PRINCETON ECOM CORP, S-1, 1999-03-31

PRINCETON ECOM CORP
S-1, 1999-03-31

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<PAGE>

As filed with the Securities and Exchange Commission on March 31, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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PRINCETON ECOM CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 7374 22-2528267
(Primary standard (I.R.S. employer
(State or other industrial identification no.)
jurisdiction of classification code
incorporation or number)
organization)
165 Wall Street
Princeton, New Jersey 08540
(609) 924-1244
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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Donald C. Licciardello
Chairman and Chief Executive Officer
Princeton eCom Corporation
165 Wall Street
Princeton, New Jersey 08540
(609) 924-1244
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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Copies to
James P. Prenetta, Jr., Russell U. Schenkman, Ellen B. Corenswet, Esq.
Esq. Kelley Drye & Esq. Hale & Schenkman 13 Brian B. Margolis, Esq.
Warren LLP 101 Park Roszel Road Suite C-225 Brobeck, Phleger &
Avenue New York, New Princeton, New Jersey Harrison LLP 1633
York 10178 (212) 808- 08540 (609) 452-0110 Broadway New York, New
7800 York 10019 (212) 581-
1600

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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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(d)
under the Securities Act of 1933, please 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
under the Securities Act of 1933, please check the following box. [_]

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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Maximum
Aggregate
Title of each Class of Offering Price Amount of
Securities to be Registered (1) Registration Fee
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par value........................... $46,000,000 $12,788
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.

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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 said
Section 8(a), may determine.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any jurisdiction where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED MARCH 31, 1999

[PRINCETON eCOM LOGO]

Common Stock

Princeton eCom Corporation is offering shares of its common stock.
This is Princeton eCom's initial public offering and no public market exists
for its shares. Princeton eCom will apply for approval for quotation on the
Nasdaq National Market under the symbol "ECOM" for the shares we are offering.
We anticipate that the initial public offering price will be between $ and
$ per share.

--------------

Investing in the common stock involves risks.
See "Risk Factors" beginning on Page 6.

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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to Princeton eCom...................................... $ $
</TABLE>

The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.

Princeton eCom has granted the underwriters a 30-day option to purchase up to
an additional shares of common stock to cover over-allotments. BancBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
purchasers on , 1999.

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BancBoston Robertson Donaldson, Lufkin & Jenrette
Stephens

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e-Manager The undersigned is facilitating
Internet distribution.

E*TRADE Securities DLJdirect Inc.

The date of this Prospectus is , 1999.
<PAGE>

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.

Until , 1999, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Financial Data.................................................. 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 19
Business................................................................. 27
Management............................................................... 42
Certain Transactions..................................................... 50
Principal Stockholders................................................... 51
Description of Capital Stock............................................. 52
Shares Eligible for Future Sale.......................................... 54
Underwriting............................................................. 56
Legal Matters............................................................ 58
Experts.................................................................. 58
Additional Information................................................... 58
Index to Financial Statements............................................ F-1
</TABLE>

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Digital Scanline, els Electronic Lockbox Service, PAID Payments Acquisition
through Interactive Devices and 1-800-PayBill are our registered trademarks. e-
Collect is also a trademark of ours. All other trademarks or trade names
referred to in this prospectus are the property of their respective owners.

3
<PAGE>

SUMMARY

This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus, including "Risk Factors" and the
financial statements, carefully before making an investment decision.

The Company

We are a leading provider of Internet bill publishing and payment services
for financial institutions and large businesses that generate a substantial
number of consumer bills. Our electronic services, utilizing the Internet, the
telephone and private computer networks, eliminate the need for billers to
generate and mail paper bills and eliminate the need for consumers to write and
mail paper checks. Our services allow billers to publish and present bills to
consumers, either directly through billers' own web sites or indirectly through
the web sites of financial institutions and Internet portals. Our electronic
payment services provide an efficient billing solution that automatically
updates billers' financial accounting systems by electronically delivering
payment information. Concurrently, the consumer's bank account is
electronically debited to pay the bill. As of March 31, 1999, we service over
250 billers and financial institutions, of which a limited number are currently
using our Internet bill publishing and payment service.

The Internet is becoming an increasingly accepted platform for broad
consumer-based financial services like insurance, mortgages and bill
presentment and payment. According to Jupiter Communications, in 1998
approximately 15 billion consumer paper bills were received by approximately
100 million U.S. households. Creating and publishing a paper bill is a
multiple-step process that is costly and labor intensive for the biller.
According to the Gartner Group, the average cost to the biller of creating and
delivering a paper bill is $1.00. The bill payment process is also time
consuming and can be costly for the consumer. The Internet provides an
opportunity to dramatically simplify the bill presentment and payment process
and to reduce costs and improve convenience of the billing cycle for both the
biller and the consumer. Billers must decide whether to internally develop the
capacity to perform this process or to outsource the process. Many billers lack
the resources and expertise to cost-effectively implement, maintain, scale,
enhance and service the hardware and software necessary to electronically
present bills and process consumer payments.

Our Internet bill publishing and payment service provides the following key
benefits to our customers:

. comprehensive, cost-effective outsourcing of the entire bill publishing
and payment process;

. broad distribution that enables billers to publish their bills through
multiple presenters and provides consumers with numerous options of
where and when to access and pay their bills;

. fully customized Internet-based consumer billing interface that allows
billers, financial institutions and Internet portals to preserve the
existing look and feel of their web sites;

. reliable and scalable system architecture;

. enhanced network and data security; and

. ease of integration with billers' financial accounting systems.

--------------------

On January 25, 1984, we were incorporated in the State of Delaware under
the name Princeton TeleCom Corporation. On March 24, 1999, we changed our name
to Princeton eCom Corporation. Our principal office is located at 165 Wall
Street, Princeton, New Jersey 08540 and our telephone number is (609) 924-1244.
Our web site address is www.princetontele.com. The information on our web site
is not a part of this prospectus.

We intend to effect a - for-1 stock split to be effective immediately
prior to the closing of this offering. Unless otherwise noted, the information
in this prospectus assumes that the stock split has not been effected and that
the underwriters will not exercise their over-allotment option.

4
<PAGE>

The Offering

<TABLE>
<S> <C>
Common stock offered by Princeton eCom...... shares
Common stock to be outstanding after the
offering.................................. shares
Use of proceeds............................. To invest in the further growth
and expansion of our business and
for working capital and other
general corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol...... ECOM
</TABLE>

Summary Financial Data
(in thousands, except per share data)

The As Adjusted Balance Sheet Data summarized below reflects the
application of the net proceeds from the sale of the shares of common stock
offered by Princeton eCom at an assumed initial public offering price of $
per share, after deducting the underwriting discounts and commissions and our
estimated offering expenses.

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues.................... $ 797 $2,235 $1,836 $3,032 $3,822
Operating loss.................... (764) (556) (2,184) (2,126) (3,341)
Net loss.......................... (546) (629) (2,191) (2,142) (3,355)
Basic and diluted net loss per
share........................... $(0.20) $(0.23) $(0.78) $(0.75) $(1.07)
Shares used in computing net loss
per share....................... 2,784 2,784 2,818 2,856 3,141
</TABLE>

<TABLE>
<CAPTION>
December 31, 1998
--------------------- ---
Actual As Adjusted
-------- -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................. $ 6,362 $
Working capital (deficit)............................. (308)
Total assets.......................................... 9,344
Long term debt, less current portion.................. 50
Total stockholders' equity............................ 278
</TABLE>

5
<PAGE>

RISK FACTORS

You should carefully consider the following risks and uncertainties before
making your investment decision. The trading price of our common stock could
decline due to any of these risks, and you could lose all or part of your
investment. You should also refer to the other information contained in this
prospectus, including our financial statements and the related notes. This
prospectus contains forward-looking statements that involve risks and
uncertainties. These statements relate to our future plans, objectives,
expectations and intentions, and the assumptions underlying or relating to any
of these statements. These forward-looking statements are usually accompanied
by words like "believes," "anticipates," "plans," "expects" and similar
expressions. Our actual results could differ materially from those discussed in
these statements. Factors that could contribute to such differences include,
but are not limited to, those discussed below and elsewhere in this prospectus.

Risks Related To Our Business

We have a history of losses and expect to continue to incur losses

We have incurred net losses in each of the last five years. For the year
ended December 31, 1998, we had a net loss of $3.4 million. As of December 31,
1998, we had an accumulated deficit of approximately $10.9 million. We expect
to continue to incur losses from operations for the foreseeable future. We
cannot assure you that we will ever become profitable. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

We intend to expend significant resources on our sales, marketing and new
customer implementation operations. As a result, we will need to achieve
significant revenue increases to achieve and maintain profitability. We cannot
assure you that we will be able to achieve the necessary revenue growth. Our
number of customers or the number of services which our customers buy from us
may grow more slowly than we anticipate or may decrease in the future. Even if
we become profitable, we may not sustain or increase our profits on a quarterly
or annual basis in the future.

Our operating results may fluctuate significantly from quarter to quarter,
which may negatively impact our stock price

Our quarterly operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside of our control.
These factors include:

<TABLE>
<S> <C>
. the rate at which we transition . the timing and rate of market
our existing billers to our acceptance by financial
Internet bill publishing and institutions of our payment
payment service; services;

. our ability to expand our . our ability to upgrade, develop
customer base and develop new and maintain our systems and
relationships with financial infrastructure and the timing and
institutions and Internet cost of this;
portals;
. our ability to offer
. the amount and timing of costs competitively priced services;
related to our sales and
marketing efforts and other . interest rate fluctuations;
initiatives;
. governmental regulation of the
. our ability to renew existing Internet, in general, and the
agreements with customers; electronic bill presentment and
payment markets, in particular;
. the timing and rate of market and
acceptance of our Internet bill
publishing and payment service . economic conditions which may
and other services and service affect the budgets of billers,
enhancements introduced by either financial institutions and
us or our competitors; consumers for technological
expenditures.

</TABLE>

6
<PAGE>

Because of these factors, we believe that comparisons of our quarterly
operating results are not necessarily meaningful. In addition, it is possible
that in some future quarters our operating results will be below the
expectations of research analysts and investors, and in that case, the price of
our common stock is likely to decline.

Our business model is unproven and is evolving

To date, our business has consisted primarily of providing electronic
billing services to billers and financial institutions. We have only derived an
insignificant amount of revenue from our Internet bill publishing and payment
service. The electronic bill presentment and payment industry, including all
non-paper based mediums, is an evolving industry. We need to attract and retain
a significant number of billers willing to use our Internet bill publishing and
payment service. We cannot assure you that we will be able to attract and
retain these additional billers. If a significant number of billers fail to
adopt our Internet bill publishing and payment service or adopt this service
more slowly than anticipated, or if we fail to retain new billers or further
expand this service to penetrate our existing customer base, we may not be able
to achieve the critical mass necessary for our Internet bill publishing and
payment service to succeed. Furthermore, consumers may not be receptive to
using the Internet to pay their bills. Our business would be materially and
adversely affected if the market for Internet bill presentment and payment
services fails to develop or develops more slowly than we expect. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business--The Princeton eCom Strategy."

If we fail to respond to rapid technological change, our business will suffer

The electronic bill presentment and payment industry is characterized by
rapid technological change. As a result, the emergence of new industry
standards and practices could render our existing technologies and systems, and
thus our services, obsolete. The development of our technologies and necessary
service enhancements entails significant technical and business risks and
requires substantial lead-time and expenditures. We may not be able to keep
pace with the latest technological developments, successfully identify and meet
our customer demands, use new technologies effectively or adapt our services to
customer requirements or emerging industry standards. If we cannot adapt or
respond in a cost-effective and timely manner to technological changes, our
business, operating results and financial condition will be materially and
adversely affected.

If we do not develop relationships with significant Internet aggregators of
consumer bills, our business will suffer

We believe that in order to be successful in the Internet bill presentment
and payment industry, we must have a relationship with a minimum number of
aggregators that will enable our customers, through our Internet bill
publishing and payment service, to reach a significant portion of the consumer
audience. We cannot assure you that we will be able to achieve or maintain this
minimum number of relationships and our failure to do so would have a material
and adverse effect on our business, operating results and financial condition.

Increased competition in the electronic bill presentment and payment markets
would materially and adversely affect our business

For customers seeking to obtain a complete outsourcing solution such as
that provided by us, we believe that we currently face direct competition from
only a limited number of companies. However, we anticipate that competition in
the Internet bill presentment and payment market and other markets in which we
operate will intensify in the future as:

. traditional lockbox service providers and traditional bill fulfillment
vendors attempt to offer Internet bill presentment and payment services;
and

. new providers of electronic lockbox and Internet bill presentment
services develop.

7
<PAGE>

We also face indirect competition from various third-party software
vendors, including Bluegill, eDocs, Just in Time Solutions and Sterling
Commerce, which develop some of the software necessary for the development of
an integrated, in-house Internet bill presentment and payment service. In
addition, these companies could potentially leverage their existing
capabilities and relationships to enter the outsourced Internet bill
presentment and payment market.

Competitive pressures would have a material and adverse effect on our
business, operating results and financial condition. We believe that the
principal competitive factors in our market are:

.ability to identify and respond to customer needs;

.technical expertise;

.quality of the service;

.price of the service;

.breadth of distribution through aggregators, and ultimately presenters;
and

. preexisting relationships that traditional bill fulfillment vendors and
lockbox service providers may have with our potential customers.

Many of our actual and potential competitors have significantly greater
financial, marketing, technical, sales and customer support and other
resources, larger customer bases and longer relationships with customers than
we do. In addition, some of these potential competitors may be able to devote
greater resources to the development, promotion and sale of their services,
adopt more aggressive pricing strategies and devote substantially more
resources to the development of technology and systems development than we are
able to.

Increased competition may result in reduced operating margins, loss of
market share and diminished value of our services, as well as different
pricing, service and marketing strategies. Despite our current competitive
positioning, we may not be able to compete successfully against current and
future competitors, and competitive pressures we face could have a material and
adverse effect on our business, operating results and financial condition.

If we fail to successfully expand our sales and marketing activities, our
business will be materially and adversely affected

We intend to expand our sales and marketing activities by hiring a sales
and marketing director and additional sales and marketing personnel.
Competition for a qualified sales and marketing director, as well as sales and
marketing personnel, is extremely intense. Our ability to expand our sales and
marketing activities involves a number of risks including:

. our ability to successfully integrate our new sales and marketing
director with our existing and future sales and marketing personnel; and

. our ability to hire, retain, integrate and motivate sales and marketing
personnel in a very competitive environment.

We cannot assure you that we will be successful in integrating a sales and
marketing director and expanding our sales and marketing personnel, and our
failure to do so would have a material and adverse effect on our sales and
marketing efforts and on our business, operating results and financial
condition.

A number of members of our management team have little experience working
together, and we depend on a few key employees and technical personnel

Our future success will depend upon the continued service of key management
and technical personnel. Our President and Chief Operating Officer joined us in
March 1999 and our Vice President and Chief Financial

8
<PAGE>

Officer joined us in February 1999. Given their limited experience with our
business and other members of management, it is possible that these two
officers may not integrate well with each other or with other members of our
management team. Their failure to integrate well would have a material and
adverse effect on our business, operating results and financial condition.

We currently do not maintain key man life insurance policies on any of our
employees. While some of our key employees will have employment agreements with
us prior to the closing of this offering, the loss of the services of any of
our key employees or our inability to hire and retain additional key employees
would have a material and adverse effect on our business, operating results and
financial condition.

If we fail to effectively manage our internal growth, our business will be
materially and adversely affected

We recently began to significantly expand our operations and intend to
continue this expansion. We increased our employee base from 56 at December 31,
1997 to 75 at December 31, 1998. This expansion has placed, and is expected to
continue to place, a significant strain on our managerial, operational and
financial resources. We must hire additional managerial and administrative
employees and expand our operations and employee base. In addition, we cannot
assure you that we can successfully integrate any new management personnel into
our existing management team. We cannot assure you that current and planned
personnel, systems, procedures and controls will be adequate to support our
future operations. If we are unable to manage our growth effectively, the
quality of our services, our ability to train and retain key personnel, and our
business, operating results and financial condition will be materially and
adversely affected.

We are dependent on our existing relationships with financial institutions,
bill fulfillment vendors and Internet portals to help market our services and
our business would be materially and adversely affected if we were to lose one
or more of these relationships

We depend on our relationships with financial institutions and bill
fulfillment vendors, and, in the future, we anticipate that we will depend upon
Internet portals, to expand the distribution of our services to more billers
and consumers. Our ability to increase revenues depends upon our ability to
market our services through new and existing relationships. If we lose some of
these relationships or fail to develop new ones, our business will not meet
growth expectations and our business, operating results and financial condition
will be materially and adversely affected.

If our system security is breached, our business will be materially and
adversely affected

A fundamental requirement for Internet bill presentment and payment
services is the secure transmission of confidential information over public
computer networks. Third parties may attempt to breach our system security or
that of our customers. If they are successful, they could obtain consumers'
confidential information, including consumer profiles, passwords, financial
account information, bank account numbers or other personal information. We may
be liable to our billers or their consumers for any breach in our system
security and any breach could harm our reputation. Our computer servers are
vulnerable to computer viruses, physical or electronic break-ins and similar
disruptions, which could lead to interruptions or delays in processing
transactions, or the manipulation or loss of data. We may be required to expend
significant capital and other resources to license encryption technology and
additional technologies to protect against system security breaches or to
alleviate problems caused by any breach. Our failure to prevent system security
breaches would have a material and adverse effect on our business, operating
results and financial condition.

