<PAGE>
As filed with the Securities and Exchange Commission on September 6, 2000
Registration No. 333-36694
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
PRE EFFECTIVE AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
FIRSTQUOTE INC.
(Name of small business issuer in its charter)
--------------
<TABLE>
<S> <C> <C>
Delaware 7373 98-0162893
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification No.)
</TABLE>
12 Avenue des Morgines
1213 Petit Lancy 1
Geneva, Switzerland
4122-879-0879
(Address and telephone number of principal executive offices
and principal place of business)
--------------
Neil Gibbons
12 Avenue des Morgines
1213 Petit Lancy 1
Geneva, Switzerland
4122-879-0879
(Name, address and telephone number of agent for service)
Copies to:
Daniel K. Donahue, Esq.
Daniel C. Burnham, Esq.
Oppenheimer Wolff & Donnelly LLP
500 Newport Center Drive, Suite 700
Newport Beach, CA 92660
(949) 719-6000
--------------
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered(1) per Share(2) Offering Price Fee(3)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value........ 1,399,763 Shares $11.00 $15,397,393 $4,064.79
==================================================================================================
</TABLE>
(1) Includes 197,815 shares subject to a previously filed registration
statement on Form S-3 (SEC File No. 333-36700) which are being re-
registered on this registration statement on Form SB-2.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
based upon the last sale of the Registrant's common stock on May 8, 2000,
as reported in the over-the-counter market.
(3) Previously paid, including $574.45 previously paid in connection with the
initial registration of 197,815 shares referred to in footnote (1) above.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
===============================================================================
<PAGE>
PROSPECTUS
1,399,763 Shares
FIRSTQUOTE INC.
Common Stock
This prospectus relates to the offer and sale of our common stock by the
selling shareholders identified in this prospectus. The selling shareholders
will determine when they will sell their shares, and in all cases, will sell
their shares at the current market price or at negotiated prices at the time of
the sale. Although we have agreed to pay the expenses related to the
registration of the shares being offered, we will not receive any proceeds from
the sale of the shares by the selling shareholders.
Our common stock is currently traded on the OTC Bulletin Board under the
symbol "FSQT." We have applied to list our common stock on the NASDAQ National
Market System. On August 18, 2000, the last reported sale price of the common
stock on the OTC Bulletin Board was $5.19 per share.
----------------
Please see "Risk Factors" beginning on page 3 to read about certain factors
you should consider before buying shares of our common stock.
----------------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary .................................................................. 1
Risk Factors ............................................................. 3
Selling Stockholders ..................................................... 7
Market for Common Equity and Related Stockholder Matters ................. 8
Management's Discussion and Analysis or Plan of Operation ................ 9
Business ................................................................. 12
Management............................... ................................ 19
Principal Stockholders ................................................... 22
Description of Securities ................................................ 24
Legal Matters ............................................................ 26
Experts .................................................................. 26
Available Information .................................................... 27
Index to Financial Statements ............................................ 28
</TABLE>
----------------
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this prospectus
in connection with the offer described in this prospectus and, if given or
made, such information and representations must not be relied upon as having
been authorized by us. Neither the delivery of this prospectus nor any sale
made under this prospectus shall under any circumstances create any implication
that there has been no change in our affairs since the date hereof or since the
date of any documents incorporated herein by reference. This prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the securities to which it relates, or an offer or
solicitation in any state to any person to whom it is unlawful to make such
offer in each state.
<PAGE>
SUMMARY
You should read this summary in conjunction with the more detailed
information and financial statements appearing elsewhere in this prospectus.
Our Company
We are engaged in the business of developing and marketing a range of
internet-based financial information and transactional services to the European
investment community. We provide real-time and delayed market data, news and
other financial information over the internet. We also provide to financial
institutions a turnkey solution for their provision of electronic brokerage
services to their customers. Our financial information services are offered by
us directly on a subscription basis. We also provide to financial institutions,
such as banks and brokerage firms, financial media and publishing organizations
and internet service providers, the ability to offer our financial information
services to their clients on a co-branded basis. We also derive revenue from
the provision of underlying internet access and network connectivity services
to our corporate and institutional clients.
Our services are available via our own wide-area internet network backbone
by dial-up or dedicated access, as well as from any other internet point of
access world-wide.
Our executive offices are located at 12, Av. des Morgines, 1213 Petit-Lancy
1, Geneva, Switzerland. Our telephone number is +4122-879-0879.
The Offering
This offering relates to the offer and sale of our common stock by the
selling shareholders identified in this prospectus. We will not receive any
proceeds from the sale of the shares by the selling shareholders.
1
<PAGE>
Summary Financial Information
The summary financial information set forth below has been derived from our
financial statements. You should read this information in conjunction with the
financial statements and notes thereto, included elsewhere in this memorandum.
<TABLE>
<CAPTION>
Year Ended Year Ended Six Months Ended June
December 31, December 31, 30,
------------ ------------ ------------------------
1999 1998 2000 1999
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operations Data:
Net revenue................. $ 1,778,459 $ 534,715 $ 2,695,129 $ 644,362
Net loss.................... (6,840,368) (3,421,229) (4,448,758) (3,366,656)
<CAPTION>
June 30,
2000
------------
(Unaudited)
<S> <C>
Balance Sheet Data:
Working capital............. $ 2,445,355
Total assets................ 11,844,216
Total liabilities........... 4,607,677
Stockholders' equity........ 7,236,539
</TABLE>
2
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. The trading price of our common stock could decline due to any
of these risks, and you may lose part or all of your investment.
We have a history of losses and will experience future losses
We have incurred net losses of approximately $6.8 million for fiscal year
1999 and approximately $3.4 million for fiscal year 1998. As of June 30, 2000,
we had an accumulated deficit of approximately $18.1 million. We have not
achieved profitability and we expect to continue to experience net losses in
the future. We anticipate continuing to incur significant sales and marketing,
product development and general and administrative expenses and, as a result,
we will need to generate significantly higher revenues to achieve and sustain
profitability on an annual basis. Although our revenues have grown in recent
quarters, we cannot be certain that we will continue to achieve revenue growth
or realize sufficient revenues to achieve profitability.
We will require additional financing in order to meet our future capital needs
We require substantial working capital to fund our business. As of June 30,
2000, we had approximately $2.5 million of working capital. We believe that our
existing capital resources will be sufficient to meet our capital requirements
for through the end of the current fiscal year ending December 31, 2000.
However, we will require, at least $3,000,000 of additional capital over the
next 12 months in order to fund our planned operating and capital expenditures
through June 2001. If our capital requirements vary materially from those
currently planned, we may require additional financing sooner than anticipated.
Additional financing may not be available when needed on terms favorable to us
or at all. If adequate funds are not available or are not available on
acceptable terms, we may be unable to develop or enhance our services, take
advantage of future opportunities or respond to competitive pressures, which
could materially adversely affect our business, financial condition or results
of operations.
We are in an intensely competitive business
We face intense competition on a number of fronts. In the area of internet-
based market data and financial information services, we face direct
competition from a number of well-established companies that provide electronic
and online financial data and information, including Reuters, Bloomberg,
Bridge, GlobalNet Financial and Atos, among others. As a provider of hardware
and software solutions which enable banks and brokerage houses to operate
online brokerage services, we compete to an extent with established online
brokerage firms such as E*Trade, Charles Schwab and DLJ Direct and, in the
European context, Consors and e-Cortal, who develop proprietary market data and
internet brokerage systems. Many of our competitors have greater name
recognition, financial, technical or marketing resources, and more extensive
customer bases than we do. Our competitors can leverage these advantages to
gain market share to our detriment and we may not be able to compete
effectively with them.
A downturn in U.S. or international securities markets could adversely affect
our business
Substantially all of our revenues to date have been from subscriptions to
our financial information and electronic brokerage services. We expect these
services to continue to account for substantially all of our revenues for the
foreseeable future. As a result, we are directly affected by U.S., European and
international economic and political conditions, broad trends in business and
finance and substantial fluctuations in volume and price levels of securities
and futures transactions. In recent months, the U.S. securities markets have
established record levels of trading. However, a downturn in these markets
could adversely affect our operating results and future plan of operations.
Certain of our competitors with more diverse product and service offerings may
be better positioned to withstand such a downturn in the securities industry.
3
<PAGE>
We must keep pace with the rapidly changing product requirements of our
customers
The information and financial services industries are characterized by rapid
technological change, changes in customer requirements, frequent new service
and product introductions and enhancements, and emerging industry standards. We
believe our future success will depend, in part, on our ability to anticipate
and adapt to such changes and to offer, on a timely basis, services that meet
customer demands. Our inability to develop on a timely basis new products or
enhancements to existing products, or the failure of such products or
enhancements to achieve market acceptance, could materially and adversely
affect our business, financial condition and results of operations.
Our success depends on the continued development of the internet and online
commerce, particularly in Europe
The market for electronic brokerage services, particularly over the
internet, is at an early stage of development and is rapidly evolving. As is
typical for new and rapidly evolving industries, demand and market acceptance
for recently introduced services and products are subject to a high level of
uncertainty. Although the past two years have shown a rapid increase in the
volume of commercial transactions over the internet, there can be no assurance
that the internet will continue to be accepted by consumers as a widely used
medium for commerce and communication. In addition, European companies and
consumers may not adopt the internet with the same enthusiasm as in the United
States. Accordingly, because global commerce and online exchange of information
on the internet and other similar open wide area networks are new and evolving,
there can be no assurance that the internet will prove to be a viable
commercial marketplace. If critical issues concerning the commercial use of the
internet are not favorably resolved, if the necessary infrastructure is not
developed, or if the internet does not become a viable commercial marketplace,
our business, financial condition and operating results will be materially
adversely affected.
Our success depends in part on our ability to securely keep and transmit data
A significant barrier to online commerce and communication is the secure
transmission of confidential information over public networks. We rely on
encryption and authentication technology to provide the security and
authentication necessary to effect secure transmission of confidential
information. Advances in computer capabilities, new discoveries in the field of
cryptography or other events or developments may result in a compromise or
breach of the encryption or other algorithms we use to protect customer
transaction data. If any such compromise of our security were to occur, it
could have a material adverse effect on our business, financial condition and
operating results.
We depend on third parties for the information we provide
We use suppliers of information, software and services in virtually every
phase of its operations. Our financial data service is offered pursuant to
separate non-exclusive licenses from the following two companies:
. Standard & Poor's ComStock, which supplies us with a raw feed of market
data from securities and commodities exchanges world-wide; and
. Townsend Analytics, Ltd., which supplies us with its proprietary
software program which organizes the raw data feed from S&P ComStock for
presentation in tabular and chart formats.
Our license with Townsend Analytics is presently due to expire in January
2001, subject to automatic successive one year extensions unless either party
notifies the other of its intent to allow the agreement to terminate. While we
are presently in negotiations with Townsend for a long term extension, there
can be no assurance we will be able to negotiate a long-term extension on terms
acceptable to us. Although we believe that we have no long term dependence on
any one supplier, there is always a certain amount of time required to develop
internally or locate and engage externally a replacement and integrate that
replacement into our operations. In the event a key supplier terminates its
relationship with us without notice, or should we be compelled to do the same,
our operations may be adversely affected.
4
<PAGE>
We may not be able to protect our proprietary rights and we may incur
significant costs in attempting to do so
Our success and ability to compete are dependent to a significant degree on
our proprietary technology. We rely on a combination of copyright, trade secret
and trademark laws, as well as confidentiality agreements and licensing
agreements to protect our proprietary rights. However, it may be possible for a
third party to copy or otherwise obtain and use our software or other
proprietary information without authorization or to develop similar software
independently. In addition, litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation, whether
successful or unsuccessful, could result in substantial costs and diversions of
resources, either of which could have a material adverse effect on our
business, financial condition and operating results.
We may pursue future acquisitions which could dilute our stockholders or cause
us to incur debt and assume contingent liabilities
As part of our business strategy, we expect to review acquisition prospects
that would complement our current product offerings, augment our market
coverage or enhance our technical capabilities, or that may otherwise offer
growth opportunities. While we have no current agreements or negotiations
underway with respect to any such acquisitions, we may acquire businesses,
products or technologies in the future. Such actions by us could materially
adversely affect our results of operations and/or the price of our common
stock. Further, if we issue stock in connection with such acqusitions, our
stockholders will be diluted.
We have limited experience in assimilating acquired organizations into our
operations and we may not be able to successfully integrate any businesses,
products, technologies or personnel that we might acquire in the future. Our
failure to do so could have a material adverse effect on our business,
financial condition and results of operations.
A large percentage of our stock is held by our officers and directors
Our present directors and executive officers and their respective affiliates
beneficially own approximately 53% of our outstanding common stock. As a
result, these stockholders, if they act together, will be able to exercise
significant influence over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions, and will have veto power with respect to any stockholder action
or approval requiring a majority vote.
Certain provisions in our charter and bylaws may discourage take-over attempts
and thus depress the market price of our stock
Certain provisions in our certificate of incorporation, bylaws, and Delaware
law may be deemed to have an anti-takeover effect. Such provisions may delay,
deter or prevent a tender offer or takeover attempt that a stockholder might
consider to be in that stockholder's best interests. For example, our
certificate of incorporation allows our board of directors to issue additional
shares of common stock or establish one or more classes or series of preferred
stock, having rights, preferences and limitations as determined by the board of
directors without stockholder approval.
In addition, we are subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law which prohibits a publicly-held
Delaware corporation from engaging in certain business combinations with
interested stockholders for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. Compliance with both
the Delaware code and the anti-takeover provisions in our charter and bylaws
could have the effect of delaying, deterring or preventing a tender offer or
takeover attempt that a stockholder might consider to be in that stockholder's
best interests, including attempts that might result in a premium over the
market price for the shares held by stockholders.
5
<PAGE>
We may issue preferred stock which adversely affects the rights of common stock
holders
Our board of directors has the authority to issue up to 10,000,000 shares of
preferred stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by our stockholders. To
date, we have 200,815 shares of preferred stock outstanding in two different
series. Any additional preferred stock issued by our board of directors may
contain rights and preferences adverse to the voting power and other rights of
the holders of common stock.
The market for our stock is limited
Our common stock is traded on the OTC Bulletin Board under the symbol
"FSQT." On August 18, 2000, the last reported sale price of the common stock on
the OTC Bulletin Board was $5.19 per share. However, we consider our common
stock to be "thinly traded" and any last reported sale prices may not be a true
market-based valuation of the common stock. There can be no assurance that an
active market for our common stock will develop. In addition, the stock market
in general, and internet and technology companies in particular, have
experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of such companies.
Special note regarding forward-looking statements
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "except," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results
may differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness
of the forward-looking statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus or to conform such
statements to actual results or to changes in our expectations.
6
<PAGE>
SELLING STOCKHOLDERS
This prospectus relates to the offer and sale of our common stock by the
selling shareholders identified below. The shares were issued in connection
with our acquisition of Stockdata Amsterdam BV in December 1999 and in a
private placement concluded in March 2000. We agreed to register the shares for
resale. The selling shareholders will determine when they will sell their
shares, and in all cases, will sell their shares at the current market price or
at negotiated prices at the time of the sale. Although we have agreed to pay
the expenses related to the registration of the shares being offered, we will
not receive any proceeds from the sale of the shares by the selling
shareholders.
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this prospectus by each selling
shareholders. In reviewing the table, please keep in mind that the amounts in
the column relating to shares beneficially owned after the offering assume that
all offered shares are sold.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering Shares
--------------------------- Beneficially
Number of Number of Owned After
Name Shares owned Shares offered Offering
---- ------------ -------------- ------------
<S> <C> <C> <C>
Media Investerings-en
Managementmaatschappij B.V.......... 210,484 135,574 74,190
Horizon Investments B.V.............. 98,583 45,190 53,393
CV Stockdata......................... 37,199 17,052 20,147
Oakes Fitzwilliams & Co.............. 53,053 53,053 0
Ermgassen & Co., Ltd................. 37,838 87,838 0
Idrone Pauline Mary Brittain......... 900 900 0
Roger Brittain....................... 2,000 2,000 0
Durnford Securities Ltd.............. 7,350 7,350 0
Jan Pier Ebbinge..................... 11,000 11,000 0
Fleetway Investments Ltd............. 4,500 4,500 0
Intercontinental Services Limited A/C
J331C............................... 11,000 11,000 0
Kestrel Services Ltd. ............... 14,700 14,700 0
Marcuard Cook & Cie.................. 14,700 14,700 0
Overseas & Foreign Investors......... 11,000 11,000 0
Paris Investments.................... 7,350 7,350 0
Rysaffe Trustee Company (CI) Ltd. Re:
The Hector Settlement............... 3,600 3,600 0
SBS Nominees Ltd. A/C SBCLT.......... 73,500 73,500 0
John William Taylor.................. 4,400 4,400 0
Andrew Threipland.................... 4,500 4,500 0
Marcus Widmer........................ 5,800 5,800 0
Dunpil Management Ltd. .............. 7,350 7,350 0
Benjamin Slade....................... 7,350 7,350 0
Smith & Williamson Nominees Limited.. 44,100 44,100 0
Christopher Weston................... 14,700 14,700 0
Yili Holdings Ltd. .................. 14,700 14,700 0
FPK Nominees......................... 7,350 7,350 0
European Financial Services
Venture Fund (General Partner)
Limited........................... 449,500 449,500 0
NeSBIC Converging Technologies Europe
(CTE)............................... 1,502,822 151,471 1,351,351
GIMV................................. 1,238,552 151,471 1,087,081
Leon Seynave......................... 36,765 36,765 0
</TABLE>
7
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock trades on the OTC Bulletin Board under the symbol "FSQT."
We have applied to list our common stock on the NASDAQ National Market System.
The following table shows the high and low closing prices of our common stock
for the periods indicated as reported by the OTC Bulletin Board. These prices
do not include retail markup, markdown or commission.
