UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended May 31, 2002
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-27773
BANKENGINE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-3134518
-------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
157 Adelaide Street West, Suite 426
Toronto, Ontario, Canada M5H 4E7
(Address of principal executive offices, including zip code)
(416) 860-9378
(Registrant's telephone number, including area code)
Check whether the Registrant (1) has 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, and (2) has been subject to such filing requirements for
the past 90 days. Yes |X| No |_|
The number of shares outstanding of the registrant's Common Stock,
$.001 Par Value, on July 19, 2002, was 19,015,893 shares.
BANKENGINE TECHNOLOGIES, INC.
MAY 31, 2002 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements.....................................................................2
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................................14
PART II OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................18
Item 2. Changes in Securities and Use of Proceeds...............................................18
Item 3. Defaults Upon Senior Securities.........................................................18
Item 4. Submission of Matters to a Vote of Security Holders.....................................18
Item 5. Other Information.......................................................................19
Item 6. Exhibits and Reports on Form 8-K........................................................19
Exhibit Index...........................................................................21
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance and underlying assumptions and
other statements, which are other statements of historical facts. These
statements are subject to uncertainties and risks including, but not limited to,
product and service demand and acceptance, changes in technology, economic
conditions, the impact of competition and pricing, government regulation, and
other risks defined in this document and in statements filed from time to time
with the Securities and Exchange Commission. All such forward-looking statements
are expressly qualified by these cautionary statements and any other cautionary
statements that may accompany the forward-looking statements. In addition,
BankEngine Technologies, Inc. disclaims any obligations to update any
forward-looking statements to reflect events of circumstances after the date
hereof.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
As of May 31, 2002
(Amounts Expressed in US Dollars)
(Unaudited)
ASSETS
Current
Cash and cash equivalents $ 141,026
Funds held on deposit 219,375
Accounts receivable 33,617
Prepaid expenses and sundry 12,631
406,649
CAPITAL ASSETS, net of accumulated depreciation 93,272
INTANGIBLE ASSETS, net of accumulated amortization 23,196
523,117
LIABILITIES
Current
Accounts payable 500,634
Income taxes payable 49,100
Deferred revenue 15,069
Current portion of loan payable 15,083
579,886
LOANS FROM STOCKHOLDER 124,502
LOAN PAYABLE 36,321
740,709
CONTINGENCIES AND COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock authorized 50,000,000 Class Common Stock with a par value of $.001 each 18,916
Additional paid in capital 452,390
Accumulated deficit (669,558)
Accumulated other comprehensive income (loss) net of tax (19,340)
(217,592)
523,117
The accompanying notes are an integral part of these consolidated financial
statements.
2
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three and nine month periods ended May 31, 2002 and 2001
(Amounts Expressed in US Dollars)
(Unaudited)
For the three month For the nine month
periods ended May 31, periods ended May 31,
--------------------- --------------------------
2002 2001 2002 2001
---------- ------- ----------- -----------
Revenue $ 64,969 $ 18,931 $ 71,044 $ 313,988
Cost of sales 62,325 10,732 70,265 61,794
Gross profit 2,644 8,199 779 252,194
Selling, general and administrative expenses 156,349 72,386 272,987 228,623
Depreciation 6,926 - 9,562 -
163,275 72,386 282,549 228,623
Income (loss) before interest income and minority interest (160,631) (64,187) (281,770) 23,571
Interest income 1,558 - 2,453 -
Income (loss) before minority interest (159,073) (64,187) (279,317) 23,571
Minority interest (1,514) - (1,514) -
Net income (loss) (157,559) (64,187) (277,803) 23,571
Net income (loss) per common share $0.01) ($0.00) ($0.02) $0.00
Weighted average number of
Common shares outstanding 18,284,025 17,115,893 17,522,878 14,746,031
The accompanying notes are an integral part of these
consolidated financial statements.
