SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 21, 1999 (June 4, 1999)
Digital Courier Technologies, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-20771 87-0461856
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(State or Other (Commission (IRS Employer
Jurisdiction of Incorporation) File Number) Identification No.)
136 Heber Avenue, Suite 204, P.O. Box 8000, Park City, Utah 84060
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (435) 655-3617
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 7. Financial Statements and Exhibits
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Exhibit 2.1. SB.com, Inc. financial statements as of and for the periods
ended December 31, 1998 and 1997 (with Independent Auditors
Report Thereon)
Exhibit 2.2. SB.com, Inc. unaudited financial statements as of and for the
quarter ended March 31, 1999.
<PAGE>
EXHIBIT 2.1
SB.COM, INC.
Financial Statements
December 31, 1998 and 1997
(With Independent Auditors Report Thereon)
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
SB.Com, Inc.
We have audited the accompanying balance sheets of SB.Com, Inc. as of December
31, 1998 and 1997, and the related statements of income and retained earnings
and cash flows for the year ended December 31, 1998 and the period from June 16,
1997 (date of inception) to December 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SB.Com, Inc. as of December 31,
1998 and 1997, and the results of its operations and its cash flows for the year
ended December 31, 1998 and the period from June 16, 1997 (date of inception) to
December 31, 1997, in conformity with generally accepted accounting principles.
KIRKLAND, RUSS, MURPHY & TAPP
Clearwater, Florida
July 30, 1999
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SB.COM, INC.
Balance Sheets
December 31, 1998 and 1997
ASSETS
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1998 1997
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Current assets:
Cash 101,104 3,400
Accounts receivable 70,414 10,749
Deferred tax asset -- 700
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Total current assets 171,518 14,849
Property and equipment:
Furniture and fixtures 2,941 --
Equipment 16,789 3,250
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Total property and equipment 19,730 3,250
Less accumulated depreciation and amortization (2,539) (325)
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Net furniture, fixtures and equipment 17,191 2,925
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$ 188,709 17,774
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<PAGE>
SB.COM, INC.
Balance Sheets - Continued
December 31, 1998 and 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1998 1997
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Current liabilities:
Accounts payable and accrued expenses $ 62,815 12,829
Income taxes payable 22,478 435
Current deferred tax liability 7,000 --
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Total current liabilities 92,293 13,264
Deferred tax liability 7,000 1,000
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Total liabilities 99,293 14,264
Stockholders' equity:
Common stock, $.001 par value, authorized; 1,000
shares issued and outstanding 500 shares 1 1
Additional paid-in capital 499 499
Retained earnings 88,916 3,010
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Total stockholders' equity 89,416 3,510
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$188,709 17,774
======== ========
See accompanying notes to financial statements.
<PAGE>
SB.COM, INC.
Statements of Income and Retained Earnings
Year Ended December 31, 1998 and the Period From
June 16, 1997 (date of inception) to December 31, 1997
1998 1997
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Net revenues $731,816 57,312
Cost of revenues 222,969 9,094
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Gross profit 508,847 48,218
Selling, general and administrative expenses 384,984 44,148
Depreciation expense 2,214 325
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Operating income before income taxes 121,649 3,745
Provision for income taxes 35,743 735
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Net income 85,906 3,010
Retained earnings at beginning of year 3,010 --
-------- --------
Retained earnings at end of year $ 88,916 3,010
======== ========
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SB.COM, INC.
Statements of Cash Flows
Year Ended December 31, 1998 and the Period From
June 16, 1997 (date of inception) to December 31, 1997
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 85,906 3,010
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,214 325
Increase in receivables (59,665) (10,749)
Increase in accounts payable and accrued expenses 49,986 12,829
Increase in income taxes payable 22,043 435
Increase in deferred income taxes 13,700 300
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Net cash provided by operating activities 114,184 6,150
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Cash flows used in investing activities - additions to property
and equipment (16,480) (3,250)
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Cash flows from financing activities
Proceeds from stock issued to stockholders -- 500
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Net increase in cash 97,704 3,400
Cash at beginning of year 3,400 --
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Cash at end of year $ 101,104 3,400
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
SB.COM, INC.
Notes to Financial Statements
Periods Ended December 31, 1998 and 1997
(1) Description of Business and Summary of Significant Accounting Policies
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(a) Description of Business
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SB.COM, Inc. (Company), a Florida Corporation, was established
on June 16, 1997. The Company is privately owned and based in
Clearwater, Florida. The Company is engaged in processing and
securing credit card payment transactions over the Internet.
(b) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the estimated useful
life of the asset.
(c) Income Taxes
------------
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under
the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS
No. 109, the effect of a change in tax rates on deferred tax
assets or liabilities is recognized in income in the period that
included the enactment.
(d) Estimates
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In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, as well as the reported
amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(e) Concentrations of Credit Risk
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Cash balances are maintained in a financial institution.
Occasionally, deposits exceed amounts insured by the Federal
Deposit Insurance Corporation.
(continued)
<PAGE>
SB.COM, INC.
