<PAGE>
As filed with the Securities and Exchange Commission on May 10, 2000
Registration No. 333-
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
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.
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>
============================================================================================================
Title of Each Class Proposed Proposed
of Securities Amount to be Maximum Offering Maximum Aggregate Amount of
to be Registered Registered Price per Share (1) Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 1,201,948 Shares $11.00 $13,221,428 $3,490.34
============================================================================================================
</TABLE>
(1) 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.
_______________________
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
1,201,948 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 May 5, 2000, the last reported sale price of the common stock on the
OTC Bulletin Board was $11.00 per share.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE _ 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
Summary .................................................................... 1
Risk Factors ............................................................... 3
Selling Stockholders ....................................................... 8
Market for Common Equity and Related Stockholder Matters ................... 9
Management's Discussion and Analysis or Plan of Operation .................. 10
Business ................................................................... 13
Management.................................................................. 20
Principal Stockholders ..................................................... 24
Description of Securities .................................................. 25
Legal Matters .............................................................. 27
Experts .................................................................... 27
Available Information ...................................................... 27
Index to Financial Statements .............................................. 28
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.
This prospectus contains forms of forward-looking statements. When used in this
prospectus, the words "believe," "expect," "anticipate," "estimate" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks, uncertainties and assumptions, which are
identified and described in the "Risk Factors" section, below. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary from those anticipated,
estimated, or projected and the variations may be material. We caution you not
to place undue reliance on any such forward-looking statements, all of which
speak only as of the date made.
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. We also provide 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 services are provided to our corporate clients for internal use as
well as for redistribution to their customer bases.
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 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. 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.
-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.
Operations Data:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Net revenue............................ $ 1,778,459 $ 534,715
Net loss............................... (6,840,368) (3,421,229)
Balance Sheet Data: December 31, 1999
-----------------
Working capital deficit................ $ (872,337)
Total assets........................... 7,361,614
Total liabilities...................... (3,421,919)
Stockholders' equity................... 3,939,695
</TABLE>
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<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 December 31, 1999, we
had an accumulated deficit of approximately $13.7 million. We have not achieved
profitability and may incur 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.
Failure To Meet Future Capital Needs May Adversely Affect Our Business
We require substantial working capital to fund our business. We have had
significant net losses and negative cash flow from operations since inception
and expect to continue to experience net losses and negative cash flow in, at
least, the near future. As of December 31, 1999, we had approximately $1.1
million in cash and short term investments. However, in March 2000, obtained
additional capital through our private placement sale of 1,061,057 common shares
for the net proceeds of $7.2 million. We believe that the net proceeds form the
March 2000 private placement, together with 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, 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.
Our Markets Are Highly Competitive
The market for electronic brokerage services, particularly over the internet, is
new, rapidly evolving and intensely competitive. We expect competition to
continue and intensify in the future. We encounter direct competition from
discount brokerage firms providing either touch-tone telephone or online
brokerage services, or both. These competitors include such discount brokerage
firms as E*Trade, Charles Schwab & Co., Inc., and DLJ Direct (a division of
Donaldson, Lufkin & Jenrette Securities Corporation), among others. We also
encounter competition from established full-service brokerage firms such as
PaineWebber Incorporated, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, among others. In addition, we compete with financial institutions,
mutual fund sponsors and other organizations, some of which provide electronic
brokerage services. Most of our competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources. Many
current and potential competitors also have greater name recognition and more
extensive customer bases that could be leveraged, thereby gaining market share
to our detriment. We may not be able to compete effectively with current or
future competitors. In addition, the competitive pressures we face may have a
material adverse effect on our business, financial condition and operating
results.
We Are Subject To Risks Associated With The Securities 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 adversely affect our
business, financial condition and results of operations.
We Are Substantially Dependent On The Development Of The Internet And Online
Commerce
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 has shown a rapid increase in the volume of
commercial transactions over the Internet, these 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.
We Are Subject To The Risks Associated With Encryption Technology
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.