Our operations are dependent upon systems which are located at a single site
and any prolonged interruption of our systems would materially and adversely
affect our business

Our success depends largely upon the efficient and uninterrupted operation
of our operating systems. All of our operating systems are located at a single
facility leased by us in Princeton, New Jersey. Our systems are

9
<PAGE>

vulnerable to damage or interruption from fire, power loss, telecommunications
failure, break-ins and similar events. We cannot assure you that we will not
experience system failures in the future. The occurrence of a system failure or
similar event would have a material and adverse effect on our business,
operating results and financial condition.

A constraint in capacity to process transactions would materially and adversely
affect our business

Capacity constraints in processing transactions, due to a sharp increase in
traffic, may cause unanticipated system disruptions, impair quality and lower
the level of our service. If this were to happen, our business, operating
results and financial condition will be materially and adversely affected.

We do not have any long-term contracts with our billers or aggregators

All of our contracts with our billers and aggregators are short-term and
can be terminated without cause, generally upon 30 to 90 days' notice. Our
future success depends on our ability to retain our current billers and
aggregators and attract new billers and aggregators. The loss of billers or
aggregators, or our inability to attract new billers or aggregators, would have
a material and adverse effect on our business, operating results and financial
condition.

If our services do not function as designed, we may incur significant liability

Our Internet bill publishing and payment service is designed to provide
payment management functions and to limit the billers' risk of fraud or loss in
effecting transactions with their consumers. As our Internet bill publishing
and payment service becomes more critical to our billers, there is a potential
for significant liability claims for the processing of fraudulent or erroneous
transactions. If a liability claim were brought against us, even if not
successful, its defense would likely be time consuming and costly and could
injure our reputation. A successful liability claim may have a material and
adverse effect on our business, operating results and financial condition.

Our failure to successfully integrate any future acquisitions would strain our
managerial, operational and financial resources

As part of our business strategy, we intend to pursue strategic
acquisitions that would provide additional technologies, billers, services or
experienced personnel. Acquisitions present a number of potential risks that
would have a material and adverse effect on our business, operating results and
financial condition, including:

. difficulties in assimilating the acquired company's personnel,
operations and technologies;

. the potential loss of key employees of the acquired company;

. the distraction of our management's attention from other business
concerns; and

. potentially dilutive issuances of our common stock or the incurrence of
substantial amounts of debt.

If we are unable to protect our intellectual property rights, our business will
be materially and adversely affected

We protect our intellectual property rights through a combination of
trademark, copyright and trade secrets laws. We cannot assure you that the
steps we have taken to protect our intellectual property rights, however, will
be adequate to deter misappropriation of those rights. We may not be able to
detect unauthorized use of and take appropriate steps to enforce our
intellectual property rights. It may also be possible for unauthorized third
parties to copy certain portions of our proprietary information or reverse
engineer the proprietary information utilized in our services.

10
<PAGE>

taken or will take in the future will be sufficient to protect our technology
from infringement or misappropriation or deter independent development of
similar or superior technologies by others.

Many parties are actively developing Internet billing and telephone
analysis systems technologies. We expect these developers to continue to take
steps to protect these technologies, including seeking patent protection. For
example, we are aware that a number of patents have been issued in the areas of
web-based information indexing and retrieval, online direct marketing and
telephone statistical analysis systems. As a result, we believe that disputes
over the ownership of these technologies are likely to arise in the future. We
anticipate that additional third-party patents will be issued in the future. We
cannot be certain that our services do not infringe valid patents, copyrights
or other intellectual property rights held by third parties.

Furthermore, we cannot assure you that third parties will not claim that we
have infringed upon their patents or other proprietary rights. From time to
time, we expect to be subject to claims by third parties in the ordinary course
of our business, including claims of alleged infringement of trademarks,
copyrights and other intellectual property rights of third parties. Although
there has not been any litigation relating to these claims to date, these
claims and any resultant litigation, should they occur, would subject us to
significant liability for damages and would result in the invalidation of our
proprietary rights. In addition, even if we prevail, this litigation could be
time-consuming and expensive to defend, and could result in the diversion of
our time and attention, any of which would materially and adversely affect our
business, operating results and financial condition. Any claims or litigation
from third parties may also result in limitations on our ability to use the
trademarks and other intellectual property subject to these claims or
litigation, unless we enter into agreements with the third parties. However,
these agreements may be unavailable on commercially reasonable terms, or at
all.

Year 2000 problems would adversely affect our business

Many currently installed computer systems and software products are coded
to accept and recognize only two-digit rather than four-digit entries to define
the applicable year. These systems may recognize a date using "00" as the year
1900 rather than the year 2000. As a result, computer systems and/or software
used by many companies, including our billers and financial institutions upon
which we rely to perform our services, may need to be upgraded to comply with
Year 2000 requirements or risk system failure or miscalculations causing
disruptions of normal business activities.

We have completed our assessment of our services and information technology
systems. We believe that our core/mission critical systems and a majority of
our non-mission critical systems are Year 2000 compliant. We anticipate that
our systems which are not Year 2000 compliant will be Year 2000 compliant by
October 1999. We have also completed our initial survey of the information
systems of our principal vendors and service providers. Based on
representations of these vendors and service providers, we believe that the
information technology systems of these third parties, as they relate to us, do
not pose significant operational issues. Our assessment is on-going and will
continue with all principal vendors and service providers with which we do
business. In addition, we do not believe our embedded systems pose Year 2000
concerns because we believe that we have identified all of our software and
hardware that require Year 2000 updates or modifications.

We currently anticipate that our total expenses for Year 2000 compliance
will be less than $300,000. As of March 31, 1999, we have spent approximately
$130,000 in personnel and other costs related to our Year 2000 risk assessment
and remediation efforts.

In order to accurately provide our services, we must rely on technology
supported by billers, financial institutions, aggregators, presenters and
consumers. Furthermore, our services rely on transmission of data over the
Internet, third party data and voice communication lines, and data transmission
through wire transfer systems, including the Federal Funds system. Failure by
us, our billers, aggregators, presenters or suppliers to

11
<PAGE>

adequately address Year 2000 issues in a timely manner could impede our ability
to provide our services and have a direct impact on our ability to generate
revenue. This, in turn, could have a material and adverse impact on our
business, operating results and financial condition. Accordingly, we plan to
correct our remaining Year 2000 issues by October 1999. We believe that
associated costs are adequately budgeted for in our 1999 business plan.
However, if our efforts or the efforts of billers, aggregators, financial
institutions and others with which we engage in business fail to adequately
address their own Year 2000 issues, the most likely worst case scenario would
be a substantial loss of our revenue for some period of time. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Considerations."

Risks Related to Our Industry

We depend on the continued growth in the use of the Internet and the
development of the Internet infrastructure

Our business would be materially and adversely affected if Internet usage
does not continue to grow rapidly. Internet usage may be inhibited for a number
of reasons, including:

. concerns about the security of confidential information;

. lack of reliability and ease of access;

. lack of cost-effective, high-speed service;

. inconsistent quality of service;

. inadequate network infrastructure; or

. adoption of onerous governmental regulations.

In addition, the Internet infrastructure may not be able to support the
demands placed on it by increased Internet usage and its performance and
reliability may decline. Internet web sites have experienced interruptions in
their service as a result of outages and other delays occurring throughout the
Internet network infrastructure. If these outages or delays frequently occur in
the future, Internet usage, as well as the use of our Internet Bill Publishing
service, could grow more slowly than projected or decline.

Internet bill presentment and payment services may not grow at the same rate as
Internet usage

Our success will depend in large part on the growth rate of Internet usage
generally. Our business, operating results and financial condition would be
materially and adversely affected if Internet bill presentment and payment
services did not meet growth expectations.

We may encounter Internet security concerns that would hinder Internet commerce

The secure transmission of confidential information over the Internet is an
important component of electronic commerce and communications over the
Internet. Any well-publicized compromise of Internet security could deter
people from using the Internet to conduct transactions that involve the
transmittal of confidential information. Because a number of our services
involve the transfer of confidential information, our business, operating
results and financial condition could be materially and adversely affected if
Internet users significantly reduce their use of the Internet because of system
security concerns. We may also be required to expend significant time and
resources to protect our services against the threat of security breaches or to
alleviate problems caused by such breaches.

Government regulation and the legal uncertainties relating to the Internet
would cause our business to suffer

12
<PAGE>

types of providers of electronic commerce services. We cannot assure you that a
federal or state agency will not attempt, either now or in the future, to
require that providers of services like ours be licensed. This would impede our
ability to do business in the regulator's jurisdiction. In conducting several
aspects of our business, we are subject to various laws and regulations
relating to commercial transactions generally, such as the Uniform Commercial
Code. We are also subject to the electronic funds transfer rules embodied in
Regulation E promulgated by the Federal Reserve Board. Given the expansion of
the electronic commerce market, it is possible that the Federal Reserve might
revise Regulation E or adopt new rules for electronic funds transfer affecting
users other than consumers. Because of growth in the electronic commerce
market, Congress has held hearings on whether to regulate providers of services
and transactions in the electronic commerce market. It is possible that
Congress or individual states could enact laws regulating the electronic
commerce market. If enacted, these laws, rules and regulations could be imposed
on our business and industry and would have a material and adverse effect on
our business, operating results and financial condition. Federal, local and
state laws and regulations may be adopted in the future to address issues like:

. user privacy;

. pricing;

. online content regulation;

. taxation; and

. the characteristics and quality of online products and services.

Any new laws or regulations relating to the Internet would have a material
and adverse effect on our business, operating results and financial condition.

Risks Relating to this Offering

Trading in our common stock could be subject to extreme price and volume
fluctuations and you could have difficulty trading your shares of common stock

We cannot predict the extent to which investor interest in Princeton eCom
will lead to the development of an active trading market or that the market
price of our common stock will not decline below the initial public offering
price. The initial public offering price for the shares of our common stock
will be determined by negotiations between us and the representatives of the
underwriters and may not be indicative of the prices that will prevail in the
trading market. The stock market has experienced significant price and volume
fluctuations and the market prices of securities of technology companies,
particularly Internet-related companies, have been extremely volatile.
Investors may not be able to resell their shares at or above the initial public
offering price.

We are controlled by our principal stockholder whose interests may differ from
those of other stockholders

After this offering, Donald C. Licciardello, our Chairman and Chief
Executive Officer, will control, in the aggregate, approximately %, or % if
the underwriters' overallotment option is exercised in full, of our outstanding
common stock. As a result, he will have the ability to control our management
and affairs, and to control substantially all matters submitted to our
stockholders for approval, including the election and removal of directors and
any merger, consolidation or sale of all or substantially all of our assets.
This concentration of control may have the effect of deterring a change in
control of the company, impeding a merger, consolidation, takeover or other
business transaction involving us or discouraging a potential acquirer from
making a tender offer or otherwise attempting to obtain control of the company.
Any of the foregoing results could, in turn, materially and adversely affect
the market price for our common stock. See "Principal Stockholders."

13
<PAGE>

We may spend a substantial portion of the net proceeds in ways with which you
may not agree

We currently have no specific uses for a substantial portion of the net
proceeds of this offering. Accordingly, you will be relying on our management's
judgment with only limited information about our specific intentions regarding
the use of the net proceeds. We may spend most of the net proceeds from this
offering in ways with which you may not agree. Our failure to apply these funds
effectively would have a material and adverse effect on our business, operating
results and financial condition. See "Use of Proceeds."

Certain provisions of Delaware law, our certificate of incorporation, by-laws,
and some of our agreements may make a takeover of our company more difficult
which could materially and adversely affect the market price for our common
stock

We are subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law. Section 203 could delay or prevent a third
party or a significant stockholder from acquiring control of us. In addition,
provisions of our Certificate of Incorporation, by-laws and other agreements
may have the effect of discouraging, delaying or preventing a merger, tender
offer or proxy contest involving us, even if such transaction would be
beneficial to our stockholders. See "Description of Capital Stock."

Declines in our stock price could lead to costly litigation that would
adversely affect our business

Securities class action litigation has often been brought against companies
that experience significant declines in the market price of their securities.
If this kind of action is brought against us, it could result in substantial
monetary expenditures as well as a diversion of our management's attention from
their day-to-day business activities, which would have a material and adverse
effect on our business, operating results and financial condition.

Future sales of our common stock in the public market may depress our stock
price

The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of common stock in the
market after this offering, or the perception that these sales may occur. These
sales also might make it more difficult for us to sell equity securities in the
future and at a price that we deem appropriate. See "Shares Eligible for Future
Sale."

We face uncertainty about additional financing for our future capital needs

We currently anticipate that the net proceeds of this offering and existing
cash and cash equivalents, will be sufficient to meet our operating activities,
capital expenditures and other obligations until at least the end of the year
2000. However, if we were to raise additional funds through the issuance of
equity securities, the percentage ownership of our stockholders would be
reduced, and the equity securities sold might have rights, preferences or
privileges senior to those of the common stock being sold in this offering. We
cannot assure you that additional financing will 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 would have a material and adverse effect on our business,
operating results and financial condition.

You will experience an immediate and substantial dilution in the book value of
your investment

Investors purchasing shares in this offering will incur immediate and
substantial dilution in net tangible book value per share. To the extent
outstanding options to purchase common stock are exercised, there will be
further dilution. See "Dilution."

14
<PAGE>

USE OF PROCEEDS

The net proceeds we receive from this offering are estimated to be
approximately $ million, $ million if the underwriters' over-allotment
option is exercised in full, assuming an initial public offering price of $
per share, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us. The principal uses of the net
proceeds will be to invest in the further growth and expansion of our business
and for working capital and other general corporate purposes. In addition, we
may use a portion of the net proceeds from this offering to acquire or invest
in complementary businesses. However, we do not currently have commitments or
agreements to make such investment.

As of the date of this prospectus, we have not identified with certainty
the specific uses for the net proceeds from this offering. Consequently, our
management will have discretion over their use and investment. Pending their
use, the net proceeds will be invested in short-term, investment grade,
interest-bearing instruments, certificates of deposit or direct or guaranteed
obligations of the United States government. See "Risk Factors--Risks Relating
to this Offering--We may spend a substantial portion of the net proceeds in
ways with which you may not agree."

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock and
do not intend to pay any cash dividends in the foreseeable future. We currently
anticipate that all future earnings, if any, will be retained to finance the
further expansion and continued growth of our business. Any future
determination regarding the payment of cash dividends will be within the sole
discretion of our board of directors and will depend upon, among other things,
our earnings, operating results, financial condition and current and
anticipated cash needs.

15
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1998
on an actual basis and as adjusted to reflect the sale by us of the shares of
common stock to be sold in this offering at an estimated offering price of $
per share. The As Adjusted data is calculated after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us. See
"Use of Proceeds." The capitalization information set forth in the table below
is qualified by and should be read in connection with the more detailed
financial statements and related notes thereto included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
December 31, 1998
---------------------
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Long-term debt, less current portion..................... $ 50 $
-------- ------
Stockholders' equity:
Common stock, $0.01 par value; 6,000,000 shares
authorized; 3,706,542 shares issued and outstanding,
actual; and shares issued and outstanding, as
adjusted............................................. 37
Additional paid-in-capital............................. 12,269
Accumulated deficit.................................... (10,894)
Subscriptions receivable............................... (267)
Deferred compensation.................................. (867)
-------- ------
Total stockholders' equity............................. 278
-------- ------
Total capitalization................................. $ 328 $
======== ======
</TABLE>

The above capitalization table excludes (1) 722,300 shares of common stock
issuable upon the exercise of options outstanding under our stock option plans,
as of December 31, 1998, at a weighted average price of $2.80 per share, (2)
65,000 shares of common stock issuable upon the exercise of options granted in
February 1999 at $12.00 per share, (3) 140,000 shares of common stock issuable
upon the exercise of options granted in March 1999 at $16.00 per share, (4)
789,050 shares of common stock reserved for issuance, and not outstanding,
under our existing stock option plans as of March 31, 1999 and (5) 44,792
shares of common stock purchased by a major stockholder on March 30, 1999, at
$12.03 per share, in connection with a September 1998 stock purchase agreement.

16
<PAGE>

DILUTION

Our net tangible book value as of December 31, 1998 was $278,287, or $0.08
per share of common stock. Net tangible book value per share represents the
amount of our total tangible assets less our total liabilities, divided by the
number of shares of our common stock outstanding. After giving effect to the
sale by us of our shares of common stock in this offering at an estimated
offering price of $ per share and the application of the estimated net
proceeds of this offering, our net tangible book value as of December 31, 1998
would have been approximately $ , or $ per share of common stock. This
represents an immediate increase in the net tangible book value of $ per
share to existing stockholders and an immediate dilution in the net tangible
book value of $ per share to new investors buying common stock in this
offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $
Net tangible book value per share as of December 31, 1998.... $0.08
Increase attributable to new investors ......................
-----
Adjusted net tangible book value per share as of December 31,
1998.........................................................
----
Dilution per share to new investors............................ $
====
</TABLE>

The following table summarizes, as of December 31, 1998, the total number
of shares of common stock purchased from us, the total consideration paid to us
and the average price per share paid by existing stockholders and by new
investors:

<TABLE>
<CAPTION>
Shares Total
Purchased Consideration
-------------- -------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. % $ % $
New investors...................... $
--- ----- ---- -----
Total............................ 100.0% $ 100.0%
=== ===== ==== =====
</TABLE>

The foregoing discussion excludes (1) 722,300 shares of common stock
issuable upon the exercise of options outstanding under our stock option plans,
as of December 31, 1998, at a weighted average price of $2.80 per share, (2)
65,000 shares of common stock issuable upon the exercise of options granted in
February 1999 at $12.00 per share, (3) 140,000 shares of common stock issuable
upon the exercise of options granted in March 1999 at $16.00 per share, (4)
789,050 shares of common stock reserved for issuance, and not outstanding,
under our existing stock option plans as of March 31, 1999 and (5) 44,792
shares of common stock purchased by a major stockholder on March 30, 1999, at
$12.03 per share, in connection with a September 1998 stock purchase agreement.