3
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated statements of changes in Stockholders Equity (Deficiency)
For the nine month periods ended May 31, 2002 and 2001
(Amounts Expressed in US Dollars)
(Unaudited)
Accumulated
Common Stock Additional Other
----------------------- paid in Accumulated Comprehensive Comprehensive
Shares Amount capital deficit income(loss) income(loss)
---------- ------- ---------- ------------ ------------ ------------
Balance, August 31, 2000 12,000,000 $ 12,000 $ 200,849 $ (209,314) $ - $ 1,767
Shares issued on acquisition 5,115,893 5,116 230,341 - - -
Net income for the period - - - 23,571 23,571 -
Foreign currency translation
Adjustment - - - - 14,581 14,581
Balance, May 31, 2001 17,115,893 17,116 431,190 (185,743) 38,152 16,348
Balance, August 31, 2001 17,115,893 17,116 431,190 (391,755) - (12,326)
Options issued in exchange for services - - 5,000 - - -
Shares issued in connection with 1,800,000 1,800 16,200 - - -
investment in Platinum
Telecommunications, Inc.
Net loss for the period - - - (277,803) (277,803) -
Foreign currency translation
Adjustment - - - - (7,014) (7,014)
Balance, May 31, 2002 18,915,893 18,916 452,390 (669,558) (284,817) (19,340)
The accompanying notes are an integral part of these consolidated financial
statements.
4
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine month periods ended May 31, 2002 and 2001
(Amounts Expressed in US Dollars)
(Unaudited)
2002 2001
-------- ---------
OPERATING ACTIVITIES
Net (loss) $-277803 $23571
Adjustments to reconcile net (loss)
to net cash used by operating activities
Depreciation and amortization 9562 3148
Options exchanged for services 5000 0
(Increase) decrease in accounts receivable -25940 27,006
Minority interest -1514 0
Decrease in funds on deposit 71881 0
(Increase) decrease in prepaid expenses and sundry assets -6773 0
Increase (decrease) in accounts payable 119856 17874
Decrease in deferred revenue 156 0
Total adjustments 172228 48028
Net cash provided by (used in) operating activities -105575 71599
Investing activities
Acquisition of capital assets -13596 0
Net cash (used in) investing activities -13596 0
Financing activities
Advances (repayments) of loans -2441 -89989
Loan advances from shareholder 1114 0
Issuance of capital stock 0 156946
Net cash provided by (used in) financing activities -1327 66957
Effects of changes in Foreign currency rates 5154 0
Increase (decrease) in cash -115344 138556
Cash and cash equivalents, beginning of period 256370 51785
Cash and cash equivalents, end of period 141026 190341
Interest paid 286 Nil
Income taxes paid Nil Nil
The accompanying notes are an integral part of these consolidated financial
statements
5
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
1. BASIS OF PRESENTATION
On January 5, 2001, Callmate Telecom International, Inc. (Callmate)
acquired all of the issued and outstanding shares of common stock of
WebEngine Technologies, Inc. (WebEngine) in exchange for 12,000,000
common shares of Callmate in a reverse acquisition. 9,200,000 common
shares of Callmate held by previous shareholders of Callmate were
cancelled in exchange for all of the shares of its subsidiaries which
carry on the UK operations of Callmate. The acquisition by the
shareholders of WebEngine of a majority of the shares of Callmate has
been accounted for as a reverse acquisition. As Callmate became
substantially a shell after the removal of the UK operations, no
goodwill has been reflected on this acquisition. Although Callmate is
the legal acquirer, WebEngine is treated as having acquired Callmate
for accounting purposes.
WebEngine was incorporated in November 2000 in order to hold the shares
of Cyberstation Computers and Support Inc. (Cyberstation). The
shareholders of Cyberstation became the shareholders of WebEngine and
therefore WebEngine has been considered to be a successor to
Cyberstation.
The historical financial statements of BankEngine are those of
Cyberstation as the Company has been accounted for as the successor to
Cyberstation.
The estimated income tax costs of the divestiture of the UK operations
has been treated as a reduction of the assets acquired on the
acquisition of the shell company and has been included in income taxes
payable.
On March 5, 2001, Callmate changed its name to BankEngine Technologies, Inc.
WebEngine changed its name to Critical Commerce Inc. in November 2001.