<TABLE>
<CAPTION>
High Low
----- ----
<S> <C> <C>
1998
First quarter..................................................... 2.13 1.56
Second quarter.................................................... 2.00 1.00
Third quarter..................................................... 1.13 0.91
Fourth quarter.................................................... 2.00 0.69
1999
First quarter..................................................... 5.00 1.38
Second quarter.................................................... 11.00 3.31
Third quarter..................................................... 10.00 5.25
Fourth quarter.................................................... 7.50 4.00
2000
First quarter..................................................... 19.00 5.88
Second quarter.................................................... 12.00 6.00
Third quarter (through August 18, 2000)........................... 7.50 5.13
</TABLE>
We consider our common stock to be thinly traded and, accordingly, reported
sale prices may not be a true market-based valuation of our common stock. As of
August 24, 2000, there were approximately 344 record holders of our common
stock.
We have not paid any cash dividends since our inception and do not
contemplate paying dividends in the foreseeable future. It is anticipated that
earnings, if any, will be retained for the operation of our business.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Background
General. We are a European technology provider of financial information and
electronic brokerage solutions. We offer a comprehensive range of real-time
market data and electronic brokerage systems for both the institutional and
individual investor. Our financial information systems are offered via the
internet or through virtual private networks using internet technology. We also
provide related network services to users of our financial information and
electronic brokerage products.
Effective December 24, 1999, we acquired all of the outstanding capital
shares of Stockdata Amsterdam BV, a company located in Amsterdam, for cash and
securities with a value of up to $3,750,000. Stockdata is engaged in the
distribution of real-time market data products to the Benelux region, primarily
through the use of datacast technologies via cable networks. This acquisition
will give us a sales and operations presence in the Benelux countries of
Belgium, The Netherlands and Luxembourg. Stockdata Amsterdam's operations are
currently profitable, so we believe that the effects of the acquisition on our
cash flow and liquidity will be neutral to positive.
Our plan of operations for the 2000 fiscal year is to continue to target
strategic alliances in key European financial centers from which to leverage
our growth. We plan to market our financial market information, analytical
tools and electronic brokerage systems both under our own product names and as
co-branded implementations with institutional clients.
Currency Exchange Rates. Although we report our results in US dollars,
virtually all of our revenues and expenses are denominated in other currencies,
primarily Swiss francs, Euros and Pounds sterling. Consequently, our net
results are directly affected by changes in the exchange rate between the US
dollar, on the one hand, and the Swiss franc, Euros or Pounds sterling, on the
other. Our transactions and those of our subsidiaries are recorded based on the
functional currency of each particular company. Our main operating subsidiary
maintains a Swiss franc functional currency and has a US dollar denominated
current account with its parent company. This results in foreign exchange
differences being recorded based on variations in the USD/CHF rate of exchange,
which are carried forward on consolidation.
Our assets and liabilities and those of our subsidiaries are translated at
the exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from differences in exchange rates from period
to period are included in the cumulative translation adjustment account in
stockholders' equity.
Results of Operations
Year Ended December 31, 1999 and 1998
Revenue for the year ended December 31, 1999 was $1,778,459, an increase of
233% over that of $534,715 for the corresponding prior year. Revenue is derived
primarily from the provision of financial market data and related network
connectivity and web-operation services, but also includes revenue from
development and integration projects as well as transaction related revenue
linked to electronic brokerage activity.
Revenue for the fourth quarter of 1999 was only marginally increased from
that of the previous quarter, due principally to an increased foreign exchange
rate between European currencies in which revenue is recorded and the US
Dollar, in which revenue is reported, as well as "year 2000' factors which
caused certain business to be shifted into the first quarter of 2000.
Cost of revenue for the year ended December 31, 1999 was $2,157,659, an
increase of 78% above the amount of $1,209,387 for the corresponding prior
year. Cost of revenue as a percentage of revenue has decreased from 226% in the
prior year to 121%, reflecting the economies of operation at a larger scale.
Cost of revenue includes network expenses, data feeds and commissions.
9
<PAGE>
Selling and market development expenses for the year ended December 31, 1999
were $405,256 or 83% above the amount of $221,210 for the corresponding prior
year. Corporate and product marketing expenses have increased in conjunction
with the corporate name change from Virtual Telecom to FirstQuote and the
continued rollout of our services in Europe.
General and administrative expenses for the year ended December 31, 1999
were $4,796,643, an increase of 68% from the amount of $2,861,662 for the
corresponding prior year. Staff costs represent the major component of this
expense and have increased 101% from $1,232,645 to $2,483,326. Operating
expenses have increased 50% from $1,108,596 to $1,666,618, and depreciation
charges have increased by 24% from $520,421 to $646,699.
Operating loss for the year ended December 31, 1999 was $5,581,099, an
increase of 49% from the amount of $3,757,544 for the prior year. Expressed as
a percentage of revenue the operating loss has improved from 703% to 314% of
revenue.
Foreign exchange gains and losses arise essentially from the revaluation of
amounts due by our Swiss operating company, FirstQuote SA, to the parent
holding corporation, which are denominated in US dollars. The functional
currency of FirstQuote SA is the Swiss franc, and the resultant loss on
revaluation in Swiss francs is carried forward in consolidation. The US
dollar/Swiss franc rate of exchange was 1.3760 at December 31, 1998 and 1.5915
at December 31, 1999.
Net loss for the year ended December 31, 1999 was $6,840,368, compared with
$3,421,229 for the corresponding prior year.
Six Months Ended June 30, 2000 and 1999
We acquired FirstQuote Stockdata on December 24, 1999. FirstQuote Stockdata
has been included in our consolidated operating results for all periods
subsequent to December 24, 1999.
Revenue for the six months ended June 30, 2000 was $2,695,129, an increase
of 318% over that of $644,362 for the corresponding prior year period. Revenue
is comprised primarily of the provision of financial market data services and
related network services, the development and operation of market data enabled
web-sites, as well as transaction related revenue linked to the provision of
outsourced electronic brokerage services. Without giving effect to the
consolidation of FirstQuote Stockdata, we had a 161% increase in revenue during
the six month period ended June 30, 2000 over the prior year period.
Revenue for the second quarter of 2000 increased 11% above that of the first
quarter of 2000 and 269% over that for the three months ended June 30, 1999.
Without giving effect to the consolidation of FirstQuote Stockdata, we had a
144% increase in revenue during the three month period ended June 30, 2000 over
the prior year period.
Cost of revenue for the six months ended June 30, 2000 was $2,026,777, an
increase of 141% above the amount of $839,532 for the corresponding prior year
period. Cost of revenue as a percentage of revenue has decreased from 130% in
the prior year to 75%, reflecting the economies of operation at a larger scale.
Cost of revenue includes content acquisition costs, network expenses, and
commissions.
Selling and market development expenses for the six months ended June 30,
2000 were $421,277, an increase of 207% above the amount of $137,391 for the
corresponding prior year period. Corporate and product marketing expenses have
increased in conjunction with our corporate name change to FirstQuote and the
continued rollout of our services in Europe.
General and administrative expenses for the six months ended June 30, 2000
were $4,508,990, an increase of 112% from the amount of $2,124,560 for the
corresponding prior year period. Staff costs represent the major component of
this expense and have increased 104% from $1,059,245 to $2,160,712. Office
expenses have
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increased 79% from $284,269 to $508,124, and depreciation charges (excluding
amortisation of goodwill) have increased by 58% from $289,311 to $457,720.
Amortisation of goodwill related to our acquisition of FirstQuote Stockdata
amounted to $554,741 for the six months ended June 30, 2000.
Operating loss for the six months ended June 30, 2000 was $4,261,915, an
increase of 73% from the amount of $2,457,121 for the prior year period.
Expressed as a percentage of revenue the operating loss has improved from 381%
to 158% of revenue.
Foreign exchange gains and losses arise essentially from the revaluation of
amounts due to us from our Swiss operating subsidiary, FirstQuote SA, which are
denominated in US dollars. The functional currency of FirstQuote SA is the
Swiss franc, and the resultant loss on revaluation in Swiss francs is carried
forward in consolidation. The US dollar and Swiss franc rate of exchange was
one US dollar for 1.3760 Swiss franc as of December 31, 1998, 1.5915 Swiss
franc as of December 31, 1999 and 1.6343 Swiss franc as of June 30, 2000.
The continued increase in the value of the US dollar against most European
currencies has resulted in revenues and costs reported in US dollars being
lower than had the value of the US dollar remained more constant.
Net loss for the six months ended June 30, 2000 was $4,448,758, compared
with $3,366,656 for the corresponding prior year period.
Liquidity and Financial Condition
As of June 30, 2000, we had working capital of $2,445,357 and stockholders'
equity of $7,236,541.
In January 2000, we obtained bridge financing of $510,000 from three of our
existing financial investors in order to finance our acquisition of FirstQuote
Stockdata, and pending the closing of our private placement of 1,061,057 of our
common shares for a total amount of $7,155,180, which was concluded during
March 2000. Two thirds of the bridge financing was converted to common shares
as part of the private placement and the remaining $170,000 was repaid during
April 2000 at our option.
During the six months ended June 30, 2000, we also received $477,750 from
the exercise of 136,500 warrants at $3.50. During the same period, we also
received $155,000 from the exercise of 70,000 employee stock options at strike
prices varying between $2.00 and $3.50 per share.
We continue to generate negative cash flows from operations. Cash flow is
calculated by adjusting net income or loss by non-cash items of expense such as
depreciation, foreign exchange differences and stock compensation. The
significance of cash flow is its ability to measure the amount of cash used in
operating a business. The negative cash flow from operations was approximately
$519,000 per month during the second quarter of 2000, compared with $485,000
per month during the first quarter of 2000 and $461,000 per month during the
fourth quarter of 1999. We anticipate continuing to incur increasing sales and
marketing, product development and general and administrative expenses. As a
result, we will need to generate significantly higher revenues to achieve and
sustain positive cash flow and profitability on an annual basis. Although our
revenues have grown in recent quarters, we cannot be certain that we will
continue to achieve revenue growth or realize sufficient revenues to achieve
positive cash flow or profitability.
We believe that we will require a minimum of $3,000,000 of additional
capital over the next 12 months in order to fund the planned operating and
capital expenditure. We intend to pursue the required capital through the sale
of additional securities. However, there are no commitments or understandings
on the part of any party to provide any additional debt or equity capital to us
and there can be no assurance that we will be able to obtain additional
capital. Our inability to increase revenue or obtain additional debt or equity
capital on a timely basis will, in all likelihood, materially adversely affect
its future planned growth of operations and revenues.
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BUSINESS
General
We are engaged in the business of developing and marketing a range of
internet-based financial information and transactional services to the European
investment community. We provide business-to-business and business-to-consumer
services to the financial marketplace. Our services are provided to our
corporate clients for internal use as well as for redistribution to their
customer bases. We provide real-time or delayed market data, news and other
financial information as well as electronic brokerage capabilities over the
internet to a range of customized interfaces, including desktop client-server
applications, web-browser based interfaces, as well as via wireless services
such as the short messaging service and the wireless application protocol. .
Our financial information services are offered on a direct subscription
basis or as a co-branded business-to-business service to financial
institutions, such as banks and brokerage firms, financial media and publishing
organizations and internet service providers, who desire to offer financial
content and related services directly to their own customers. We also offer to
institutional clients turnkey solutions for internet-based electronic brokerage
capabilities. We also derive revenue from the provision of underlying internet
access and network connectivity services to its corporate and institutional
clients.
Our services are available via our own wide-area internet network backbone
by dial-up or dedicated access, as well as from any other Internet point of
access world-wide.
Products and Services
We provide real-time or delayed market data, news and fundamental financial
information using internet technologies. Our services are marketed to European
financial institutions, including brokerage firms, banks, insurance companies,
fund managers, professional traders, and private investors. The market data
comprises securities, including stocks, futures and options on stocks, major
stock and option indices, commodities and foreign exchange rates, from over 150
exchanges worldwide, including major European, American and Asian exchanges. We
consolidate and manage information on our own data hub for over 800,000
securities instruments. This content is received over data feeds from stock
exchanges and third party providers and is processed on a number of servers
within a common financial data hub, embodying database, analytical and
transactional functionality. Access to such content and functionality is
governed by a permissioning database which controls users' access to different
content or applications to which the user interfaces. In this manner, customers
can access the data via a range of user interfaces including Windows compliant
desktop resident "client' applications, dynamic or static web browsers, as well
as short messaging service or wireless application protocol devices which are
fed content on a real-time or delayed basis, according to each user profile.
The above content is distributed across our network backbone directly to
permanently connected users or via the public internet. As a result, our
services can be organized over the public internet, virtual private networks,
intranets, extranets and local or wide area networks using internet protocol
technology.
Our specific services include:
FirstQuote Professional: This is a real-time market data, news and
fundamental financial information service that employs a sophisticated desktop
resident decision support interface targeted at institutional investors,
brokerage firms and their more active clients. It provides real-time data
coverage across a variety of financial instruments, sophisticated analytical
tools, alarm settings, historical data, news and all investment indicators
regularly used by professional traders. FirstQuote Professional displays
financial information in multiple windows on multiple pages, each of which can
be configured to suit individual requirements, and stored for retrieval.
FirstQuote Professional customers are granted a floating license, allowing the
software to
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be installed and used on multiple machines, for example an office PC, home PC
and portable PC, and thus providing a highly mobile solution. However only one
simultaneous access is permitted per subscription.
The principal features of the FirstQuote Professional include:
Market Minder A quote screen with rows of symbols and columns of prices
and other data related to the symbols (name, last price,
bid, ask, etc.)
MultiQuote Detailed fundamental information on a symbol in a
customizable layout
Ticker Scrolling ticker window showing trade price and volume
information.
Time & Sales Tabular display of each transaction showing transaction type
price and volume.
News A scrolling list of searchable headlines and full news
stories.
Charts Graphical analysis of market data with a variety of
technical studies available.
Forex Foreign exchange cross rates
Table Exportable tabular display of market data for a given symbol
Turbo Options Advanced options quote screen
Market Makers Comparative table of market maker bids and asks indicating
market depth.
Alarm Automated event-monitoring tool.
Internet Drag and drop functionality enables seamless look up of
Browser financial information from public Internet databases (such
as Yahoo and Edgar On-line) or private intranet databases.
DDE Link Links real-time data into a spreadsheet for further analysis
and modeling.
FirstQuote Lite: This is a real-time market data, news and fundamental
financial information service designed for corporate treasurers, portfolio
managers, smaller brokers and sophisticated private investors. The service
provides real-time data and news, and includes a reduced range of analytical
tools and functions when compared to FirstQuote Professional. The service
consists of a fixed page market data screens featuring Market Minder,
MultiQuote, Ticker, Time and Sales, News, Charts and Internet Browser. The
fixed page nature of this product provides for customizable configurations to
be implemented for larger groups, which are then non-modifiable by users.
FirstQuote Trader: This is an electronic brokerage service designed to be
integrated with either the FirstQuote Professional or FirstQuote Lite services.
The service is offered as an outsourced solution to banks and brokerage firms
providing them the ability to offer internet-based electronic brokerage
services to their clients. The service involves the design of appropriate
network architectures as well as the integration of our licensed trading server
platform software with the institution's existing settlement and account risk
management systems. We provide the electronic order entry and routing
technologies as well as the security systems, while the institution's existing
computer systems provide order approval and execution functions. As a result
the institution's clientele is offered a complete order entry, execution, and
real time profit/loss portfolio information via the Internet. Since the
FirstQuote Trader elements of the interface are embedded within the FirstQuote
Professional or FirstQuote Lite services, we can provide a complete and real-
time package of decision support, order entry, order routing and portfolio
monitoring capability.
We are not a licensed bank or securities brokerage firm nor do we intend to
obtain any such licenses at this time. Therefore, we intend for the foreseeable
future to offer electronic brokerage services on a co-branded outsourced basis
to licensed banks and brokerage firms. Our electronic brokerage technology is
based on a software license from Townsend Analytics which is described under
the heading Trademarks and Licenses below.
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FirstQuote.net Services: The FirstQuote.net range of services complement the
FirstQuote Professional range by offering similar content and applicable
functionality over Web and wireless technologies targeted at clients of banks,
brokerages, financial media companies and internet service providers seeking to
add financial content to their portal audiences. In this way we are able to
reach broader bands of the investment community, with the objective of
seamlessly upgrading certain of the more sophisticated users to higher value
services, such as those provided under the FirstQuote Professional range of
products.
FirstQuote.net is a component-based service offering, providing businesses
in the finance sector with an array of browser-based investor content combined
with ease-of-use functionality. The browser-based application components allow
real-time customer interaction for finance, content management and trade
lifecycle support. The offering provides banks and brokerage institutions with
the capability to provide their clients with multiple points from which to
access market data, news, analyses, brokerage reports, fundamental data,
portfolio services, market risk, trade and order management services to any one
of a number of desktop or wireless devices, based on a common client profile.
As the applications are component-based, fully customised solutions can be
rapidly created, addressing the "speed to market' issue.
FirstQuote.net components are centered around the following product ranges:
SnapQuote
Static, refresh updated, web-based modules for market data,
charts and news
StreamQuote Dynamically updating content, including screen tickers,
charts, as well as real-time browser-based electronic
brokerage functionality
MarketRisk Decision support analyses presented via a range of graphical
interfaces
SMS Alert features based on pre-defined user-configured parameters
WAP
Wireless access to market data, charts, news and electronic
brokerage functionality, based on wireless application
protocol enabled devices such as mobile telephones and
personal digital assistants.
FirstQuote Network Services: In order to offer a complete end-to-end package
of services, we also provide network development and enterprise connectivity
services including internet access and network security services to our
corporate and institutional clients.