Our Business Will Be Substantially Dependent On Certain Strategic Relationships
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.
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 Are Subject To Risks Associated With International Operations
A component of our long-term strategy is to expand into a number of European
markets. As a result, we are subject to certain risks inherent in conducting
business internationally, including:
. unexpected changes in regulatory requirements;
. export restrictions, tariffs and other trade barriers;
. problems in collecting accounts receivable;
. political instability;
. currency fluctuations;
. seasonal reductions in business activity; and
. potentially adverse tax consequences.
Any of these factors could adversely affect our international operations and
could have a material adverse effect on our current or future business, results
of operations and financial condition.
Our Failure To Adequately Protect Our Proprietary Rights May Adversely Affect
Our Business
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. Notwithstanding the precautions we have taken
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 Engage In Future Acquisitions That Dilute Our Stockholders, 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. Acquisitions
also entail numerous risks, including:
. difficulties in assimilating acquired operations, technologies or
products;
. unanticipated costs associated with the acquisition could materially
adversely affect our results of operations;
. diversion of management's attention from other business concerns;
. adverse effects on existing business relationships with suppliers and
customers;
. risks of entering markets in which we have no or limited prior
experience; and
. potential loss of key employees of acquired organizations.
We have limited experience in assimilating acquired organizations into our
operations and we may not be able to
-5-
<PAGE>
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.
We Have No Immediate Plans To Pay Cash Dividends
We have never declared or paid cash dividends on its capital stock and we do not
expect to declare or pay any cash dividends for the foreseeable future.
Earnings, if any, will be retained to fund development and expansion. Any
future determination to pay cash dividends will be at the discretion of the
Board of Directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business condition and such other
factors as the Board of Directors may deem relevant.
Control By Existing Stockholders May Limit Your Ability To Influence The Outcome
Of Director Elections And Certain Transactions
Our present directors and executive officers and their respective affiliates
beneficially own approximately 53% of the 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 Corporate Charter And Bylaws, As Well As Applicable
Regulations, May Discourage Take-Over Attempts And Thus Depress The Market Price
Of Our Stock
Certain provisions of the 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 combination 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 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.
Certain Provisions In Our Corporate Charter And Bylaws May Effect The Rights Of
Common Stock Holders
Our board of directors has the authority to issue up to an additional 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.
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<PAGE>
We Do Not Have An Active Market For Our Common Stock
Our common stock is traded on the NASDAQ OTC Bulletin Board under the symbol
"FSQT." On May 5, 2000, the last reported sale price of the common stock on the
OTC Bulletin Board was $11.00 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 "Risks 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 to conform such
statements to actual results or to changes in our expectations.
-7-
<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 a private
placement concluded in March 2000. In connection with the private placement, 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:
<TABLE>
<CAPTION>
Shares Beneficially Owned
Prior to Offering
-------------------------------- Shares
Number of Shares Number of Beneficially Owned
Name owned Shares offered After Offering(1)
- --------------------------------- ---------------- -------------- ------------------
<S> <C> <C> <C>
Oakes Fitzwilliams & Co. 53,053(2) 53,053 0
Ermgassen & Co., Ltd. 37,838(2) 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) 1,351,351 151,471 1,199,880
GIMV 1,087,081 151,471 935,610
Leon Seynave 36,765 36,765 0
</TABLE>
___________________
(1) Assumes all offered shares sold
(2) Represents common shares issuable upon exercise of outstanding warants.
-8-
<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
1998:
<S> <C> <C>
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 (through May 5, 2000) 12.00 6.00
</TABLE>
We consider our common stock to be thinly traded and that any reported
sale prices may not be a true market-based valuation of our common stock. As of
May 5, 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.
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<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 opf the outstanding capital
shares of Stockdata Amsterdam BV, a company located in Amsterdam, for a
consideration 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.
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
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
comprised 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 (which generally lead to a resultant
revenue stream) 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, resulting principally from 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.
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 o 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
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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 opertaing, 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.
