UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A - AMENDMENT NO. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 23, 1999
EMARKETPLACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-14731
(State or other (IRS Employer
jurisdiction of Identification No.)
Formation)
Commission File number 33-0558415
255 West Julian Street, Suite 100, San Jose, CA 95110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 295-6500
-------------------------------------------------------
(Former name or former address, if changes since last report)
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Item 7. Financial Statements, Pro Forma Information and Exhibits
(a) Financial statements of TechStore, LLC; business acquired. See pages F-1
through F-9 below.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly authorized and caused the undersigned to sign this
Report on the Registrant's behalf.
EMARKETPLACE, INC.
By: /s/ Robert M. Wallace
Name: Robert M. Wallace
Title: Chairman of the Board
Dated: December 27, 1999
<PAGE>
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Form 8K/A of
eMarketplace, Inc. of our report dated October 22, 1999, on our audit of the
financial statements of TechStore, LLC.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
December 27, 1999
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Item 7.
REPORT OF INDEPENDENT AUDITORS
To the Members of
TechStore, LLC
We have audited the accompanying balance sheets of TechStore, LLC as
of December 31, 1998 and 1997, and the related statements of operations, changes
in members' [deficit], and cash flows for the year and two month period then
ended, respectively. 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 TechStore, LLC as of
December 31, 1998 and 1997, and the results of its operations and its cash flows
for the year and two month period then ended, respectively, in conformity with
generally accepted accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
October 22, 1999
F-1
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TECHSTORE, L.L.C.
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BALANCE SHEETS
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December 31,
1 9 9 8 1 9 9 7
Assets:
Current Assets:
Cash $ 116,139 $ 20,462
Accounts Receivable - Net 63,014 12,044
Prepaid Expenses 4,660 --
---------- -----------
Total Current Assets 183,813 32,506
Furniture and Equipment - Net 36,923 5,977
Deposits 107,365 --
---------- -----------
Total Assets $ 328,101 $ 38,483
========== ===========
Liabilities and Members' Deficit:
Current Liabilities:
Accounts Payable $ 263,276 $ 33,805
Accrued Liabilities 55,475 261
Notes Payable to Member 45,000 9,177
Capital Lease Obligation - Current 4,120 --
---------- -----------
Total Current Liabilities 367,871 43,243
Capital Lease Obligation - Non-Current 7,210 --
---------- -----------
Total Liabilities 375,081 43,243
---------- -----------
Members' Deficit:
Members' Capital Contributions 7,200 7,200
Accumulated Deficit (54,180) (11,960)
---------- -----------
Total Members' Deficit (46,980) (4,760)
---------- -----------
Total Liabilities and Members' Deficit $ 328,101 $ 38,483
========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
F-2
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TECHSTORE, L.L.C.
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STATEMENTS OF OPERATIONS
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For the Period from
November 1, 1997
Year ended [Inception] to
December 31, December 31,
1 9 9 8 1 9 9 7
------- -------
Net Revenues $6,341,161 $ 36,178
Cost of Revenues 5,976,157 33,271
---------- ----------
Gross Margin 365,004 2,907
---------- ----------
Operating Expenses:
Sales and Marketing 256,407 3,206
Research and Development 79,928 8,499
General and Administrative 64,780 3,162
---------- ----------
Total Operating Expenses 401,115 14,867
---------- ----------
Loss from Operations (36,111) (11,960)
Other Income 1,606 --
Interest Expense - Net (7,715) --
---------- ----------
Net Loss $ (42,220) $ (11,960)
========== ==========
The Accompanying Notes are an Integral Part of These Financial Statements.
F-3
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TECHSTORE, L.L.C.
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STATEMENT OF CHANGES IN MEMBERS' DEFICIT
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Total
Bejan Derek Mosen Members'
Aminifard Wall Aminifard Deficit
Balance - November 1, 1997 $ -- $ -- $ -- $ --
Capital Contribution 7,200 -- -- 7,200
Net Loss (11,960) -- -- (11,960)
--------- --------- -------- ----------
Balance - December 31, 1997 (4,760) -- -- (4,760)
Net Loss (29,554) (6,333) (6,333) (42,220)
--------- --------- -------- ----------
Balance - December 31, 1998 $ (34,314) $ (6,333) $ (6,333) $ (46,980)
========= ========= ======== ==========
The Accompanying Notes are an Integral Part of These Financial Statements.
F-4
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TECHSTORE, L.L.C.