We maintain our own wide-area internet protocol network backbone, enabling
clients to access the market data, financial information and online dealing
services directly by way of dial-up or dedicated lines, where speed and
performance is an issue and thus connectivity is not entrusted to the public
internet. Our internet backbone is currently operative throughout Switzerland,
as well as in Paris and Frankfurt and is being extended to London and
Amsterdam. We also lease bandwidth from various European telecommunications
carriers further enabling access to our services from any internet access point
worldwide.
Market Environment and Corporate Strategy
Based on our own marketing analysis and research reports published by
Forrester Research and Datamonitor, we believe that the market for online
investor services in Europe, including both informational and transactional
services, will provide significant opportunities for the provision of the
underlying technology and content. While this market has developed rapidly in
the USA over the past three years, we believe the European marketplace is
characterized by particular parameters which will require a distinctly
different approach in order to capitalize on the opportunities presented. As a
result, we believe that significant market opportunities exist for a provider
of financial information and electronic brokerage services that is able to
address the interests and requirements of the European investor.
We believe that the key drivers influencing the market opportunity which we
face are as follows:
Internet penetration: While the European private and business internet
connectivity currently lags behind that of the USA, recent studies indicate
that this will be redressed over the next three years. According to a
Datamonitor report, internet connectivity for European business users is
estimated to reach 70% penetration by
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the year 2004 or about 5.75 million companies. Particularly noteworthy is the
extension of the internet to a range of wireless devices which we believe will
further increase penetration, as well as the demand for investment information
and transactional services. Emerging demand for such wireless services is
believed to be growing strongly in Europe due to the large installed base of
GSM mobile phones.
Growth in online banking: The number of Europeans using internet banking is
expected to grow by 30% to 21 million by the year 2004. The move into online
banking is a rational move for traditional banks as the costs of online
transactions cost up to 12 times less to process than transactions made in
person. Also, online customers tend to be more sophisticated and able to look
after their own finances.
Direct equity ownership: The trend towards greater financial flexibility and
self-determination amongst the European investment community is being driven
both by an emerging class of information- and technology-enabled individuals as
well as government pressure to encourage individual retirement planning outside
of traditional state controlled pension funds.
Availability of investment products: The scope of investment possibility has
been significantly extended during the past three years with the emergence of
several "new market' exchanges in Europe which are largely geared towards new-
economy equities. While European mid-size companies are privately held to a
greater extent than their US counterparts, the succession of ownership to a
next generation who are not always willing to remain in control is creating
flotation opportunities in many cases.
Number of online accounts: According to a Forrester Research report, the
number of online securities accounts in Europe is currently about 1.3 million,
estimated to grow to 14 million by 2002.
Cross border investment tendencies: European investors have traditionally
invested within their own local markets. However, in light of currency-related
and trade harmonization initiatives currently being adopted by European
countries, we believe that a demand for cross-border investment opportunities
will emerge.
Pressure on European financial institutions to offer online services: Over
the past three years, European financial institutions have committed
significant resources to the introduction of the Euro as well Y2K issues. We
believe that presently, many such financial institutions will perceive an
increased need to offer or improve online investment services to their clients,
with an emphasis on speed to market, in order to maintain clients, capitalize
on additional revenue opportunities, reduce costs, and counter competition from
especially US based service providers penetrating European markets.
Cross-selling demand from other internet franchises for financial
services: Following from possibilities created by the internet-economy, we
believe that many enterprises which currently command the attention of large
franchises of internet-enabled communities will seek to add complementary
financial services to their product offering in an attempt to capitalize on
overall e-commerce opportunities, thus requiring access to the services that we
provide.
Our objective is to be a leading provider of internet-based services and
solutions to the European investment community. We plan to achieve these
objectives through:
. the development of strategic alliances with banks and securities
brokerages, financial service providers, financial news organizations,
financial middle-ware companies and internet service providers
throughout Europe, so as to leverage our services across existing client
bases;
. our own direct sales channels targeted at sophisticated private
investors as well as corporate clients; and
. the development and operation of co-branded content-enabled web-sites
catering to emerging Internet-communities, for the purpose of offering
basic investor services which serve as a marketing platform for our more
sophisticated higher value services.
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Key elements of our strategy include:
State of the Art Technology: Our technologies and services include software
licensed from Townsend Analytics Ltd. We believe that Townsend Analytics is a
recognized world leader in the development and commercialization of software
and technologies dedicated to internet-based market data, trading and exchange
activities. The owner and President of Townsend Analytics, Mr. Stuart Townsend,
has served on our Board of Directors since April 1997.
European Focus: We offer internet-based information and electronic brokerage
services that are uniquely European in nature. Until now, the dominant
providers of internet-based information and brokerage services in Europe have
been U.S. based companies which, in our opinion, offer a service that is
distinctly American in nature. We believe that financial and information
services offered by U.S. tend to focus on the U.S. stock markets, and to the
extent they focus on Europe, the focus is homogenized in the sense that they
treat the European market as one market. The U.S. competition does not give
proper regard to the fact that Europe, unlike the U.S., is a highly fragmented
market with significant language, demographic and cultural distinctions. Since
most of the European banks tend to serve one or perhaps a few of the many
market segments, our marketing research indicates that banks and their
clientele prefer a service that emphasizes their distinct interests,
particularly the presentation of content in manner that focuses on local stock
markets and stocks, financial and news publications and trading tools that best
meet the interests and needs of the banks' clientele. While market data and
financial services cover all major world markets and exchanges, we believe that
our services provide greater focus on pan-European markets and exchanges than
other competing services. In the case of joint-service arrangements for the
provision of a co-branded service, we work with our local partner to customize
the offered service to suit the cultural need and investment profile of the
partner's existing and targeted clientele.
Strategic Alliances; Business-to-Business Model: By focusing on the
development of co-branded information and brokerage services pursuant to
strategic alliances, we intend to acquire access to existing target client
bases. We plan to enter into one or more strategic relationships with banks and
securities brokerages, financial services providers, financial news
organizations, middle-ware providers and internet service providers in each of
the major investment and geographical communities of Western Europe. We believe
that this strategy will accelerate the expansion of our services throughout
Europe and, at the same time, reduce the marketing costs typically associated
with the rollout of a service of this nature throughout an area made up of
several large and culturally diverse communities.
Development of FirstQuote Brand Name: We have applied for trademark
registration of the FirstQuote mark in the USA, Switzerland and throughout the
European Union. We intend to market our services and solutions throughout
Europe under the FirstQuote brand name. We will endeavor to create a high
degree of consumer awareness of the FirstQuote name and the association of
quality and reliable services with such name in the European investment and
banking communities. We intend to leverage our FirstQuote brand-name through
the future development and marketing of additional services, including a portal
web-sites linking the customer to an array of internet based financial and
investment services.
Competition
The market for financial information and brokerage services over the
internet is rapidly evolving and becoming increasingly competitive. We expect
competition to continue and intensify in the future.
In the area of market data and financial services, we face direct
competition from several companies that provide for the delivery of financial
data over the Internet or other electronic means. At the more sophisticated end
of our product offering, we believe our primary competitors include Reuters,
Bloomberg, and Bridge. In the web-browser based arena, companies such as
GlobalNet Financial and Atos currently also offer content-enabled web material.
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In the area of electronic brokerage services, we seek to enter into
partnering arrangements with licensed banks and brokerage firms enabling them
to provide the service in turn to their own clients. Such arrangements will to
an extent compete with electronic brokerage firms such as the eSchwab division
of Charles Schwab & Co., Inc., E-Trade Group and DLJdirect, and in the European
context, Consors and e-Cortal who develop proprietary market data and internet
brokerage systems. However, we believe that these same electronic brokerage
firms may solicit either content or specific applications from us to supplement
their existing technologies. The above partnering arrangements may also
encounter competition from brokerage firms offering full-service brokerage
operations.
Many of our competitors have longer operating histories and significantly
greater financial, technical, marketing and other resources than us. In
addition, many of our competitors offer a wider range of services and financial
products, and thus may be able to respond more quickly to new or changing
opportunities, technologies and customer requirements. There can be no
assurance that we will be able to compete effectively with current or future
competitors or that such competition will not have a material adverse affect on
our business, financial condition and operating results.
Third Party Providers
We employ the services of the following businesses:
Content Originators: We have entered into contractual arrangements with a
number of securities and commodities exchanges as well as proprietary financial
news providers, in order to have the necessary rights to redistribute such
content to its subscribers and website users.
Content Distributors: We receive market data information and news either
directly from the content originators or pursuant to agreements with revendors
of such content which provide real-time or delayed data by satellite or
landline transmission.
Network Infrastructure and Capacity: In order to distribute our services
over our own network backbone as well as via the public internet, we lease
infrastructure and bandwidth from a number of pan-European and international
telecommunications companies.
Strategic Partnering Arrangements
Our business plan focuses on the development of significant partnering
arrangements throughout Europe. The purpose of these partnering arrangements is
to provide investment services, such as market data and financial information
services or on-line brokerage activities, to a targeted clientele as a co-
branded service of between us and a particular partner. We have targeted the
following areas where such partnerships are being pursued:
Financial institutions: Banks and securities brokerages not currently
offering or looking to expand their range of online investment services are
faced with a buy-or-build decision as well as a speed-to-market requirement. We
believe that many such institutions will opt for an outsourced service in order
to achieve a rapid entry into a potentially unfamiliar market territory.
Media organizations: Traditional media groups are currently challenged to
offer electronic new-media services, especially regarding the provision of
financial data, and do not necessarily have the resources or the online
infrastructure to be able to complement their traditional distribution
channels.
Financial middle-ware providers: Providers of traditional financial systems
have generally not included real-time content, decision support user-interfaces
or order-execution transactional functionality, all of which requires network
and contractual infrastructure beyond their core offerings. We believe that our
content and electronic brokerage process know-how can be effectively combined
with such providers in order that their products may cater to a more complete
package of requirements.
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Internet service providers: Providers of internet access have traditionally
had large populations of users which pass through their networks. They have
embraced the concept of "web portals' in order to maximize additional e-
commerce opportunities offered to these users. We believe that such service
providers and web portal operators will require access to content and
transactional functionality such as it could provide.
Trademarks and Licenses
We have registered, or have applied for registration, for the trademarks
FirstQuote in Switzerland, the European Union and the United States.
Our high-end market data and financial information services and our
electronic brokerage solutions are based on software licensed to us by Townsend
Analytics Ltd. of Chicago, Illinois. Pursuant to a Computer Software License
Agreement, Townsend Analytics has appointed us as a non-exclusive distributor
for the sale, support and servicing of Townsend Analytics' proprietary software
programs relating to market data and financial information services and on-line
brokerage activities. Under the agreement, we are authorized to implement and
resell these software programs in return for agreed royalty payments. The
agreement restricts the right of Townsend Analytics to grant certain further
software licensing rights in certain European regions until December 31, 2000.
Our information services and brokerage solution are substantially dependent
on the technologies licensed by Townsend Analytics. Our license with Townsend
Analytics is presently due to expire in January 2001, subject to automatic
successive one year extensions unless either party notifies the other of its
intent to allow the agreement to terminate. While we are presently in
negotiations with Townsend for a long term extension, there can be no assurance
we will be able to negotiate a long-term extension on terms acceptable to us.
In the event our continued access to the licensed software is terminated or
interrupted for a significant length of time, we would have to either develop
or acquire suitable replacement software, of which there can be no assurance,
or discontinue our present operations.
Government Regulation
Our market data and financial and on-line brokerage services are not
currently subject to direct regulation by Swiss, European Union or other law,
other than regulations applicable to businesses generally. Changes in the
regulatory environment relating to the internet content or connectivity
industries, including regulatory changes that directly or indirectly affect
telecommunications costs, could have a material adverse affect on our business.
We cannot predict the impact, if any, that future regulation or regulatory
changes may have on our business.
Employees
As of the date of this prospectus, we employed 60 full-time employees, 3
part-time employees and 5 full-time consultants, 11 of whom are involved in
administration, 22 of whom are involved in software development and engineering
and 35 of whom are involved in sales, sales support and marketing.
Facilities
Our executive offices are located in Geneva, Switzerland and consist of 586
square meters of leased premises. The lease for these premises expires on April
30, 2002 and provides for monthly rent of approximately $15,000.
In addition, we lease 360 square meters of office space in Zurich,
Switzerland for a monthly rent of approximately $9,000, 39 square meters in
Paris, France for a monthly rent of approximately $5,300, and 25 square meters
in London, United Kingdom for a monthly rent of approximately $3,900.
Legal Proceedings
There are no pending legal proceedings to which we or our properties are
subject.
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MANAGEMENT
Set forth below are our directors and officers:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Chairman of the Board, Chief Executive Officer and
Neil Gibbons......... 51 President
Vice President, Chief Operating Officer, Secretary
Daniel Huber......... 32 and Director
Mark Benn............ 36 Chief Financial Officer and Director
Stuart Townsend...... 53 Director
Bryan Wood........... 54 Director
Frank Verschoor...... 39 Director
Paul Goossens........ 44 Director
</TABLE>
Mr. Gibbons co-founded FirstQuote SA in 1994 and has served as our Chief
Executive Officer, President and director since our inception in July 1996.
From 1991 to 1994, Mr. Gibbons was engaged as an independent investment manager
and marketing consultant in the financial services industry. Mr. Gibbons holds
an MBA (Cum Lauda) from IMD, Lausanne, Switzerland.
Mr. Huber co-founded FirstQuote SA in 1994 and has served as our Vice
President, Chief Operating Officer, Secretary and director since our inception
in July 1996. Since 1992, Mr. Huber has also served as Chief Executive Officer
of Profilinvest SA, an investment management firm founded by Mr. Huber.
Mr. Huber holds a degree in portfolio management and financial analysis.
Mr. Benn has served as our Chief Financial Officer since April 1998 and as a
director since May 2000. From January 1994 to March 1998 he was finance manager
for Radcliffes Trustee Company S.A., an international financial services
company. Mr. Benn holds a B.Com (Hons) in Information Systems and is a
qualified Chartered Accountant.
Mr. Townsend has served as one of our directors since April 1997. Mr.
Townsend is the founder of Townsend Analytics, Ltd., a developer of financial
data software, and for the past five years has served as its President.
Mr. Wood has served as one of our directors since December 1997. Mr. Wood is
a founder of Alta-Berkeley Venture Partners, a privately held venture capital
group, which was formed in 1982 and, for the past five years, has served as its
Senior Partner. Mr. Wood holds an MBA from Harvard Business School and BSc in
Industrial Engineering from Virginia Polytechnic Institute.
Mr. Verschoor has served as one of our directors since February 1999. Since
February 1998, he has served as the Investment Director of the NeSBIC CTE Fund.
From January 1997 to January 1998, he was managing partner of FMR International
BV, a Dutch information technology consulting firm. From 1994 to December 1996,
Mr. Verschoor held several positions in USoft UK Ltd., a development tools
software company. Mr. Verschoor holds an MBA from Rotterdam School of
Management/Erasmus University.
Mr. Goossens has served as one of our directors since February 1999. He is
currently a Senior Investment Manager and was previously a portfolio manager
with GIMV, having commenced there in September 1996. From September 1995 to
August 1996 he completed a MBA at Nijenrode University in the Netherlands.
Previously, since 1994, he worked in the field of high-tech services to the oil
industry. Mr. Goossens also holds a degree in Electromechanical engineering
from Leuven University in Belgium.
19
<PAGE>
Executive Compensation
The following table sets forth the cash compensation paid by us to our chief
executive officer and to all other executive officers for services rendered
during the fiscal years ended December 31, 1999, 1998 and 1997. The table is
based on the following:
. Mr. Benn began his employment with us in April 1998.
. While our executive officers are paid in Swiss francs, the table presents
the salaries paid to our executive officers calculated in U.S. dollars
based on a U.S. dollar/Swiss franc exchange rate of one U.S. dollar for
1.455 Swiss francs as of December 31, 1997, 1.376 Swiss francs as of
December 31, 1998 and 1.5915 Swiss francs as of December 31, 1999.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------- ---------------------------------------
Common Shares
Restricted Underlying
Stock Options Granted All Other
Name and Position Year Salary Bonus Other Awards ($) (# Shares) Compensation
----------------- ---- ------- ------ ----- ---------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Neil Gibbons, CEO....... 1999 $98,020 $8,168 -- -- 7,500 $4,524
1998 87,209 -- -- -- 40,000 5,233
1997 65,980 -- -- -- 50,000 4,948
Daniel Huber, COO....... 1999 $98,020 $8,168 -- -- 7,500 $4,524
1998 87,209 -- -- -- 40,000 5,233
1997 65,980 -- -- -- 50,000 4,948
Mark Benn, CFO.......... 1999 $67,860 $5,655 -- -- 17,500 --
1998 58,866 -- -- -- 95,000 --
</TABLE>
Mr. Gibbons and Mr. Huber each serve pursuant to an employment agreement
dated May 31, 1996. Each agreement is for an initial period of five years
terminating on May 31, 2001, subject to up to three consecutive three-year
terms. Under their agreements with us, Mr. Gibbons and Mr. Huber are each paid
an annual salary of 156,000 Swiss francs, which amounts to approximately
$98,020 based on an exchange rate of one US dollar for 1.5915 Swiss francs as
of December 31, 1999. The salaries payable to Messrs. Gibbons and Huber are
adjusted annually based on increases in the Swiss consumer price index. In
addition to their salaries, Mr. Gibbons and Mr. Huber are entitled to monthly
car allowances of 600 Swiss francs, which amounts to approximately $377 as of
December 31, 1999.
Option/SAR Grants in 1999 Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date
---- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Neil Gibbons, CEO.......... 7,500 2% 4.00 12/31/2001
Daniel Huber, COO.......... 7,500 2% 4.00 12/31/2001
Mark Benn, CFO............. 17,500 4% 4.00 12/31/2001
</TABLE>
Compensation of Directors. All of our directors receive reimbursement for
out-of-pocket expenses for attending board of directors meetings. We intend to
appoint additional members to the board of directors, including outside or non-
officer members. Any outside directors may receive an attendance fee for each
meeting of the board of directors. From time to time we may engage certain
members of the board of directors to perform services on our behalf and
compensate such persons for the services which they perform.
