(1) Based on options for an aggregate of 1,530,000 shares of common stock
granted during the fiscal year ended October 31, 1999.
(2) On the date of the grant of the options for the shares of common stock, our
Board of Directors estimated that the fair market value of that stock to be
$0.25.
(3) Potential realizable value is based on the assumption that the shares of
our common stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the option term. These
numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect our estimate of
future stock price growth.
<PAGE>
Fiscal Year-End Option Value
The following table provides information regarding the number and value
of options to acquire shares of common stock held by the Named Executive
Officers on October 31, 1999.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year-End (#) Fiscal Year-End1
-----------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Michael Kang 0 575,000 0 $5,534,375
John Combs 0 575,000 0 $5,534,375
</TABLE>
(1) For purposes of determining the values of the options held by the Named
Executive Officers, the Company assumed that the shares of common stock
underlying the option granted had a value of $10.125 per share on October
31, 1999, which is the estimated fair market value the Board of Directors
attributed to that stock on October 31, 1999. The option value is based on
the difference between the fair market value of such shares on October 31,
1999, and the option exercise price per share, multiplied by the number of
shares subject to the options.
Employment Agreements
The Company has adopted a policy of entering into employment agreements
with each of its senior management and key personnel, and has either entered
into an employment agreement with each of those persons or has approved the
terms of such agreements. The employment agreements generally have initial terms
of five years. Under the agreements, the employee is entitled to a base salary
($250,000 for Mr. Kang, $250,000 for Mr. Combs), plus incentive bonuses (as
determined by the Board of Directors), standard benefits such as health and life
insurance, and reimbursement of reasonable expenses. The base salary payable to
Mr. Kang and Mr. Combs increases by $50,000 every year to a maximum of $450,000.
The agreements also provide for moving allowances in some instances. The
employment agreements for a number of the Company's senior management also
provide for the grant of options.
The Company may terminate the employment contracts for cause (which is
defined in the agreements) or without cause. In addition, the employee can
terminate the contract on notice to the Company ranging from 90 to 180 days. If
the contract is terminated without cause or as a result of a "change of
control," as defined in the agreements, the employee is entitled to receive
severance pay of up to 36 months salary, depending on the particular agreement.
The agreements also contain non-competition, non-solicitation and assignment of
inventions provisions which the Company believes are consistent with industry
practice.
Limitations of Liability and Indemnification
The Company's Certificate of Incorporation limits the personal
liability of directors and officers for monetary damages to the maximum extent
permitted by Delaware law. Under Delaware law, such limitations include monetary
damages for any action taken or failed to be taken as an officer or director
except for (i) an act or omission that involves intentional misconduct or a
knowing violation of the law, or (ii) payment of improper distributions.
Delaware law also permits a corporation to indemnify any current or former
director, officer, employee or agent if the person acted in good faith and in a
manner in which he reasonably believed to be in or not opposed to the best
interest of the corporation. In the case of a criminal proceeding, the
indemnified person must also have had no reasonable cause to believe that his
conduct was unlawful.
The Company's Bylaws provide that, to the full extent permitted by its
Certificate of Incorporation and the Delaware General Corporation Law, the
Company will indemnify (and advance expenses to) its officers, directors and
employees in connection with any action, suit or proceeding (civil or criminal)
to which those persons are made party by reason of their being a director,
officer or employee. Any such indemnification is in addition to the advancement
of expenses.
Compensation of Directors
Directors do not receive cash compensation for serving on the Board of
Directors or any committee of the Board, or for any other services rendered to
the Company in their capacity as directors of the Company, but are reimbursed
for expenses they incur in connection with attending Board or committee
meetings. There are no other arrangements for compensation to the Board of
Directors' members.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The table below sets forth information, as of October 31, 1999, with
respect to beneficial ownership of the Company's common stock by each person
known by the Company to be the beneficial owner of more than 5% of its
outstanding common stock, by each of its directors, by each Named Executive
Officer, and by all of the Company's officers and directors as a group. Unless
otherwise noted, each shareholder has sole investment and voting power over the
shares owned.