The acquisition of Callmate, as a reverse acquisition, was reflected as
follows;
Funds on deposit $601,457
Accounts payable (316,000)
Income taxes payable (50,000)
--------
Capital stock issued $235,457
--------
As discussed in Note 4, on April 5, 2002, the Company through its
subsidiary Cyberstation, acquired 70% of the issued and outstanding
stock of Platinum Telecommunications Inc. for the issuance of 1,800,000
common shares of BankEngine Technologies, Inc.
6
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
2. MANAGEMENT INTENTIONS
The Company has sustained recurring operating losses and negative cash
flows from operations. Management plans to mitigate these adverse
conditions through the following activities;
a) The Company has developed a new software product, the Critical
Commerce Suite. The Critical Commerce Suite is a sophisticated
online entertainment database and billing system that manages
an entire online entertainment business. From the serving and
management of video streaming, management of images for
viewing, and sale, the Suite provides cutting edge management
tools for sophisticated management oversight. The Critical
Commerce Suite can either be offered as a service, whereby the
Company manages a series of sites and content for a monthly
fee, or is licensed with fees corresponding to the number
clients managed and services offered. The Company has
finalized development and is currently focusing its efforts on
marketing this new product.
2. The Company is disputing the amount of $170,000 included in
accounts payable which represents an amount invoiced by the
former auditors of the Company. As discussed in Note 7, the
Company does not believe that its former auditors, who have
taken no action beyond sending invoices, will file a claim.
The Company intends to resolve this dispute shortly.
3. As discussed in Note 4 the Company has acquired a subsidiary,
Platinum Telecommunications Inc.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principal business activities
The Company is a long distance telecommunications service
provider through its subsidiary Platinum Telecommunications,
Inc.
The Company carries on the business of software development
for its Critical Commerce Suite to provide video streaming
analysis tools and computer consulting, through its wholly
owned subsidiaries, Critical Commerce Inc., a Delaware
corporation, and Cyberstation, a company operating in Canada.
7
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
2. Basis of consolidated financial statement presentation
In the opinion of management, all adjustments consisting only
of normal recurring adjustments necessary for a fair statement
of (a) the results of operations for the three and nine month
periods ended May 31, 2002 and 2001, (b) the financial
position at May 31, 2002, and (c) cash flows for the
nine-month periods ended May 31, 2002 and 2001, have been
made. The results of operations for the three and nine-month
periods ended May 31, 2002 are not necessarily indicative of
those to be expected for the entire year. The unaudited
consolidated financial statements and notes are presented as
permitted by Form 10-QSB. Accordingly, certain information and
note disclosures normally included in consolidated financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America have been
omitted.
The audited financial statements at August 31, 2001, which are
included in the Company's Annual Report on Form 10-KSB should
be read in conjunction with these consolidated financial
statements.
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. The earnings of the subsidiaries are
included from the date of acquisition for acquisitions accounted for using the
purchase method. All significant intercompany accounts and transactions have
been eliminated.
3. Net Income (Loss)Per Weighted Average Common Stock
Net income (loss) per common stock is computed by dividing net
income (loss) for the period by the weighted average number of
common stock outstanding during the period.
The Company has adopted Statement No.128, Earnings Per Share,
which requires presentation, in the consolidated statement of
income, of both basic and diluted earnings per share.
4. Foreign Currency
Assets and liabilities recorded in foreign currencies are
translated at the exchange rate on the balance sheet date for
the convenience of the reader. Translation adjustments
resulting from this process are charged or credited to other
comprehensive income. Revenue and expenses are translated at
average rates of exchange prevailing during the periods
presented. Gains and losses on foreign currency transactions
are included in financial expenses. No representation is made
that the foreign currency amounts could have been, or could
be, converted into United States dollars at the rates on the
respective dates and or at any other certain rates.
8
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
5. Use of Estimates
The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in
the United States of America requires management to make
estimates and assumptions that affect certain reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates. These estimates are reviewed periodically and
as adjustments become necessary, they are reported in earnings
in the period in which they become known.
f) Computer Software Development
The Company accounts for the cost of developing computer software for sale as
research and development expenses until the technological feasibility of the
product has been established. To date all costs have been expensed. In the
future, at the end of each year the Company will compare any unamortized capital
costs to the net realizable value of the product to determine if a reduction in
carrying value will be warranted.
g) Segment Reporting
The Company applies Financial Accounting Standards Boards ("FASB") statement No.