20
<PAGE>
Related Party Transactions
Our chief operating officer, Daniel Huber, is also chief executive officer
of Profilinvest SA, an investment management firm in Geneva, Switzerland. At
the present time and for the foreseeable future, Mr. Huber intends to devote
substantially all of his business time to us. However, Mr. Huber's association
with Profilinvest SA presents a potential conflict between his provision of his
services to us and to Profilinvest.
Mr. Stuart Townsend, one of our directors, is the founder and president of
Townsend Analytics, Ltd., the provider of the financial software used
extensively by us. In December 1998, we extended the scope our agreement with
Townsend Analytics, Ltd. and Townsend Analytics agreed not to undertake any new
licensing agreements for Switzerland, Germany, France, and the Benelux
countries until December 31, 2001. Pursuant to this extension, we agreed to pay
$250,000 in cash and issue 135,000 common shares, and we are further committed
to minimum royalty payments of $50,000 per month from July 1, 1999, $100,000
per month from January 1, 2000 and $150,000 per month from July 1, 2000.
As of December 31, 1998, we owed $1,000,000 to Alta-Berkeley Venture
Partners, one of the holders of our Series B Preferred Stock. This amount was
converted into Series C Preferred Stock in January 1999.
Limitation of Liability of Directors and Indemnification of Directors and
Officers
The Delaware General Corporation Law provides that corporations may include
a provision in their articles of incorporation relieving directors of monetary
liability for breach of their fiduciary duty as directors, provided that such
provision shall not eliminate or limit the liability of a director for:
. any breach of the director's duty of loyalty to the corporation or its
stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payment of a dividend or unlawful stock purchase or redemption;
or
. any transaction from which the director derived an improper personal
benefit.
Our articles of incorporation provide that directors are not liable to us or
our stockholders for monetary damages for breach of their fiduciary duty as
directors to the fullest extent permitted by Delaware law. In addition, our
bylaws provide that we may indemnify directors, officers, employees or agents
to the fullest extent permitted by law and we have agreed to provide such
indemnification to each of our directors.
The above provisions in our articles of incorporation and bylaws and in the
written indemnity agreements may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their fiduciary duty, even though such an action, if successful, might
otherwise have benefited us and our stockholders. However, we believe that the
foregoing provisions are necessary to attract and retain qualified persons as
directors.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 Act and is, therefore,
unenforceable.
21
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this prospectus by:
. each person who is known by us to be the beneficial owner of more than
five percent of our issued and outstanding common stock;
. each of our directors and executive officers; and
. all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
Number of Percentage
Name And Address Shares Owned
---------------- --------- ----------
<S> <C> <C>
Neil Gibbons.......................................... 1,486,770 11.0%
12, Av. des Morgines
1213 Petit-Lancy 1
Geneva, Switzerland
Daniel Huber.......................................... 1,186,770 8.8%
12, Av. des Morgines
1213 Petit-Lancy 1
Geneva, Switzerland
Stuart Townsend....................................... 185,000 1.4%
Townsend Analytics
100 South Wacker Drive
Suite 1500
Chicago, Illinois
Bryan Wood............................................ 2,464,257 18.4%
Alta-Berkeley Venture Partners
9 Saville Row
London, England W1X IAF
Frank Verschoor....................................... 1,502,823 11.3%
NeSBIC CTE Fund
Savannahweg 17
3542 AW
RM Utrecht, Netherlands
Paul Goossens......................................... 1,238,552 9.3%
GIMV
Karel Oomsstraat 37
B-2018 Antwerp, Belgium
Alta-Berkeley Venture Partners........................ 2,464,257 18.4%
9 Saville Row
London, England W1X IAF
NeSBIC CTE Fund....................................... 1,502,823 11.3%
3542 AW
RM Utrecht, Netherlands
GIMV.................................................. 1,232,552 9.2%
Karel Oomsstraat 37
B-2018 Antwerp, Belgium
All directors and executive officers as a group (six
persons).............................................. 8,064,172 59.4%
</TABLE>
22
<PAGE>
The table above includes the following:
. 90,000 shares of common stock underlying presently exercisable options
held by Mr. Gibbons;
. 90,000 shares of common stock underlying presently exercisable options
held by Mr. Huber; and
. 50,000 shares of common stock underlying presently exercisable options
held by Townsend Analytics, Ltd., of which Mr. Townsend is the president
and owner.
The shares that are listed in the table above under Mr. Wood's name are
owned by Alta-Berkeley V, C.V. and two affiliated funds. Mr. Wood is the senior
partner of Alta-Berkeley Venture Partners, which serves as the manager of the
funds.
The shares that are listed in the table above under Mr. Verschoor's name are
owned by the NeSBIC CTE Fund, of which Mr. Verschoor is the investment
director.
1,232,257 of the shares that are listed in the table above under Mr.
Goossens' name are owned by GIMV, of which Mr. Goossens is an investment
manager.
23
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 20,000,000 shares of common stock, of which, as
of the date of this prospectus, 13,346,967 shares were issued and outstanding.
As of the date of this prospectus, there are no outstanding options, warrants
or other securities which upon exercise or conversion entitle their holder to
acquire shares of common stock, except as set forth below.
Holders of shares of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders generally. The approval of
proposals submitted to stockholders at a meeting other than for the election of
directors requires the favorable vote of a majority of the shares voting,
except in the case of certain fundamental matters, such as certain amendments
to our certificate of incorporation, and certain mergers and reorganizations,
in which cases Delaware law and our bylaws require the favorable vote of at
least a majority of all outstanding shares. Stockholders are entitled to
receive such dividends as may be declared from time to time by the board of
directors out of funds legally available therefor, and in the event of
liquidation, dissolution or winding up, to share ratably in all assets
remaining after payment of liabilities. The holders of shares of common stock
have no preemptive, conversion, subscription or cumulative voting rights.
Preferred Stock
Under our certificate of incorporation, additional shares of preferred stock
may, without any action by the shareholders, be issued by our board of
directors from time to time in one or more series for such consideration and
with such relative rights, privileges and preferences as the board of directors
may determine. Accordingly, the board of directors has the power, without
shareholder approval, to fix the dividend rate and to establish the provisions,
if any, relating to voting rights, redemption rate, sinking fund, liquidation
preferences and conversion rights for any series of preferred stock issued in
the future, which could adversely affect the voting power or other rights of
the holders of common stock.
The board of directors authority to issue preferred stock provides a
convenient vehicle in connection with possible acquisitions and other corporate
purposes, but could have the effect of making it more difficult for a person or
group to gain control of FirstQuote. We do not have present plans to issue any
shares of preferred stock.
As of the date of this prospectus, there were 199,315 shares of preferred
stock outstanding, of which 3,000 shares are issued and outstanding as Series A
preferred stock and held of record by one stockholder, and 197,815 shares are
issued and outstanding of Series D preferred stock held of record by three
shareholders. We have the right to reissue the shares of any series of
preferred stock upon conversion to common stock. All issued shares of preferred
stock are fully paid and non-assessable.
Investor Rights Agreement
In 1998 and 1997, we sold shares of Series B and C preferred stock to a
group of institutional investors. In April 2000, those shares of Series B and C
preferred stock were converted into 5,707,501 shares of common stock. However,
in connection with the sale of the Series B and C preferred shares, we entered
into an Investors' Rights Agreement with the purchasers of the Series B and
Series C preferred stock. Pursuant to the Investors Rights Agreement, the
investors have the right to purchase a pro rata share of any issuance of our
capital stock or rights, options or warrants to purchase such capital stock.
Certain issuances of securities are excluded from the right of first refusal,
including securities issued pursuant to any stock option, stock purchase or
stock bonus plan, agreement or arrangement approved by the board of directors.
This right of first refusal expires in January 2006.
24
<PAGE>
The Investors' Rights Agreement mentioned above also provides that certain
actions we may take in the future will require the approval of the holders of a
majority of the outstanding common stock held by the investors. The corporate
actions requiring such approval include:
. entering into any agreement providing for the merger, liquidation or
sale of all or substantially all of our assets, or engaging in any
business activity which is fundamentally different from our current
business;
. any amendments to our certificate of incorporation or bylaws;
. acquiring the assets of another business if the value of that
acquisition exceeds $200,000;
. incurring any indebtedness or extending any credit not in the ordinary
course of our business;
. varying the terms of the employment of any of our highest paid employees
or directors; and
. engaging in any transactions with our affiliates.
Unit Warrants
From October through December 1996, we conducted a private placement in
which we issued 283,781 Series A units, each Series A unit consisting of one
Series A share and one Series A unit warrant. Each Series A unit warrant
originally entitled its holder to purchase one share of common stock at an
exercise price of $7.00 per share until July 31, 1998, at which time the
unexercised Series A unit warrants were to expire by their own terms. In
December 1997, we adjusted the exercise price of each Series A unit warrant to
$3.50 per share and extended the expiration date to December 31, 2000. The
Series A unit warrants are subject to customary anti-dilution provisions. As of
the date of this prospectus, 154,131 Series A warrants remain outstanding.
In June 1997, we conducted a private placement of units at $5.00 per unit.
Each of these units consisted of two shares of common stock and one warrant
which entitles its holder to purchase one share of common stock at an exercise
price of $3.50 per share. In the private placement, we sold 204,000 units for
the gross proceeds of $1,020,000. In February 1998, we effectively reduced the
price of the units from $5.00 per share to $4.00 per unit and issued an
additional 102,000 shares of common stock. As of the date of this prospectus,
all 204,000 of these warrants are outstanding.
In February 1998, we granted warrants to Ermgassen & Co. Ltd. as a finders'
fee in connection with the sale of shares of the Series C preferred stock. The
warrants allow Ermgassen & Co. to purchase up to 37,838 shares of our common
stock at an exercise price of $1.85 over a five year period. All 37,838 of
these warrants are outstanding as of the date of this prospectus.
In March 2000, we granted warrants to Ermgassen & Co. Ltd. as a finders'
fees in connection with the sale of common shares. The warrants allow Ermgassen
& co. to purchase up to 36,067 shares of common stock at an exercise price of
$6.80 over a five year period. All 36,067 of these warrants are outstanding as
of the date of this prospectus.
Stock Option Plan
We have adopted a 1997 stock option plan, which permits us to grant options
to our employees, officers, directors, consultants and independent contractors.
We may issue an aggregate of 2,000,000 shares of common stock pursuant to the
stock option plan. As of the date of this prospectus, we have granted under the
stock option plan options to purchase an aggregate of 1,136,300 shares of
common stock, at exercise prices ranging from $2.00 to $6.00 per share, to our
employees, officers, directors and consultants.
Dividends
We do not expect to pay cash dividends on our common stock in the
foreseeable future.
Transfer Agent
The transfer agent for our common stock is American Securities Transfer and
Trust Incorporated, 12039 West Alameda Parkway, Suite Z-2, Lakewood, Colorado
80228.
25
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock offered
hereby will be passed upon for us by Oppenheimer Wolff & Donnelly LLP, Newport
Beach, California.
EXPERTS
Arthur Andersen SA, independent auditors, have audited, as set forth in
their report appearing elsewhere in this prospectus, our financial statements
as of December 31, 1999, 1998 and 1997. We have included our financial
statements in the prospectus in reliance on Arthur Andersen SA's report, given
on their authority as experts in accounting and auditing.
Berk Katwijk Accountants, independent auditors, have audited, as set forth
in their report appearing elsewhere in this prospectus, financial statements of
Stockdata Amsterdam BV as of December 31, 1998 and 1997. We have included
Stockdata Amsterdam BV's financial statements in the prospectus in reliance on
Berk Katwijk Accountants' report, given on their authority as experts in
accounting and auditing.
26
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, which requires us to file reports, proxy statements and other
information with the SEC. These reports, proxy statements and other information
may be inspected and copied at the public reference facilities maintained by
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material can also be obtained from the public reference section
of the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the SEC maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of the SEC's Web
site is http://www.sec.gov.
We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933 with respect to the shares covered by this prospectus.
As permitted by the rules and regulations of the SEC, this prospectus, which is
part of the registration statement, omits certain information, exhibits,
schedules and undertakings set forth in the registration statement. Copies of
the registration statement and the exhibits are on file with the SEC and may be
obtained from the SEC's web site or upon payment of the fee prescribed by the
SEC, or may be examined, without charge, at the offices of the SEC set forth
above. For further information, reference is made to the registration statement
and its exhibits.
27
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FIRSTQUOTE INC.
Independent Auditors' Report.......................................... F-1
Consolidated Balance Sheets at December 31, 1999 and 1998............. F-2
Consolidated Statements of Operations for the years ended December 31,
1999 and 1998........................................................ F-3
Consolidated Statements of Cash Flows for the years ended December 31,
1999 and 1998........................................................ F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the
years ended December 31, 1999 and 1998............................... F-5
Notes to Consolidated Financial Statements............................ F-6
Unaudited Condensed Balance Sheet at June 30, 2000.................... F-19
Unaudited Condensed Consolidated Statements of Operations for the Six
Months Ended June 30, 2000 and June 30, 1999......................... F-20
Unaudited Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2000 and June 30, 1999......................... F-21
Notes to Unaudited Condensed Financial Statements..................... F-22
STOCKDATA AMSTERDAM BV
Report of Independent Auditors........................................ F-23
Balance Sheets as of December 31, 1998 and 1997....................... F-24
Statements of Income for the years ended December 31, 1998 and 1997... F-26
Notes to Financial Statements......................................... F-27
Notes to Unaudited Condensed Financial Statements..................... F-36
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1999...................................... F-37
</TABLE>
28
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
FirstQuote Inc., Delaware
We have audited the accompanying consolidated balance sheets of FirstQuote
Inc. and its subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years then ended. The consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated 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 FirstQuote Inc. and its subsidiaries as of December 31, 1999 and 1998, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States.
Arthur Andersen S.A.
Geneva
March 29, 2000
The accompanying notes are an integral part of these consolidated financial
statements.
F-1
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As Of December 31, 1999 and 1998
(Currency--U.S. dollars)
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
------------ -----------
ASSETS (Audited) (Audited)
------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents......................... $ 1,093,630 $ 229,450
Trade accounts receivable, net.................... 616,168 191,229
Subscriptions receivable from stockholders........ -- --
Prepaid expenses and other receivables............ 810,608 62,108
------------ -----------
Total current assets............................ 2,520,406 482,787
============ ===========
NON-CURRENT ASSETS
Property and equipment, net....................... 1,525,400 1,130,563
Goodwill.......................................... 3,307,110 --
Other assets...................................... 8,699 28,487
------------ -----------
Total non-current assets........................ 4,841,209 1,159,050
------------ -----------
Total Assets.................................... $ 7,361,615 $ 1,641,837
============ ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Trade accounts payable............................ $ 1,547,028 $ 658,700
Accrued liabilities............................... 807,341 102,274
Current portion of capital lease obligations...... 142,626 146,481
Advances/convertible loans from stockholders/
related parties.................................. -- 1,000,000
Deferred income................................... 895,747 170,808
------------ -----------
Total current liabilities....................... 3,392,742 2,078,263
------------ -----------
LONG TERM CAPITAL LEASE OBLIGATIONS
Capital lease obligation, net of current portion.. 29,177 166,621
------------ -----------
STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value, 10,000,000
shares authorized;
Class A: 6,500 and 68,500 shares issued and
outstanding.................................... 7 69
Class B: 1,923,716 shares issued and
outstanding.................................... 1,924 1,924
Class C: 3,783,784 shares issued and
outstanding.................................... 3,784 --
Class D: 197,815 shares issued and outstanding.. 198 --
Common Stock, $0.0001 par value, 20,000,000 shares
authorized;...................................... 6,423 5,781
6,423,409 and 5,781,309 shares issued and
outstanding Additional paid-in capital........... 16,703,759 6,381,315
Cumulative translation adjustment................. 907,495 (148,610)
Accumulated deficit............................... (13,683,893) (6,843,526)
------------ -----------
Total stockholders' equity...................... 3,939,697 (603,047)
------------ -----------
Total Liabilities and Shareholders' Equity...... $ 7,361,616 $ 1,641,837
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, 1999 and 1998
(Currency--U.S. dollars)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------------
1999 1998
----------- -----------
(Audited) (Audited)
<S> <C> <C>
REVENUE.............................................. $ 1,778,459 $ 534,715
OPERATING EXPENSES
Cost of Revenue.................................... 2,157,659 1,209,387
Selling & Market Development Expenses.............. 405,256 221,210
General & Administrative Expenses.................. 4,796,643 2,861,662
----------- -----------
7,359,558 4,292,259
----------- -----------
OPERATING RESULT..................................... (5,581,099) (3,757,544)
OTHER INCOME AND EXPENSES
Interest Income/(Expense).......................... 99,536 (3,441)
Foreign Exchange Gain/(Loss), net.................. (1,358,805) 339,756
----------- -----------
(1,259,269) 336,315
----------- -----------
NET LOSS............................................. $(6,840,368) $(3,421,229)
=========== ===========
Basic and diluted weighted average
number of common shares............................. 6,102,359 5,781,309
=========== ===========
Basic and diluted net loss per common share.......... $ (1.12) $ (0.59)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended December 31, 1999 and 1998
(Currency--U.S. Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1999 1998
----------- -----------
(Audited) (Audited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss............................................ $(6,840,367) $(3,421,229)
Adjustments to reconcile net loss to net cash used
in operating activities:
Exchange (gain)/loss............................... 1,358,805 (339,756)
Depreciation and amortization...................... 646,699 520,421
Provision for doubtful debtors..................... 88,875 15,840
Interest accrued on loans payable.................. -- 5,417
Stock and stock options issued as compensation
cost.............................................. 125,000 --
Write-off of goodwill.............................. 21,336 --
Increase/decrease resulting from changes in:
Trade accounts receivable.......................... (271,947) (141,138)
Prepaid expenses and other receivables............. (304,052) 75,999
Trade accounts payable............................. 320,886 463,766
Accrued liabilities and provisions................. 249,912 (77,174)
Deferred income.................................... 179,516 137,052
----------- -----------
Net cash used-in operating activities............ (4,425,337) (2,760,802)
CASH USED IN INVESTING ACTIVITIES:
Purchase of equipment............................... (540,942) (464,211)
Purchase of subsidiary.............................. (245,031) --
Other non-current asset expenditures................ (102,291) (2,613)
----------- -----------
Net cash used-in investing activities............ (888,264) (466,824)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Issuance of stock................................... 7,000,000 --
Commission on issuance of stock..................... (70,000) --
Issuance of stock upon exercise of warrants......... 681,275 --
Issuance of stock upon exercise of options.......... 20,000 --
Collection of stock subscriptions receivable........ -- 2,000,000
Advances from stockholders and related parties...... -- 1,000,000
Payment to stockholder and related party............ -- --
Reimbursements of advances from stockholders and
related parties.................................... (1,000,000) (96,089)
Payment of capital lease obligations................ (150,795) (75,537)
----------- -----------
Net cash provided by financing activities........ 6,480,480 2,828,374
Effect of Exchange Rate Changes on Cash and cash
equivalents......................................... (302,699) 59,438
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS......................................... 864,180 (339,814)
CASH AND CASH EQUIVALENTS AT BEGINNING............... 229,450 569,264
----------- -----------
CASH AND CASH EQUIVALENTS AT END..................... $ 1,093,630 $ 229,450
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For The Years Ended December 31, 1999 and 1998
(Currency--U.S. Dollars)
<TABLE>
<CAPTION>
Class A Class D
Preferred Class B Class C Preferred
Common stock stock Preferred stock Preferred stock stock
---------------- --------------- ---------------- ---------------- --------------
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
--------- ------ ------- ------ --------- ------ --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1997................... 5,375,272 5,375 147,938 148 1,923,716 1,924 -- -- -- --
Issuance of common stock
to repay convertible
loan................... 145,161 145
Conversion of preferred
to common stock........ 158,876 159 (79,438) (79)
Issuance of common stock
as a result of price
reset on private
placement units........ 102,000 102
Net loss................