17
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data has been derived from our financial
statements. The selected financial data as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 are derived
from our financial statements that have been audited by Arthur Andersen LLP,
independent public accountants, and are included elsewhere in this prospectus.
The selected financial data as of December 31, 1996 has been derived from our
audited balance sheet which is not included in this prospectus. The selected
financial data as of December 31, 1994 and 1995 and for each of the two years
in the period ended December 31, 1995 are derived from our unaudited financial
statements not included in this prospectus. The following financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and the
related notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Service fees..................... $ 792 $ 1,868 $ 1,632 $ 2,333 $ 2,386
Interest......................... 5 367 204 699 1,436
------- ------- ------- ------- -------
Total revenues.................. 797 2,235 1,836 3,032 3,822
------- ------- ------- ------- -------
Operating expenses:
Cost of services................. 476 1,054 1,363 1,801 1,967
Development costs................ 216 410 834 820 895
Selling, general and
administrative................. 869 1,327 1,823 2,537 3,283
Amortization of deferred
compensation................... -- -- -- -- 1,018
------- ------- ------- ------- -------
Total operating expenses........ 1,561 2,791 4,020 5,158 7,163
------- ------- ------- ------- -------
Operating loss.................... (764) (556) (2,184) (2,126) (3,341)
Interest expense.................. 84 73 7 16 14
------- ------- ------- ------- -------
Loss before extraordinary item.... (848) (629) (2,191) (2,142) (3,355)
Extraordinary gain from debt
forgiveness..................... 302 -- -- -- --
------- ------- ------- ------- -------
Net loss.......................... $ (546) $ (629) $(2,191) $(2,142) $(3,355)
======= ======= ======= ======= =======
Basic and diluted net loss per
share........................... $ (0.20) $ (0.23) $ (0.78) $ (0.75) $ (1.07)
======= ======= ======= ======= =======
Shares used in computing net loss
per share....................... 2,784 2,784 2,818 2,856 3,141
======= ======= ======= ======= =======
<CAPTION>
December 31,
-------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......... $ 443 $ 1,408 $ 523 $ 505 $ 6,362
Working capital (deficit)......... (2,463) (3,266) (5,635) (7,908) (308)
Total assets...................... 1,031 2,748 1,799 2,110 9,344
Long-term debt, less current
portion......................... 20 26 121 75 50
Total stockholders' equity
(deficit)......................... (2,425) (3,055) (5,244) (7,385) 278
</TABLE>

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial
statements and the related notes which are included elsewhere in this
prospectus. The following discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ significantly
from those discussed in these forward-looking statements as a result of various
factors, including, but not limited to, those set forth under "Risk Factors"
and elsewhere in this prospectus.

Overview

We are a leading provider of Internet bill publishing and payment services
for financial institutions and large businesses that generate a substantial
number of consumer bills. We were founded in 1984 to provide support services
to billers and financial institutions which were providing home banking
services to consumers. In 1990, we developed our electronic lockbox service,
known as els, which provides electronic transfer of funds and accounts
receivable data to large businesses and financial institutions. els was
developed as a means to reduce the number of payments that financial
institutions and billers were unable to process due to inadequate or mismatched
information. In 1994, we introduced our Balance Transfer Utility service, which
electronically transfers balances from one credit card institution to another.
This service generally involves larger dollar volumes than our other services,
thereby providing additional interest revenue. We did not derive significant
revenues from our Balance Transfer Utility service until 1997. In 1996, we
introduced 1-800-PayBill, a service that allows consumers to access and pay
their bills by telephone. In November 1997, we introduced an expansion of this
service to include the use of the Internet for bill presentment and payment.
This service, known as Internet Bill Publishing, allows consumers to access and
review their bill and make a secure electronic payment using the Internet.
Today, we offer a total of six publishing and payment services and service over
250 billers and financial institutions, of which a limited number are currently
using our Internet Bill Publishing that service. Although we expect that a
large portion of our future revenue will come from our Internet Bill Publishing
service, our revenues to date have been derived primarily from our other
services.

Our revenues are primarily derived from two sources.

. Service Fees. We derive revenue from contractual relationships with
billers and financial institutions. Service fee revenues, which
represent transaction fees charged by us for our services, are
recognized as the services are performed.

. Interest. We also derive revenue through the overnight investment of
funds received from consumers pending payment. Interest revenue is
recorded as it is earned.

We intend to significantly increase our sales and marketing and new
customer implementation expenditures during 1999. We believe these expenditures
will enable us to successfully implement our strategy of growing our biller
base and continuing to expand our relationships with aggregators. We also
believe that we can increase our market share of the Internet bill presentment
and payment market by increasing the marketing and promotion of our services
through the establishment of strategic relationships with traditional bill
fulfillment vendors and traditional lockbox providers that have existing
relationships with our targeted customer base.

We incur development costs in connection with developing our services. To
date, we have not capitalized any development costs. We expect to significantly
increase our development costs in the future as we enhance our current services
and develop new service offerings. This increase will primarily relate to the
hiring of additional employees performing technical support and computer
programming functions.

During 1998, we recorded an aggregate deferred compensation expense of
approximately $1.9 million in connection with the grant of stock options to our
employees and directors at exercise prices below the fair market value of our
common stock. We are amortizing this deferred compensation expense over the
vesting periods of the options, which range from immediate vesting to periods
of up to four years. Of the $1.9 million of deferred compensation expense
recorded, approximately $1.0 million was charged to expense during the year
ended December 31, 1998.

19
<PAGE>

We have incurred significant losses since our inception and we expect to
continue to incur significant losses for the foreseeable future. As of December
31, 1998, we had an accumulated deficit of approximately $10.9 million and
approximately $8.6 million of net operating loss carryforwards for federal
income tax purposes. Our net loss carryforwards begin to expire in 2003.

Results of Operations

The following table sets forth financial data as a percentage of revenues
for the periods indicated.

<TABLE>
<CAPTION>
Year Ended
December 31,
----------------------
1996 1997 1998
------ ----- -----
<S> <C> <C> <C>
Revenues:
Service fees......................................... 88.9% 77.0% 62.4%
Interest............................................. 11.1 23.0 37.6
------ ----- -----
Total revenues.................................... 100.0 100.0 100.0
------ ----- -----
Operating expenses:
Cost of services..................................... 74.2 59.4 51.5
Development costs.................................... 45.4 27.0 23.4
Selling, general and administrative.................. 99.3 83.7 85.9
Amortization of deferred compensation................ 0.0 0.0 26.6
------ ----- -----
Total operating expenses.......................... 218.9 170.1 187.4
------ ----- -----
Operating loss......................................... (118.9) (70.1) (87.4)
Interest expense....................................... 0.4 0.5 0.4
------ ----- -----
Net loss............................................... (119.3)% (70.6)% (87.8)%
====== ===== =====
</TABLE>

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Revenues

Total revenues increased by $790,000 to $3.8 million in the year ended
December 31, 1998 from $3.0 million in the year ended December 31, 1997, an
increase of 26%.

Service Fees. Service fees were relatively unchanged at $2.3 million for
the year ended December 31, 1998 compared to $2.4 million for the year ended
December 31, 1997. Revenue was relatively flat because the increase in revenues
from our 1-800-PayBill service and Internet Bill Publishing service was offset
by a decrease in revenue from our payment services resulting from
consolidations in the financial services industries which prompted institutions
to bring these services in-house. Service fees represented 62% of total
revenues for the year ended December 31, 1998 compared to 77% of total revenues
for the year ended December 31, 1997.

Interest. Interest revenue increased by $737,000 to $1.4 million for the
year ended December 31, 1998 from $699,000 for the year ended December 31,
1997, an increase of 105%. This increase is primarily attributable to an
increase in the use of our Balance Transfer Utility service during 1998 which
generates higher interest revenue due to the large dollar volumes associated
with this service. Interest revenue represented 38% of total revenues for the
year ended December 31, 1998 compared to 23% of total revenues for the year
ended December 31, 1997.

Operating Expenses

Total operating expenses increased by $2.0 million to $7.2 million for the
year ended December 31, 1998 from $5.2 million for the year ended December 31,
1997, an increase of 38%.

Cost of Services. Cost of services consists primarily of data processing
costs, new customer implementation, customer service and technical support, as
well as third party transaction fees like automated clearinghouse transaction
charges.

20
<PAGE>

Cost of services increased by $166,000 to $2.0 million for the year ended
December 31, 1998 from $1.8 million for the year ended December 31, 1997, an
increase of 9%. This increase was due primarily to incremental costs associated
with the increased use of our 1-800-PayBill service and Internet Bill
Publishing service in 1998 compared to 1997. Cost of services was 52% of total
revenues for the year ended December 31, 1998 compared to 59% of total revenues
for the year ended December 31, 1997. This percentage decrease is due to
increased revenues during 1998 from our Balance Transfer Utility service, which
generates higher interest revenue without a significant increase in cost.

Development Costs. Development costs consist primarily of salaries for
software engineers and programming personnel. Development costs increased
$75,000 to $895,000 for the year ended December 31, 1998 from $820,000 for the
year ended December 31, 1997, an increase of 9%. This increase was primarily
attributable to the addition of database and software development personnel
during the fourth quarter of 1998. Development costs were 23% of total revenues
for the year ended December 31, 1998 compared to 27% of total revenues for the
year ended December 31, 1997. This percentage decrease resulted from relatively
flat development costs being spread over a larger revenue base in 1998.

Selling, General and Administrative. Selling, general and administrative
expense consist primarily of salaries for sales and marketing personnel and
accounting and administrative personnel, as well as sales commissions and
public relations expense. Selling, general and administrative expense increased
$746,000 to $3.3 million for the year ended December 31, 1998 from $2.5 million
for the year ended December 31, 1997, an increase of 30%. This increase was
primarily attributable to an increase in the number of sales and marketing and
administrative personnel in 1998. Selling, general and administrative expense
was 86% of total revenues for the year ended December 31, 1998 compared to 84%
of total revenues for the year ended December 31, 1997.

Amortization of Deferred Compensation. Amortization of deferred
compensation expense was $1.0 million in the year ended December 31, 1998.
Deferred compensation represents the difference between the exercise price of
options granted by us and the fair market value of our common stock on the
grant date of options with exercise prices below fair market value on the grant
date. Deferred compensation is being amortized over the respective vesting
periods of the options. At December 31, 1998, we had $867,000 of deferred
compensation that will be amortized over the remaining vesting periods of the
options which range from one to four years.

Interest Expense. Interest expense consists of interest paid on leased
equipment. Interest expense was relatively unchanged from $16,000 for the year
ended December 31, 1997 to $14,000 for the year ended December 31, 1998.

Net Loss. For the foregoing reasons, net loss increased by $1.2 million to
$3.4 million for the year ended December 31, 1998 from a net loss of $2.1
million for the year ended December 31, 1997, an increase of 57%.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Revenues

Total revenues increased by $1.2 million to $3.0 million for the year ended
December 31, 1997 from $1.8 million for the year ended December 31, 1996, an
increase of 67%.

Service Fees. Service fees increased by $701,000 to $2.3 million for the
year ended December 31, 1997 from $1.6 million for the year ended December 31,
1996, an increase of 44%. This increase was primarily attributable to increased
use of our 1-800-PayBill service and our Balance Transfer Utility service in
1997. Service fees represented 77% of total revenues for the year ended
December 31, 1997 compared to 89% of total revenues for the year ended December
31, 1996.

Interest. Interest revenue increased by $495,000 to $699,000 for the year
ended December 31, 1997 from $204,000 for the year ended December 31, 1996, an
increase of 243%. This increase is primarily

21
<PAGE>

attributable to an increase in the number of transactions processed in 1997
compared to 1996, in addition to an increase in the dollar volume of
transactions processed due to an increase in use of our Balance Transfer
Utility service. Interest revenue represented 23% of total revenues for the
year ended December 31, 1997 compared to 11% of total revenues for the year
ended December 31, 1996.

Operating Expenses

Total operating expenses increased by $1.1 million to $5.2 million for the
year ended December 31, 1997 from $4.0 million for the year ended December 31,
1996, an increase of 28%.

Cost of Services. Cost of services increased by $438,000 to $1.8 million
for the year ended December 31, 1997 from $1.4 million for the year ended
December 31, 1996, an increase of 31%. This increase corresponds to the
increase in revenues generated from increased transaction processing in 1997.
Cost of services was 59% of total revenues for the year ended December 31, 1997
compared to 74% of total revenues for the year ended December 31, 1996. This
percentage decrease is due to increased revenues from our Balance Transfer
Utility service, which generates higher interest revenue without a significant
increase in cost.

Development Costs. Development costs remained relatively unchanged at
$820,000 for the year ended December 31, 1997 compared to $834,000 for the year
ended December 31, 1996, due to the consistent number of personnel and payroll
expenses in this department. Development costs were 27% of total revenues for
the year ended December 31, 1997 compared to 45% of total revenues for the year
ended December 31, 1996. The percentage decrease is due to a similar amount of
development costs being spread over a larger revenue base in 1997.

Selling, General and Administrative. Selling, general and administrative
expense increased by $714,000 to $2.5 million for the year ended December 31,
1997 from $1.8 million for the year ended December 31, 1996, an increase of
40%. This increase is primarily attributable to an increase in payroll expense
resulting from headcount increases in several departments including sales,
accounting and system administration. Selling, general and administrative
expense was 84% of total revenues for the year ended December 31, 1997 compared
to 99% of total revenues for the year ended December 31, 1996.

Interest Expense. Interest expense increased by $9,000 to $16,000 for the
year ended December 31, 1997 from $7,000 for the year ended December 31, 1996,
an increase of 129%. This increase is attributable to a capital equipment lease
entered into in early 1997.

Net Loss. For the foregoing reasons, net loss decreased by $49,000 to $2.1
million for the year ended December 31, 1997 from $2.2 million for the year
ended December 31, 1996, a decrease of 2%.

22
<PAGE>

Selected Unaudited Quarterly Results of Operations

The following table sets forth our unaudited quarterly results of
operations for each of the eight quarters ended December 31, 1998. In
management's opinion, this unaudited information has been prepared on the same
basis as our audited financial statements included elsewhere in this prospectus
and includes all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the unaudited quarterly results when read in
conjunction with our audited financial statements and notes thereto included
elsewhere in this prospectus. The results of operations for any quarter are not
necessarily indicative of future results of operations.

<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
-------- -------- --------- -------- -------- -------- --------- --------
Statement of Operations
Data: (in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Service fees........... $ 500 $ 535 $ 591 $ 707 $ 583 $ 517 $ 623 $ 664
Interest............... 105 116 210 267 248 186 486 516
------ ------ ------ ------ ------ ------ ------ -------
Total revenues........ 605 651 801 974 831 703 1,109 1,180
------ ------ ------ ------ ------ ------ ------ -------
Operating expenses:
Cost of services....... 387 443 448 522 430 490 466 580
Development costs...... 226 211 178 206 216 230 188 261
Selling, general and
administrative....... 565 429 699 843 672 768 740 1,103
Amortization of
deferred
compensation......... -- -- -- -- 34 14 55 916
------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses............ 1,178 1,083 1,325 1,571 1,352 1,502 1,449 2,860
------ ------ ------ ------ ------ ------ ------ -------
Operating loss.......... (573) (432) (524) (597) (521) (799) (340) (1,680)
Interest expense........ 3 4 4 5 4 4 4 2
------ ------ ------ ------ ------ ------ ------ -------
Net loss................ $ (576) $ (436) $ (528) $ (602) $ (525) $ (803) $ (344) $(1,682)
====== ====== ====== ====== ====== ====== ====== =======
Basic and diluted net
loss per share........ $(0.20) $(0.15) $(0.18) $(0.21) $(0.18) $(0.28) $(0.11) $ (0.45)
====== ====== ====== ====== ====== ====== ====== =======
Shares used in computing
net loss per share.... 2,844 2,855 2,862 2,863 2,872 2,872 3,107 3,705
====== ====== ====== ====== ====== ====== ====== =======
<CAPTION>
Percentage of Total Revenues
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Service fees........... 82.6% 82.2% 73.8% 72.6% 70.2% 73.5% 56.2% 56.3%
Interest............... 17.4 17.8 26.2 27.4 29.8 26.5 43.8 43.7
------ ------ ------ ------ ------ ------ ------ -------
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------ -------
Operating expenses:
Cost of services....... 64.0 68.0 56.0 53.6 51.7 69.7 42.0 49.2
Development costs...... 37.4 32.4 22.2 21.1 26.0 32.7 17.0 22.1
Selling, general and
administrative....... 93.4 65.9 87.3 86.6 80.9 109.3 66.7 93.5
Amortization of
deferred
compensation......... 0.0 0.0 0.0 0.0 4.1 2.0 5.0 77.6
------ ------ ------ ------ ------ ------ ------ -------
Total operating
expenses............ 194.8 166.3 165.5 161.3 162.7 213.7 130.7 242.4
------ ------ ------ ------ ------ ------ ------ -------
Operating loss.......... (94.8) (66.3) (65.5) (61.3) (62.7) (113.7) (30.7) (142.4)
Interest expense........ 0.5 0.6 0.4 0.5 0.5 0.6 0.4 0.2
------ ------ ------ ------ ------ ------ ------ -------
Net loss................ (95.3)% (66.9)% (65.9)% (61.8)% (63.2)% (114.3)% (31.1)% (142.6)%
====== ====== ====== ====== ====== ====== ====== =======
</TABLE>

23
<PAGE>

We have experienced year-to-year revenue growth with some seasonal
fluctuations during the second half of the year. These fluctuations relate
primarily to increases in interest revenue derived from our Balance Transfer
Utility service during the last two quarters of the year. These increases
result from direct marketing programs initiated by credit card issuers which
cause increased demand for our Balance Transfer Utility service. The increased
demand in Balance Transfer Utility services causes interest revenue to increase
because the transactions processed have higher dollar values per transaction
than our other services.