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount and Nature of Percent of Class
Beneficial Owner
<S> <C> <C> <C>
Common John W Combs(1) 1,845,000 14.22%
815 Hornby Street, Suite 404
Vancouver, British Columbia V62
286
Common Michael Y H Kang(2) 1,845,000 14.22%
815 Hornby Street, Suite 404
Vancouver, British Columbia V62
286
</TABLE>
(1) Includes 1,845,000 shares held by West Point Asset Management Ltd for the
benefit of Mr. Combs and his family.
(2) Includes 1,845,000 shares held byRaging Bull Asset Management Ltd for the
benefit of Mr. Kang and his family.
<PAGE>
<TABLE>
<CAPTION>
(b) Security Ownership of Named Executive Officers
Title of Class Name and Address of Amount and nature of Percent of Class
Beneficial Owner Beneficial Owner
<S> <C> <C> <C>
Class A Preferred Michael Y H Kang 250,000 50%
Class A Preferred John W Combs 250,000 50%
</TABLE>
Item 13. Certain Relationships and Related Transactions
Digital Commerce Bank Inc. is the holder of the Company's bank charter. John W
Combs, as nominee of the Company's bank, applied for the bank charter and
contributed the charter to our bank once the application was approved. Following
the contribution, the capital securities of Digital Commerce Bank were
transferred to the Company.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements
The Company's consolidated financial statements and its subsidiary are
included elsewhere in this Report.
(b) Financial Statement Schedules
No schedules are required in connection with the filing of this Report as
amounts are either immaterial or are otherwise disclosed in the financial
statements.
<TABLE>
<CAPTION>
(c) Exhibits
INDEX TO EXHIBITS
Exhibit
No. Exhibit Page
<S> <C> <C>
3.1 Certificate of Incorporation of EZ Data Systems, Inc.
3.2 Bylaws
3.3 Certificate of Amendment of Certificate of Incorporation of EZ Data Systems, Inc.
3.4 Certificate of Amendment of Certificate of Incorporation of Systems Assurance Corporation.
3.5 Certificate of Amendment of Certificate of Incorporation of Systems Assurance Corporation.
3.6 Certificate of Amendment of Certificate of Incorporation of Systems Assurance Corporation.
3.7 Certificate of Change of Location of Registered Office and/or Registered Agent of Systems
Assurance Corporation
3.8 Certificate of Change of Location of Registered Office and/or Registered Agent of Systems
Assurance Corporation
4.1 Certificate Establishing and Designating the Rights, Preferences and Restrictions of Series
A Preferred Stock of Digital Commerce, Inc.
10.1 Certificate of Ownership and Merger Merging EZ Data, Inc. into EZ Data Systems, Inc.
10.2 Certificate of Ownership and Merger Merging Systems Assurance Corporation into Unidata
Systems, Inc..
10.3 Acquisition Agreement by and between Assurance Corporation and Digital Commerce, Inc.
10.4 1999 Stock Option Plan
10.5 Employment Agreement with Michael Kang
10.6 Employment Agreement with John W. Combs
10.7 Humboldt Bank Independent Sales Organization (ISO) Agreement
21.1 Subsidiaries of the Registrant
27.1 Financial Data Schedule
</TABLE>
(d) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended October 31,
1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Digital Commerce International, Inc.
August ___, 2000 By: /s/ Michael Y H Kang
-------------------------------------
Michael Y H Kang
Chairman and Chief Executive Officer
Digital Commerce International, Inc.
August ___, 2000 By: /s/ John W. Combs
--------------------------------------
John W. Combs
Director and Executive Vice President,
Principal Financial Officer
DIRECTORS
August ___, 2000 By: /s/ Michael Y H Kang
---------------------------------------
Michael Y H Kang
August ___, 2000 By: /s/ John W. Combs
---------------------------------------
John W. Combs