Translation loss........
--------- ----- ------- --- --------- ----- --------- ----- ------- ---
Balance at December 31,
1998................... 5,781,309 5,781 68,500 69 1,923,716 1,924 -- -- -- --
Conversion of preferred
to common stock........ 124,000 124 (62,000) (62)
Issuance of preferred
stock through private
placement offering..... 3,783,784 3,784
Issuance of common stock
pursuant to agreement
with Townsend
Analytics, Ltd......... 135,000 135
Issuance of common stock
pursuant to exercise of
warrants and stock
options................ 204,650 205
Issuance of stock
pursuant to purchase of
Stockdata B.V.......... 178,450 178 197,815 198
Net loss................
Translation gain........
--------- ----- ------- --- --------- ----- --------- ----- ------- ---
Balance at December 31,
1999................... 6,423,409 6,423 6,500 7 1,923,716 1,924 3,783,784 3,784 197,815 198
========= ===== ======= === ========= ===== ========= ===== ======= ===
</TABLE>
<TABLE>
<CAPTION>
Additional Cumulative Total
paid in translation Accumulated stockholders' Comprehensive
capital adjustment deficit equity less Loss
---------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1997................... 6,156,642 131,707 (3,422,297) 2,873,499 (3,290,590)
Issuance of common stock
to repay convertible
loan................... 224,855 225,000
Conversion of preferred
to common stock........ (80) --
Issuance of common stock
as a result of price
reset on private
placement units........ (102) --
Net loss................ (3,421,229) (3,421,229) (3,421,229)
Translation loss........ (280,317) (280,317) (280,317)
---------- --------- ----------- ---------- ----------
Balance at December 31,
1998................... 6,381,315 (148,610) (6,843,526) (603,047) (3,701,546)
Conversion of preferred
to common stock........ (62) --
Issuance of preferred
stock through private
placement offering..... 6,926,216 6,930,000
Issuance of common stock
pursuant to agreement
with Townsend
Analytics, Ltd......... 249,865 250,000
Issuance of common stock
pursuant to exercise of
warrants and stock
options................ 701,070 701,275
Issuance of stock
pursuant to purchase of
Stockdata B.V.......... 2,445,347 2,445,723
Net loss................ (6,840,367) (6,840,367) (6,840,367)
Translation gain........ 1,056,106 1,056,106 1,056,106
========== ========= =========== ========== ==========
Balance at December 31,
1999................... 16,703,751 907,496 (13,683,893) 3,939,893 (5,874,263)
========== ========= =========== ========== ==========
</TABLE>
F-5
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 1999 and 1998
1. Description of the Company and its subsidiaries
FirstQuote Inc. (previously Virtual Telecom, Inc., the "Company") was
incorporated in Delaware on July 3, 1996 for the purpose of holding all the
shares of FirstQuote SA (previously Virtual Telecom SA), a Swiss corporation
formed in 1994. The owners of FirstQuote SA contributed all of the FirstQuote
S.A. shares in consideration for 3,194,540 common shares of FirstQuote Inc. The
accompanying financial statements have been prepared as if the acquisition had
occurred at FirstQuote SA's inception (May 19, 1994), using the historical
costs of each entity.
Unless the context otherwise requires, all references to the Company include
its wholly-owned subsidiaries, FirstQuote SA, a Swiss corporation, FirstQuote
Limited, an English corporation founded in December 1997, and FirstQuote
Stockdata BV, a Dutch corporation.
The Company has incurred operating losses and negative cash flows since
inception. As of December 31, 1999 the Company had a working capital deficit of
$872,337. In March 2000, the Company sold 1,061,057 shares of Common Stock for
a total consideration of $7,155,184. The plan of operations for 2000 and
thereafter will require increases in expenditures above those incurred to date.
The ability of the Company to continue operations as planned will be dependent
on the ability of the Company to generate increased revenues, produce positive
margins and/or raise additional finance.
2. Summary of significant accounting policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States 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 from these estimates.
Revenue recognition
The Company's subsidiary develops, installs, and maintains systems that
allow its clients to access the financial information and market data services
that it provides over an Internet connection as well as to access the Internet
at large. The Company therefore derives both single installation and recurring
revenues.
Installation revenues and related costs are recognized upon completion of
installation. Where installation revenues exceed installation costs, then
installation revenues are recognized over the service period and not at
installation.
Recurring revenues for financial data services and network services are
normally invoiced in advance. The resulting amount of unearned income not
attributable to the period of invoicing is reflected under current
F-6
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
liabilities as deferred revenue, and recognized in the profit and loss account
according to the month of applicability of the underlying services.
Foreign currency translation
The Company accounts for foreign currency transactions in accordance with
Statement of Financial Accounting Standard (SFAS) No. 52, "Foreign Currency
Translation" which provides for the translation of assets and liabilities at
the end of period current rate and of operations and cash flows at the rates
existing at the date of the transaction, or appropriate average. Foreign
currency transactions are translated into the functional currency at the rate
existing at the date of the transaction and outstanding balances are revalued
at the year-end rate with the resulting exchange gain or loss being included in
the statement of operations.
The functional currency of the Company's main operating subsidiary,
FirstQuote SA, is the Swiss Franc (CHF), and of FirstQuote Stockdata BV is the
Dutch Guilder (NLG). The functional currency of FirstQuote Inc. and FirstQuote
Limited is US dollars.
The resulting gain or loss on translation into the reporting currency is
included as a separate component of equity under "cumulative translation
adjustment".
Cash and cash equivalents
The Company considers all highly liquid debt instruments with an initial
maturity of three months or less to be cash equivalents.
Property and equipment
Property and equipment is stated at cost and depreciated using the straight-
line method over their estimated useful lives, ranging from 3 to 5 years.
Leasehold improvements are depreciated over the shorter of the life of the
lease or the life of the asset. Upon sale, any gain or loss is included in the
statement of operations. Maintenance and minor replacements are charged to
operations as incurred.
Goodwill
Goodwill is computed as being the difference between the purchase price and
the fair value of the net assets acquired.
Goodwill is amortized over the estimated product or technology cycle of the
underlying acquisition, generally being three years.
The Company reviews goodwill for impairment whenever events or changes in
circumstances indicate that the carrying amount of the underlying asset may not
be recoverable. Such carrying amount is reduced to its estimated fair value in
the period the asset is determined to be impaired.
Income taxes
The Company utilizes the liability method to account for income taxes. Under
this method, deferred taxes are determined based on the differences between the
financial statement and tax bases of assets and liabilities, using enacted tax
rates in effect for the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.
The Company's subsidiary, FirstQuote SA, is incorporated in Switzerland. The
tax charge in Switzerland is an accumulation of the taxes due to the city, the
canton (state) and the federal authorities.
F-7
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
Stock-based Compensation
The Company accounts for stock based compensation in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation", which provides for a fair value based method of accounting
for grants of equity instruments to employees or suppliers in return for goods
or services. With respect to stock-based compensation to employees, SFAS No.
123 permits the continued application of the provisions prescribed by APB
Opinion No. 25. However, pro forma disclosure of net income and earnings per
share must be presented as if the fair value based method had been applied in
measuring compensation cost.
The Company has elected to continue with the accounting method prescribed by
APB Opinion No. 25 and presented the required pro forma disclosures of SFAS 123
in Note 11.
The Company has elected to continue with the accounting method prescribed by
APB Opinion No. 25 and presented the required pro forma disclosures of SFAS 123
in Note 0.
Fair value of financial instruments
The carrying value of financial instruments included in current assets and
liabilities approximates fair value because of the short maturity of these
items.
Segment Reporting
Statement No. 131, Disclosures about Segments of an Enterprise and Related
Information, requires certain disclosures about segments of an enterprise, if
applicable, and major customers. The Company manages its activities as one
segment under the guidelines of this standard.
Advertising expenditure
Advertising is expensed as incurred.
Net loss per common share
Net loss per common share is based on the net loss divided by the weighted
average number of common shares outstanding.
Convertible preferred stock and outstanding warrants have not been included,
as their effect would be antidilutive.
Recent Accounting Pronouncements
Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities (Issue Date 6/98) establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The Statement requires
that changes in the derivative's fair value be recognized in earnings unless
specific hedge accounting criteria are met. Special accounting for qualifying
hedges allows a derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. Statement No. 133 is effective for fiscal years beginning
after June 15, 2000 and must be applied to (a) derivative instruments and (b)
certain derivative instruments embedded in hybrid contracts that were issued,
acquired, or substantively modified after December 31, 1997. The Company has
not yet quantified the impact of adopting Statement No. 133.
F-8
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current year's presentation.
3. Trade Receivables
<TABLE>
<CAPTION>
December 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Trade accounts receivable.............................. $ 727,050 $ 205,764
Less: Allowance for doubtful accounts.................. (110,882) (14,535)
--------- ---------
Trade accounts receivable, net......................... $ 616,168 $ 191,229
========= =========
</TABLE>
Accrued income of $175,207 and (1998: $170,808) is included in trade
accounts receivable.
4. Aquisition of Stockdata BV
In December 1999, the Company acquired all of the outstanding capital shares
of Stockdata Amsterdam BV, a limited liability company organized under the laws
of The Netherlands and located in Amsterdam, The Netherlands. Stockdata is
engaged in the distribution of real-time market data products to the Benelux
region, primarily through the use of datacast technologies via cable networks.
Subsequent to the acquisition, the name of the acquired company was changed to
FirstQuote Stockdata BV.
The acquisition was conducted pursuant to a Securities Purchase Agreement
dated December 24, 1999 between the Company and the stockholders of Stockdata.
Pursuant to the agreement, the Stockdata stockholders transferred to the
Company all of the outstanding capital shares of Stockdata in consideration of
the Company's payment of up to $3,750,000, payable as follows: $245,031 in
cash; $1,059,239 in the assignment to the Stockdata Shareholders of Stockdata
receivables; and the Company's issuance of 197,815 shares of Series D preferred
stock and 148,450 shares of common stock, all such shares being valued at
approximately $6.50 per share. An additional 30,000 of the Company's common
shares are issuable to the sellers 18 months from the closing date, subject to
the Company's right to offset against the shares any damages or costs it incurs
as a result of sellers' breach of any of its representations, warranties or
agreements under the Securities Purchase Agreement. The value of this
contingent consideration has been included in the cost of acquisition and
recorded at the date of acquisition.
The net assets acquired were valued at their recorded fair value at the date
of acquisition, based on management estimate. The purchase price was allocated
as follows:
<TABLE>
<S> <C>
Receivables due from stockholders............................ $1,059,239
Other current assets......................................... 435,245
Property and equipment....................................... 509,294
Current liabilities.......................................... (1,582,224)
Goodwill..................................................... 3,328,446
----------
$3,750,000
</TABLE>
The acquisition was accounted for under the purchase method of accounting.
The results of operations of Stockdata for the period from the date of the
acquisition have been included in the consolidated financial statements.
F-9
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition had taken place on January 1 of
each year:
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenue............................................... $ 4,036,237 $ 3,170,274
Net loss, after amortised goodwill.................... (7,874,477) (4,597,184)
Amortised goodwill included in net loss............... (1,136,591) (1,314,245)
Basic and diluted net loss per share.................. (1.28) (0.77)
</TABLE>
The unaudited consolidated pro forma information is not necessarily
indicative of the combined results that would have occurred had the acquisition
occurred on those dates, nor is it indicative of the results that may occur in
the future.
5. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
----------- ----------
<S> <C> <C>
Software............................................... $ 20,008 $ 23,761
Computer equipment..................................... 1,775,514 773,837
Computer equipment under capital lease................. 41,840 48,393
Furniture and fixtures................................. 159,435 112,387
Vehicles under capital lease........................... 74,851 61,065
Network equipment under capital lease.................. 759,186 878,085
----------- ----------
2,830,834 1,897,528
Less: Accumulated Depreciation......................... (1,305,434) (766,965)
----------- ----------
$ 1,525,400 $1,130,563
----------- ----------
</TABLE>
Depreciation for the year amounted to $646,699 and (1998: $520,421),
including $295,837 (1998: $301,828) in depreciation of assets under capital
leases.
6. Goodwill
Goodwill results from the excess of purchase cost over the estimated fair
value of net assets acquired resulting from the acquisition of Stockdata
Amsterdam BV, as described in Note 4. An amount of $3,328,446 was allocated to
goodwill to be amortized over three years.
<TABLE>
<CAPTION>
December 31,
-----------------
1999 1998
---------- -----
<S> <C> <C>
Goodwill upon acquisition of subsidiary................ $3,328,446 $ --
Less: Accumulated amortisation......................... (21,336) --
---------- -----
Goodwill, net.......................................... $3,307,110 $ --
========== =====
</TABLE>
7. Capital lease obligations
The Company's Swiss subsidiary is obligated under capital leases (network,
computer and cars) and operating leases (offices) expiring at various dates
through September 2002.
F-10
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
Minimum lease payments for leases that have initial or remaining non-
cancelable terms in excess of one year are:
<TABLE>
<CAPTION>
Operating Leases Capital Leases
---------------- --------------
<S> <C> <C>
Future minimum lease payments:
2000.......................................... $396,547 $157,916
2001.......................................... 339,268 13,597
2002.......................................... 197,510 9,577
2003.......................................... 125,894 811
-------- --------
Minimum lease payments.......................... $933,325 181,090
--------
Less: Amount representing interest.............. 9,287
--------
171,803
Less: Current maturities........................ 142,626
--------
Long term capital lease obligations............. $ 29,177
========
</TABLE>
8. Advances and convertible loans from stockholders and related parties
As at December 31, 1998 the Company owed $1,000,000 in respect of a loan
convertible into preferred stock of the Company upon the conclusion of
additional equity financing, or redeemable, at the option of the lender. In
January 1999, the loan was converted into 540,541 shares of Series C Preferred
Stock (see Note 12). No interest was paid on the loan, nor did it carry any
beneficial conversion features.
9. Related party transactions
Software Solution provider
In January 1997 the Company entered into a software distributor agreement
with a financial software solution provider as disclosed in Note 10.
Employment agreements
Commencing May 1, 1996, the Company entered into five-year term employment
agreements with two stockholders. Both agreements provide for compensation of
at least approximately $5,600 per month plus monthly car allowances of
approximately $400 per month. The agreements can be extended up to three
additional three-year terms and are subject to yearly consumer price index
increases. Total compensation paid under these agreements amounted to $221,426
(1998: $144,480).
Office lease
The Company entered into a month to month sublease agreement with a company
affiliated with a stockholder, whereby the Company recovers certain costs for
the use of its premises, utilities and computer systems usage. The agreement
was terminated in June 1999. Amounts charged to the affiliate during the year
amounted to approximately $5,400 (1998: $9,000).
10. Major agreements
Network equipment service agreement
In September 1996, the Company entered into an equipment purchase and
network maintenance service agreement with a major computer equipment
manufacturer, whereby the Company committed to outsource the
F-11
<PAGE>
FIRS TQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
maintenance and operation of the network for a total of approximately $635,000
from 1997 through 2000. Decreasing cancellation fees apply if the Company
terminates the agreement before the end of the four-year term of the agreement,
ranging from approximately $480,000 to $100,000.
During December 1998, the Company concluded negotiations to take over
certain operations and maintenance elements envisaged within the agreement for
a reduction in the amount of ongoing payments.
There are other major suppliers of similar equipment and services. A change
in supplier, however, could cause disruption in service and a possible loss of
revenues which would adversely affect future operating results.