Notes to Financial Statements - Continued
(2) Income Taxes
------------
Income tax expense for the year ended December 31, 1998 and the period
from June 16, 1997 to December 31, 1997 was approximately $36,000 and
$1,000, respectively. Income taxes for the year ended December 31,
1998 and the period from June 16, 1997 to December 31, 1997 differ
from the amounts computed by applying the effective U.S. federal
income tax rate of 34% to income before income taxes as a result of
the following:
1998 1997
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Computed ?expected? tax $ 41,000 1,000
State income taxes, net of federal
tax benefit 4,000 -
Surtax exemption (9,000) -
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$ 36,000 1,000
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The tax effect of temporary differences that give rise to deferred
taxes at December 31, 1998 and 1997 are as follows:
1998 1997
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Deferred tax assets:
Accounts payable and accrued expenses $ 12,000 4,300
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Total deferred tax assets 12,000 4,300
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Deferred tax liability:
Accounts receivable $ (19,000) (3,600)
Depreciation methods (7,000) (1,000)
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Total deferred tax liability (26,000) (4,600)
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Net deferred income taxes $ (14,000) (300)
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(3) Contractual Agreements
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The Company entered into a three year term agreement to pay a
Processor of real time credit card transactions a commission of 40% of
the revenues generated from this type of transaction. The agreement
ends in June, 2000 and can be canceled upon 30 days written notice by
either party.
The Company entered into an Independent Agent (Agent) agreement in
September, 1997 to pay 100% of income derived from residuals provided
by the Agent at a fee of 30% of transaction fees. The agreement can be
terminated by either party at any time.
(continued)
<PAGE>
SB.COM, INC.
Notes to Financial Statements - Continued
(4) Related Party Transactions
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(a) Operating Lease
---------------
The Company's office facility is located in Clearwater, Florida.
The office facility is leased from a company controlled by one
of its stockholder. Rent expense for the year ended December 31,
1998 and the period from June 16, 1997 to December 31, 1997 was
approximately $5,000.
(b) Management Fees
---------------
Management fees of approximately $90,000 and $10,000 was paid to
companies owned by its shareholders during the year ended
December 31, 1998 and the period from June 16, 1997 to December
31, 1997, respectively.
(5) Year 2000 Issue
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The majority of the Company's reliance on information technology
relates to its Processor of real time credit card transactions. The
Processor has informed the Company that it will have modified or
converted its information technology by the year 2000.
(6) Subsequent Events
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In 1999, the Company acquired certain assets of its credit card real
time processing company (Note 3). They issued 500 shares of its common
stock as consideration for the acquisition.
In 1999, the Company's articles of incorporation were amended to
increase the authorized shares of common stock from 1,000 shares to
7,500,000 shares.
In June 1999, the Company was acquired by a publicly held company in a
stock purchase agreement. The stockholders of the Company received in
the aggregate 2,840,000 shares of the acquiring company's common stock
in exchange for the Company's issued and outstanding common stock.
<PAGE>
EXHIBIT 2.2
SB.COM. INC
CONDENSED BALANCE SHEET
AS OF MARCH 31, 1999
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 390,801
Other current assets 7,000
--------------------
Total current assets 397,801
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PROPERTY AND EQUIPMENT:
Computer, office equipment and vehicles 52,822
Furniture, fixtures and leasehold improvements 2,941
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55,763
Less accumulated depreciation and amortization (11,902)
--------------------
Net property and equipment 43,861
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OTHER ASSETS 727
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$ 442,389
====================
<PAGE>
SB.COM, INC.
CONDENSED BALANCE SHEET (Continued)
AS OF MARCH 31, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 255,000
Income taxes payable 36,779
Other accrued liabilities 2,672
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Total current liabilities 294,451
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CAPITAL LEASE OBLIGATIONS 31,738
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STOCKHOLDERS' EQUITY:
Common stock, 7,500
Retained earnings 108,700
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Total stockholders' equity 116,200
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$ 442,389
==================
.
<PAGE>
SB.COM, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
REVENUES $ 191,771
COST OF SALES 73,876
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Gross margin 117,895
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OPERATING EXPENSES:
Selling, general and administrative 82,142
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PROVISION FOR INCOME TAXES 14,301
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NET INCOME $ 21,452
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<PAGE>
<TABLE>
<CAPTION>
SB.COM, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
Increase (Decrease) in Cash
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,452
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 9,363
Changes in operating assets and liabilities, net of effect of
acquisitions and dispositions-
Trade accounts receivable 70,414
Other assets (7,726)
Accounts payable and accrued liabilities (45,842)
Deferred taxes payable (14,000)
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Net cash used in operating activities 33,661
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (36,033)
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Net cash used in investing activities (36,033)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from borrowings 286,738
Receivalbe from stockholder 7,000
Net additional investment Company 5,331
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Net cash provided by financing activities 299,069
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NET INCREASE IN CASH 296,697
CASH AT BEGINNING OF PERIOD 101,104
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CASH AT END OF PERIOD $ 397,801
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</TABLE>
<PAGE>
SB.COM, INC.
NOTE TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - INTERIM CONDENSED FINANCIAL STATEMENTS
The accompanying interim condensed financial statements as of March 31,
1999 and for the three months ended March 31, 1999 and 1998 are unaudited. In
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation have been included. The financial
statements are condensed and, therefore, do not include all disclosures normally
required by generally accepted accounting principles. These financial statements
should be read in conjunction with the Company's annual financial statements
included herein. The results of operations for the three months ended March 31,
1999 are not necessarily indicative of the results to be expected for the entire
fiscal year ending December 31, 1999.
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIGITAL COURIER TECHNOLOGIES, INC.
Dated: August 17, 1999 By:/s/ Mitchell Edwards
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Mitchell Edwards
Chief Financial Officer