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STATEMENTS OF CASH FLOWS
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For the Period from
November 1, 1997
Year ended [Inception] to
December 31, December 31,
1 9 9 8 1 9 9 7
------- -------
Operating Activities:
Net Loss $ (42,220) $ (11,960)
Adjustments to Reconcile Net Loss to Net Cash
[Used for] Provided by Operating Activities:
Depreciation 6,664 756
Changes in Assets and Liabilities:
Accounts Receivable (50,970) (12,044)
Prepaid Expenses and Deposits (112,025) --
Accounts Payable 229,471 42,982
Accrued Liabilities 46,037 261
---------- ----------
Net Cash - Operating Activities 76,957 19,995
---------- ----------
Investing Activities:
Additions to Furniture and Equipment (25,250) (6,733)
---------- ----------
Financing Activities:
Proceeds from Notes Payable to Member 255,000 --
Repayments of Notes Payable to Member (210,000) --
Repayments of Capital Lease Obligations (1,030) --
Capital Contribution -- 7,200
---------- ----------
Net Cash - Financing Activities 43,970 7,200
---------- ----------
Net Increase in Cash 95,677 20,462
Cash - Beginning of Periods 20,462 --
---------- ----------
Cash - End of Periods $ 116,139 $ 20,462
========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest $ 7,900 $ --
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Acquisition of Equipment under
Capital Lease $ 12,360 $ --
The Accompanying Notes are an Integral Part of These Financial Statements.
F-5
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TECHSTORE, L.L.C.
NOTES TO FINANCIAL STATEMENTS
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[1] The Company
TechStore, L.L.C. [the "Company"], an online retailer of computer hardware and
software, was formed in March 1998 by three members, including Mr. Bejan
Aminifard, the sole proprietor of TechStore, the Company's predecessor which was
formed in November 1997. Mr. Aminifard contributed his business to the Company
in March 1998, in exchange for a 70% ownership interest. As a result, Mr.
Aminifard is the managing member of the Company. The 1998 statement of
operations reflects the results of operations of both the Company and its
predecessor. The Company was acquired by E-Taxi in April 1999 [See Note 8B].
The Company has devoted a substantial effort to developing its website.
Accordingly, the Company has incurred losses from operations and negative
working capital since inception. The Company is striving to achieve profitable
operations by gaining market acceptance of its products. The Company is also
actively seeking to raise additional capital. However, there can be no assurance
that the Company's efforts to achieve profitable operations or raise additional
capital will be successful.
The Company is subject to all of the risks inherent in an early stage business
in the technology and Internet industries. The risks include but are not limited
to limited operating history, limited management resources, reliance on
relationships with merchandise vendors, dependence on the Internet and related
security risks and the changing nature of the Internet industry.
[2] Summary of Significant Accounting Policies
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 expenses during the
reporting period.
Actual results could differ form those estimates.
Cash and Cash Equivalents - The Company considers all highly liquid instruments
with a maturity of three months or less when purchased to be cash equivalents.
There were no cash equivalents at December 31, 1998 or 1997.
Furniture and Equipment - Furniture and equipment, including furniture and
equipment under capital leases, are recorded at cost and depreciated using the
straight-line method over their useful lives, which is generally three to five
years. Maintenance and repairs are charged to expense as incurred, and
improvements and betterments are capitalized. When assets are retired or
otherwise disposed of, the cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss is reflected in operations in the
period realized.
Revenue Recognition - Upon sale of an item, the Company takes title to the
merchandise, charges the customer's credit card and arranges for a third party
to complete delivery to the customer. The Company obtains merchandise from a
vendor who retains physical possession of the merchandise. The Company is not
obligated to take title to the merchandise unless it successfully sells the
merchandise. Subsequently, the Company pays the vendor any amount due for the
purchase of the related merchandise. The Company records the full sales amount
as revenue upon verification of credit card authorization and shipment of the
merchandise. The Company is at risk of loss for collecting all of the sales
proceeds, delivery of the merchandise and returns from customers. In instances
where credit card authorization has been received but the merchandise has not
been shipped, the Company defers revenue recognition until the merchandise is
shipped.
The Company allows customers to return products, in certain circumstances.
Accordingly, the Company provides for allowances for estimated future returns at
the time of shipment based on historical experience.
Advertising Costs - Advertising costs are expensed when incurred. Advertising
costs amounted to $71,872 and $625 for the years ended December 31, 1998 and
1997, respectively.
F-6
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TECHSTORE, L.L.C.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
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[2] Summary of Significant Accounting Policies [Continued]
Research and Development Costs - The costs of website development are expensed
as incurred as research and development costs.
Income Taxes - No provision for income taxes is made in these financial
statements as the Company intends to elect partnership tax status under Section
754 of the Internal Revenue Code. The members are responsible for reporting to
taxing authorities their respective share of the Company's income, loss,
deductions and credits.