License to use and disseminate stock market information
In August 1996, the Company entered into a 30-month license agreement to use
and disseminate stock market information. After the initial term, the agreement
is renewable in twelve-month increments, with a 90-day cancellation notice
period. According to the default terms of the agreement, a twelve-month renewal
period commenced in February 2000.
Financial software solution provider
In January 1997 the Company entered into a 3-year software distributor
agreement with a financial software solution provider based in the USA
controlled by a director of the Company. Under the agreement, the Company is
required to pay royalties based on the number of its clients using the
software. After the initial term, the agreement is renewable on a 12 month
basis. A 90-day cancellation period applies throughout the contract.
In December 1998 the Company extended the scope of this agreement whereby
the software provider agreed not to undertake any new licensing agreements for
Switzerland, Germany, France, and the Benelux countries until December 31,
2001. Under the terms of the agreement, the Company was committed to paying a
single amount of $500,000 ($250,000 of which was settled in February 1999 in
cash and the remainder in March 1999 through the issuance of 135,000 common
shares), and is further committed to minimum royalty payments of $50,000 per
month from July 1, 1999, $100,000 per month from January 1, 2000 and $150,000
per month from July 1, 2000.
While there are other providers of related financial software solutions on
the market, the specialist nature of the software solutions provided under the
agreement means that the Company places significant reliance on this supplier
in terms of securing future revenues.
11. Income Taxes
Deferred income tax assets and liabilities are provided for temporary
differences between financial statement income and amounts currently taxable.
For US tax reporting purposes the Company has a net operating loss carry
forward of approximately $1,786,144 (1998: $1,034,443) to offset federal income
taxes which expire at different dates through the year 2013. These net
operating losses could be restricted due to a change in the Company's
ownership.
For Swiss reporting purposes the Company has a net operating loss carry
forward of $11,987,490 (1998: $5,826,944) to offset federal income taxes in
Switzerland which expire between the years 2003 and 2006.
F-12
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
Temporary differences that give rise to deferred income tax assets and
liabilities are:
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net operating loss carry forward................... $ 3,484,374 $ 1,760,666
Less: Valuation allowance.......................... (3,484,374) (1,760,666)
----------- -----------
Net deferred tax asset............................. $ -- $ --
----------- -----------
</TABLE>
A valuation allowance is used to reduce the deferred tax asset to a level
which, more likely than not, will be realized. A valuation allowance for the
full amount of deferred tax assets has been recorded since certain doubts exist
regarding the use of the tax losses carried forward to offset future taxable
income.
12. Stockholders' equity
Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock, $.001
par value ("Common Stock"). As of December 31, 1999, 6,423,409 shares were
issued and outstanding and held by approximately 313 stockholders of record.
As of December 31, 1999, there are no outstanding options, warrants or other
securities, which upon exercise or conversion entitle their holder to acquire
shares of Common Stock, other than the Unit Warrants, Series A, B and C
Preferred Stock and options issued under the Stock Option Plan, described
below.
Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. The approval of proposals
submitted to stockholders at a meeting other than for the election of directors
requires the favorable vote of a majority of the shares voting, except in the
case of certain fundamental matters (such as certain amendments to the
Certificate of Incorporation, and certain mergers and reorganizations), in
which case Delaware law and the Company's Bylaws require the favorable vote of
at least a majority of all outstanding shares. Stockholders are entitled to
receive such dividends as may be declared from time to time by the Board of
Directors out of funds legally available therefore, and in the event of
liquidation, dissolution or winding up of the Company to share ratably in all
assets remaining after payment of liabilities. The holders of shares of Common
Stock have no pre-emptive, conversion, subscription or cumulative voting
rights.
In April 1998, the Company issued 145,161 shares of its common stock in
conversion of $225,000 of loan principal at a price of $1.55 per share.
In March 1999, the Company issued 135,000 shares in settlement of half of
the amount due to the financial software solution provider as reflected in Note
10.
In December 1999, the Company issued 178,450 shares as an element of the
purchase consideration for the acquisition of Stockdata BV, as reflected in
Note 4.
In March 2000, by way of a private placement, the Company sold 1,061,057
shares of its Common Stock for a total consideration of $7,155,184.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock,
$.001 par value ("Preferred Stock"). The Company's Board of Directors is
authorized to issue from time to time, without shareholder
F-13
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
authorization, in one or more designated series or classes, any or all of the
authorized but unissued shares of Preferred Stock with such dividend,
redemption, conversion and exchange provisions as may be provided in the
particular series.
The Board of Directors of the Company designated an initial series of
Preferred Stock as "Series A Preferred Stock" consisting of 750,000 authorized
shares with a par value of $0.001 and a liquidation preference of $3.50. In
November 1997 the conversion price of the Series A Preferred Stock was reset to
$1.75 per share, which allows converting one Series A Preferred Stock into two
shares of Common Stock. The Series A Preferred Stock does not carry dividend
rights or any other rights senior to the Common Stock and has equal voting
rights with the Common Stock. The Series A Preferred Stock is redeemable by the
Company, at a price equal to the liquidation preference plus any unpaid
dividends, at the earlier of one year from the date of initial issuance or upon
the closing of a public offering of the Company's Common Stock where
immediately following such offering the Common Stock is listed on the New York
Stock Exchange or the NASDAQ Stock Market. No shares of Series A Preferred
Stock shall be redeemed without the consent of the majority of outstanding
shares of Series B Preferred Stock.
During 1996, the Company issued 283,781 units of its securities ("Units"),
each Unit consisting of one share of Series A Preferred stock and one Common
Stock purchase warrant ("Unit Warrant") for a total consideration of $875,520,
net of $117,713 in issuance costs. In connection therewith, the Company also
issued 200,000 shares of its common stock to related parties as commissions for
the issuance of the Units. The shares were valued at $.25 a share, the opening
trading price of the Company's stock in November 1996, resulting in a $50,000
deduction from the Preferred Stock proceeds.
As at December 31, 1999 277,281 shares of Series A Preferred Stock had been
converted into 554,562 Common Shares, and 6,500 shares of Series A Preferred
Stock remained outstanding. In February 1999, a further 5,000 shares of Series
A Preferred Stock were converted.
In December 1997, the Board of Directors of the Company designated a second
series of preferred shares as "Series B Preferred Stock" consisting of
1,923,716 authorized shares with a par value of $0.001. On December 30, 1997,
the Company sold 1,923,716 shares of its Series B Preferred Stock to three
affiliated Alta-Berkeley venture capital funds (collectively referred to as
"Alta-Berkeley") for $3,000,000 of which $1,000,000 was received in December
1997 and $2,000,000 in March 1998.
In January 1999, the Board of Directors of the Company designated a third
series of preferred shares as "Series C Preferred Stock" consisting of
3,783,784 authorized shares with a par value of $0.001. On January 25, 1999,
the Company sold 3,783,784 shares of its Series C Preferred Stock to five
parties, including Alta-Berkeley, two other venture capital funds, a bank and a
private investor, for a total consideration of $7,000,000.
Concurrent with the issuance of the Series B Preferred Stock, the Company
and Alta-Berkeley entered into an Investors' Rights Agreement, which has been
amended to include the holders of the Series C Preferred Stock. Pursuant to the
terms of this agreement, the Company increased the authorized number of its
directors to nine. Holders of the shares of both the Series B Preferred Stock
as a class, and the Series C Preferred Stock as a class, are each entitled to
elect two members of the Company's Board (four in total). In addition, the
Company has granted the holders of the Series B Preferred Stock and the Series
C Preferred Stock (the "Holders") the right of first refusal to purchase a pro
rata share of any new equity securities which the Company may issue. The right
of first refusal expires on January 24, 2006. The Investors' Rights Agreement
also grants the Holders registration rights in certain circumstances as well as
certain approval and disclosure rights over certain management and strategic
matters.
F-14
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
The shares of both the Series B Preferred Stock and the Series C Preferred
Stock have a liquidation preference of the greater of (i) $3.50 per share if
the event of liquidation, dissolution or winding up occurs on or before
December 31, 2000 and thereafter of $5.20 per share and (ii) $1.85 plus a pro-
rata share of any excess liquidation proceeds accruing to the common
shareholders. The shares are all convertible at any time into shares of the
Company's Common Stock on a one-for-one basis, subject to adjustment pursuant
to certain anti-dilution rights, and have full voting rights.
Warrant Issues
During 1996, the Company issued 283,781 units ("Units") of its securities,
each Unit consisting of one Series A Preferred Share and one Common Stock
purchase warrant ("Unit Warrant").
During 1997, the Company issued a further 204,000 units ("Units") of its
securities, each Unit consisting of two Common Shares and one Unit Warrant.
Each Unit Warrant entitles its holder to purchase one share of Common Stock
at an exercise price of $3.50 per share until December 31, 2000, at which time
the unexercised Unit Warrants shall expire by their own terms. The Unit
Warrants are subject to anti-dilution provisions.
As at December 31, 1999 194,650 Unit Warrants had been exercised and
293,131 Unit Warrants remained outstanding. In February 1999, a further
130,000 Unit Warrants were exercised.
Stock Option Plan
During 1997, the Company adopted a Stock Option Plan (the "Plan"). As at
December 31, 1999 a total of 750,000 common shares may be issued under the
Plan and have been reserved by the Directors for that purpose. Pursuant to the
issuance of the Series C Preferred Stock an additional 400,000 shares were
reserved for the Plan. The Board of Directors determines the terms and
exercise prices of all options to be granted.
Officers and directors of the Company, as well as consultants, independent
contractors or other service providers are eligible for "Non-qualified
Options". Only employees of the Company or its subsidiaries (including
officers and directors) are eligible to receive grants of "Incentive Stock
Options". No option may be granted under the Plan after March 19, 2008, but
options granted before that date may be exercisable after that date. Options
granted under the Plan are subject to a minimum vesting period of one year.
Pro forma information concerning the Company's net loss and earnings per
share had compensation cost on all options granted been determined consistent
with SFAS No. 123, is as follows:
<TABLE>
<CAPTION>
Year Ended December
31,
---------------------
1999 1998
---------- ----------
<S> <C> <C>
Net loss, as reported.................................... $6,840,368 $3,421,229
Net loss, pro forma...................................... 8,370,902 3,470,629
Basic and diluted loss per share, as reported............ $ 1.14 $ 0.59
Basic and diluted loss per share, pro forma.............. 1.40 0.60
</TABLE>
The effects of applying SFAS No. 123 in this pro-forma disclosure are not
indicative of future amounts.
F-15
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
The following additional information has been used in determining the above
disclosures regarding the Plan:
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------
1999 1998
---------- -------
<S> <C> <C>
Weighted-average assumptive information used:
Risk-free rate........................................... 5.00% 5.00%
Expected life (days)..................................... 992 1,113
Expected volatility...................................... 101% 57%
Weighted-average grant-date fair value of options.......... $ 3.18 $ 0.13
Options granted during the year:
Directors and employees.................................. 481,300 380,000
Fair value of options granted during the year:
Directors and employees.................................. $1,530,534 $49,400
</TABLE>
A summary of the status of the Company's stock option plan as of December
31, 1999 and 1998 is presented below:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------------
1999 1998
------------------------ -----------------------
Weighted- Weighted-
Average Average
Number of Excercise Number of Exercise
Options Price Options Price
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at the beginning
of the year................. 655,000 $2.00 310,000 $3.33
Add:Granted during the year.. 481,300 5.85 380,000 2.00
Less:Exercised during the
year........................ 10,000 2.00 -- --
Forfeited during the
year..................... -- -- 35,000 2.00
--------- ----- ------- -----
Outstanding at the end of the
year........................ 1,126,300 $2.97 655,000 $2.00
Weighted average remaining
contractual life............ 718 days 910 days
Exercisable at the end of the
year........................ 645,000 $2.12 200,000 $2.00
--------- ----- ------- -----
</TABLE>
In March 1998, the strike price applicable to all of the options existing at
that time was reset to $2.00. Since the revised fair value of the options based
on the reset strike price was lower than the amount originally recorded as
compensation cost, no adjustment was made as a result of the reset.
13. Retirement plans
All of the Company's Swiss-based employees, including its executive
officers, are required to participate in the pension or retirement plans
required by law in Switzerland, which are similar to defined contribution
plans.
The Assurance Vieillesse et Survivants ("AVS") is a state-administered plan,
under which the Company and the employee each contribute an amount of 5.05% of
salary to the AVS fund. The Prevoyance Professionnelle plan ("LPP") is
administered by an independent insurance company whereby amounts of
F-16
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
between 5% and 15% of each employee's compensation are contributed to the LPP
fund. The Company and employees each contribute 50% of this cost. In addition
to the legally required plans, the Company undertakes supplemental LPP programs
for its management.
The Company has no pension or retirement liability other than its obligation
to make employer and employee contributions to the AVS and LPP funds. Amounts
charged to income during the year in respect of the AVS and LPP plans
(including supplemental programs) for executive officers and other employees
was approximately $361,068 (1998: $176,561).
All of the Company's Dutch-based employees, including its executive
officers, are required to participate in the pension or retirement plans
required by law in the Netherlands, which are similar to defined contribution
plans.
The Algemene Ouderdoms Wet ("AOW") is a state-administered plan under which
the employees contribute an amount of 17.9% of salary to the AOW fund. The
Collectieve Pensioenregeling is administered by an independent insurance
company whereby amounts starting at 6% of the employee's compensation are
contributed to the Collectieve Pensioenregeling. The employee contributes the
first 6% and the company provides the balance such that, combined with the AOW,
a pension of 70% of the employee's annual compensation can be provided
commencing at the age of 65.
The company has no pension or retirement liability other than its obligation
to make employer and employee contributions to AOW and Collectieve
Pensioenregeling were approximately NLG 65.000 (1998: NLG 90.000). The Company
does not maintain any plans for other post-employment or post-retirement
employee benefits.
14. Subsequent events
On March 20, 2000, the Company sold 1,061,057 shares of its Common Stock for
a total consideration of $7,155,184, as disclosed in Note 11.
[The following paragraph is unaudited]
In March 2000, the Company granted warrants to Oakes Fitzwilliams & Co and
Ermgassen & Co. as a finders' fees in connection with the sale of common
shares. The warrants allow the holders to purchase up to 36,067 shares of
common stock at an exercise price of $6.80 over a five year period. All 36,067
of these warrants are outstanding as of the date of this prospectus. The
warrants entitle the holders to subscribe for common shares in the Company at
the same price at which the common shares were sold, for a period of 5 years
from the date of issue. The exercise price of the warrants was tied to the
issue price of the common shares sold under the private placement, since such
was considered to reflect most accurately the fair market value of the stock at
the time. As such, no compensation expense was recorded under APB 25.
[The following paragraph is unaudited]
In April 2000, the Company converted 1,923,716 shares of Series B Preferred
Stock and 3,783,785 shares of Series B Preferred Stock to 5,707,501 shares of
its Common Stock. The conversion of these shares was on a one for one basis by
their own terms, as govered by the Company's certificate of designations. There
were no beneficial conversion features.
F-17
<PAGE>
FIRSTQUOTE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999 and 1998
15. Supplementary disclosure to cash flow statement
<TABLE>
<CAPTION>
Year ended
-------------------------
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Cash paid during the year for:
Interest........................................... $ 12,020 $ 5,417
Non-cash operating activities:
Marketing services received as payment for revenue
recognized........................................ 150,479 --
Non-cash investing and financing activities:
Conversion of amount due to stockholders to
Preferred Stock................................... 1,000,000 --
Capital leases relating to finance equipment....... 7,233 197,545
Common stock issued in consideration for prepaid
license fees...................................... 250,000 --
Common stock issued to repay a bridging loan....... -- 225,000
Issuance of stock pursuant to purchase of Stockdata
B.V............................................... 2,445,730 --
</TABLE>
F-18
<PAGE>
FIRSTQUOTE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
2000
------------
(Unaudited)
<S> <C>
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents....................... $ 4,983,109
Trade accounts receivable, net.................. 1,077,151
Prepaid expenses................................ 540,352
Other current assets............................ 438,981
------------
Total current assets........................ 7,039,593
------------
NON-CURRENT ASSETS
Property and equipment, net..................... 2,046,518
Goodwill, net................................... 2,752,369
Other assets.................................... 5,736
------------
Total non-current assets.................... 4,804,623
------------
Total Assets................................ $ 11,844,216
============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Trade accounts payable.......................... $ 1,914,167
Accrued expenses................................ 1,354,433
Current portion of capital lease obligations.... 75,037
Deferred income................................. 1,250,601
------------
Total current liabilities................... 4,594,238
------------
LONG-TERM CAPITAL LEASE OBLIGATIONS
Capital lease obligations, net of current
portion......................................... 13,439
------------
STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value, 10,000,000
shares authorized;
Class A: 1,500 and 6,500 shares
issued and outstanding....................... 2
Class B: 0 and 1,923,716 shares
issued and outstanding....................... --
Class C: 0 and 3,783,784 shares
issued and outstanding....................... --
Class D: 197,815 shares issued
and outstanding.............................. 198
Common Stock, $0.001 par value,
20,000,000 shares authorized;
13,408,466 and 6,423,409 shares
issued and outstanding....................... 13,408
Additional paid-in capital...................... 24,245,157
Cumulative translation
adjustment..................................... 1,110,426
Accumulated deficit............................. (18,132,652)
------------
Total stockholders' equity.................. 7,236,539
------------
Total Liabilities and Stockholders' Equity.. $ 11,844,216
============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-19
<PAGE>
FIRSTQUOTE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
ended June 30,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
REVENUE............................................. $ 2,695,129 $ 644,362
OPERATING EXPENSES
Cost of Revenue................................... 2,026,777 839,532
Selling & Market Development Expenses............. 421,277 137,391
General & Administrative Expenses................. 4,508,990 2,124,560
----------- -----------
6,957,044 3,101,483
----------- -----------
OPERATING LOSS...................................... (4,261,915) (2,457,121)
OTHER INCOME AND EXPENSES
Interest Income / (Expense), net.................. 77,434 57,909
Foreign Exchange (Loss) / Gain, net............... (264,277) (967,444)
----------- -----------
(186,843) (909,535)
----------- -----------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS.......... (4,448,758) (3,366,656)
=========== ===========
Basic and diluted net loss per common share......... $ (0.47) $ (0.56)
=========== ===========
Basic and diluted weighted average number of common
shares............................................. 9,532,747 5,992,193
----------- -----------
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-20
<PAGE>
FIRSTQUOTE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months
ended June 30,
------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss........................................... $(4,448,758) $(3,366,656)
Adjustments to reconcile net loss to net cash used
in operating activities:
Exchange loss / (gain)........................... 264,277 967,444
Depreciation of property and equipment........... 457,720 289,311
Amortisation of goodwill......................... 554,741 --
Provision for doubtful debtors................... 82,399 40,804
Stock issued for license costs................... 62,500 62,500
Change in operating assets and liabilities
Trade accounts receivable........................ (543,382) (276,419)
Prepaid expenses and other receivables........... (231,225) (203,568)
Trade accounts payable........................... 367,139 199,880
Accrued expenses................................. 538,071 113,459
Deferred income.................................. 354,854 102,379
----------- -----------
Net cash used-in operating activities............ (2,541,664) (2,070,866)
CASH FROM INVESTING ACTIVITIES:
Purchase of equipment.............................. (978,838) (165,272)
Other non-current asset movements.................. 2,962 (179,304)
----------- -----------
Net cash used in investing activities............ (975,876) (344,576)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common and Preferred Stock............. 7,155,180 7,000,000
Commission on issuance of Common and Preferred
Stock............................................. (245,259) (70,000)
Issuance of stock upon exercise of warrants........ 477,750 478,275
Issuance of stock upon exercise of options......... 155,000 --
Advances from stockholders and related parties..... -- --
Reimbursements of advances from stockholders and
related parties................................... -- (1,000,000)
Payment of capital lease obligations............... (83,327) (78,881)
----------- -----------
Net cash provided by financing activities........ 7,459,344 6,329,394
Effect of exchange rate changes on cash and cash
equivalents......................................... (52,325) (191,653)
NET INCREASE IN CASH AND CASH EQUIVALENTS............ 3,889,479 3,722,299
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....... 1,093,630 229,450
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR............. $ 4,983,109 $ 3,951,749
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
F-21
<PAGE>
FIRSTQUOTE INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1--Condensed Financial Statements
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at June 30, 2000, and for all
periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1999
audited financial statements. The results of operations for the three months
ended June 30, 2000 are not necessarily indicative of the operating results for
the full year.
