The Bermuda e-commerce company which made Bank of Bermuda write off $10 million at the beginning of the year because of its investment in the start-up, has seen its net loss contract considerably.

First Ecom Inc., which saw its stock fall from $34 to less than $1 in less than a year, merged earlier this year with a US gas and oil exploration company in a bid to diversify out of the electronic card processing business.

Net loss for the second quarter of 2001 after amortisation, depreciation and non-cash compensation associated with stock options was $1.6 million as compared to the first quarter of 2000 net loss of $4.3 million - a sizeable improvement over the previous year.

Lines Overseas Management also heavily invested in the start-up which first dropped the "dot com" from its name and then signed a memorandum of understanding with Denver-based Gasgo Energy Ltd., a company which explores petroleum and natural gas properties.

"During the second quarter the company has focused on getting the structure right," said Gregory Pek, president and Co-CEO of First Ecom.

"We did this by continuing with the cost control measures introduced during the first quarter and by focusing our resources on our key strategies, namely building up the payment processing side of the business and furthering our interest and involvement in the oil and gas exploitation industry."

First Ecom, which was launched on the NASDAQ at the end of 1999, posted revenue from continuing operations for the quarter of $24,152 as compared with revenue for the same quarter in 2000 of $5,730.

The company said the increase in revenue for the second quarter was due to an increase in processing of transactions from both the banks enabled directly by the company and the consolidation of FEDS. The current quarter's revenue is attributable solely to payment processing operations.

Net loss per share for the quarter was $0.08 per share as compared to a net loss per share of $0.24 for the same quarter in 2000.

Mr. Pek added: "We engaged in serious discussions with Gasco Energy, which resulted in the company entering into an agreement, in early July, to acquire a 26 percent equity interest.

"This is the company's first venture in the oil and gas business and all information we are receiving indicates that the potential is much greater than we first anticipated.

"Costs are down, revenues are up, in fact our processing revenue for the month of July is in excess of $60,000. The company structure is starting to take shape and our major strategic initiatives have been implemented. Despite the difficult market and business environment I remain confident that we are heading in the right direction and that the patience of our shareholders will be rewarded."

Bank of Bermuda owned more than ten percent of the company, and LOM owns more than 13 percent. Both are believed to have bought into the company for $7 a share.

The company said that while it had in excess of $23 million in cash and cash equivalents at the end of the quarter, interest income decreased 48 percent as compared with the second quarter of 2000. This decrease was primarily due to the reduction in short term interest rates, the business said.

During the second quarter of fiscal year 2001, the company said it concentrated its efforts on delivering its payment processing solutions in the Asia Pacific region, and in addition, acquired the remaining 50 percent of First Ecommerce Data Services Limited ("FEDS").

FEDS provides payment-processing solutions primarily in the Caribbean and Americas regions.

Operating expenses for the three months ending June 30, 2001 were 65 percent lower than for the comparable period in 2000 and for the six months ended June 30, 2001 were 49 percent lower than for the comparable period in 2000. This reflects the company's concentrated effort on reducing costs.

The company had a total of 27 (including 8 at FEDS) full time employees as at June 30, 2001 as compared to 76 full time employees as at June 30, 2000. This decrease in employees has resulted in a recovery, during the six months ended June 30, 2001, of $2.3 million of previously expensed stock-based compensation costs. During the comparable period ended June 30, 2000, the company expensed $2.0 million of stock-based compensation.

A full report on the company is available at the SEC's Edgar database at www.freeedgar.com.