131, "Disclosure about Segments of an Enterprise and Related Information". The
Company has considered its operations and has determined that it operates in two
operating segments for purposes of presenting financial information and
evaluating performance. As such, the accompanying financial statements present
information in a format that is consistent with the financial information used
by management for internal use.
9
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
4. INVESTMENT IN PLATINUM TELECOMMUNICATIONS INC.
On April 5, 2002, the Company through its subsidiary Cyberstation,
acquired 70% of the issued and outstanding stock of Platinum
Telecommunications Inc. ("Platinum") for the issuance of 1,800,000
common shares of BankEngine Technologies Inc. The Company acquired
Platinum, a long distance telecommunications service provider, in order
to reenter the telecommunications industry. The results of operations
of Platinum are included in the operations of the Company from April 5,
2002 through May 31, 2002. Unaudited pro forma results of operations
after giving effect to certain adjustments resulting from this
acquisition for the nine month periods ended May 31, 2002 and 2001 as
if the business combination had occurred at the beginning of each
period presented are not material to the financial statements and,
accordingly, are not presented herein. The investment has been
accounted for by the purchase method as follows;
Consideration 18,000
Costs of acquisition 10,000
------
Total investment 28,000
Share of net assets acquired 2,738
------
Intangible asset acquired 25,262
------
The intangible assets acquired representing contracts and client lists
are being amortized over a 24 month period from the date of
acquisition.
The net assets acquired and capital stock issued on the transaction are
not included in the statement of cash flow as follows;
Bank 7,709
Telecommunication switch 74,417
Accounts payable (19,048)
Deferred revenue (14,908)
Intangible asset 25,262
Loans payable (53,918)
Minority interest (1,514)
Capital stock (18,000)
5. INVESTMENT IN NON-CONTROLLED INVESTEE
The Company has a 50% interest in X-Tech International Solutions
Limited (X-Tech), a company operating in the UK. BankEngine has no
involvement with the management of this company and it is intended that
it be wound down in the near future. As of September 30, 2001, X-Tech
had a total shareholders' deficiency of approximately $6,000 and had
realized net losses of approximately $6,000 for the period February
2000 to September 30, 2001. BankEngine has no obligation to fund any
shortfalls and therefore no amount has been reflected for its
investment in X-Tech.
10
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
6. CAPITAL STOCK
1. Authorized
50,000,000 Common stock with a $.001 par value
2. Common stock
The Company had issued and outstanding 14,315,893 common stock
at the time of the reverse acquisition in January 2001. As
detailed in note 1, the Company issued 12,000,000 common
shares to the shareholders of WebEngine. A total of 9,200,000
shares were cancelled in exchange for the removal of the UK
operations in January 2001. During January 2002, the Company
agreed to issue 100,000 shares in consideration of services.
This issuance was cancelled during April 2002.
Shares outstanding prior to the
reverse acquisition 14,315,893
Issued to shareholders of WebEngine 12,000,000
Cancelled for UK operations (9,200,000)
Shares issued for acquisition in the current period 1,800,000
----------
Shares outstanding at May 31, 2002 18,915,893
----------
All other assets held at the Company level continue to be held
for the benefit of the Company and therefore the value
attributable to the remaining previous shareholders is
reflected by these other assets. The other assets were funds
held on deposit by a bank in the UK to provide security for
credit card transactions of the UK operations. As the UK
operations have since ceased, the security deposits may be
released to BankEngine in accordance with the credit card
agreements. The capital stock reflects additions to paid in
capital for the estimated value of these funds net of
estimated liabilities payable to the credit card company,
accounts payable to the previous auditors of the Company and
net of the estimated income tax liability arising on the
disposition of the UK companies for an addition to paid in
capital totaling $235,457.
On April 5, 2002, the Company contracted to issue 600,000
options exercisable at $0.10 per share. The options have a 5
year term and were issued in consideration of consulting
services to be rendered by the principal of Platinum
Telecommunications Inc. The estimated value of the options of
$5,000 has been expensed in the quarter ended May 31, 2002.