The revenue decrease from the fourth quarter of 1997 to the first quarter
of 1998 is also due to a one-time $150,000 fee paid by a customer during the
fourth quarter of 1997 to terminate its contract. In addition, total revenue
decreased slightly from the first quarter of 1998 to the second quarter of
1998, as a result of the loss of some financial institutions due to industry
consolidation which prompted these institutions to bring these services in-
house.

Cost of services as a percentage of revenue was higher in the second
quarter of 1998 than in previous quarters as a result of increases in payroll
expense related to increased headcount during this quarter. We increased the
number of personnel in this quarter in anticipation of increased customer
demand. Selling, general and administrative expense was also high in this
quarter due to increases in sales and marketing expenses primarily attributable
to the addition of personnel and tradeshow expenses incurred during this
quarter.

In addition to seasonal fluctuations, quarterly results of operations may
be subject to significant fluctuations due to several factors, including:

. the timing and number of new customer transactions being brought on-
line;

. billers marketing efforts to their consumer base;

. our ability to renew existing agreements with billers;

. sales and implementation cycles of our customers;

. consumer acceptance of our services, including our Internet Bill
Publishing service;

. our ability to offer competitively priced services;

. our ability to address new and related market opportunities;

. the loss of key employees and time needed to recruit, hire and train new
personnel, particularly development personnel;

. our ability to upgrade, develop and maintain our systems and
infrastructure and the amount and timing of the costs related to this;

. the mix of service fees and interest revenue;

. interest rate fluctuations;

. changes in governmental regulation; and

. general economic conditions.

We anticipate that our operating expenses will continue to increase
significantly. If revenues in any quarter do not increase correspondingly, our
results of operations for that quarter would be materially and adversely
affected. For the foregoing reasons, we believe that quarter-to-quarter
comparisons of our results of operations are not necessarily meaningful and
that our results of operations in any particular quarter should not be relied
upon as necessarily indicative of future performance.

24
<PAGE>

Liquidity and Capital Resources

Historically, we have experienced significant operating losses and working
capital deficits. Our working capital deficit was $5.6 million at December 31,
1996 and $7.9 million at December 31, 1997. In September 1998, we sold 831,290
shares of our common stock to Billing Concepts Corp. for $10.0 million. At
December 31, 1998 our working capital deficit was $308,000.

Net cash used in operating activities was $3.4 million for both the year
ended December 31, 1998 and the year ended December 31, 1996. For the year
ended December 31, 1997, our operating activities generated cash of $2.5
million. The cash used in operating activities in 1998 was primarily the result
of our net loss before the amortization of deferred compensation and an
increase in other current assets, partially offset by an increase in accounts
payable. For the year ended December 31, 1997, cash provided by operating
activities was primarily attributable to an increase in customer deposits
payable, in addition to increases in accounts payable and accrued expenses.
During 1996, cash used in operating activities was primarily attributable to
our net loss.

Net cash used in investing activities was $257,000, $373,000 and $298,000
for the years ended December 31, 1998, 1997 and 1996. This cash was used
primarily for the purchase of computer equipment and software.

Net cash provided by financing activities was $9.5 million in the year
ended December 31, 1998 and $2.9 million in the year ended December 31, 1996.
Net cash used in financing activities was $2.2 million in the year ended
December 31, 1997. The cash generated in 1998 resulted from the net proceeds of
$10.0 million from the sale of shares of our common stock in September 1998,
partially offset by decreases in bank overdrafts and payments on long-term
debt. The cash used in 1997 was primarily due to a decrease in the bank
overdraft. The cash generated in 1996 was primarily attributable to an increase
in the bank overdraft.

We believe that, based on our current business plan, the net proceeds from
this offering and existing cash and cash equivalents will be sufficient to meet
our operating activities, capital expenditures and other obligations until at
least the end of the year 2000.

Year 2000 Considerations

State of Readiness. We have completed our assessment of our services and
information technology systems. We believe that our non-mission critical
systems and a majority of our non-mission critical systems are Year 2000
compliant. We anticipate that our systems which are not Year 2000 compliant by
October 1999. We have also completed our initial survey of the information
systems of our principal vendors and service providers. Based on
representations of these vendors and service providers we believe that the
information technology systems of these third parties, as they relate to us, do
not pose significant operational issues. We have replaced any of our principal
vendors that are unable to certify that their products are Year 2000 compliant.
Our assessment is on-going and will continue with all principal vendors and
service providers with which we do business. In addition, we do not believe our
embedded systems pose Year 2000 concerns because we believe that we have
identified all of our software and hardware that require Year 2000 updates or
modifications.

Costs. We currently anticipate that our total expenses for Year 2000
compliance will be less than $300,000. As of March 31,1999, we have spent
approximately $130,000 in personnel and other costs related to our Year 2000
risk assessment and remediation efforts.

25
<PAGE>

Risks. In order to accurately provide our Internet Bill Publishing service,
we must rely on technology supported by billers, financial institutions,
aggregators, presenters and consumers. Furthermore, our services rely on
transmission of data over the Internet, third party data and voice
communication lines, and data transmission through wire transfer systems,
including the Federal Funds system. Failure by us, our billers, aggregators,
presenters or suppliers to adequately address Year 2000 issues in a timely
manner could impede our ability to provide our services and have a direct
impact on our ability to generate revenue. This, in turn, could have a material
and adverse impact on our business, operating results and financial condition.
Accordingly, we plan to correct our remaining Year 2000 issues by October 1999.
We believe that associated costs are adequately budgeted for in our 1999
business plan. However, if our efforts or the efforts of billers, aggregators,
financial institutions and others with which we engage in business, fail to
adequately address their own Year 2000 issues, the most likely worst case
scenario would be a substantial loss of our revenue for some period of time.

Contingency Plan. We are currently developing a contingency plan to address
situations that may result if we are unable to achieve complete Year 2000
compliance by October 1999. We cannot provide any assurance that the plan we
develop will be successful in addressing any remaining Year 2000 issues.

New Accounting Pronouncement

In March 1998, the American Institute of Certified Pubic Accountants issued
Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use," or SOP 98-1. SOP 98-1 provides
guidance on accounting for computer software developed or obtained for internal
use, including the requirement to capitalize specified costs and amortization
of such costs. We adopted SOP 98-1 in January 1999. The adoption did not have a
material effect on our financial position or results of operations.

Market Risk

A significant portion of our revenue is generated from interest paid on
amounts deposited with financial institutions pending payment. The interest
earned is based on prevailing interest rates. Accordingly, fluctuations in
interest rates will affect our revenues. Likewise, a decrease in revenue
generated by overnight investment may not be met by a corresponding decrease in
any borrowing costs which we may incur in the future. Thus, either a fall in
the prevailing interest rates or an increase in future borrowing costs could
materially and adversely affect our business, operating results and financial
condition. In the future, we may manage our interest rate risk through interest
rate hedging techniques. However, we currently do not use such techniques and
they may not be successful in reducing or eliminating our interest rate risk in
the future.

26
<PAGE>

BUSINESS

Company Overview

We are a leading provider of Internet bill publishing and payment services
for financial institutions and large businesses that generate a substantial
number of consumer bills. Our electronic services, utilizing the Internet, the
telephone and private computer networks, eliminate the need for billers to
generate and mail paper bills and eliminate the need for consumers to write and
mail paper checks. Our services allow billers to publish and present bills to
consumers, either directly through billers' own web sites or indirectly through
the web sites of financial institutions and Internet portals. Our electronic
payment services provide an efficient billing solution that automatically
updates billers' financial accounting systems by electronically delivering
payment information. Concurrently, the consumer's bank account is
electronically debited to pay the bill. As of March 31, 1999, we service over
250 billers and financial institutions, of which a limited number are currently
using our Internet bill publishing and payment service.

Industry Background

Growth of the Internet and Electronic Commerce

The Internet has experienced rapid growth and has developed into a
significant tool for global communications and commerce. It has enabled
millions of people to share information and transact business electronically.
In 1998, International Data Corporation, or IDC, estimated that there were 52
million users of the Internet in the United States. IDC projects that the
number of people using the Internet in the United States will increase to over
135 million by the end of 2002. Internet-based businesses, as well as
traditional businesses, now use the Internet to offer a variety of products and
services, including consumer products and brokerage and other financial
services. Advances in online security and payment mechanisms have also
encouraged businesses and consumers to engage in electronic commerce. Forrester
Research estimates that sales over the Internet will increase from $7.8 billion
in 1998 to $108 billion in 2003.

Emergence of Internet-based Financial Services

Internet-based financial services, like electronic brokerage and banking,
represent a significant portion of the electronic commerce market. The
attractiveness of Internet-based financial services stems in large part from
the speed of conducting financial transactions over the Internet, as well as
the ability of the Internet user to access extensive amounts of information.
Forrester Research estimates that the number of online brokerage accounts will
grow from 3.0 million in 1997 to 14.4 million by the year 2002 and that assets
managed online will reach $688 billion by the year 2002. Similarly, Forrester
Research estimates that online banking will grow from 2.4 million households in
1998 to 18 million in 2002. The Internet is also becoming a more significant
platform for broad consumer-based financial services like insurance, mortgages
and bill presentment and payment.

Traditional Bill Fulfillment and Payment Process

According to Jupiter Communications, in 1998 approximately 15 billion
consumer paper bills were received by approximately 100 million U.S.
households. Most of these are recurring monthly or quarterly bills mailed to
consumers primarily by retailers, utilities and credit card companies. Paper
bills are prepared by either the biller itself or, more often, by an outsourced
bill fulfillment vendor. Creating and distributing a paper bill is a costly
multiple-step process that includes extracting relevant data from the legacy
accounts receivable system of the biller, organizing the data into a billing
format, printing and separating the bills, stuffing envelopes, applying postage
and mailing the bill to the consumer. The bill payment process is also costly
and labor intensive. The biller must currently contract with a commercial
lockbox which receives consumer payments. The lockbox vendor opens the payments
and separates checks from the remittance stub. The lockbox vendor also sends
the biller reports which allow the biller to update both its accounts
receivable system and its accounting records. We estimate that the cost to the
biller of preparing and sending a paper bill and receiving and posting a bill
payment ranges from approximately $0.75 to $1.60 per bill. According to the
Gartner Group, the average cost to the biller of creating and delivering a
paper bill is $1.00.

27
<PAGE>

Similarly, the traditional bill fulfillment and payment process is time-
consuming and can be costly for the consumer. We believe the Internet bill
presentment and payment process will bring added convenience to the consumer.
Jupiter Communications currently estimates that, during each 12-month period,
U.S. households will spend an average of 24 hours on bill management, $46 on
postage and $144 on check-writing fees to handle an average of 12 recurring
monthly bills. The graph below depicts the steps involved in the traditional
paper-based billing and payment process:

[To be inserted at this location is a diagram which shows the eleven steps
of the traditional billing process. The eleven steps are:

Step 1 - Biller prepares the paper bill

Step 2 - Biller delivers the bill to the post office bulk mail center

Step 3 - Post office delivers the bill to the consumer's mailbox

Step 4 - Consumer reviews the bill, writes a check, and mails the check and
payment stub back to the biller

Step 5 - Post office delivers the check and payment stub to the biller's
mailbox or traditional lockbox service

Step 6 - Biller or lockbox service opens the envelope, separates the check and
the payment stub, records the payment and updates the biller's
accounts receivable system

Step 7 - Biller or lockbox service encodes and deposits the check and the bank
forwards the check to the Federal Reserve

Step 8 - Federal Reserve sorts each individual check and forwards them to the
consumer's bank

Step 9 - For each check, the Federal Reserve debits the reserve account of the
consumer's bank and credits the reserve account of the biller's bank

Step 10 - Consumer's bank account is debited and the biller's bank account is
credited; the consumer's bank receives the check from the Federal
Reserve

Step 11 - Consumer's bank prepares a monthly statement and sends it with the
cancelled paper checks to the consumer]

28
<PAGE>

Internet Bill Presentment and Payment Process

The Internet provides an opportunity to dramatically simplify the bill
presentment and payment process. This technology will greatly reduce the costs
to the biller and improve the convenience of the billing and payment process
for the consumer. The biller compiles relevant data from its legacy accounts
receivable system and can either publish the data itself on its own web site or
release the data to a bill publisher which publishes the data on the web site
of the consumer's financial institution or on an Internet portal like Yahoo! or
America Online. Consumers are able to access their bill and account information
whenever they wish and may pay bills by clicking a payment symbol on the
computer screen. Funds are electronically transferred from the consumer's bank
account, through a payment network like the Federal Reserve System, to a
concentration account of an electronic lockbox service where all payments to a
particular biller are deposited and transferred to the biller's bank account.
Bill and account information is accessible by the consumer through the legacy
accounts receivable system, which is continuously updated to reflect consumer
payments. We estimate that the total cost to the biller and the consumer for
our Internet Bill Publishing Service ranges from $0.35 to $0.50. The graph
below depicts the steps involved in the Internet bill publishing and payment
process:

[To be inserted at this location in a diagram which shows the five step process
to the Internet bill presentment and payment process:

INTERNET BILL PRESENTMENT AND PAYMENT

Step 1 - The biller creates an electronic bill with interactive bill analysis
and one-on-one marketing options (in-house or out-sourced to Internet
bill publisher)

Step 2 - All the electronic bills for a particular consumer are aggregated and
presented to web sites

Step 3 - The consumer accesses the bill at a web site, customizes the
presentation format, reviews the bill and initiates the payment by
clicking on the payment button

Step 4 - The consumer's bank electronically transfers the money from the
consumer's bank account to the biller's bank account; the biller's
accounts receivable system is electronically updated

Step 5 - The consumer's bank prepares a monthly statement and sends it to the
consumer]

29
<PAGE>

The Internet bill presentment process can be viewed as analogous to the
process of creating, distributing and selling books. A number of parties are
potentially involved in this process. The parties involved typically include
the following:

. Billers: The principal billers are retailers, utilities and financial
institutions that issue credit cards. Although there are thousands of
billers, we believe that a large portion of total bills generated are
produced by a concentrated number of billers. The biller would be
equivalent to the author in the book publishing analogy.

. Publishers: The publisher compiles, formats and verifies the information
in the accounts receivable data base and then creates a bill for
presentment on the Internet. A publisher may be either the biller itself
or an entity, like us, that provides an outsourced publishing solution
for multiple billers. This publishing role is similar to the role of the
book publisher which takes the content provided by the author and
packages the book for distribution.

. Aggregators: An electronic biller is generally required to engage one or
more aggregators which collect consumer bills from numerous publishers
and sort and present these bills to consumers through the Internet.
Aggregators enable, through presenters, a consumer to access account
information regarding multiple billers on a single web site, rather than
having to go to each individual biller's web site to access account
information. The aggregator performs a role similar to that of a book
distributor, which has arrangements with multiple publishers and retail
outlets to facilitate the distribution of the publishers' books to the
retail outlets.

. Presenters: Once an aggregator has received and sorted bills created by
the publishers, these bills can be presented on the web sites of one of
two types of presenters: financial institutions or Internet portals.
These presenters are comparable to the retail outlets and other means by
which consumers directly purchase books.

The following chart shows the layers of parties involved in the Internet
bill presentment process.

To be in serted at this location is a diagram which depicts the layer of players
involved in the Internet bill presentment and payment process.

<TABLE>
<CAPTION>
<S> <C> <C>
Consumer Consumers
Layer 1

Web Sites Biller.com Financial Institution.com Portal.com
Layer 2 (e.g. Con Edison, AT&T) (e.g. First Union, Citigroup) (e.g. Yahoo!, AOL, Quicken)

Aggregator Aggregators (e.g. TransPoint, CheckFree, M&I)
Layer 3

Publisher Outsourced Publisher Enabling Software Providers
Layer 4 (e.g. Princeton eCom, IBS) (e.g. BlueGill, eDocs)

Biller Retailers Utilities Credit Card Cable Telecom
Layer 5 Issuers

</TABLE>

30
<PAGE>

Outsourcing Opportunity

As the use of the Internet for bill presentment and payment grows, billers
must decide whether to develop this capability internally or to outsource the
process entirely. Billers that choose to manage their own Internet bill
presentment and payment process may encounter a number of obstacles. To be in a
position to publish and achieve wide distribution of their bills, billers must
purchase, successfully integrate and maintain:

. software which enables the biller to parse and decode bill data print
streams;

. in-house publishing servers which will update and display bill content;

. messaging software like OFX, EDI and NT, which enables the biller to
communicate with multiple aggregators;

. automated clearinghouse software which enables the biller to
electronically debit consumer accounts;

. a dedicated interface with a major bank which enables the biller to
receive funds and data through automated clearinghouse transactions; and

. lockbox software which enables the biller to update legacy accounts
receivable files.

In addition, once billers are capable of publishing and handling payments,
they must then make arrangements with multiple aggregators or presenters that
present bills for multiple billers.