[3] Operating Agreement
The Company's operating agreement commenced on October 1, 1998. The liability of
any Member for the losses, debts, liabilities and obligations of the Limited
Liability Company shall be limited to paying: the capital contribution of such
Member when due under this Agreement; such Member's share of any undistributed
assets of the Limited Liability Company and (only if and to the extent at any
time required by applicable law) any amounts previously distributed to such
Member by the Limited Liability Company.
[4] Concentrations of Credit Risk
The Company maintains its cash balances in one financial institution. The
balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1998, the Company had no uninsured cash balances.
The Company purchases merchandise from one vendor. Purchases from this vendor
during fiscal 1998 and 1997 amounted to $5,864,974 and $22,756, or 97% and 92%
of cost of revenue, respectively. This vendor also accounted for 81% of the
accounts payable balance as of December 31, 1998 and -0-% as of December 31,
1997. The Company is entirely dependent on this supplier for order fulfillment
and for shipping merchandise directly to customers. Management believes that
there is no business vulnerability regarding this concentration of purchases as
the goods are available from other sources. However, there can be no assurance
that such a distributor could provide the fulfillment, service and pricing
currently offered by its current supplier.
The Company performs credit evaluations of its potential customers at the time
of order placement.
[5] Furniture and Equipment
Furniture and equipment consisted of the following:
December 31,
1 9 9 8 1 9 9 7
Office Equipment $ 27,162 $ 6,733
Office Equipment Under Capital Lease 12,360 --
Office Furniture 4,820 --
--------- ---------
Totals - At Cost 44,342 6,733
--------- ---------
Accumulated Depreciation (6,389) (756)
Accumulated Deprecation of Office Equipment
Under Capital Lease (1,030) --
--------- ---------
Total Accumulated Depreciation (7,419) (756)
--------- ---------
Furniture and Equipment - Net $ 36,923 $ 5,977
========= =========
Depreciation expenses was $6,664 and $756 for 1998 and 1997, respectively.
F-7
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TECHSTORE, L.L.C.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
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[6] Leases
The Company leases office equipment and vehicles under capital and operating
leases.
The Company's lease obligations as of December 31, 1998, under capital leases
and operating leases having an initial or remaining term of more than one year,
are as follows:
Capital Operating
Year ending Lease Leases
December 31,
1999 $ 5,353 $ 12,000
2000 5,353 12,000
2001 4,015 6,500
--------- ---------
Total Minimum Lease Payments 14,721 $ 30,500
=========
Lease Amount Representing Interest (3,391)
Present Value of Minimum Lease Payments 11,330
Less Current Portion 4,120
Obligation Under Capital Leases - Long-Term $ 7,210
------------------------------------------- =========
Total rent expense under all non-related party operating leases for the year
ended December 31, 1998 was $4,597.
There were no lease obligations as of December 31, 1997.
[7] Related Party Transactions
On May 1, 1998, the Company issued a one year promissory note to a member in
exchange for $100,000 in cash. The note bears interest at a rate of 8.28% per
annum. Subsequent to May 1, 1998, the Company made additional borrowings from
the same member totaling $155,000. The Company repaid $210,000 of the
outstanding borrowings as of December 31, 1998. The Company paid a total of
$3,921 in interest under the above borrowings for the year ended December 31,
1998.
During fiscal 1998, the Company paid $20,482 and $64,086 to two members,
respectively, in consideration for management services provided to the Company.
During fiscal 1997, these fees totaled $-0- and $5,890.
On April 1, 1998, the Company entered into a month to month rental agreement
with a member for office space. Rental expense amounted to $7,221 and $-0- in
the fiscal years ended December 31, 1998 and 1997, respectively.
F-8
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TECHSTORE, L.L.C.
NOTES TO FINANCIAL STATEMENTS, Sheet #4
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[8] Subsequent Events
[A] In March 1999, the Company sold a 25% ownership interest to a new member in
exchange for $400,000 in cash.
[B] On March 31, 1999, the members of the Company entered into a contribution
and exchange agreement with E-Taxi, Inc. ["E-Taxi"] pursuant to which the
members contributed their ownership interests in the Company to E-Taxi in
exchange for shares of common and preferred stock of E-Taxi.
In April 1999, E-Taxi acquired TechStore, in a business combination accounted
for using the purchase method of accounting. The purchase price consisted of
stock valued at $1,492,000 and cash of $66,667.
[C] On March 31, 1999, two members of the Company entered into employment
agreements with E-Taxi for a term of five years. In connection with these
employment agreements, E-Taxi also granted each of the two members a restricted
stock award which is earned upon the achievement of certain performance
objectives.
[D] In January 1999, the Company issued a four-month promissory note to a member
for $100,000 in cash. The note bears interest at a rate of 8.28% per annum.
. . . . . . . . . . . .
F-9