11
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
7. CONTINGENCIES AND COMMITMENTS
As discussed in the Capital Stock note, the Company is liable
for shortfalls which may arise upon the settlement with the
credit card company. The credit card company has agreed that
the limit of the Company's liability is the amount of security
held on hand which at May 31, 2002 amounted to the equivalent
of approximately $219,000. This amount has been reflected as
Funds held on deposit. An amount equivalent to approximately
$187,000 is included in accounts payable which is the estimate
of the liability at May 31, 2002. During the quarter ended May
31, 2002, this estimated liability amount was increased by
approximately $40,000 and the corresponding expense is
included in general and administrative expenses in the
accompanying statement of operations. The final settlement
will be based on the transactions to December 31, 2001 and
will be settled in 2002.
Included in accounts payable is the amount of $170,000 which
represents the amount invoiced by the former auditors of the
Company. The Company is disputing this amount. The Company
does not believe that its former auditors, who have taken no
action beyond sending invoices, will file a claim. If a claim
were to be raised, the Company would vigorously dispute the
action as well as consider its own options.
The Company has signed a lease commitment for its office space
in Toronto, Canada which expires August 31, 2002 and which has
an annual rent payable of $46,500.
8. SEGMENT INFORMATION
Information about operating segments is as follows:
Nine Months Ended Software
May 31, 2002 Development Telecom Total
------------ ----------- ------- -----
Revenues $8,000 $63,000 $71,000
Segment loss 259,000 19,000 278,000
Three Months Ended
May 31, 2002
Revenues $2,000 $63,000 $65,000
Segment loss 139,000 19,000 158,000
12
BANKENGINE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2002 and 2001
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
9. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142), which is effective for fiscal years
beginning after December 15, 2001, except goodwill and intangible
assets acquired after June 30, 2001 are subject immediately to the
non-amortization and amortization provisions of this Statement. Under
the new rules, goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statement. Other intangible
assets will continue to be amortized over their useful lives.
In August 2001, the Financial Accounting Standards Board Issued
Statement of Financial Accounting Standards No. 143 "Accounting for
Asset Retirement Obligations", effective for fiscal years beginning
after June 15, 2002. This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated retirement costs.
In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-lived Assets", effective for fiscal
years beginning after December 15, 2001. This statement addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets.
The Company has not yet determined what the effects of these Statements
will be on its financial position and results of operations.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
Form 10-QSB.
This filing contains forward-looking statements. The words "anticipated,"
"believe," "expect, "plan," "intend," "seek," "estimate," "project," "will,"
"could," "may," and similar expressions are intended to identify forward-looking
statements. These statements include, among others, information regarding future
operations, future capital expenditures, and future net cash flow. Such
statements reflect the Company's current views with respect to future events and
financial performance and involve risks and uncertainties, including, without
limitation, general economic and business conditions, changes in foreign,
political, social, and economic conditions, regulatory initiatives and
compliance with governmental regulations, the ability to achieve further market
penetration and additional customers, and various other matters, many of which
are beyond the Company's control. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove to be incorrect,
actual results may vary materially and adversely from those anticipated,
believed, estimated, or otherwise indicated. Consequently, all of the
forward-looking statements made in this filing are qualified by these cautionary
statements and there can be no assurance of the actual results or developments.
Callmate Telecom International, Inc. ("Callmate") acquired WebEngine
Technologies International, Inc. ("WebEngine") pursuant to a Share Purchase
Agreement effective as of January 5, 2001. Callmate acquired all 12,000,000
shares of common stock of WebEngine in a share exchange, which exchange was
effected on a one-for-one basis. The transaction was reported on a Form 8-K
filed with the Securities and Exchange Commission (the "SEC") on January 16,
2001. Subsequent thereto, Callmate changed its name to BankEngine Technologies,
Inc. (the "Company") as reported on Schedule 14C. The Company filed the
Definitive 14C on March 5, 2001.
The Company decided to move away from the telecom business in the UK due to the
increased competitiveness in this sector internationally and growing
indebtedness. The trend internationally, and especially in the UK, in the
telecom sector is for consolidation and competition from transnational
corporations continues to be fierce. Many competitors have since ceased
operations.