Liquidity and Financial Condition
As of December 31, 1999, we had negative working capital of $872,336 and
stockholders' equity of $3,939,695. In January 2000, we obtained bridge loans
totaling $510,000 from certain existing institutional investors in order to
finance the acquisition of Stockdata. In March 2000, we concluded a private
placement of 1,061,057 common shares for the total gross proceeds of $7,155,184,
including the conversion of the $510,000 of bridge loans.
During the year ended December 31, 1999, we received $681,275 in
connection with the exercise of 194,650 warrants at $3.50 per share. Subsequent
to December 31, 1999, an additional 130,000 warrants were exercised for a
consideration to the Company of $455,000. As of the date of the prospectus,
163,131 warrants remained outstanding, all exercisable at $3.50 per share.
We continues to generate negative cashflows from operations since its cost
base exceeds its revenues from operating activities. The net `cash burn' rate
from operations was approximately $461,000 per month during the fourth quarter
of 1999 compared with an average of approximately $390,000 per month during the
year ended December 31, 1999, reflecting the increased level of operations.
Our plan of operations for the next 12 months will require increases in the
amounts of operating and capital expenditure above those incurred to date. As of
the date of this report, and subsequent to the recently concluded private
placement, we believe that we have sufficient capital in order to finance
operations and capital expenditures over the next 12 months. As of he date of
this prospectus we have no agreements or understandings for our receipt of
additional capital and there can be no assurance that we will be able to obtain
additional capital if and when it might ne needed. Our inability to obtain
additional capital if and when needed will, in all likelihood, materially
adversely affect our future planned growth of operations and revenues.
Year 2000 Compliance
As of the date of this prospectus, nothing has come to our attention that
would indicate that any of our computer software applications, or those of our
information suppliers and software licensers, are unable to operate accurately
after January 1, 2000.
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<PAGE>
Forward Looking Statements
This prospectus contains various forward-looking statements that are based
on our beliefs as well as assumptions made by and information currently
available to us. When used in this prospectus, the words "believe," "expect,"
"anticipate," "estimate" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks,
uncertainties and assumptions referred to herein, including, without limitation,
those matters set forth above in the section, "Risk Factors." Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated, or projected. We caution potential investors not to place undue
reliance on any such forward-looking statements, all of which speak only as of
the date made.
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<PAGE>
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 (SMS) and the wireless application protocol
(WAP).
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 its 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 SMS or WAP 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 Pro Services:
FirstQuote Professional: This an 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 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:
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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 Browser Drag and drop functionality enables seamless look up of
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 (from the above table)
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 of 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
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outsourced basis to licensed banks and brokerage firms. Our electronic brokerage
technology is based on a software license from Townsend Analytics. See
"Trademarks and Technology Licenses" below for a summary of the terms and
conditions of our license agreement with Townsend Analytics.
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 which are 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 WAP 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, the
Company also provides network development and enterprise connectivity services
including Internet access and network security services to its corporate and
institutional clients.
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<PAGE>
The Company maintains its 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. The Company's Internet backbone is currently operative
throughout Switzerland, as well as in Paris and Frankfurt and is being extended
to London and Amsterdam. The Company also leases bandwidth from various European
telecommunications carriers further enabling access to the Company's services
from any Internet access point worldwide.
Market Environment and Corporate Strategy
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 characterised by particular
parameters which will require a distinctly different approach in order to
capitalise 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 it faces are as follows:
Internet penetration: While the European private and business internet
connectivity currently lags behind that of the USA, recent studies indicate this
will be redressed over the next three years. Internet connectivity for European
business users is estimated to reach 70% penetration by the year 2004 or about
5.75 million companies (Datamonitor). 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 (Datamonitor).
For traditional banks to move into online banking is a rational move as the
costs of online transactions cost up to 12 times less to process than
transactions made in person. 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 (commonly referred to as
EURO.NM), 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: The number of online securities accounts in
Europe is currently about 1.3 million (Forrester Research), estimated to grow to
14 million by 2002
Cross border investment tendencies: European investors have
traditionally invested within their own local markets. However, related to
currency and trade harmonisation initiatives currently being adopted by European
countries, the Company believes 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. The
Company believes 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,
capitalise on additional revenue opportunities, reduce costs, and counter
competition from especially US based service providers penetrating European
markets.