Note 2--Issuance of Common Stock
In March 2000, the Company issued 1,061,057 shares of its Common Stock to a
number of existing and additional venture capital and private investors for a
total consideration of $7,155,180.
In April 2000, the holders of 1,923,716 shares of Series B Preferred Stock
and 3,783,785 shares of Series C Preferred Stock converted those shares into
5,707,501 shares of Common Stock.
During the six months ended June 30, 2000, the holders of 5,000 shares of
Series A Preferred stock converted those shares to into 10,000 shares of Common
Stock.
During the six months ended June 30, 2000, the Company issued 136,500 shares
of its Common Stock upon the exercise of 136,500 warrants previously issued
with the Series A Preferred stock and certain stock units. The warrants were
exercisable at $3.50.
During the six months ended June 30, 2000, the Company issued 70,000 shares
of its Common Stock upon the exercise of 70,000 options by employees of the
Company. The options carried strike prices ranging from $2.00 to $3.50.
F-22
<PAGE>
AUDITORS' REPORT
To the shareholders and management of Stockdata Amsterdam B.V.,
Introduction
We have audited the financial statements of Stockdata Amsterdam B.V.,
Amsterdam,for the year 1998. 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 audit.
Scope
We conducted our audit in accordance with auditing standards generally
accepted in The Netherlands. 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.
Opinion
In our opinion, the financial statements give a true and fair view of the
financial position of the company as at December 31, 1998 and of the result for
the year then ended in accordance with accounting principles generally accepted
in The Netherlands and comply with the financial reporting requirements
included in Part 9, Book 2 of The Netherlands Civil Code.
Katwijk, The Netherlands,
February 14, 2000.
M. Souverijn R. van Leeuwen
Accountant-Administrative consulent Register accountant
Appropriation of Income
Conditions in conformity with article 22 of the articles of incorporation of
the company.
Appropriation of Net Income 1997
The net loss for the year 1997 amounting to NLG 490,898 is added to the
retained earnings.
Appropriation of Net Income 1998
The net income for the year 1998 is added to the retained earnings.
F-23
<PAGE>
STOCKDATA AMSTERDAM B.V.
BALANCE SHEETS AT DECEMBER 31, 1998 and 1997
(After appropriation of net income)
(Currency--Dutch guilders)
ASSETS
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
FIXED ASSETS:
Intangible fixed assets:
Database...................................... NLG 316,666 NLG 633,333
Tangible fixed assets:
Decoders...................................... 272,000 221,000
Network....................................... 15,865 24,505
Oracle........................................ 16,890 --
Software...................................... 50,000 75,000
-------------- --------------
Total tangible fixed assets................. 354,755 320,505
Financial fixed assets:
Interest in group company..................... -- --
-------------- --------------
Total fixed assets.......................... 671,421 953,838
-------------- --------------
CURRENT ASSETS:
Inventory....................................... 22,700 33,000
Accounts receivable:
Trade......................................... 347,105 294,677
Affiliated companies.......................... 105,477 --
Other receivables and prepaid expenses........ 1,655,181 397,558
-------------- --------------
2,107,763 692,235
Cash............................................ 1,379,013 1,317,606
-------------- --------------
Total current assets........................ 3,509,476 1,671,111
-------------- --------------
Total assets................................ NLG 4,180,897 NLG 2,996,679
============== ==============
</TABLE>
F-24
<PAGE>
STOCKDATA AMSTERDAM B.V.
BALANCE SHEETS AT DECEMBER 31, 1998 and 1997--(Continued)
(After appropriation of net income)
(Currency--Dutch guilders)
SHAREHOLDER'S EQUITY AND LIABILITIES
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
SHAREHOLDER'S EQUITY:
Issued and paid-in capital NLG 40,000 NLG 40,000
Reserved development......................... 316,666 633,333
Retained earnings............................ (1,170,787) (1,762,140)
(814,121) (1,088,807)
Capital to issue including premium........... 700,000 700,000
Paid-in capital.............................. 494,150 --
-------------- --------------
Total shareholder's equity............... 380,029 (388,807)
PROVISIONS:
Interest in group company.................... 350,809 311,501
LONG-TERM LIABILITIES:
Long term debt............................... 10,417 102,084
SHORT-TERM LIABILITIES:
Short term portion of long term debt......... 91,667 91,920
Advance payments on sales.................... 1,419,493 984,831
Affiliated companies......................... -- 282,579
Trade payables............................... 471,903 652,903
Taxes and social security contributions...... 656,586 414,068
Other payables and accrued liabilities....... 799,993 545,600
Total short term liabilities............. 3,439,642 2,971,901
-------------- --------------
Total shareholder's equity and
liabilities............................. NLG 4,180,897 NLG 2,996,679
============== ==============
</TABLE>
F-25
<PAGE>
STOCKDATA AMSTERDAM B.V.
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
(Currency--Dutch guilders)
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
REVENUES:
Net sales...................................... NLG 4,779,258 NLG 3,273,718
Other revenues................................. 455,752 478,497
------------- -------------
Total revenues............................... 5,235,010 3,752,215
------------- -------------
OPERATING COST:
Cost of outsourced services and other external
cost.......................................... 2,753,285 2,319,076
Other cost of sales............................ 521,864 327,573
Wages and salaries............................. 478,787 293,757
Social securities.............................. 56,318 29,393
Depreciation of fixed assets................... 374,407 343,107
Other operating cost........................... 706,246 727,647
------------- -------------
Total operating cost......................... 4,890,907 4,040,553
------------- -------------
Operating income/(loss)...................... 344,103 (288,338)
------------- -------------
FINANCIAL INCOME AND EXPENSE:
Result of investments.......................... (39,308) (183,692)
Interest of income/(expense)................... (30,109) (76,477)
Total financial income and expense........... (69,417) (260,169)
------------- -------------
Income/(loss) on ordinary activities before
taxation...................................... 274,686 (624,984)
Provision for tax on income on ordinary
activities P.M. P.M.
------------- -------------
Income/(loss) on ordinary activities after
taxation...................................... 274,686 (548,507)
------------- -------------
Extraordinary income........................... -- 57,609
Net income/(loss)............................ NLG 274,686 NLG (490,898)
============= =============
</TABLE>
F-26
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
1. General
The company is a wholly owned subsidiary of De Achterkant B.V. located in
Leiden, the Netherlands. (Renamed in 1999: Media Investerings-en Management
Maatschappij M.I.M.M. B.V.)
2. Accounting Principles
(a) General
Assets and liabilities denominated in foreign currencies are
translated into Dutch guilders at the rates of exchange prevailing at
yearend. The exchange results are recorded in the statement of income.
(b) Intangible fixed assets
The database is valued against acquisition cost including
capitalized costs in connection with the development of the database.
The database is depreciated on a straight-line basis over a period of
3 years.
(c) Tangible fixed assets
Tangible fixed assets are stated at the acquisition cost, less
straight-line depreciation. The depreciation is calculated on the basis
of acquisition cost less residual value and the estimated useful life
of the related asset.
(d) Financial fixed assets
Investments in subsidiaries and associated companies are stated at
net asset value. The net asset value is determined on the basis of the
accounting principles applied by the company. Negative equity is
provided for.
(e) Inventory
Trade goods are stated at the lower of purchase price or net
realizable value.
(f) Accounts receivable
Accounts receivable are stated at face value, less an allowance for
possible uncollectable accounts.
(g) Other assets and liabilities
Other assets and liabilities are valued at face value .
(h) Recognition of income
Net sales are determined on the basis of the value (excluding taxes)
of services rendered, less discounts, rebates and similar charges
granted to customers.
(i) Depreciation
The depreciation of intangible fixed assets and tangible fixed
assets is calculated as 33% respectively 20% of the acquisition cost.
F-27
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
(j) Taxes on ordinary and extraordinary result
These are calculated on the taxable result on the basis of the tax
rate prevailing at yearend. In the annual report, the taxes on income
is not recorded (reference is made to note 16.).
3. Intangible Fixed Assets
This regards the valuation of the database. The original capitalized amount
of NLG 950,000 is derived from a valuation report dated July 12, 1993. The
report is produced by a qualified IT specialist. Since 1997, the database is
depreciated.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Book value January 1.......................... NLG 633,333 NLG 950,000
Depreciation.................................. (316,667) (316,667)
------------ ------------
Book value December 31........................ NLG 316,666 NLG 633,333
============ ============
</TABLE>
4. Tangible Fixed assets
The movement in tangible fixed assets is as follows:
<TABLE>
<CAPTION>
Book Value
January 1 Additions Depreciation
----------- ---------- ------------
<S> <C> <C> <C>
Decoders............................... NLG 221,000 NLG 75,100 NLG 24,100
Network................................ 24,505 -- 8,640
Oracle................................. -- 16,890 --
Software............................... 75,000 -- 25,000
----------- ---------- ----------
NLG 320,505 NLG 91,990 NLG 57,740
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Book Value
December 31
-----------
<S> <C>
Decoders....................................................... NLG 272,000
Network........................................................ 15,865
Oracle......................................................... 16,890
Software....................................................... 50,000
-----------
NLG 354,755
===========
</TABLE>
The composition of tangible fixed assets as of December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Historical Accumulated Book Value
Cost Depreciation December 31
----------- ------------ -----------
<S> <C> <C> <C>
Decoders.............................. NLG 461,850 NLG 189,850 NLG 272,000
Network............................... 25,945 10,080 15,865
Oracle................................ 16,890 -- 16,890
Software.............................. 125,000 75,000 50,000
----------- ----------- -----------
NLG 629,685 NLG 274,930 NLG 354,755
=========== =========== ===========
</TABLE>
F-28
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
The software is bought on hire purchase. The liabilities are recorded as
long term debt and short term debt. The legal ownership will be obtained at the
final redemption.
5. Financial fixed assets
In 1996 the company acquired a 100% interest in HPU Dataservices B.V.,
Amsterdam, the Netherlands. A provision is recorded for the negative
shareholder's equity value of this participation.
6. Inventory
This regards the decoders in stock
7. Accounts Receivable
Trade
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Trade receivables................................ NLG 401,980 NLG 349,552
Less: provision for doubtful debt................ (54,875) (54,875)
----------- -----------
NLG 347,105 NLG 294,677
=========== ===========
</TABLE>
Affiliated companies
This regards a receivable on HPU Dataservice B.V.
Other receivables and prepaid expenses
<TABLE>
<CAPTION>
1998 1997
------------- -----------
<S> <C> <C>
Prepaid rent.................................... NLG 665,765 NLG --
Prepaid expenses................................ 202,744 --
Credit note to receive.......................... -- 216,000
Current account M.I.M.M. B.V. .................. 63,933 --
Current account IQ Media Leiden B.V. ........... 706,234 152,000
Other........................................... 16,505 29,558
------------- -----------
NLG 1,655,181 NLG 397,558
============= ===========
</TABLE>
It is assumed that a provision for doubtful debt is not needed at the
moment. The long term portion of the prepaid rent amounts to NLG 545,765.
8. Cash
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Petty cash/suspense account................... NLG 254 NLG 3,870
ABN/AMRO...................................... 1,375,043 1,296,445
ABN/AMRO Belgium.............................. 3,716 14,647
ABN/AMRO Switzerland.......................... -- 2,644
------------- -------------
NLG 1,379,013 NLG 1,317,606
============= =============
</TABLE>
F-29
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
The ABN/AMRO Bank granted a combined credit facility to the company and its
affiliated companies. As a result, the usage of cash is restricted.
The credit facility is secured by: A first pledge on furniture and fixture;
Pledging of receivables (first pledge is at the factor-company)
9. Shareholder's Equity
Issued and paid-in capital
Common shares consist of 40,000 authorized common shares of which 40,000
shares are issued and paid-in at December 31, 1998. The shares have a par
value of NLG 1 each.
Legal reserve
This regards capitalized costs in connection with the development of the
database.
The movement in legal reserve is as follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Balance January 1................................ NLG 633,333 NLG 950,000
Release.......................................... (316,667) (316,667)
----------- -----------
Balance December 31.............................. NLG 316,666 NLG 633,333
=========== ===========
</TABLE>
Retained earnings
The movement in retained earnings is as follows:
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
Balance January 1......................... NLG (1,762,140) NLG (1,587,909)
Profit/(loss) of the year................. 274,686 (490,898)
Release development reserve............... 316,667 316,667
-------------- --------------
Balance December 31....................... NLG (1,170,787) NLG (1,762,140)
============== ==============
</TABLE>
Prepayments on shareholder's equity
Ultimo 1996, the company received a payment in kind of NLG 700,000 from
NDK Data NV. The company has agreed to issue capital to NDK Data N.V. for
this payment. The issued capital will represent an interest of 25% in the
company. The payment in kind exceeding par value will be considered as
premium.
At December 20, 1998 it is decided to issue capital amounting to NLG
1,500,000 to C.V. Stockdata. The issue price has not been determined yet.
Paid-in capital exceeding par value will be considered as additional
paid-in capital. The amounts received from C.V. Stockdata at the end of
1998 are considered as prepayment on shareholder's equity.
F-30
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
10. Provision
The negative equity of the participation is provided for.
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Balance January 1.................................. NLG 311,501 NLG 127,809
Share in the result................................ 39,308 183,692
----------- -----------
Balance December 31................................ NLG 350,809 NLG 311,501
=========== ===========
</TABLE>
11. Long-term liabilities
<TABLE>
<CAPTION>
Subordinated
Loan Hire -
Depreciation purchase
NDK contract Total
------------ ----------- -----------
<S> <C> <C> <C>
Balance January 1................... NLG 133,587 NLG 60,417 NLG 194,004
Redemption.......................... (66,920) (25,000) (91,920)
----------- ----------- -----------
66,667 35,417 102,084
Current portion..................... (66,667) (25,000) (91,667)
----------- ----------- -----------
Long term debt...................... NLG -- NLG 10,417 NLG 10,417
=========== =========== ===========
</TABLE>
The subordinated loan originates from the takeover of activities from NDK
Data N.V.
To finance the software, the company purchased by a hire-purchase contract.
The financer is the legal owner of the package. The legal ownership transfers
to the company at the final redemption.
12. Short-term liabilities
Liabilities with a remaining period up to 1 year, including the short-term
portion of long-term liabilities, are presented under short-term liabilities.
Short-term portion of long term debt
Represents the current portion of the loan NDK Data N.V. and the
financial lease agreement.
Advanced payments on sales
Represents advanced payments on services from customers.
Affiliated companies
Represents a payable to HPU Dataservices B.V.
F-31
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
Taxes and social security contributions
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
VAT.............................................. NLG 357,000 NLG 130,515
VAT advanced payments............................ 153,160 74,485
Wage taxes....................................... 160,000 120,000
Industrial insurance board....................... (13,574) 89,068
----------- -----------
NLG 656,586 NLG 414,068
=========== ===========
</TABLE>
Other payables and accrued liabilities
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current account Keizersgracht 213................. NLG 171,131 NLG 246,519
Houdstermij B.V.