The strategic decision to shed the telecom business in the UK, while canceling
9.2 million shares as part of the original payment for the telecom assets, both
alleviated most of the debt burden of the Company and reduced the outstanding
share capital. The Company has chosen to focus on the business of acting as a
solution provider for the purposes of processing online transactions for online
merchants as well as a solution provider for online content management systems.
The Company's previous acquisition of Cyberstation Inc. and its access to the
BankEngine Suite of software was fortuitous and should help the Company secure
sufficient market share in both areas. The BankEngine software product is mature
and adaptable while the new Critical Commerce Suite is innovative and novel. The
Company has recently completed development of its Critical Commerce Suite and is
focusing its marketing efforts on this product.
On April 2, 2002, Cyberstation Computers and Support Inc., an Ontario
corporation ("Cyberstation") and wholly owned subsidiary of the Company, entered
into a Common Stock Purchase Agreement (the "Agreement") by and among Platinum
Telecommunications, Inc. ("Platinum") and Mr. Zeeshan Saeed (the "Seller").
Pursuant to the Agreement, Cyberstation acquired seventy percent (70%) of the
issued and outstanding shares of common stock of Platinum (the "Platinum
Shares") in consideration for 1,800,000 shares of common stock of the Company,
par value $0.001 per share. The Platinum Shares were acquired from the Seller,
by whom Platinum was immediately before closing of the Agreement wholly owned.
The Agreement was effective as of April 5, 2002. The transaction was negotiated
on an arms-length basis. Neither the Company nor Cyberstation had any
affiliation with Platinum or any of its officers or directors.
14
PLATINUM TELECOMMUNICATIONS, INC. DISCUSSION
After careful consideration and examination of international market trends, the
Company has decided to re-enter the telecom arena with the acquisition of
Platinum Telecommunications, Inc. ("Platinum") Platinum presents an opportunity
for the Company due to its low cost of acquisition combined with existing
expertise within the Company leading to possible positive synergies.
Internationally, many telecommunications companies have ceased operations and
this has allowed for less competition in the market place. Opportunity thus
exists for small, cost-conscious, operators who can utilize the latest IP based
technology in order to leap frog some competitors. Platinum owns an IP based
switch for the purposes of buying and selling long distance telephone time. When
combined with substantial IP expertise possessed by the Company, we feel that
opportunity exists to succeed in this niche based market place while mitigating
any substantial risk.
Because of BankEngine's expertise in the area of online development and
transaction processing research/development, the Company believes that the
possible synergies make the transaction advantageous for shareholders.
Specifically, the advent of TCP/IP (the backbone language of the Internet) based
telephony solutions for Telephony over the last two years will allow the Company
to contribute substantially to the technological developments required to
further develop Platinum's business. The Company has excellent resources in the
area of programming of IP Telephony which arguably is one of the most important
components of IP based Telephony companies.
The Company acknowledges that Platinum is development-stage business and that
this market sector is very competitive but nonetheless presents substantial
opportunity.
CRITICAL COMMERCE DISCUSSION
The Critical Commerce Suite is a sophisticated online entertainment database and
billing system that manages an entire online entertainment business. From the
serving and management of video streaming, management of images for viewing, and
sale, the Suite provides cutting edge management tools for sophisticated
management oversight. The Critical Commerce Suite can either be offered as a
service, whereby the Company manages a series of sites and content for a monthly
fee, or is licensed with fees corresponding to the number clients managed and
services offered. The Company has finalized development and is currently
implementing marketing.
Connectivity management of online video streaming services
The system offers complete management of statistical data derived from viewer
access to a variety of popular online video streaming platforms at the choice of
merchants. Critical Commerce Suite's sophisticated databases can manage access
to a full range of access data derived from customer viewing patterns and
habits.
Connectivity to video libraries
The system offers complete management over libraries of video clips and larger,
downloadable segments.
Customer account Management
The system offers a wide range of customer consumption data so as to provide
accurate billing information. In addition, the system tracks referral activity
for reselling purposes and more accurate billing.