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Cross-selling demand from other internet franchises for financial
services: Following from possibilities created by the Internet-economy, we
believe that many enterprises currently commanding the attention of large
franchises of Internet-enabled communities, will seek to add complementary
financial services to their product offering in an attempt to capitalise 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, whereby
its services can be leveraged across existing client bases
our own direct sales channels targeted at sophisticated private
investors as well as corporate clients
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 a marketing platform for our more sophisticated
higher value services.
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 believe that it offers 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 US based companies which, in our opinion, offer a service
that is distinctly US in nature. Our market data and financial services cover
all major world markets and exchanges. However, we believe that our services
provide greater focus on pan-European markets and exchanges than other competing
services. In the case of joint-venture 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 an 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 its 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 shall 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 on-line brokerage services
over the Internet is rapidly evolving and becoming increasingly competitive. We
expect competition to continue and intensify in the future.
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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.
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 as the eSchwab division of
Charles Schwab & Co., Inc., E-Trade Group and DLJdirect, and in the more-
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 its
services over its 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:
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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 (functionality or contractual content) to be able to complement
their traditional distribution channels.
Financial middle-ware providers: The 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.
Internet service providers: The 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 maximise 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 has 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 its
electronic brokerage solutions are based on software licensed to us by Townsend
Analytics Ltd. of Chicago, Illinois. Pursuant to a Computer Software License
Agreement dated January 16, 1997, 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. Pursuant to 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. 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 its
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 at present, 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.
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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:
Name Age Position
- ---- --- --------
Neil Gibbons 51 Chairman of the Board, Chief Executive Officer and
President
Daniel Huber 32 Vice President, Chief Operating Officer, Secretary
and Director
Mark Benn 36 Chief Financial Officer
Stuart Townsend 53 Director
Bryan Wood 54 Director
Frank Verschoor 39 Director
Paul Goossens 44 Director
Mr. Gibbons co-founded FirstQuote SA in 1994 and has served as Chief
Executive Officer, President and director of the Company since its 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 Vice
President, Chief Operating Officer, Secretary and director of the Company since
its 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 Chief Financial Officer of the Company since April
1998. 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 a director of the Company 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 a director of the Company since December 1997. Mr.
Wood is a founder of Alta-Berkeley Associates, 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 a director of the Company 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 a director of the Company 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.
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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:
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------ ------------------------------------------
Name and Position Year Salary Bonus Other Restricted Common Shares All Other
Stock Underlying Compen-
Awards ($) Options Granted sation
(# Shares)
- ----------------- ----- ----------- ---------- ----- ---------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Neil Gibbons, CEO 1999 CHF 156,000 CHF 13,000 -- -- 7,500 CHF 7,200
1998 CHF 120,000 -- -- -- 40,000 CHF 7,200
1997 CHF 96,000 -- -- -- 50,000 CHF 7,200
Daniel Huber, COO 1999 CHF 156,000 CHF 13,000 -- -- 7,500 CHF 7,200
1998 CHF 120,000 -- -- -- 40,000 CHF 7,200
1997 CHF 96,000 -- -- -- 50,000 CHF 7,200
Mark Benn, CFO(2) 1999 CHF 108,000 CHF 9,000 -- -- 17,500 --
1998 CHF 81,000 -- -- -- 95,000 --
</TABLE>
_______________
(1) Represents an allowance of CHF 600 per month.
(2) Commenced April 1998.
Option/SAR Grants in 1999 Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
- ---------------------------------------------------------------------------------------
Name Number of % of Total Exercise or Expiration
Securities Options/SARs Granted Base Price Date
Underlying to Employees in ($/Sh)
Options/SARs Fiscal Year
Granted (#)
- ----------------- ------------ --------------------- ----------- ----------
<S> <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 to the board. 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 behalf of the
Company and will compensate such persons for the services which they perform.