Many billers lack the resources and expertise to cost-effectively
implement, maintain, scale, enhance and service the hardware and software
necessary to provide their own Internet bill presentment and payment system and
to develop and maintain multiple relationships with aggregators or presenters
and financial institutions. Billers can outsource their Internet bill
presentment and payment process. An outsourced solution is attractive to
billers because it allows them to focus on their core competencies and to
accelerate the time in which they can offer Internet bill presentment and
payment services to their customers.

The Princeton eCom Solution

Our Internet bill publishing and payment service provides a comprehensive,
cost-effective, outsourced solution for billers desiring to reduce costs and to
provide their consumers with a convenient presentment and payment method. Our
service is designed to publish bills for billers either directly through their
own web site or indirectly through the web sites of financial institutions and
Internet portals. Our Internet bill publishing and payment service is designed
to provide the following key benefits:

Comprehensive, Cost-Effective Outsourcing. Our comprehensive solution
offers billers the full range of services necessary to outsource their entire
Internet bill presentment and payment process. Our service reduces the costs to
and administrative burden on billers by eliminating the need to develop and
manage an in-house system and by capitalizing on economies of scale and
implementation expertise.

Broad Distribution and Access. Our relationships with multiple aggregators
allow broad distribution that enables billers to publish their bills through
multiple presenters, thereby providing their consumers with numerous options of
where and when to access and/or pay their bills. In addition, our technology
allows consumers to access their bills through the computer, the telephone,
personal digital assistants and through a variety of other devices.

Branding. In all aspects of our Internet bill presentment and payment
service, the Princeton eCom name is virtually invisible to the consumer. Our
fully customized Internet-based consumer billing interface allows billers,
financial institutions and Internet portals to preserve the existing look and
feel of their web sites.

Reliability and Scalability. Our system architecture is designed to ensure
reliability through the use of parallel processing and redundant hardware and
software components. Currently, our system supports over 80 million accounts
receivable records monthly and can be easily expanded.

31
<PAGE>

Enhanced Security. We have integrated third-party licensed and internally-
developed technology with sophisticated third-party hardware to reduce the
potential for network security breaches. We maintain network and data center
surveillance 24 hours a day, seven days a week.

Ease of Implementation. Our service can be easily integrated with a
biller's existing legacy accounts receivable systems. We enable billers to
provide Internet bill presentment and payment to their consumers without
modifications to their existing systems or to their processing and
reconciliation procedures.

The Princeton eCom Strategy

Our goal is to strengthen our position as a leading provider of Internet
bill publishing and payment services. We plan to achieve this goal by
implementing the following key strategies:

Further Penetrate Our Existing Customer Base. We believe that our existing
base of billers and financial institutions which do not currently use our
Internet bill publishing and payment service provides substantial opportunities
for expansion of this service. To date, only 11 of our over 250 customers
utilize our Internet bill publishing and payment service. We intend to further
penetrate this existing customer base by substantially expanding our sales and
marketing efforts and service offerings.

Expand Our Sales and Marketing Efforts. We are developing a sales and
marketing plan directed towards the largest billers in the United States that
do not currently use any of our services. To implement this sales and marketing
plan, we are recruiting a number of experienced sales professionals. To date,
we have spent a nominal amount on our sales and marketing efforts. We intend to
substantially increase these expenditures during the next several years. In
addition, we intend to expand our indirect sales channels by establishing
strategic relationships with companies like GE Capital, Alltel and CSG Systems,
which should enable us to gain access to the biller bases of these companies.

Expand Our Distribution Channels. We intend to expand our distribution
channels by developing relationships with additional aggregators. Because
aggregators rely upon bill publishers with significant biller relationships, we
believe that aggregators will find us more attractive as our biller base
expands. To date, we have relationships with a number of aggregators, including
TransPoint, a Microsoft/First Data Corporation/Citigroup joint venture, and
Intuit.

Introduce New Services and Service Enhancements. We seek to remain on the
forefront of the Internet bill presentment and payment industry by continuing
to develop more advanced services designed to address our customers' needs. We
use customer feedback, including surveys, to design service enhancements that
meet evolving customer needs. Examples of service enhancements which we have
previously developed include interactive data, which enable consumer-initiated
bill analysis on the Internet, one-to-one marketing and electronic commerce
transaction capability. In some circumstances, we also develop specific
applications to meet the needs of particular customers. For example, we
developed a system for Sallie Mae that electronically updates student loan
information.

Pursue Strategic Acquisitions. We intend to pursue strategic acquisitions
that complement our business. We may acquire companies to obtain additional
technologies, billers, services or experienced personnel.

32
<PAGE>

Our Services

Our services are targeted at large billers and financial institutions.
Depending on the services provided and transaction volume, we generally charge
our customers between $0.10 and $0.50 per transaction. Our current services are
as follows:

<TABLE>
<CAPTION>
Service Description Benefits
------- ----------- --------
<C> <C> <C> <S>
. Internet Bill Publishing Service for publishing and . Bills are accessible
paying bills using the through the web sites
Internet of billers, financial
institutions and
Internet portals
. Allows for the
consolidation of
consumer bills from
multiple billers on
one web site
. Provides additional
value-added
capabilities like
real-time billing
information and one-
to-one marketing
. Allows billers to
expand the number of
consumers using the
service without
additional
infrastructure
investment
. Maintains biller or
web site brand name
. Can be modified to
biller specifications

. els Clearinghouse service for . Reduces payment
Electronic Lockbox Service consumer-initiated payments accounting errors
that originate from a through consumer
account validation
procedures
computer or phone . Provides the consumer
real-time access to
data through
dedicated, dial-up
facilities or virtual
private networks
. Enables biller to
provide timely
response to consumer
status inquiries
. Compatible with our
Internet Bill
Publishing,
1-800-PayBill and
similar services from
other payment
originating vendors

. 1-800-PayBill Service for paying bills by . Permits consumers to
telephone make a bill payment in
as few as five
keystrokes
. Provides accurate and
prompt posting of bill
payments
. Enables the consumer
to effect automatic
payment of recurring
bills without
additional consumer
intervention
. Synchronized with
Internet Bill
Publishing: a payment
made through one
device is immediately
reflected on the other
device

. BTU Service that electronically . Processes balance
Balance Transfer Utility transfers balances from one transfers rapidly,
credit card institution to accurately and cost-
effectively
another . Protects the identity
of the new credit card
institution
. Provides the new
credit card
institution with a
report detailing all
transactions which
have been effected
. Remits aggregate
dollar amounts to the
recipient credit card
institution

. e-Collect Service that collects . Facilitates rapid debt
outstanding balances collection
electronically . Replaces manual
processing and
significantly reduces
collection costs and
human error
. Validates account
number information for
each collected payment
. Enables daily
reconciliation of the
collection process
</TABLE>

33
<PAGE>

<TABLE>
<CAPTION>
Service Description Benefits
------- ----------- --------
<C> <C> <C> <S>
. RDF Service that produces and . Enables payment
Remote Disbursement Facility disburses paper checks validation through an
electronic checkbook
that we maintain
. Provides customers
with the information
on the front and back
of all checks,
including all
endorsements stamps
and notations
. Automatically
electronically
confirms addresses
with post office
databases
</TABLE>

Sales and Marketing

Historically, our sales and marketing efforts have been limited to specific
face-to-face meetings with a limited number of potential billers and financial
institutions and we have spent a nominal amount on these efforts. We are
developing a sales and marketing plan directed towards further penetrating our
existing base of billers and financial institutions which do not currently use
our Internet bill publishing and presentment service while simultaneously
targeting the largest billers in the United States that do not currently use
any of our services. To implement this sales and marketing plan, we are
recruiting a number of experienced sales professionals. We intend to
substantially increase our sales and marketing efforts and expenditures over
the next several years. In addition, we intend to expand our indirect sales
channels by establishing strategic relationships with various companies in
order to enable us to gain access to the biller bases of these various
companies. To date we have entered into strategic relationships with TransPoint
and Intuit.

We intend to use a variety of marketing programs to build market awareness
of Princeton eCom and our services and to generate new business. These programs
include:

. market research;
. service and strategy updates with industry analysts;
. public relations activities including press releases and featured news
articles;
. direct mail and relationship marketing;
. trade shows;
. speaking engagements; and
. web site marketing.

Implementation Resources

Concurrent with our expanded sales and marketing efforts, we intend to
invest additional funds to strengthen our implementation resources. Our
implementation staff is responsible for all aspects of bringing a new customer
online and for resolving any technical issues which may arise. To date, this
process has been designed to meet our current sales volume. Additional
investment in implementation will enable us to meet the requirements of the
additional billers and financial institutions which we anticipate will result
from our expanded sales and marketing efforts. Our additional investment in
implementation resources will focus on additional programming and project
management resources and on new project management software.

Service Development

We use customer feedback, including surveys, to develop new services as
well as enhancements to our existing services. These new services and
enhancements are designed to meet the evolving needs of our customers. We also
develop, from time to time, specific services and service enhancements to meet
the needs of particular billers and financial institutions.

Our service development department currently consists of 14 software
developers who have extensive knowledge of, and practical experience with,
PL/SQL, Oracle forms and Pro*C. Members of our development team use hyper-text
mark up language, Perl, Java Script, and C++, along with desktop tools such as
FrontPage editor, Adobe PhotoShop, Visual Studio, and MicroSoft Image Composer.

34
<PAGE>

We expense development costs as incurred. In 1998, we spent approximately
$895,000 on service development. We expect to significantly increase
expenditures in this area over the next several years.

Customers

As of March 31, 1999, we service over 250 billers and financial
institutions. Although the use of our Internet bill publishing and payment
service is currently limited to 11 of our customers, we intend to cross-market
this service to the balance of our existing customer base. No individual
customer accounted for more than 8% of our total revenues, or 12% of our
service fee revenues, in 1998. The following are some of our representative
customers.

<TABLE>
<S> <C>
Telecommunications Financial Services

Bell Atlantic Mobile* Advanta Corporation
Lucent Technologies Consumer CFI
Products, L.P.* Chase Manhattan
Citibank Universal Card
Utilities Discover Card

Equifax
Adelphia Cable First Union
Ameren UE* First USA
Boston Gas Company GE Capital
Los Angeles Department of Water & Liberty Mutual Group
Power* Merchant Express
Metropolitan St. Louis Sewer M&I Data Services
District NationsBank
Michigan Consolidated Gas Sallie Mae
National Utility Investors (NUI)* Sears Payment Systems
Public Service Electric & Gas Washington Mutual
St. Louis Water Western Union
Southern California Edison*

Washington Gas* Media

Retailers Los Angeles Times

Federated Department Stores
(Bloomingdales and Macy's)
Sears

<CAPTION>
---
</TABLE>
- --------
*Customer currently using our Internet bill publishing and payment service.

35
<PAGE>

Technology

We have created a proprietary infrastructure by combining internal
expertise with advanced technology.

Network Design. We have designed a network which is modular, scalable and
reliable. The modular design allows us to upgrade, modify and maintain our
network equipment without having to take our systems out of service. This
modularity also enhances the scalability of our network. In fact, our network
can handle an increase in transaction volume by simply adding additional
modules of data storage, central processing units and other technological
components. As of March 31, 1999, we support over 80 million bills monthly.
Similarly, the introduction of new services requires only incremental changes
to our system architecture. Finally, we have designed our infrastructure with
ample internal redundancy to ensure reliability 24 hours a day, 7 days a week.
We employ backup servers, mirrored storage devices and a redundant power
supply. We store backup data offsite. We have recently established a Sungard
hot site where backup data, facilities and equipment are maintained and can be
up and running within three days in the event of an equipment failure or a
natural disaster at our Princeton, New Jersey site.

Connectivity. Historically, we have developed and implemented a broad
array of technologies to increase our connectivity to billers, financial
institutions and aggregators. This connectivity allows for the transfer of
bill and payment data from the billing source as well as the generation of
bill and payment data into various formats. These technologies enable us to
connect to the legacy platforms of most billers. We also interconnect with all
of the major banking networks where payments are obtained, processed and
transferred, in the aggregate, to the designated accounts of our billers.

Network Infrastructure. Internally, we route telecommunications
protocol/Internet protocol over a well-segmented network in an ethernet
environment. Our network backbone travels at gigabit speed with dedicated 100
megabit feeds to workstations on the network. We employ Novell and several
varieties of UNIX operating systems, including Sun Solaris, HPUX, SCO and
Linux. Microsoft NT workstations are employed for client-side aspects of data
processing. We have licensed third-party software and have developed our own
software applications in C++, Java, Oracle forms, and other open tools.

Security. We implement best industry practices for data security rather
than relying on any single security vendor's solution. Our Internet security
begins with our router, which is connected to our Internet service provider,
PSINet. Our router first filters and narrows both ports and addresses,
limiting the flow of information into our system. Our local area network
connects to our Linux firewall, which provides several custom security
services. After testing each data packet, the firewall has access to our local
area network where access to data is controlled through password security and
customized application program interfaces at both the Solaris operating system
and Oracle database levels.

36
<PAGE>

Network Topology and Operations. We maintain a network based on three core
systems -- our retail, wholesale and Digital Scanline systems. These systems
are based on open standards and interface with many consumer input and output
devices, financial institutions, payment mechanisms and billing systems. The
graph below outlines our infrastructure as well as the interfaces with other
systems:

[CHART TO COME]

Our retail system, which provides for the publishing of bills to consumers
and allows consumers to pay their bills electronically, houses millions of
bills each day from our billers' legacy accounting systems. Our real-time
processing engine publishes the data to various devices. We reduce the risk of
technological obsolescence of our system by using device-independent
interfaces. Our retail system interfaces with web servers, interactive
telephony and customer service interfaces.

Web servers act as an open platform for several forms of communication
through:

. Hyper-Text Mark-up Language, or HTML, based Internet Bill Publishing
service that allows billers to offer Internet bill presentment and
payment directly on their own web sites or indirectly on the web sites
of presenters;

. Open Financial Exchange-based communication, or OFX, that allows access
to Intuit's Quicken and, with some modifications, Microsoft's Money
personal financial manager programs; and

. Electronic collection systems that allow close integration between us
and our customers through the deployment of extranets across the web
using a dual-certificate secure-sockets layer.

The same technology and data that support our web servers also support our
interactive telephony and customer service systems. This standardization gives
our customers seamless integration across each of the systems. Consequently, a
bill paid by any of these methods is immediately reflected on a bill accessed
through any of the other methods.

Our retail system communicates with aggregators through custom interfaces
designed by us. Currently, we utilize a software package, Biller Integration
System, to exchange data with TransPoint. This connection, as well as other
custom interfaces, allow us to publish bills and accept payment instructions
through aggregators.

Our wholesale system disburses payments and funds to the billers' bank
accounts through the Federal Reserve System's Fed-wire or automated
clearinghouse system. Private networks are also used to make

37
<PAGE>

payments from a consumer's checking account or credit card as necessary to
complete the payment process. Through els, our wholesale system also conveys
both payments and payment data information electronically to the respective
biller enabling the biller to update its billing and accounts receivables
systems.

The Digital Scanline system ensures the veracity of data that is
transmitted from the retail system to the wholesale system for payment. Our
technology uses account validation to reduce processing errors and fraud. In
addition, we provide other payment services for financial institutions. These
payments are tested with Digital Scanline before being loaded into our
wholesale database. This process is designed to ensure that every payment
accepted by our wholesale system will post when transmitted to the biller.

Operational Controls

We have developed our own set of operating procedures and proprietary
processing management applications, controls and practices designed to minimize
transmission and processing related errors. We believe that our current
controls provide reasonable assurance that our processing environment:

. is stable;

. processes the data promptly and accurately; and

. reconciles incoming remittance data and funds with all related outgoing
data and funds prior to each transmission.

We use internally developed proprietary reconciliation control applications
that are managed and operated independently from the actual processing
environment. By using this approach we can validate the accuracy of the outcome
of each transaction on both an aggregate customer level as well as on an
individual transaction basis. Our processes provide us with a real-time control
audit that is independent from any disruptions, disturbances, or malfunctions
of the live processing environment. Trained computer operators are responsible
for ensuring the accuracy of the data input to the system, and for reconciling
the remittance data and monetary transactions to the control totals. Any
reconciliation discrepancies are displayed on monitors and must be resolved
prior to transmission of remittance data and funds to billers and their banks.

Customer Support

Our customer support program is designed to provide high quality,
personalized customer support on a timely basis. We strive to achieve this
objective through the use of both internally developed monitoring and training
systems as well as customer surveys which have been designed to identify areas
in need of improvement and solicit ideas for future service needs. We have also
implemented internal procedures that are designed to bring unusual customer
support issues to the attention of senior management. We provide customer
service free of charge for our financial institution customers. In addition, we
offer to our billers, on a fee basis, an outsourcing service whereby we act as
their consumer support operation.

Billers. Each of our billers is assigned an account representative who
provides a direct point of contact for general inquiries and service requests.
This representative is responsible for coordinating the availability of
appropriate business and technical resources to respond to that particular
biller's service and support requirements. Escalation procedures are designed
to assure the availability of technical personnel on a 24 hour a day, seven
days a week basis. For fast resolution of payment inquiries, we offer some
billers customized on-line customer service interfaces. These interfaces enable
the biller to access real-time payment information that is stored in our
payment disbursement warehouse.

Financial Institutions. Each of our financial institution customers is
assigned a customer service representative who responds to requests for
information about consumers and payments. This representative provides the
financial institution with documentation regarding payments in sufficient
detail to enable the financial institution to track payment disbursement and
respond to inquiries.