Bandwidth Usage and Tracking
The system offers effective analysis of bandwidth usage and consumption. The
control of this type of information is vital for the success of online content
stores and content distribution providers.
BANK ENGINE
The Company continues to market its BankEngine suite (the "BankEngine Suite") of
electronic commerce banking products for Internet merchants and financial
institutions. The Company's products will provide systems which allow merchants
to process payments and screen against fraud and banks to manage their merchants
and screen against fraud. The Company is able to support merchants and merchant
banks worldwide.
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The Company has been providing online electronic transactions and fraud
prevention since 1996. The BankEngine Suite consists of a complete, turnkey
suite of secure electronic commerce banking solutions for Internet merchants and
financial institutions. The BankEngine Suite includes: CertEngine(TM),
CardEngine(TM), CheqEngine(TM), ATMEngine(TM), BankEngine(TM), BankWeb(TM) and
BankAdmin(TM).
The BankEngine Suite encompasses a wide range of activities including credit
card processing, electronic check processing, electronic cash & debit cards,
electronic bank transfers, bank account management, accounting, secure PKI
authentication including electronic signatures, and 2048 bit TLS encryption.
Using the Internet to bridge the gap between merchants and banks, BankEngine has
been supporting merchants and merchant banks worldwide. The Company can support
member banks in Canada, United States, Central American, Caribbean, Western
Europe, Australia, and Asia Pacific, and supports 173 different currencies.
Merchants are issued merchant accounts from their choice of BankEngine
Suite-enabled member banks and can perform transactions with their accounts
using the Internet, regardless of where in the world they are located. Merchants
can easily integrate the Company's client software into their automated Internet
servers and use the BankEngine Suite for their manual & batch processing.
In addition, BankEngine client software works with any type of Internet
connection, and runs on multiple operating systems including Win32
(95/98/2000/NT) and most flavors of Unix, under a variety of computer hardware.
BankEngine Suite client software can be used with any programming language. The
BankEngine Suite is powerful enough and robust enough to allow each merchant to
transact simultaneously from multiple Internet computers, multiple manual
operators, and multiple batches. The BankEngine Suite protects the secrecy of
each and every transaction and report synchronization, using its military grade
security, which includes PKI authentication and 2048 bit TLS cryptography.
Results of Operations
THREE MONTHS ENDED MAY 31, 2002 COMPARED TO THREE MONTHS ENDED MAY 31, 2001
Revenues
Revenue for the three-month period ended May 31, 2002 totaled $64,969, an
increase of 243% from the comparable period in 2001. This increase is
attributable to the acquisition of Platinum as substantially all of the revenue
is from telecommunication services.
Cost of Sales
The cost of sales for the three-month period ended May 31, 2002 totaled $62,325,
an increase of 481% from the comparable period in 2001. The increase is due to
the change in the Company's revenue model and consists of long distance and
related telecommunication services costs incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended May 31,
2002 were $156,349 as compared to $72,386 for the similar period in 2001. The
116% increase in selling, general and administrative expenses is principally
attributable to the adjustment of the estimated liability for calling card
chargebacks in the amount of $40,000 and the consulting and travel costs
incurred for the Company's telecommunications services.
Net Loss
Net loss for the three months ended May 31, 2002 amounted to $157,559 as
compared to a net loss of $64,187 for the three months ended May 31, 2001. This
increase in the net loss is principally attributable to the change in revenues
from consulting services to telecommunication services and the change in the
estimate of the liability for calling card chargebacks in the amount of $40,000.
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NINE MONTHS ENDED MAY 31, 2002 COMPARED TO NINE MONTHS ENDED MAY 31, 2001
Revenues
Revenue for the nine-month period ended May 31, 2002 totaled $71,044, a decrease
of 77% from the comparable period in 2001. This decrease is attributable to the
change in the Company's focus from computer consulting and online transaction
processing to telecommunication services and software development of its
Critical Commerce Suite.
Cost of Sales
The cost of sales for the nine-month period ended May 31, 2002 totaled $70,265,
an increase of 14% from the comparable period in 2001. The increase is due to
the change in the Company's revenue model from computer consulting and online
transactions to telecommunication services and software development as reflected
by the reduced sales volume.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended May 31,
2002 were $272,987 as compared to $228,623 for the similar period in 2001. The
increase is principally attributable to the adjustment of the estimated
liability for calling card charge backs in the amount of $40,000.