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.
-22-
<PAGE>
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. whereby the latter 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 the Company owed $1,000,000 to Alta-Berkeley
Associates, holders of the 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 (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for unlawful payment of a
dividend or unlawful stock purchase or redemption, or (iv) for any transaction
from which the director derived an improper personal benefit. Our Articles of
Incorporation provide that directors are not liable to the Company or its
stockholders for monetary damages for breach of their fiduciary duty as
directors to the fullest extent permitted by Delaware law. In addition to the
foregoing, 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 1933 Act and is, therefore, unenforceable.
-23-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of the prospectus by (i) each person
who is known by us to be the beneficial owner of more than five percent (5%) of
our issued and outstanding shares of common stock, (ii) each of our directors
and executive officers and (iii) all directors and executive officers as a
group.
<TABLE>
<CAPTION> Number Of Percentage
Name And Address Shares Owned
- ---------------- ----------------- ----------
<S> <C> <C>
Neil Gibbons (1) 1,486,770 (2) 11.0%
Daniel Huber (1) 1,186,770 (2) 8.8%
Stuart Townsend (3) 185,000 (4) 1.4%
Bryan Wood (5) 2,464,257 (6) 18.4%
Frank Verschoor (7) 1,502,823 (8) 11.3%
Paul Goossens (9) 1,238,552 (10) 9.3%
Alta-Berkeley (5) 2,464,257 (6) 18.4%
NeSBIC CTE Fund (7) 1,502,823 11.3%
GIMV (9) 1,232,552 9.2%
Directors and executive officers as a group 8,064,172 59.4%
</TABLE>
- ---------------------
(1) Address is 12, Av. des Morgines, 1213 Petit-Lancy 1, Geneva, Switzerland.
(2) Includes 90,000 shares of Common Stock underlying presently exercisable
options.
(3) Address is Townsend Analytics, 100 South Wacker Drive, Suite 1500, Chicago,
Illinois.
(4) Includes 50,000 shares of Common Stock underlying immediately exercisable
options, and 135,000 shares of Common Stock held by Townsend Analytics,
Ltd. of which Mr. Townsend is President and owner.
(5) Address is Alta-Berkeley Associates, 9 Saville Row, London, England W1X
IAF.
(6) Represents shares of common stock held by Alta-Berkeley V, C.V. and two
affiliated funds. Mr. Bryan Wood is the Senior Partner of Alta-Berkeley
Associates which serves as manager of the three funds.
(7) Address is NeSBIC CTE Fund, Savannahweg 17, 3542 AW, RM Utrecht,
Netherlands
(8) Represents shares of common stock held by the NeSBIC CTE Fund. Mr. Frank
Verschoor is the investment director of the NeSBIC CTE Fund.
(9) Address is GIMV, Karel Oomsstraat 37, B-2018 Antwerp, Belgium
(10) Represents shares of common stock held by the GIMV, and 6,000 shares held
directly. Mr. Paul Goossens is an investment manager of the GIMV.
-24-
<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 and held by approximately 344 recordholders. 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 the
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 the company. 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.
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.
Those 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;
-25-
<PAGE>
. any amendments to our Certificate of Incorporation or Bylaws;
. acquiring the assets of another business if the value of that
acquisition excess $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 anticipate the payment of 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.
-26-
<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.
-27-
<PAGE>
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, file reports, proxy
statements and other information with the SEC. Our reports, proxy statements
and other information filed pursuant to the Securities Exchange Act of 1934 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 common stock offered hereby. 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.