38
<PAGE>

Consumers. We operate a call-center that answers all Internet bill
publishing and payment, 1-800-PayBill or els related consumer inquiries. Each
of our billers is offered the opportunity to outsource its customer service
function to our experienced customer service staff.

Competition

The market for Internet bill presentment and payment services is new and
rapidly evolving. For customers seeking a complete outsourcing solution, we
believe that we currently face direct competition from only a limited number of
companies. However, we anticipate that competition in the Internet bill
presentment and payment market will intensify in the future as:

. traditional lockbox service providers and traditional bill fulfillment
vendors attempt to offer Internet bill presentment and payment; and

. new providers of electronic lockbox and Internet bill presentment
services develop.

Competitive pressures would have a material and adverse effect on our
business, operating results and financial condition. We believe that the
principal competitive factors in our market, are:

. ability to identify and respond to customer needs;

. technical expertise;

. quality of the service;

. price of the service;

. breadth of distribution through aggregators, and ultimately presenters;
and

. preexisting relationships that traditional bill fulfillment vendors and
lockbox service providers may have with our potential customers.

Increased competition may result in reduced operating margins, loss of
market share and diminished value of our services, as well as different
pricing, service and marketing strategies. Despite our current competitive
positioning, we may not be able to compete successfully against current and
future competitors, and competitive pressures we face could have a material
adverse effect on our business, operating results and financial condition.

39
<PAGE>

Proprietary Rights

We have registered the trademarks Digital Scanline, els Electronic Lockbox
Service, PAID Payments Acquisition through Interactive Devices and 1-800-
PayBill. We have also applied for registration for the trademark e-Collect. We
protect our intellectual property rights through a combination of trademark,
copyright and trade secrets laws. We cannot assure you that the steps we have
taken to protect our intellectual property rights, however, will be adequate to
deter misappropriation of those rights. We may not be able to detect
unauthorized use of and take appropriate steps to enforce our intellectual
property rights. It may also be possible for unauthorized third parties to copy
certain portions of our proprietary information or reverse engineer the
proprietary information utilized in our services.

In order to limit access to and disclosure of our proprietary information,
all of our employees are subject to confidentiality and invention assignment
arrangements, and we enter into nondisclosure agreements with third-parties
with whom we do business. We cannot assure you that these arrangements or other
steps we have taken or will take in the future will be sufficient to protect
our technology from infringement or misappropriation or deter independent
development of similar or superior technologies by others.

Furthermore, we cannot assure you that third parties will not claim that we
have infringed upon their patents or other proprietary rights. From time to
time, we expect to be subject to claims by third parties in the ordinary course
of our business, including claims of alleged infringement of trademarks,
copyrights and other intellectual property rights of third parties. Although
there has not been any litigation relating to these claims to date, these
claims and any resultant litigation, should they occur, would subject us to
significant liability for damages and would result in the invalidation of our
proprietary rights. In addition, even if we prevail the litigation could be
time-consuming and expensive to defend and could result in diversion of our
time and attention, any of which would materially and adversely affect our
business, operating results and financial condition. Any claims or litigation
from third parties may also result in limitations on our ability to use the
trademarks and other intellectual property subject to these claims or
litigation, unless we enter into agreements with the third parties. However,
these agreements may be unavailable on commercially reasonable terms, or at
all.

Government Regulation

Our management believes that we are not required to be licensed by the
Office of the Comptroller of the Currency, the Federal Reserve Board, or other
federal or state agencies that regulate or monitor banks or other types of
providers of electronic commerce service. We may, however, be periodically
audited by banking authorities since we are a supplier of services to financial
institutions. We cannot assure you that a federal or state agency will not
attempt, either now or in the future, to require that providers of services
like ours be licensed. This would impede our ability to do business in the
regulator's jurisdiction. A number of states have legislation regulating or
licensing check sellers or money transmitters, which may require us to register
under such legislation in specific instances. Management does not believe that
any state or federal legislation of this type would materially affect our
business. We may be subject to audit or examination under any of the foregoing
requirements. Violations by us of these requirements could limit or restrict
our access to the payment clearance systems or our ability to obtain access to
such systems from banks. Further, the Federal Reserve rules provide that we can
only access the Federal Reserve's automated clearinghouse system through a
bank. If the Federal Reserve rules were to change to further restrict access to
the automated clearinghouse system or limit our ability to provide automated
clearinghouse transaction processing services, our business would be materially
and adversely affected.

40
<PAGE>

In conducting various aspects of our business, we are subject to laws and
regulations relating to commercial transactions generally, such as the Uniform
Commercial Code, and are also subject to the electronic funds transfer rules
embodied in Regulation E issued by the Federal Reserve Board. The Federal
Reserve's Regulation E implements the Electronic Fund Transfer Act, which was
enacted in 1978. Regulation E protects consumers engaging in electronic
transfers, and sets forth basic rights, liabilities and responsibilities of
consumers who use electronic money services and of financial institutions that
offer these services. For us, Regulation E sets forth disclosure and
investigative procedures. For consumers, Regulation E establishes procedures
and time periods for reporting unauthorized use of electronic money transfer
services and limitations on the consumer's liability if the notification
procedures are followed within prescribed periods. Such limitations on the
consumer's liability may result in liability to us.

Given the expansion of the Internet commerce market, it is possible that
the Federal Reserve might revise Regulation E or adopt new rules for electronic
funds transfer affecting users other than consumers. Because of growth in the
Internet commerce market, Congress has held hearings on whether to regulate
providers of services and transactions in the Internet commerce market. It is
possible that Congress or individual states could enact laws regulating the
Internet commerce market. If enacted, these laws, rules, and regulations could
be imposed on our business and industry and could have a material adverse
effect on our business, operating results and financial condition. Federal,
local and state laws and regulations may be adopted in the future to address
issues like:

. user privacy;

. pricing;

. online content regulation;

. taxation; and

. the characteristics and quality of online products and services.

Any new laws or regulations relating to the Internet could have a material
and adverse effect on our business, operating results and financial condition.

Legal Proceedings

We are not involved in any material legal proceeding nor are we aware of
any threatened legal action. We are involved, from time to time, in litigation
incidental to the conduct of our business. We believe that any potential
adverse determination in such litigation will not have a material and adverse
effect on our business, operating results and financial condition.

Employees

As of March 31, 1999, we had 80 full time employees, employed in
implementation, sales and marketing, service development, finance and
administration. We have never experienced a work stoppage and none of our
employees is represented by a labor union. Except for certain members of
management who will execute employment agreements prior to the closing of this
offering, our employees work on an at-will basis. We consider our relations
with our employees to be good.

Facilities

We currently lease approximately 11,000 square feet of space at our
headquarters in Princeton, New Jersey under a lease that expires on August 31,
2002. We believe that our existing facility is adequate for our current needs
and that suitable additional space will be available, on acceptable terms, when
additional space is needed.

41
<PAGE>

MANAGEMENT

Directors and Executive Officers

Our executive officers and directors, their respective ages and their
positions with us as of March 31, 1999 are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ---- --- ------------------------------------------------
<S> <C> <C>
Donald C. Licciardello.. 52 Chairman and Chief Executive Officer
Ronald W. Averett....... 42 President and Chief Operating Officer
C. Richard Corl......... 61 Executive Vice President, Secretary and Director
Christopher S. Sugden... 29 Vice President and Chief Financial Officer
Lawrence Greenberg...... 32 Vice President and Chief Information Officer
Alexander Peterhans..... 40 Vice President and Director of Operations
Parris H. Holmes,
Jr.(1)................ 55 Director
Kelly E. Simmons(1)..... 44 Director
William C. Jennings..... 59 Director Nominee
</TABLE>
- --------
(1)Member of the Compensation Committee.

Within 90 days following the completion of this offering, we intend to
appoint two additional directors to our board who will be independent for
purposes of Nasdaq National Market listing requirements.

Donald C. Licciardello. Mr. Licciardello, one of our founders, has served
as our Chief Executive Officer and Chairman of the Board since our inception in
1984. From 1984 to March 1999, Mr. Licciardello also served as our President.
For seven years prior to our founding, Mr. Licciardello was a professor of
theoretical solid states physics at Princeton University. While at Princeton,
Mr. Licciardello co-authored a paper on two dimensional quantum diffusion which
was selected as one of the seminal works of the past 100 years by the American
Physical Society. From 1977 to 1984, Mr. Licciardello served as a technical
consultant in theoretical physics to IBM, Schlumberger, Bell Laboratories and
RCA Laboratories. From 1974 to 1976, Mr. Licciardello was also a Science
Research Council Fellow at the University of Birmingham, England. Mr.
Licciardello holds Ph.D., M.S. and B.S. degrees in Physics.

Ronald W. Averett. Mr. Averett has served as our President and Chief
Operating Officer since March 1999. Prior to joining us, from April 1998 to
December 1998 Mr. Averett was a Senior Vice President and Credit Card Division
Executive for Chevy Chase Bank's Credit Card Business. Mr. Averett contributed
to the spin-off of this division from Chevy Chase Bank in December 1998. From
January 1988 to April 1998, Mr. Averett held various executive positions in
Operations, Risk Management and Marketing with Advanta Corp, most recently as
the Senior Vice President and member of the Business Policy Committee of its
Credit Card unit. From June 1980 to December 1987, Mr. Averett held various
executive positions with Citibank, most recently as a Vice President and
Operations Consultant.

C. Richard Corl. Mr. Corl has served as our Executive Vice President since
June 1993, Secretary since May 1995, and as one of our directors since
September 1998. For more than 20 years, Mr. Corl held various executive
positions with TeleCheck Services, Inc., including Vice President of Franchise
Relations and Vice President of Marketing and Director of Strategic Planning.
Mr. Corl founded his own business in 1976 with the launch of part of the
TeleCheck Services, Inc. franchise network and served as its President and
Chief Executive Officer. In 1981, Mr. Corl sold this business to Tymshare,
Inc., which is now a part of First Data Corporation.

Christopher S. Sugden. Mr. Sugden has served as our Vice President and
Chief Financial Officer since February 1999. Prior to joining us, from June
1996 to February 1999, Mr. Sugden was the Director of Finance and Operations of
B.Y.O.B. Freedom Ventures, Inc., publishers of two magazines. From September
1992 to June 1996, Mr. Sugden held various positions with Coopers & Lybrand
LLP, now known as PricewaterhouseCoopers LLP, including supervisor. Mr. Sugden
is a certified public accountant and a member of the American Institute of
Certified Public Accountants.

42
<PAGE>

Lawrence Greenberg. Mr. Greenberg has served as Vice President and Chief
Information Officer since October 1992. Prior to becoming our Vice President
and Chief Information Officer, Mr. Greenberg founded Princeton Business
Systems, a systems integration company and served as its Managing Director.
From 1988 to 1992, Mr. Greenberg also served as the chief consultant on The New
Owners, a HarperCollins book containing detailed analysis of employee stock
ownership in America's public companies, and The Employee Stock Ownership Index
published in the Wall Street Journal.

Alexander Peterhans. Mr. Peterhans has served as our Vice President and
Director of Operations since February 1999, and as our Director of Operations
since September 1995. From February 1995 to September 1995, Mr. Peterhans
served as our Marketing Manager. From January 1984 to September 1992, he held
several positions as a research scientist in biotechnology at the Swiss Federal
Institute of Technology, Zurich, Switzerland, and Ciba-Geigy AG, Switzerland,
and at The Rockefeller University, New York. Mr. Peterhans was honored by the
Swiss Federal Institute of Technology with the Silver Medal for achievement in
original research. Mr. Peterhans holds a Ph.D. degree in Biotechnology and a
M.B.A. degree.

Parris H. Holmes, Jr. Mr. Holmes has served as one of our directors since
September 1998. Mr. Holmes is currently Chairman of the Board and Chief
Executive Officer of Billing Concepts Corp., a significant stockholder of
Princeton eCom, which provides billing services to the telecommunications
industry, positions which he has held since May 1996. From September 1986 to
August 1996, Mr. Holmes served as Chief Executive Officer of USLD
Communications Corp., a long distance telecommunications provider, and from
September 1986 to June 1997, also served as its Chairman of the Board. Mr.
Holmes currently serves as Chairman of the Board of Tanisys Technology, Inc., a
developer, manufacturer and marketer of computer peripheral equipment, and as a
director of Sharps Compliance Corp., a provider of mail sharps disposal
services for certain types of medical sharps (needles, syringes and razors)
products. On December 18, 1996, the SEC filed a civil injunctive action in the
United States District Court for the District of Columbia alleging that Mr.
Holmes failed to file timely twelve Section 16(b) reports regarding certain
1991 and 1992 transactions in the stock of USLD Communications Corp. as
required by Section 16(a) of the Securities Exchange Act of 1934. Section 16(a)
requires officers and directors of public companies to file reports with the
SEC regarding their personal transactions in the securities of such public
companies. Mr. Holmes settled this action on December 18, 1996, without
admitting or denying the allegations of the complaint, by consenting to the
entry of an injunction with respect to these requirements and paying a civil
penalty of $50,000. The staff of the SEC also has notified Mr. Holmes of its
decision to terminate its investigation of trading in the securities of USLD
Communications Corp. and the securities of Value-Added Communications, Inc. (In
the Matter of Trading in the Securities of Value-Added Communications, Inc.
(HO-2765)).

Kelly E. Simmons. Mr. Simmons has served as one of our directors since
September 1998. Mr. Simmons is currently Executive Vice President of Billing
Concepts Corp., a position which he has held since October 1998, and Chief
Financial Officer, a position which he has held since May 1996. From May 1996
to September 1998, Mr. Simmons also served as Senior Vice President of Billing
Concepts Corp. and from May 1996 to February 1998, served as its Corporate
Secretary. From May 1996 to September 1997, Mr. Simmons was the Corporate
Treasurer of Billing Concepts Corp. From November 1988 until August 1996, Mr.
Simmons held various executive positions with USLD Communications Corp.,
including Vice President-Finance and Corporate Treasurer, Vice President of
Administration and Senior Vice President of Business Development.

Future Director

William C. Jennings. Mr. Jennings, currently a senior partner with
PricewaterhouseCoopers LLP, will become a director of the Company following his
expected retirement from PricewaterhouseCoopers LLP at the end of June 1999.
Mr. Jennings served as one of our directors from September 1998 until March 15,
1999 at which time he elected to resign as a result of uncertainty as to
PricewaterhouseCoopers LLP's current policy regarding the ability of its
partners to serve as directors of for-profit companies. Mr. Jennings has served
with predecessors of PricewaterhouseCoopers LLP from 1964 to 1985 and from 1992
to the present. He

43
<PAGE>

provides risk management and internal control consulting services for clients.
He has been featured on many risk and control forums, as well as CNN, The New
York Times, Forbes, Fortune, Business Week, CFO, American Banker and many
industry-specific publications. Until the recent merger with Pricewaterhouse,
Mr. Jennings led the development of Coopers & Lybrand LLP's Internal Control
Services practice into a $150 million business. During his career at Coopers &
Lybrand LLP, Mr. Jennings was the lead partner of some of that firm's largest
clients, including Philip Morris, Shearson Lehman Brothers, Midlantic Bank,
Lipton and New Jersey Bell. From 1988 to 1991, Mr. Jennings served as Executive
Vice President and Chief Financial Officer of Banker's Trust. From 1985 to
1988, Mr. Jennings served as Senior Executive Vice President, Administration of
Shearson Lehman Brothers.

Board of Directors and Committees

Our Board is divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of our board is elected
each year. Currently, the term of office of Messrs. Corl and Simmons expires at
the annual meeting of stockholders to be held in 2000 and the term of office of
Messrs. Licciardello and Holmes expires at the annual meeting to be held in the
year 2001. The director up for election at the 1999 annual meeting is currently
vacant. Our staggered board, together with some other requirements which will
be added to our certificate of incorporation or by-laws prior to the completion
of this offering, may deter a stockholder from removing incumbent directors and
filing vacancies with its own nominees in order to gain control of our board.

We have established a compensation committee which reviews and approves the
compensation and benefits for our key executive officers, administers our
employee benefit plans and makes recommendations to our board regarding such
matters. The compensation committee currently consists of Messrs. Holmes and
Mr. Simmons.

We will establish an audit committee, consisting of at least two
independent directors, within 90 days following the completion of this
offering. Our audit committee will be responsible for reviewing our audited
financial statements and accounting practices, and considering and recommending
the employment of, and approving the fee arrangements with, independent
accountants for both audit functions and for advisory and other consulting
services.

Compensation Committee Interlocks and Insider Participation

Prior to October 20, 1998, our board did not have a compensation committee
and all compensation decisions were made by the full board. Messrs.
Licciardello and Corl did not participate in board deliberations with respect
to their individual compensation. Subsequent to October 20, 1998, the
compensation committee has made compensation decisions with respect to our key
executive officers, including the Chief Executive Officer and the President.
None of our executive officers serves as a member of the board of directors or
compensation committee of any entity that has one or more of its executive
officers serving as a member of our board or compensation committee. Our
compensation committee currently consists of Messrs. Holmes and Mr. Simmons.

Director Compensation

Employee directors do not receive compensation for their service on our
board. Non-employee directors are awarded 10,000 stock options under our Non-
Employee Director Plan for each year of service on our board.

Executive Compensation

The following table sets forth the compensation paid, earned or accrued for
all services rendered to us in all capacities during the year ended December
31, 1998 by our Chief Executive Officer and our other most

44
<PAGE>

highly compensated executive officers, other than our Chief Executive Officer,
whose aggregate cash and cash equivalent compensation exceeded $100,000.

Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Awards
-------------------- ------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary Compensation Options
- --------------------------------------- ---- ------- ------------ ------------
<S> <C> <C> <C> <C>
Donald C. Licciardello,................ 1998 $52,000 $198,000(1) 30,000
President and Chief
Executive Officer
C. Richard Corl,....................... 1998 100,000 -- 20,000
Executive Vice President
and Secretary
Lawrence Greenberg,.................... 1998 100,000 -- 30,000
Vice President and
Chief Information Officer
</TABLE>
- --------
(1)Reflects personal expenses paid on Mr. Licciardello's behalf.

Stock Option Grants

The following table sets forth information regarding stock options granted
to the officers named in the Summary Compensation Table during 1998. No stock
appreciation rights were granted during 1998.
<TABLE>
<CAPTION>
Potential Realizable Value
At Assumed Annual
Rates of Stock Price
Appreciation For
Individual Grants Option Term (2)
------------------------------------------------- --------------------------
Percent
Number of of Market
Securities Total Price
Underlying Options On Date
Options Granted Exercise of
Granted in Price Grant Expiration
Name (#) 1998(1)($/Share) ($/Share) Date (0%) (5%) (10%)
- ------------------------ ---------- ------- -------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald C. Licciardello.. 30,000(3) 7.3% $ 0.10 $12.00 10/20/03 $357,000 $456,461 $576,784
C. Richard Corl......... 20,000(3) 4.9 0.10 12.00 10/20/03 238,000 304,308 384,522
Lawrence Greenberg...... 20,000(4) 4.9 0.10 2.10 03/01/03 40,000 51,604 65,641
10,000(4) 2.4 12.00 12.00 12/21/08 -- 75,467 191,249
</TABLE>

Option Grants in Fiscal 1998

- --------
(1) We granted options to purchase a total of 408,500 shares of common stock
during the fiscal year ended December 31, 1998.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of options immediately prior to the expiration of their term
assuming the specified compounded rates of appreciation (0%, 5% and 10%) on
our common stock over the term of the options. These assumptions are based
on rules promulgated by the SEC and do not reflect our estimates of future
stock price appreciation. Actual gains, if any, on the stock option
exercises and common stock holdings are dependent on the timing of the
exercise and the future performance of our common stock. We cannot assure
you that the rates of appreciation assumed in this table can be achieved or
that the amounts reflected will be received by the option holder.
(3) Options to purchase 10,000 shares of common stock vested on October 20,
1998 and options to purchase an additional 10,000 shares of common stock
will vest on each anniversary thereafter.
(4) These options vest and become fully exercisable as to 25% on the first
anniversary of the date of grant and as to an additional 25% on each
anniversary thereafter until all these options are fully vested and
exercisable.

45
<PAGE>

Year-End Option Values

The following table sets forth information concerning the number and year
end value of unexercised options held by each of the officers named in the
Summary Compensation Table at December 31, 1998. None of the Named Executive
Officers exercised stock options or stock appreciation rights in the year ended
December 31, 1998.

Fiscal 1998 Year-End Option Values

<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised "In-the-Money" (1)
Options at Fiscal Options at Fiscal
Year-End Year-End
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald C. Licciardello..... 10,000 20,000 $119,000 $238,000
C. Richard Corl............ 10,000 10,000 119,000 119,000
Lawrence Greenberg......... 10,000 50,000 119,000 476,000
</TABLE>
- --------
(1) Options are "in-the-money" if the fair market value of the underlying
securities exceeds the exercise price of the options. The amounts set forth
represent the difference between $12.00 per share, the fair market value of
our common stock issuable upon exercise of options at December 31, 1998 (as
determined by our board), and the exercise price of the option, multiplied
by the applicable number of options.

Stock Option Plan

Our Amended 1996 Stock Option Plan, which became effective on July 1, 1996
and was amended in December 1998, provides for the granting of incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code
("incentive stock options"), and stock options not intended to qualify as
incentive stock options ("non-qualified stock options"). All of our officers,
key employees and consultants are eligible to participate in the Stock Option
Plan. The total number of shares of common stock which we may issue under the
Stock Option Plan is 1,500,000. Under present law, incentive stock options may
only be granted to our employees and employees of our subsidiaries.

The Stock Option Plan is administered by our compensation committee which
has the authority to:

. construe and interpret the plan;

. create, amend and rescind rules and regulations for the plan;

. determine the individuals entitled to participate in the plan;

. determine the timing of specific option grants, the number of options to
be granted, the vesting schedule for the options and their exercise
price;

. determine whether the options granted will be incentive stock options or
non-qualified stock options; and

. make all other determinations which may be necessary or advisable for
the administration of the plan.

Our compensation committee may grant options at an exercise price less
than, equal to or greater than the fair market value of our common stock on the
date of grant. Under present law, incentive stock options and options intended
to qualify as performance-based compensation for purposes of Section 162(m) of
the Internal Revenue Code, may not be granted at an exercise price less than
the fair market value of our common stock on the date of grant or less than
110% of the fair market value of our common stock in the case of incentive
stock options granted to optionees holding more than 10% of our voting power.
Incentive stock options may not be assigned or transferred during the lifetime
of the holder except as may be required by law. The maximum term

46
<PAGE>

of each stock option granted under the Stock Option Plan to persons other than
10% stockholders is ten years from the date of grant.

The Stock Option Plan permits the optionee to determine how they will pay
the exercise price of their options. The plan provides that the option price
may be paid:

. in cash;

. with shares of common stock valued at the fair market value of the
common stock on the date of exercise;

. in cash by a broker-dealer to whom the holder of the option has
submitted an exercise notice consisting of a fully endorsed option;

. through the surrender of options then exercisable valued at the excess
of the aggregate fair market value of the common stock subject to such
option on the date of exercise over the aggregate option price of such
common stock;

. by directing us to withhold such number of shares of common stock
otherwise issuable upon exercise of the option having an aggregate fair
market value on the date of exercise equal to the exercise price of the
option; or

. by some other method of payment as may be authorized by our compensation
committee or any combination of the foregoing payment options as our
compensation committee may permit in its sole discretion.

No incentive stock option awards may be granted under the Stock Option Plan
after June 30, 2006. Our compensation committee may, at any time, terminate,
suspend or modify the Stock Option Plan, except that no amendment or revision
may, unless appropriate stockholder approval is obtained, increase the maximum
number of shares of common stock in the aggregate for which we may grant
options under the Stock Option Plan, change the minimum purchase price of an
incentive stock option, increase the maximum term of an incentive stock option,
or grant options to persons not then currently contemplated by the plan. In
addition, no termination, suspension or modification of the Stock Option Plan
may adversely affect any right acquired by an optionee before the date of any
termination, suspension or modification without the optionee's consent.

The Stock Option Plan provides that outstanding options vest in their
entirety and become exercisable in the event we undergo a change of control. A
change of control will be deemed to occur if:

. a person or group becomes the beneficial owner of more than 50% of the
total voting power of our outstanding stock; or

. there occurs a change in the majority of the members of our board from
one year to the next, except any changes approved by the former board of
directors.

As of March 31, 1999, (1) there were outstanding options under the Stock
Option Plan to purchase an aggregate of 822,300 shares of common stock at a
weighted average price of $6.12, and (2) 664,050 additional shares of common
stock reserved for future option grants.

As soon as practicable following completion of this offering, we intend to
file with the SEC a registration statement on Form S-8 covering the shares of
common stock underlying options granted and reserve for future issuance under
the Stock Option Plan.

47
<PAGE>

Non-Employee Director Plan

Our 1998 Non-Employee Director Plan, which was approved by our board on
October 20, 1998 and became effective on October 20, 1998. It provides for the
grant of non-qualified stock options to our directors. The Director Plan
provides for the issuance of up to 200,000 shares of common stock upon exercise
of options.

Under the terms of the Director Plan, each non-employee director who was a
director on the date the plan went into effect received options to purchase a
number of shares of common stock equal to the product of the number of years he
was elected to serve as a director multiplied by 10,000. These options vest as
to 10,000 shares on the date of grant and on each of the first two
anniversaries of the date of grant, subject to a maximum of two anniversaries.
Further, non-employee directors are also entitled to receive on the first
business day after each of our annual meetings of stockholders at which the
director is re-elected to the board options to purchase an additional number of
shares equal to the number of years he or she is elected to the Board
multiplied by 10,000. These options would vest under the same terms discussed
above. In addition to the automatic grants provided by the plan, non-employee
directors may also receive additional grants of options at the discretion of
our compensation committee. The exercise price of each option under the
Director Plan, other than options granted on October 20, 1998, will be 100% of
the fair market value of our common stock on the date of grant. Each option
will have a term of six years.

The Director Plan provides that outstanding options vest in their entirety
and become exercisable in the event we undergo a change of control. For
purposes of the Director Plan, change in control has the same meaning given
such term in the Stock Option Plan.

The exercise price may be paid in cash or with shares of common stock
valued at the fair market value of the stock on the exercise date.

As of March 31, 1999, (1) there were outstanding options under the Director
Plan to purchase an aggregate of 75,000 shares of common stock at a weighted
average price of $0.10 and (2) 125,000 additional shares of common stock
reserved for future option grants.

As soon as practicable following the completion of this offering, we also
intend to file a Registration Statement on Form S-8 covering the shares of
common stock underlying options granted, or to be granted, under the Director
Plan.

401(k) Plan

Our employees participate in our 401(k) profit sharing plan, a defined
contribution plan intended to qualify under Section 401 of the Internal Revenue
Code. All personnel who have completed one year of service with us are eligible
to participate and may enter the plan as of the first day of January or July.
Participants may make pre-tax contributions to the plan of up to 15% of their
eligible earnings, subject to a statutorily prescribed annual limit. We may
make matching contributions on a discretionary basis to the plan. Each
participant is fully vested in his or her contributions, and any investment
earnings thereon. Contributions by the participants or us, and the income
earned on such contributions, are generally not taxable to the participants
until withdrawn. Contributions by us, if any, are generally deductible by us
when made. Contributions are held in trust as required by law. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives. In 1998, we did not make any matching contributions.
In 1999, we intend to match 50% of all employee contributions up to 6% of that
employee's annual base salary.

Employment Agreements

Prior to the completion of this offering, we will enter into an employment
agreement with Mr. Averett pursuant to which Mr. Averett will agree to continue
to serve full time as our President and Chief Operating Officer until March 30,
2003, unless earlier terminated in accordance with the terms of his agreement.
Mr. Averett's annual base salary under the agreement will be $200,000 per year.
In addition, Mr. Averett will be

48
<PAGE>

granted options to purchase 100,000 shares of our common stock at $16.00 per
share, which options will vest as to 25% on each anniversary and options to
purchase 15,000 shares of our common stock at $16.00 per share, which options
will vest on the earlier of the achievement of performance goals or December
31, 2002. Mr. Averett's employment agreement will also provide for some
employee benefits, vacation and reimbursement of expenses.

In addition, prior to the completion of this offering, we will enter into
an employment agreement with Mr. Sugden, pursuant to which Mr. Sugden will
agree to continue to serve full time as our Vice President and Chief Financial
Officer until, February 15, 2003, unless earlier terminated in accordance with
the terms of his agreement. Mr. Sugden's annual base salary under the agreement
will be $100,000 per year. Mr. Sugden's employment agreement will also provide
for certain employee benefits, vacation and reimbursement of expenses.

Pursuant to each employment agreement, if the executive is terminated for
"cause," as defined within the employment agreements, we will be required to
pay the executive, within ten days following this termination, any unpaid base
salary accrued through the date of termination and we will be required to
reimburse the executive for reasonable business expenses incurred prior to that
date. If we terminate Mr. Averett's employment without cause, we will be
required to pay him any unpaid base salary accrued through the date of
termination, plus an additional $200,000 (or $400,000 if he terminates his
employment as a result of a change in control) and we will be required to
reimburse him for reasonable business expenses incurred prior to the date of
termination. We will be required to pay the executive these amounts within 30
days following a termination without cause, but can, at our option, pay the
additional amounts in equal monthly installments over the 12-month period
following the date of termination.

Each of Messrs. Averett and Sugden's employment agreements will also
provide that the executive will not, during the specified restricted period (as
defined in the agreements), without our prior written consent, directly or
indirectly conduct or engage in or be associated with any person or entity
which conducts or engages in electronic bill payment, electronic bill
publishing or electronic bill presentment. For purposes of the employment
agreements, a change in control shall have the same meaning as in the Stock
Option Plan. Each of the employment agreements will also provide that the
executives shall not disclose confidential information and may not interfere
with, disrupt or attempt to disrupt the relationship, contractual or otherwise,
between us or any of our subsidiaries and our respective customers or
employees.

49
<PAGE>

CERTAIN TRANSACTIONS

Stock Purchases

In September 1998, we sold 831,290 shares of our common stock to Billing
Concepts Corp. for an aggregate purchase price of $10.0 million. Under the
terms of the stock purchase agreement for this sale, the parties agreed, among
other things, that (1) in the event that Billing Concepts Corp. desires to sell
its shares of common stock, we have a right of first refusal to purchase such
shares, (2) in the event that we offer, sell or grant any option to purchase or
otherwise dispose of any of our equity-equivalent securities or promissory
notes in a transaction intended to be exempt or not subject to registration
under the Securities Act of 1933, except under any employee, officer or
director stock option plan or through mergers or acquisitions not designed to
raise capital approved by our stockholders, Billing Concepts Corp. shall have a
right of first refusal to purchase such securities, and (3) Billing Concepts
Corp. has the right, so long as it owns at least 5% of our common stock, to
have two representatives on our board of directors. In addition, the agreement
provides that if our working capital deficit at June 30, 1998 was in excess of
$8.5 million, then Billing Concepts Corp. had a right to purchase additional
shares of our common stock at a price of $12.03 per share. As a result of our
June 30, 1998 working capital deficit having exceeded $8.5 million, on March
30, 1999, we sold 44,792 shares of common stock to Billing Concepts Corp. for
$538,838. In connection with its acquisition of our stock, Billing Concepts
Corp. entered into a voting agreement with Mr. Licciardello, our Chief
Executive Officer and largest shareholder. Under the terms of this voting
agreement, Mr. Licciardello and Billing Concepts Corp. have agreed to vote all
of their respective shares of common stock to elect to our board the two
individuals designated by Billing Concepts Corp. and three members designated
by Mr. Licciardello. In addition, Mr. Licciardello agreed to have any
transferee or purchaser of any of his shares of common stock to become a party
to the voting agreement. The voting agreement automatically terminates when
Billing Concepts ceases to own 10% of our issued and outstanding common stock.

Guarantee of loan to Donald C. Licciardello

Until March 26, 1999, some of our certificates of deposit were pledged as
collateral for a guarantee we issued in connection with a loan obtained by Mr.
Licciardello. On March 26, 1999, the collateral and our guarantee were released
by First Union National Bank.

Loan to C. Richard Corl

Mr. Corl issued to us a demand note evidencing the outstanding purchase
price for shares of our common stock purchased by him in June 1996. This demand
note, in the amount of $210,308, bears interest at a rate of six percent
annually.

50
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to us regarding
the beneficial ownership of our common stock, as of March 31, 1999, before and
after giving effect to this offering by (1) each person known by us to own
beneficially 5% or more of our common stock, (2) each of our directors, (3)
each of the Named Executive Officers, and (4) all of our current directors and
executive officers, as a group. All information with respect to beneficial
ownership has been furnished to us by our respective stockholders

<TABLE>
<CAPTION>
Shares
Beneficially Shares
Owned Prior to Beneficially
this Owned After the
Offering(1)(2) Offering(1)(2)
-------------------- -----------------
Name of Beneficial Owner Number Percent Number Percent
- ------------------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Donald C. Licciardello (3)............ 2,330,908 62.0% 2,330,908 %
Billing Concepts Corp. ............... 876,082 23.3 876,082
7411 John Smith Drive, Suite 200
San Antonio, Texas 78229
Patricia F. Corl...................... 220,000 5.8 220,000
1107 Robin Road
Gladwyne, PA 19035
C. Richard Corl (4)(5)................ 397,540 10.5 397,540
Lawrence Greenberg (4)................ 35,000 * 35,000
Parris H. Holmes, Jr (4).............. 20,000 * 20,000
Kelly E. Simmons (4).................. 12,500 * 12,500
All executive officers and directors,
as a group (8 persons)(6)........... 2,825,948(1) 74.0 2,825,948
</TABLE>
- --------
* Represents beneficial ownership of less than 1% of our outstanding shares
of common stock.

(1) Unless otherwise indicated above, the address for each executive officer
and director identified above is 165 Wall Street, Princeton, New Jersey
08540.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options and warrants held by that person
that are currently exercisable or exercisable within 60 days of March 31,
1999 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person. Except as indicated in the footnotes to this table, each
stockholder named in the table has sole voting and investment power with
respect to the shares set forth opposite such stockholder's name.
(3) This figure includes 1,700,000 shares held by the Donald Licciardello
Family Limited Partnership, of which Mr. Licciardello is the general
partner. Mr. Licciardello has voting and dispositive control over these
shares.
(4) Includes the following number of shares of common stock which the officers
named in the Summary Compensation Table have the right to acquire through
the exercise of options within 60 days of March 31, 1999: Mr. Corl, 10,000;
Mr. Greenberg, 15,000; Mr. Holmes, 10,000; and Mr. Simmons, 10,000.
(5) Includes the 220,000 shares owned by Patricia F. Corl, for which Mr. Corl
disclaims beneficial ownership.
(6) Includes a total of 55,000 shares which may be purchased upon the exercise
of options.