Net Loss
Net loss for the nine months ended May 31, 2002 amounted to $277,803 as compared
to a net income of $23,571 for the nine months ended May 31, 2001. This increase
in the net loss is principally attributable to the reduction in sales volume and
the change in operations to telecommunication services from consulting services
and the adjustment of the estimated liability for calling card chargebacks in
the amount of $40,000.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
For the nine-months ended May 31, 2002, net cash used by operating activities
amounted to $105,575 as compared to net cash provided by operating activities of
$71,599 for the comparable period in 2001. The decrease in cash provided by
operating activities is primarily the result of the reduction in volume as a
result of the change in the direction of the Company's software development and
marketing initiatives.
Financing Activities
At May 31, 2002, the Company does not have any material commitments for capital
expenditures other than for those expenditures incurred in the ordinary course
of business. The Company believes that its current operations and cash balances
will be sufficient to satisfy its currently anticipated cash requirements for
the next 12 months. However, additional capital could be required in excess of
the Company's liquidity, requiring it to raise additional capital through an
equity offering or secured or unsecured debt financing. The availability of
additional capital resources will depend on prevailing market conditions,
interest rates, and the existing financial position and results of operations of
the Company.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS IN SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 17, 2002, our predecessor, BankEngine Technologies, Inc., a Florida
corporation, held an Annual Meeting of Shareholders at which those shareholders:
(i) elected the Board of Directors for the ensuing year; (ii) ratified the
appointment of Kaufman, Rossin & Co., as our independent auditors for the
ensuing year; (iii) ratified the adoption of our 2002 Stock Option Plan; and
(iv) approved the Agreement and Plan of Merger dated April 1, 2002 with us
resulting in our company's reincorporation from the State of Florida to the
State of Delaware. The merger of the companies was effective as of May 23, 2002.
(i) The following directors were elected to the Board of Directors and
received the votes indicated:
For Against Withheld
Joseph Alves 11,524,000 --- ---
Mahmoud Hashmi 11,524,000 --- ---
Sandra Hrab 11,524,000 --- ---
(ii) The appointment of Kaufman, Rossin & Co. to serve as our
independent auditors for the ensuing year was approved by the votes indicated:
For: 11,524,000
Against: ---
Withheld: ---
(iii) The adoption of our 2002 Stock Option Plan was approved by the
votes indicated:
For: 11,515,000
Against: 9,000
Withheld: ---
(iv) The approval of the Agreement and Plan of Merger was approved by
the votes indicated.
For: 11,524,000
Against: ---
Withheld: ---
No other matter was brought to a vote. The definitive proxy statement
on Schedule 14A relating to the annual meeting was filed on April 30, 2002 with
the SEC and is incorporated herein by reference. Electronic reports filed
through the Electronic Data Gathering, Analysis and Retrieval System are
publicly available through the SEC's Web site (http://www.sec.gov).
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Material Contracts.
2.01 Plan of acquisition, reorganization, arrangements, liquidation
or succession
Agreement and Plan of Merger executed April 1, 2002.
10.01 Common Stock Purchase Agreement executed April 2, 2002.
19. Reports Furnished to Security Holders
Definitive Schedule 14A filed with the Commission on April 30,
2001, which Schedule 14A is hereby incorporated by reference.
(b) Reports on Form 8-K.
The Company filed a Form 8-K on April 19, 2002 reporting the
acquisition of 70% of Platinum Telecommunications, Inc. through its wholly owned
subsidiary Cyberstation Computers and Support Inc.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BankEngine Technologies, Inc.
Dated: July 22, 2002 By: /s/ Joseph J. Alves
-----------------------------------
Joseph Alves
Chairman and Chief Executive Officer
20
EXHIBIT INDEX
2.01 Agreement and Plan of Merger executed April 1, 2002.
10.01 Common Stock Purchase Agreement
19. Definitive Schedule 14A filed on April 30, 2002.*
* Incorporated by reference.