-28-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
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
-29-
<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 30, 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)
A S S E T S
December 31,
1999 1998
------------- ------------
(Audited) (Audited)
ASSETS
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-crrent assets 4,841,209 1,159,050
------------- ------------
------------- ------------
Total Assets $ 7,361,615 $ 1,641,837
============= ============
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE>
FIRSTQUOTE INC. AND SUBSIDIARIES
Consolidated Balance Sheets As Of December 31, 1999 and 1998
(Currency-U.S. dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<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>
F-3
<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-4
<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-5
<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 B Class C Class D
Common stock Preferred stock Preferred stock Preferred stock Preferred 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
--------- ------ -------- ------ --------- ------ --------- ------ ------- ------
<CAPTION>
Cumulative Total
Additional paid translation Accumulated stockholders' Comprehensive
in 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) (6,992,136)
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 (12,776,397)
=============== =========== =========== ============= ==============
</TABLE>
F-6
<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 is engaged in the business of developing and marketing a range
of real-time market data and online dealing services over the Internet and
providing related supporting network connectivity services. Its principal
markets are currently Switzerland, Germany and France. During 1996 and
early 1997, the Company acquired and implemented the necessary
infrastructure, comprising data feed handlers, data servers and
telecommunication networks. The Company commenced pilot commercial
operations during the latter part of 1997. The Company commenced active
marketing of its services during the second quarter of 1998 and has
concentrated on growing its client base as well as offering additional
service content (in the form of additional exchange data, news as well as
online dealing capabilities) during the second half of 1998.
2. Summary of significant accounting policies
Principle 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
liabilities as deferred revenue, and recognized in the profit and loss
account according to the month of applicability of the underlying services.
F-7
<PAGE>
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). 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 amortised over the estimated product or technology cycle of the
underlying acquisition, generally being three years.
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.
Stock-based Compensation
Statement of financial accounting standards No. 123, "Accounting for stock-
based compensation" ("SFAS No. 123") was effective for fiscal years
beginning after December 15, 1996. This statement 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 disclosures 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 0.
Fair value of financial instruments
F-8
<PAGE>
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 (Issue Date 6/97) requires the reconciliation of total segment
information presented to the corresponding amounts in the consolidated
financial statements, and establishes standards for related disclosures
about products and services, geographic areas and major customers. The
Company adopted SFAS 131 in 1998 and manages its activities as one segment
under the guidelines of the 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.
Comprehensive Income
Statement No. 130, Reporting Comprehensive Income (Issue Date 6/97)
requires companies to report all changes in equity during a period, except
those resulting from investment by owners and distribution to owners. SFAS
No. 130 was effective for periods beginning July 1, 1998 and the Company
has disclosed Comprehensive Income / (Loss), which encompasses net income
and foreign currency translation adjustments, in the Consolidated Statement
of Changes in Shareholders' Equity.
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, 1999and 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.
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" provides guidance on accounting for
the costs of computer software developed or obtained for internal use. This
SOP requires computer software costs that are incurred in the preliminary
project stage to be expensed as incurred. Once the capitalization criteria
of the SOP have been met, directly attributable development costs should be
capitalized. It also provides guidance on the treatment of upgrade and
maintenance expenditures. SOP 98-1 is effective for fiscal years beginning
after December 15, 1998. Costs incurred prior to initial application of
this SOP, whether capitalized or not, should not be adjusted to the amounts
that would have been capitalized had this SOP been in effect when those
costs were incurred. The Company has not determined the impact that this
SOP will have on its consolidated financial statements.
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities"
(Issued 4/98), requires that costs
F-9
<PAGE>
for start-up activities and organization costs should be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after December
15, 1998 and initial adoption is required to be reflected as a cumulative
effect of accounting change. The Company has not determined the impact that
this SOP will have on its consolidated financial statements.
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.
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 FirstQuote all of the outstanding capital shares of
Stockdata in consideration of FirstQuote's payment of up to US$3,750,000,
payable as follows: US$245,031 in cash; US$1,059,239 in the assignment of
Stockdata receivables; and 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 US$6.50 per share. An additional
30,000 FirstQuote common shares are issuable to the sellers' subject to
their satisfaction of certain post-closing conditions.
The audited financial statements of Stockdata BV for the years ended
December 31, 1998 and 1997, the unaudited financial statements for the nine
months ended September 30, 1999, as well as proforma consolidated financial
statements for year ended December 31, 1998 and the nine months ended
September 30, 1999, have been filed within form 8-K.