Current account NDK Data N.V. .................... 11,942 14,592
Current account HPU Magazines B.V. ............... 10,248 14,937
Current account HPU B.V. ......................... 57,392 --
Provision for vacation money...................... 28,949 7,688
Provision for vacation days....................... 30,466 --
Auditors fees..................................... 10,000 11,400
Deferred income................................... -- 40,036
Decoders to be delivered.......................... 92,750 92,750
Other............................................. 387,115 117,678
----------- -----------
NLG 799,993 NLG 545,600
=========== ===========
</TABLE>
13. Commitments
14. Revenues
Net sales
The composition of net sales by geographical segment is as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Netherlands*..................... NLG 4,318,405 90.4% NLG 2,888,426 88.2%
Belgium.......................... 460,853 9.6% 385,292 11.8%
NLG 4,779,258 100.0% NLG 3,273,718 100.0%
============= ====== ============= ======
</TABLE>
--------
* Revenues from the sales of decoders is included
F-32
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
Other revenues
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Book and magazine productions..................... NLG 455,752 NLG 478,497
----------- -----------
</TABLE>
15. Cost of revenues
Cost of outsourced services and other external cost
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Cost of book and magazine..................... NLG 542,405 NLG 735,377
productions Cost of automation................ 742,527 624,000
Purchase cost data............................ 1,134,101 578,792
Cost of data transfer......................... 334,252 310,383
Compensation third parties.................... -- 70,524
------------- -------------
NLG 2,753,285 NLG 2,319,076
============= =============
</TABLE>
Other cost of sales
Cost price decoders
Wages and salaries
The number of personnel as of December 31, 1998 was 8 (1997-4)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Social security contributions...................... NLG 43,038 NLG 14,507
Pension cost....................................... (984) 7,781
Health insurance................................... 14,264 7,105
---------- ----------
NLG 56,318 NLG 29,393
========== ==========
</TABLE>
Depreciation of fixed assets
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Intangible fixed assets
Database......................................... NLG 316,667 NLG 316,667
Tangible fixed assets
Hardware and software............................ 57,740 26,440
----------- -----------
NLG 374,407 NLG 343,107
=========== ===========
</TABLE>
F-33
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO FINANCIAL STATEMENTS--(Continued)
FOR THE YEAR ENDED DECEMBER 31, 1998
(Currency--Dutch guilders)
Other cost of revenues
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Management........................................ NLG 151,802 NLG 90,000
Financial administration.......................... 30,000 30,000
Marketing......................................... 57,824 53,272
Auditors' and consultancy cost.................... 31,483 13,674
Personnel and Organization........................ 9,000 18,000
Lease expenses.................................... 48,828 72,693
Rent and service cost............................. 96,107 99,000
Telephone, tax and copy machine................... 8,390 9,725
Housekeeping cost................................. 3,000 6,000
Personnel cost.................................... 164,849 126,643
Tax charges....................................... 33,538 79,476
Change in provision for doubtful debt............. -- 48,569
Other cost........................................ 71,425 80,595
----------- -----------
NLG 706,246 NLG 727,647
=========== ===========
</TABLE>
16. Financial income and expense
Income from participation
<TABLE>
<CAPTION>
1998 1997
---------- ------------
<S> <C> <C>
Result from investment in group company......... NLG (3,692) NLG (183,692)
</TABLE>
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Interest income
Current account Keizersgracht 213............. NLG 20,000 NLG --
Current account IQ Media B.V. ................ 20,000 --
Current account HPU dataservices B.V. ........ 7,213 25,540
Interest expense
Loan NDK Data N.V. ........................... (7,583) (13,125)
Loan HPU B.V. ................................ -- (33,369)
Current account Keizersgracht 213 Houdstermij
B.V. ........................................ -- (9,370)
Bank and collection cost...................... (59,431) (41,794)
Other interest expenses....................... (10,308) (4,359)
----------- -----------
NLG (30,109) NLG (76,477)
=========== ===========
</TABLE>
Provision for/credit from tax on income
The company has a loss carry-forward which is available to reduce future
tax liabilities. The tax authorities have not confirmed the tax loss carry
forward yet.
Extraordinary income
<TABLE>
<CAPTION>
1998 1997
------- -----------
<S> <C> <C>
Release of debt from foreign tax authorities NLG -- NLG (57,609)
</TABLE>
F-34
<PAGE>
STOCKDATA AMSTERDAM B.V.
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(Currency--US Dollars)
(unaudited)
<TABLE>
<S> <C>
REVENUES:
Net sales......................................................... $1,905,425
EXPENSES:
Cost of revenue................................................... 839,174
Selling & Market Development...................................... 96,357
General & Administrative.......................................... 801,014
----------
1,736,545
OPERATING RESULT.................................................... 168,880
OTHER INCOME AND EXPENSES
Interest.......................................................... 2,941
Foreign Exchange.................................................. 0
NET RESULT.......................................................... $ 171,820
</TABLE>
F-35
<PAGE>
STOCKDATA AMSTERDAM B.V.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1--CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position and results of operations as of September 30, 1999. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1998
audited financial statements. The results of operations for the nine months
ended September 30, 1999 are not necessarily indicative of the operating
results for the full year.
F-36
<PAGE>
FIRSTQUOTE INC. AND STOCKDATA AMSTERDAM B.V.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
for the Nine Months Ended September 30, 1999
and for the Year Ended December 31, 1998
(Unaudited)
To reflect FirstQuote's acquisition of StockData
In December 1999, FirstQuote acquired all of the outstanding capital shares
of Stockdata Amsterdam BV, a limited liability company organized under the laws
of The Netherlands and located in Amsterdam, The Netherlands. Stockdata is
engaged in the distribution of real-time market data products to the Benelux
region, primarily through the use of datacast technologies via cable networks.
Subsequent to the acquisition, the name of the acquired company was changed to
FirstQuote Stockdata BV.
The acquisition was conducted pursuant to a Securities Purchase Agreement
dated December 24, 1999 between FirstQuote and the stockholders of Stockdata.
Pursuant to the agreement, the Stockdata stockholders transferred to all of the
outstanding capital shares of Stockdata in consideration of FirstQuote's
payment of up to $3,750,000, payable as follows: $245,031 in cash; $1,059,239
in the assignment of Stockdata receivables; and the FirstQuote's issuance of
197,815 shares of Series D preferred stock and 148,450 shares of common stock,
all such shares being valued at approximately $6.50 per share. An additional
30,000 common shares of FirstQuote are issuable to the sellers' 18 months from
the closing date, subject to FirstQuote's right to offset against the shares
any damages or costs it incurs as a result of sellers' breach of any of its
representations, warranties or agreements under the Securities Purchase
Agreement. The value of this contingent consideration has been included in the
cost of acquisition and recorded at the date of acquisition.
The following tables present summary historical information for FirstQuote
and Stockdata derived from their financial statements. The acquisition of
StockData has been accounted for using the purchase method of accounting and,
accordingly, the assets acquired and the liabilities assumed have been recorded
at their fair values as of the date of the acquisition, which do not differ
significantly from historical costs. The excess of the purchase price over the
fair value of the assets and liabilities assumed amounted to $3,328,446 and has
been recorded as goodwill to be amortised over three years.
The unaudited pro forma consolidated Statements of Operations for the year
ended December 31, 1998 and for the nine months ended September 30, 1999
present the results for FirstQuote and StockData as if the acquisition had
occurred on January 1, 1998.
F-37
<PAGE>
FIRSTQUOTE INC.
PRO FORMA CONSOLIDATION FOR THE YEAR DECEMBER 31, 1998
<TABLE>
<CAPTION>
Historical Pro forma
--------------------- -------------------------
FirstQuote Stockdata
Inc. BV Adjustments Consolidated
---------- --------- ----------- ------------
USD USD USD USD
---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
INCOME STATEMENT
SALES............................ 534,715 2,635,559 0 3,170,274
EXPENSES
Cost of Revenue................ 1,209,387 1,648,870 0 2,858,257
Selling & Market Development... 221,210 29,111 0 250,321
General & Administrative....... 2,861,662 826,172 1,314,245* 5,002,079
4,292,259 2,504,153 1,314,245 8,110,657
OPERATING RESULT................. (3,757,543) 131,406 (1,314,245) (4,940,383)
OTHER INCOME AND EXPENSES
Interest....................... (3,441) 6,885 (0) 3,443
Foreign Exchange............... 339,756 0 0 339,756
NET RESULT....................... (3,421,229) 138,290 (1,314,245) (4,597,184)
</TABLE>
--------
* The referenced adjustment reflects a pro forma amortization of goodwill based
on net assets at the pro forma date of acquisition.
F-38
<PAGE>
FIRSTQUOTE INC.
PRO FORMA CONSOLIDATION: NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Historical Pro forma
--------------------- ------------------------
FirstQuote Stockdata
Inc. BV Adjustments Consolidated
---------- --------- ----------- ------------
USD USD USD USD
---------- --------- ----------- ------------
<S> <C> <C> <C> <C>
INCOME STATEMENT
SALES.......................... 1,210,065 1,905,425 0 3,115,489
EXPENSES
Cost of Revenue.............. 1,599,416 839,174 0 2,438,590
Selling & Market
Development................. 308,501 96,357 0 404,858
General & Administrative..... 3,356,281 801,014 985,684* 5,142,979
---------- --------- -------- ----------
5,264,198 1,736,545 985,684 7,986,428
OPERATING RESULT............... (4,054,134) 168,879 (985,684) (4,870,938)
OTHER INCOME AND EXPENSES
Interest..................... 86,222 2,941 0 89,163
Foreign Exchange............. (674,904) 0 0 (674,904)
---------- --------- -------- ----------
NET RESULT..................... (4,642,815) 171,820 (985,684) (5,456,679)
Weighted Average Number of
Common Shares................. 6,004,634 6,183,084
Net Result per Common Share.... (0.77) (0.88)
</TABLE>
--------
* The referenced adjustment reflects a pro forma amortization of goodwill based
on net assets at the pro forma date of acquisition.
F-39
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth estimated expenses we expect to incur in
connection with the resale of the shares being registered. All such expenses
are estimated except for the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee................................................ $ 529.77
Printing expenses................................................... $ 1,500.00
Fees and expenses of counsel for the Company........................ $ 5,000.00
Fees and expenses of accountants for Company........................ $ 5,000.00
Miscellaneous....................................................... $ 1,000.00
----------
*Total............................................................ $13,029.77
</TABLE>
Item 15. Indemnification of Directors and Officers.
Delaware Statutes
Section 145. Indemnification of Officers, Directors, Employees and Agents;
Insurance.
"(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action or suit if
the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
II-1
<PAGE>
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present
or former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by former directors and officers or other employees
and agents may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
II-2
<PAGE>
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
Certificate of Incorporation
Article 10 of the Company's Certificate of Incorporation limits the
liability of the Company's directors to the Company and its stockholders.
Article 10 reads as follows:
"A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit."
Bylaws
Bylaws. Article VII of the Company's Amended and Restated Bylaws provides
for indemnification of the Company's directors, officers and agents to advance
expenses for defense of litigation and to purchase and maintain insurance on
behalf of any director or officer of the Company against any liability asserted
against or incurred by them in such capacity or arising out of their status as
such, whether or not the Company would have power to indemnify such director or
officer against any liability under the provisions of the Certificate of
Incorporation or Delaware law, and authorize the Board to extend such indemnity
to others as follows:
"Article VII. Indemnification
7.1 Authorization For Indemnification. The Corporation may indemnify, in the
manner and to the full extent permitted by law, any person (or the estate,
heirs, executors, or administrators of any person) who was or is a party to, or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, and
with respect to any criminal action or proceeding, that he had reasonable cause
to believe that his conduct was unlawful.
7.2 Advance of Expenses. Costs and expenses (including attorneys' fees)
incurred by or on behalf of a director or officer in defending or investigating
any action, suit, proceeding or investigation may be paid by the Corporation in
advance of the final disposition of such matter, if such director or officer
shall undertake in writing to repay any such advances in the event that it is
ultimately determined that he is not entitled to indemnification. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a
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determination is reasonably and promptly made by the Board by a majority vote
of a quorum of disinterested directors, or (if such a quorum is not obtainable
or, even if obtainable, a quorum of disinterested directors so directs) by
independent legal counsel in a written opinion, or by the stockholders, that,
based upon the facts known to the Board or counsel at the time such
determination is made, (a) the director, officer, employee or agent acted in
bad faith or deliberately breached his duty to the Corporation or its
stockholders, and (b) as a result of such actions by the director, officer,
employee or agent, it is more likely than not that it will ultimately be
determined that such director, officer, employee or agent is not entitled to
indemnification.
7.3 Insurance. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or applicable law.
7.4 Non-exclusivity. The right of indemnity and advancement of expenses
provided herein shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office. Any agreement for
indemnification of or advancement of expenses to any director, officer,
employee or other person may provide rights of indemnification or advancement
of expenses which are broader or otherwise different from those set forth
herein."
Item 16. Exhibits.
<TABLE>
<C> <S>
3.1(1) Certificate of Incorporation of the Company
3.2(1) Bylaws of the Company
4.1(1) Specimen of Common Stock Certificate
4.2(5) Amended Certificate of Designations of the Company
5.1 Opinion of Oppenheimer Wolff & Donnelly LLP re: legality of shares
10.1(1) Loan Agreement dated May 15, 1996 between Virtual Telecom SA and New
Capital Investment Fund
10.2(1) Partnership Outsourcing Agreement dated September 9, 1996 between
Virtual Telecom SA and Digital Equipment Corporation
10.3(1) Employment Agreement dated May 31, 1996 between Virtual Telecom SA and
Neil Gibbons
10.4(1) Employment Agreement dated May 31, 1996 between Virtual Telecom SA and
Daniel Huber
10.5(1) Computer Software License Agreement dated January 16, 1997 between
Virtual Telecom SA and Townsend Analytics, Ltd.
10.6(1) Information and Distribution License Agreement dated August 23, 1996
between Virtual Telecom SA and McGraw-Hill International (UK) Ltd.
10.7(1) Agreement for Global Telecommunications Services dated October 1, 1996
between Virtual Telecom SA and BT Limited London (British Telecom)
10.8(1) Unidata Frame Relay & Unimaster Services dated October 22, 1996
between Virtual Telecom SA and Swiss Telecom ITT
10.9(1) News Distributor Agreement dated January 7, 1997 between Virtual
Telecom SA and AFX News Limited
10.10 Third Amended and Restated First Quote 1997 Stock Option Plan
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
10.11(3) Series B Preferred Stock Purchase Agreement dated December 18, 1997
10.12(3) Investor Rights Agreement dated December 18, 1997
10.13(3) Software License Agreement between the Company and IQ Net
10.14(4) Series C Preferred Stock Purchase Agreement dated January 25, 1999
10.15(4) Amended and Restated Investor Rights Agreement dated January 25, 1999
10.16(5) Amendment to the Software Distributor Agreement of January 16, 1997
dated December 10, 1998 between Virtual Telecom SA and Townsend
Analytics, Ltd.
10.17(6) Sale and Purchase Agreement of the shares of Stockdata BV dated
December 24, 1999, between FirstQuote Inc. and the stockholders of
Stockdata B.V.
10.18(6) Registration Rights Agreement pursuant to the Private Placement of
Common Stock
16.1(2) Letter from Raimondo, Pettit & Glassman regarding Change of
Independent Public Accountant
21.1 The Company has three subsidiaries, FirstQuote SA, a Swiss
corporation, FirstQuote Limited, an English corporation, and
FirstQuote Stockdata BV, a Dutch corporation.
23.1 Consent of Oppenheimer Wolff & Donnelly LLP (filed as part of Exhibit
5.1)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Berk Katwijk Accountants
27.1(7) Financial Data Schedule
</TABLE>
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(1) Previously filed as part of registration statement on Form 10-SB (SEC File
No. 0-22351) filed with the Securities and Exchange Commission on April 7,
1997.
(2) Previously filed as part of Current Report on Form 8-K/A (SEC File No. 0-
22351) filed with the Securities and Exchange Commission on December 23,
1997.
(3) Previously filed as part of annual report on Form 10-KSB (SEC File No. 0-
22351) for the fiscal year ended December 31, 1997.
(4) Previously filed as part of annual report on Form 10-KSB (SEC File No. 0-
22351) for the fiscal year ended December 31, 1998.
(5) Previously filed as part of annual report on Form 10-KSB (SEC File No. 0-
22351) for the fiscal year ended December 31, 1999.
(6) Previously filed as part of Current Report on Form 8-K dated December 30,
1999 (SEC File No. 0-22351) filed with the Securities and Exchange
Commission.
(7) Previously filed as part of annual report on Form 10-KSB (SEC File No. 0-
22351) for the fiscal year ended December 31, 1999 and quarterly report on
Form 10-QSB for the period ended June 30, 2000.
Item 28. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
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<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described herein, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and authorized this Pre-Effective
Amendment No. 1 to Registration Statement on Form SB-2 to be signed on its
behalf by the undersigned, thereunto duly authorized, in Geneva, Switzerland,
on September 6, 2000.
FIRSTQUOTE INC.
/s/ Neil G. Gibbons
By: _________________________________
Neil G. Gibbons,
President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to Registration Statement on Form SB-2 was signed by
the following persons in the capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Neil G. Gibbons President and Chief September 6, 2000
____________________________________ Executive Officer and
Neil G. Gibbons Director (principal
executive officer)
/s/ Mark Benn Chief Financial Officer September 6, 2000
____________________________________ (principal financial and
Mark Benn accounting officer) and
Director
/s/ Daniel Huber Director September 6, 2000
____________________________________
Daniel Huber
/s/ Stuart Townsend Director September 6, 2000
____________________________________
Stuart Townsend
/s/ Bryan Wood Director September 6, 2000
____________________________________
Bryan Wood
Director
____________________________________
Frank Verschoor
/s/ Paul Goossen Director September 6, 2000
____________________________________
Paul Goossen
</TABLE>
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