5. Property and Equipment
Property and equipment consists of the following:
F-10
<PAGE>
<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.
It is the Company's policy to depreciate its computer and network equipment
over their estimated useful lives based on current conditions. Given the
rapid technological change affecting such equipment, it is at least
reasonably possible that the Company's estimates may change in the near
term.
6. 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.
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>
7. 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 0).
8. Related party transactions
Software Solution provider
In January 1997 the Company entered into a 3-year software distributor
agreement with a financial software solution provider as disclosed in
Note 0
F-11
<PAGE>
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).
Administrative assistance
In May 1996, the Company entered into an agreement with a related party for
the provision of certain administrative services to the U.S. holding
corporation. Amounts paid under this agreement amounted to $14,420 (1998:
$24,000).
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).
9. 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 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
monthly 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
F-12
<PAGE>
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.
10. Income Taxes
Deferred income tax assets and liabilities are provided for temporary
differences between financial statement income and amounts currently
taxable.
Both the Company and its Swiss subsidiary have incurred losses for the
years ended December 31, 1999 and 1998. 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 ownership. Its Swiss subsidiary has a net operating loss
carry forward of $11,987,490 (1998: $5,826,944) to offset future income
taxes in Switzerland which expires between the years 2003 and 2006.
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. It is at least reasonably possible that the
Company's estimate of the valuation allowance may change in the near term
and result in a partial or total reversal of the allowance during 1999.
11. 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
F-13
<PAGE>
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 (see
Note 0).
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 0.
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 1,105,000
shares of its Common Stock for a total consideration of $7,514,000.
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 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.
F-14
<PAGE>
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.
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 $ 6,840,367 $ 3,421,229
Net loss, pro forma 7,837,069 3,470,629
Basic and diluted loss per share, as reported $ 1.12 $ 0.59
Basic and diluted loss per share, pro forma 1.28 0.60
</TABLE>
F-15
<PAGE>
The effects of applying SFAS No. 123 in this pro-forma disclosure are not
indicative of future amounts.
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) 1,145 1,113
Expected volatility 105% 57%
Expected dividends $ - $ -
Weighted-average grant-date fair value of options $ 4.72 $ 0.13
Options granted during the year:
Directors and employees 211,300 380,000
Consultants - -
Fair value of options granted during the year:
Directors and employees $ 996,702 $ 49,400
Consultants $ - $ _
</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-
Number of Average Number of Average
Options Excercise Price Options Exercise 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 261,300 5.85 380,000 2.00
Less: Exercised during the year 10,000 2.00 - -
Forfeited during the year - - 35,000 2.00
Expired during the year - - - -
------------ --------------- ------------ --------------
Outstanding at the end of the year 906,300 $ 2.97 655,000 $ 2.00
Weighted average remaining contractual life 715 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.
12. 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 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
F-16
<PAGE>
was approximately $361,068 (1998: $176,561).
The Company does not maintain any plans for other post-employment or post-
retirement employee benefits.
13. Subsequent events
On 3 March 2000, the Company sold 1,105,000 shares of its Common Stock for
a total consideration of $7,514,000, as disclosed in Note 11. 0.
14. Supplementary disclosure to cash flow statement
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Cash paid during the year for:
Interest $ 12,020 $ 5,417
Income taxes - -
Non-cash investing and financing transactions:
Capitalization of interest - -
Capital leases relating to finance equipment 7,233 197,545
Common stock issued in consideration
for consultancy fees - 20,000
Common stock issued to repay a bridging loan - 225,000
Common stock issued in consideration
for administrative fees - -
</TABLE>
F-17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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.
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
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
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<PAGE>
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.
(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
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<PAGE>
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.
(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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<PAGE>
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.
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(4) 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(1) 1997 Stock Option Plan of the Company
10.11(3) Series B Preferred Stock Purchase Agreement dated December 18, 1997
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<PAGE>
10.12(3) Investor Rights Agreement dated December 18, 1997
10.13(3) Software License Agreement between the Company and IQ Net
10.14(3) Series C Preferred Stock Purchase Agreement dated January 25, 1999
10.15(3) Amended and Restated Investor Rights Agreement dated January 25,
1999
10.16(3) Amendment to the Software Distributor Agreement of January 16, 1997
dated December 10, 1998 between Virtual Telecom SA and Townsend
Analytics, Ltd.
10.17(4) 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(4) Registration Rights Agreement pursuant to the Private Placement of
Common Stock which4) was closed on March 20, 2000
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
27.1(4) Financial Data Schedule
- -----------------------------------------------------------------
(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, 1999.
(4) Previously filed as part of annual report on Form 10-KSB (SEC File No. 0-
22351) for the fiscal year ended December 31, 1999.
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 Registration Statement
on Form SB-2 to be signed on its behalf by the undersigned, thereunto duly
authorized, in Geneva, Switzerland, on May 8, 2000.
FIRSTQUOTE INC.
By: /s/ Neil G. Gibbons
-------------------------------------
Neil G. Gibbons,
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Neil G. Gibbons President and Chief Executive Officer May 8, 2000
- ------------------------------------ and Director (principal executive
Neil G. Gibbons officer)
/s/ Mark Benn Chief Financial Officer (principal May 8, 2000
- ------------------------------------ financial and accounting officer)
Mark Benn
/s/ Daniel Huber Director May 8, 2000
- ------------------------------------
Daniel Huber
/s/ Stuart Townsend Director May 8, 2000
- ------------------------------------
Stuart Townsend
/s/ Bryan Wood Director May 8, 2000
- ------------------------------------
Bryan Wood
Director
- ------------------------------------
Frank Verschoor
/s/ Paul Goossens Director May 8, 2000
- ------------------------------------
Paul Goossens
</TABLE>
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<PAGE>
EXHIBIT 5.1
OPPENHEIMER WOLFF & DONNELLY LLP
500 Newport Center Drive
Suite 700
Newport Beach, California 92660
(949) 719-6000
(949) 719-6040 (Fax)
May 9, 2000
FirstQuote Inc.
12 Avenue des Morgines
1213 Petit Lancy 1
Geneva, Switzerland
Re: Registration Statement on Form SB-2
-----------------------------------
Gentlemen:
As counsel for FirstQuote Inc., a Delaware corporation (the "Company"), we
have examined its Certificate of Incorporation, as amended, Bylaws and such
other corporate records, documents and proceedings, and such questions of law as
we have deemed relevant for the purpose of this opinion. We have also, as such
counsel, examined the Registration Statement on Form SB-2 of the Company as
filed with the Securities and Exchange Commission, covering the registration
under the Securities Act of 1933, as amended, of a total 1,201,948 shares of
$.001 par value common stock ("Common Stock"), including the exhibits and form
of Prospectus (the "Prospectus") pertaining thereto, and any amendments thereto
(collectively, the "Registration Statement").
Upon the basis of such examination, we are of the opinion that:
1. The Company is a corporation duly authorized and validly existing in
good standing under the laws of the State of Delaware, with all requisite power
to conduct the business described in the Registration Statement.
2. The shares of the Company's Common Stock registered pursuant to the
Registration Statement have been duly and validly authorized and, subject to the
payment therefor pursuant to the terms contemplated in the final Prospectus,
such shares of Common Stock will be duly and validly issued as fully paid and
non-assessable securities of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Oppenheimer Wolff & Donnelly LLP
<PAGE>
EXHIBIT 23.2
Arthur Andersen SA
Route de Pre-Bois 29
1215 Geneve 15
Telephone 022 929 42 42
Fax 022 929 4200
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accounts, we hereby consent to the incorporation of our
report dated March 30, 2000 included or incorporated by referenced in the annual
report on Form 10-KSB, into the Company's Forms S-3 and SB-2 Registration
Statement.
ARTHUR ANDERSEN SA
Geneva, Switzerland
May 3, 2000