51
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, our authorized capital stock will consist
of shares of common stock, $0.01 par value per share, and 3,000,000
shares of preferred stock, $0.01 par value per share. As of March 31, 1999,
there were outstanding (1) 3,761,334 shares of our common stock held of record
by 24 stockholders and (2) options to purchase an aggregate of 897,300 shares
of common stock.

The following summary of some provisions of our common stock, preferred
stock, certificate of incorporation and by-laws, as in effect on the closing
date of this offering, is not intended to be complete and is qualified by
reference to the provisions of the applicable law and our certificate of
incorporation and by-laws included as exhibits to the registration statement of
which this prospectus is a part.

Common Stock

Holders of our common stock are entitled to one vote per share on all
matters on which the holders of common stock are entitled to vote and do not
have cumulative voting rights. This means that the holders of more than 50.0%
of our shares of common stock voting for the election of directors can elect
all of the directors up for election if they choose to do so; if this event
occurs, the holders of the remaining holders of shares of our common stock will
not be able to elect any person to our board. Subject to rights of any holders
of any shares of our preferred stock, holders of our common stock are entitled
to receive ratably such dividends as may be declared by our board from time to
time out of funds legally available for this purpose. See "Dividend Policy."
Holders of our common stock are not entitled to any preemptive, conversion,
redemption, subscription or similar rights. In the event of a liquidation,
dissolution or winding-up of Princeton eCom, whether voluntary or involuntary,
holders of our common stock are entitled to share ratably in our assets legally
available for distribution, if any, remaining after the payment or provision
for the payment of all of our debts and other liabilities and the payment and
setting aside for payment of any preferential amount due to any holders of any
shares of our outstanding preferred stock. All of our outstanding shares of
common stock are, and all of our shares of common stock offered in this
offering when issued will be, upon payment, duly and validly issued, fully paid
and nonassessable. The rights, preferences and privileges of holders of our
common stock are subject to, and may be adversely affected by, the rights of
the holders of any series of our preferred stock which we may designate and
issue in the future.

We intend to apply for listing of our common stock on the Nasdaq National
Market under the trading symbol ECOM.

Preferred Stock

Prior to completion of this offering, our certificate of incorporation will
be amended to authorize our board to issue, from time to time and without any
further action of our stockholders, up to 3,000,000 shares of preferred stock,
in one or more series. The board will be authorized to fix or alter the
designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each of these series, including the voting
rights, dividend rights, dividend rates, conversion rights, terms of
redemption, redemption price or prices, liquidation, preferences and the number
of shares constituting any series or designations of these series. The issuance
of preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes could, among other things, have the
effect, under certain circumstances, of delaying, deferring or preventing a
change in control of Princeton eCom. We have no current plan to issue any
shares of our preferred stock. See "--Authorized But Unissued Shares."

Anti-Takeover Effects of Certain Provisions of Delaware Law

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, or the DGCL. Section 203 of the DGCL generally prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the

52
<PAGE>

transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board or
unless the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in
a financial benefit to the interested stockholder. Subject to exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, fifteen percent (15%) or more
of a corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.

Certificate of Incorporation and By-law Provisions

Our by-laws currently divide the board into three classes with staggered
three year terms. This classified board could make it more difficult for a
third party to acquire, or discourage a third party from acquiring, control of
us. Our by-laws also currently authorize our board to fill vacant directorships
or increase the size of the board. This may deter a stockholder from removing
incumbent directors and simultaneously gaining control of the board by filling
the vacancies created by that removal with its own nominees. See "Management."

Prior to completion of this offering, our certificate of incorporation and
by-laws will be amended to include the provisions described in the following
paragraphs, which are intended to further enhance the likelihood of continuity
and stability in the composition of the board and which may have the effect of
delaying, deterring or preventing a future takeover or change in control of us
unless such takeover or change of control has been approved by our board.

Advanced Notice Provisions for Stockholder Proposals and Director
Nominations. Our by-laws will be amended to establish advance notice procedures
with regard to the nomination, other than by or at the direction of the board,
of candidates for election as directors and with regard to some matters to be
brought before an annual meeting of stockholders. In general, these provisions
will require that notice be received by us not less than 120 days prior to the
meeting and must contain specified information concerning the persons to be
nominated or the matter to be brought before the meeting and concerning the
stockholder submitting the proposal.

Stockholder Action; Special Meeting of Stockholders. Our by-laws will also
be amended to provide that stockholders may not take action by written consent,
but only at duly called annual or special meeting of stockholders. Our by-laws
will further be amended to provide that special meetings of our stockholders
may be called only by our Chairman of the Board or a majority of the directors.

Authorized But Unissued Shares. Our authorized but unissued shares of our
common stock and preferred stock will be available for future issuance without
stockholder approval, subject to limitations imposed by the Nasdaq National
Market. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
acquisitions and employee benefit plans. The existence of authorized but
unissued and unreserved common stock and preferred stock could render it more
difficult or discourage an attempt to obtain control of us by means of a proxy
contest, tender offer, merger or otherwise.

Limitation of Liability and Indemnification of Directors

Our by-laws provide that, except to the extent prohibited by the DGCL, our
directors shall not be personally liable to us or our stockholders for monetary
damages for any breach of fiduciary duty as a director. Under the DGCL, our
directors have a fiduciary duty to us that is not eliminated by this provision
of our by-laws and, in appropriate circumstances, injunctions and other
nonmonetary relief will remain available. This provision also does not affect
the directors' responsibilities under any other laws, including the Federal
securities laws or state or Federal environmental laws.

53
<PAGE>

Section 145 of the DGCL enables a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers. However, this provision
does not eliminate or limit the liability of a director:

. for any breach of the director's duty of loyalty to the corporation or
its stockholders;

. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. for payments of dividends or approval of stock repurchases or
redemptions that are prohibited by the DGCL; or

. for any transaction from which the director derived an improper personal
benefit.

Our by-laws provide that we may fully 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 proceeds, whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was one of our
directors or officers or is or was serving at our request as a director or
officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses, including attorney's fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by that person in connection with any threatened, pending or completed
action, suit or proceeding.

We intend to enter into indemnification agreements with our directors and
executive officers. We believe that the provisions of our by-laws and these
indemnification agreements are necessary to attract and retain qualified
directors and executive officers. We intend to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions, regardless of whether the DGCL would permit
indemnification.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent for which indemnification will be required
or permitted under our by-laws. We are not aware of any threatened litigation
or proceeding that may result in a claim for indemnification.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have outstanding an aggregate of
shares of common stock, assuming no exercise of the underwriter's over-
allotment option and no exercise of outstanding options. Of these shares, all
of the shares sold in this offering will be freely tradable without restriction
or further registration under the Securities Act of 1933, except that shares
purchased by our affiliates, as that term is defined in Rule 144 under the
Securities Act of 1933, may generally only be sold in compliance with the
limitations of Rule 144 described below.

Sales of Restricted Securities

The remaining shares of our common stock are deemed "restricted securities"
under Rule 144. Of the restricted securities, approximately shares of
common stock, which are not subject to lock-up agreements with the
representatives for the underwriters, will be eligible for immediate sale in
the public markets pursuant to Rule 144(k) under the Securities Act of 1933.
Approximately an additional shares of common stock, which are not
subject to any lock-up agreement, will be eligible for sale in the public
market in accordance with Rule 144 or Rule 701 under the Securities Act of 1933
beginning 90 days from the date of this prospectus. Upon expiration of the
lockup agreements, approximately additional shares of common stock will
be available for sale in the public markets in accordance with the provisions
of Rule 144.

54
<PAGE>

Rule 144 and Rule 701

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person, including one of our affiliates, who has
beneficially owned his or her restricted securities for at least one year from
the later of the date such securities were acquired from us or, if applicable,
one of our affiliates, is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of:

. 1% of our then outstanding shares of common stock, which will equal
approximately shares immediately after this offering; or

. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the sale.

Sales under Rule 144 are also subject to certain requirements concerning
the availability of public information, manner of sale and notice. In addition,
under Rule 144(k), if a period of at least two years has elapsed between the
later of the date the restricted securities were acquired from us or, if
applicable, one of our affiliates, a stockholder who is not an affiliate at the
time of sale and has not been one of our affiliates for a period of three
months prior to the sale is entitled to sell the shares immediately without
compliance with the foregoing requirements of Rule 144.

Securities issued in reliance on Rule 701 prior to the completion of this
offering, like shares of common stock acquired pursuant to the exercise of
stock options issued by us, are also restricted securities and, beginning 90
days after the date of this prospectus is a part, may be sold by stockholders
who are not affiliates subject only to the manner of sale provisions of Rule
144 and by affiliates under Rule 144 without compliance with the one-year
holding period requirement of the rule.

Stock Options

Immediately following this offering, we intend to file registration
statements on Form S-8 under the Securities Act of 1933 to register all shares
of common stock issuable under the Stock Option Plan and the Directors Plan.
Shares issued upon exercise of stock options granted under the Stock Option
Plan and the Directors Plan after the effective date of the Form S-8
registration statements will be eligible for resale in the public markets
without restriction, subject to Rule 144 limitations applicable to affiliates
and subject to the lock-up agreements discussed above.

Effect of Sales of Shares

Prior to this offering, there has been no public trading market for our
common stock, and no prediction can be made as to the effect, if any, that
market sales of shares of common stock or the availability of shares for sale
will have on the market price of our common stock prevailing from time to time.
Nevertheless, sales of significant numbers of shares of our common stock in the
public markets could adversely affect the market price of our common stock and
could impair our ability to raise capital through an offering of our equity
securities.

55
<PAGE>

UNDERWRITING

The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, have severally agreed with us, subject to the terms and conditions
of the underwriting agreement, to purchase from us the number of shares of
common stock set forth opposite their respective names below. The underwriters
are committed to purchase and pay for all shares if any are purchased.

<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc. ...............................
Donaldson, Lufkin & Jenrette Securities Corporation...............
E*TRADE Securities, Inc. .........................................
----
Total...........................................................
====
</TABLE>

The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at that price less
a concession of not in excess of $ per share, of which $ may be reallowed
to other dealers. After this offering, the public offering price, concession,
and reallowance to dealers may be reduced by the representatives. No reduction
shall change the amount of proceeds to be received by us as set forth on the
cover page of this prospectus. The common stock is offered by the underwriters
as stated in this prospectus, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part.

The following table summarizes the compensation to be paid to the
underwriters by us:

<TABLE>
<CAPTION>
Total
---------------------------------------
Without With
Per Share over-allotment over-allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and
commissions..................... $ $ $
</TABLE>

Princeton eCom estimates that expenses payable by us in connection with
this offering, other than the underwriting discounts and commissions referred
to above, will be approximately $ .

DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in this offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJdirect Inc. for sale to its
brokerage account holders.

Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have
agreed to purchase. If the underwriters exercise their over-allotment option to
purchase any of the additional shares of common stock, the underwriters
have severally agreed, subject to certain conditions, to purchase approximately
the same percentage thereof as the number of shares to be purchased by each of
them bears to the total number of shares of common stock offered in this
offering. If purchased, the additional shares will be sold by the underwriters
on the same terms as those on which the shares offered in this offering are
being sold. We will be obligated, pursuant to the over-allotment option, to
sell shares to the extent that the over-allotment option is exercised. The
underwriters may exercise the over-allotment option only to cover over-
allotments made in connection with the sale of the shares of common stock
offered in this offering.

56
<PAGE>

Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act of 1933 and liabilities arising from
breaches of representations and warranties contained in the underwriting
agreement.

Lock-Up Agreements. Each executive officer and director of Princeton eCom
and each holder of more than 1% of our outstanding common stock has agreed,
during the period of 180 days after the effective date of this prospectus,
subject to exceptions, not to offer to sell, contract to sell, or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to any shares
of common stock or any options to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or thereafter acquired directly by such holders
or with respect to which they have the power of disposition, without the prior
written consent of BancBoston Robertson Stephens Inc. However, BancBoston
Robertson Stephens Inc. may, in its sole discretion, and at any time or from
time to time, without notice, release all or any portion of the securities
subject to those lock-up agreements. There are no existing agreements between
the representatives and any of our stockholders who have executed a lock-up
agreement providing consent to the sale of shares prior to the expiration of
the lock-up period.

Future Sales. In addition, we have agreed that during the lock-up period we
will not, without the prior written consent of BancBoston Robertson Stephens
Inc., subject to certain exceptions,

. consent to the disposition of any shares held by stockholders subject to
lock-up agreements prior to the expiration of the lock-up period, or

. issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in
this offering, the issuance of our common stock upon the exercise of
outstanding options or warrants, and the issuance of options under
existing stock option and incentive plans provided that those options do
not vest prior to the expiration of the lock-up period. See "Shares
Eligible for Future Sale."

The underwriters do not intend to confirm sales of more than 5% of the
common stock offered in this offering to accounts over which they exercise
discretionary authority.

No Prior Public Market. Prior to this offering, there has been no public
market for the common stock. Consequently, the initial public offering price
for the common stock offered by this prospectus has been determined through
negotiations among the company and the representatives. Among the factors
considered in determining the public offering price were:

. prevailing market conditions;

. certain of our financial information;

. the present stage of the company's development;

. the market valuations of other companies that we and the representatives
believe to be comparable to us;

. estimates of our business potential;

. the present state of our development; and

. other factors deemed relevant.

Listing. We have applied to have shares of common stock approved for the
quotation on the Nasdaq National Market under the symbol "ECOM."

Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Securities Act of 1933, some persons participating in
this offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the

57
<PAGE>

open market. A stabilizing bid is a bid for or the purchase of common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price
of the common stock. A syndicate covering transaction is the bid for or the
purchase of common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with this offering. A
penalty bid is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by that
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised us that
such transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.

Directed Share Program. The underwriters have reserved up to five percent
(5%) of the common stock to be issued by us and offered for sale in this
offering, at the initial public offering price, to directors, officers,
employees, business associates and persons otherwise connected to Princeton
eCom. The number of shares of common stock available to the general public will
be reduced to the extent these individuals purchase reserved shares. Any
reserved shares which are not purchased will be offered by the underwriters to
the general public on the same basis as the other shares offered in this
offering.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Kelley Drye & Warren LLP, New York, New York. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Brobeck, Phleger & Harrison LLP, New York, New York.

EXPERTS

The financial statements of Princeton eCom Corporation as of December 31,
1997 and 1998 and for the three years in the period ended December 31, 1998
included in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein upon the authority of said firm as experts in
giving said reports.

ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 with
respect to the shares of common stock offered hereby. This prospectus, which is
a part of the registration statement, does not contain all of the information
included in the registration statement and the exhibits and schedules thereto.
You may review a copy of the registration statement, including exhibits, at the
SEC's public reference room at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or Seven World Trade Center, 13th Floor, New York, New
York 10048 or Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information
on the operation of the public reference rooms.

We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
SEC.

Our SEC filings and the registration statement can also be reviewed by
accessing the SEC's Internet site at http://www.sec.gov, which contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC.

We intend to distribute to our stockholders annual reports containing
audited consolidated financial statements. We also intend to make available to
our stockholders, within 45 days after the end of each fiscal quarter, reports
for the first three quarters of each fiscal year containing interim unaudited
financial information.

58
<PAGE>

PRINCETON ECOM CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Equity (Deficit)............................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>

F-1
<PAGE>

After the recapitalization and -for-1 stock split of each outstanding share
of common stock, as discussed in Note 13 to the financial statements, are
effected, we expect to be in a position to render the following audit report.

/s/ ARTHUR ANDERSEN LLP

Philadelphia, Pa.,
March 30, 1999

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Princeton eCom Corporation:

We have audited the accompanying balance sheets of Princeton eCom
Corporation, formerly Princeton TeleCom Corporation, (a Delaware corporation)
as of December 31, 1997 and 1998, and the related statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Princeton eCom Corporation
as of December 31, 1997 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998,
in conformity with generally accepted accounting principles.

Philadelphia, Pa.,
March 30, 1999, except for
Note 13, for which the
date is .

F-2
<PAGE>

PRINCETON ECOM CORPORATION

BALANCE SHEETS

<TABLE>
<CAPTION>
December 31
-------------------------
1997 1998
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 504,844 $ 6,362,453
Accounts receivable, net of allowance of $52,941
and $49,942..................................... 607,071 637,603
Prepaid expenses and other........................ 115,586 1,511,743
----------- ------------
Total current assets........................... 1,227,501 8,511,799
Property and equipment, net......................... 852,270 822,142
Other assets........................................ 29,839 10,217
----------- ------------
$ 2,109,610 $ 9,344,158
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank overdraft.................................... $ 843,548 $ 399,809
Customer deposits payable......................... 7,769,416 7,452,033
Current portion of long-term debt................. 48,049 29,441
Accounts payable.................................. 211,239 502,650
Accrued expenses.................................. 263,541 435,913
----------- ------------
Total current liabilities...................... 9,135,793 8,819,846
----------- ------------
Long-term debt...................................... 75,392 49,614
----------- ------------
Other liabilities................................... 283,611 196,411
----------- ------------
Commitments and contingencies (Note 6)
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 3,000,000 shares
authorized, none issued......................... -- --
Common stock, $.01 par value, 6,000,000 shares
authorized, 2,871,602 and 3,706,542 shares
issued and outstanding.......................... 28,716 37,065
Additional paid-in capital........................ 391,798 12,268,314
Accumulated deficit............................... (7,539,193) (10,893,829)
Subscriptions receivable.......................... (266,507) (266,507)
Deferred compensation............................. -- (866,756)
----------- ------------
Total stockholders' equity (deficit)........... (7,385,186) 278,287
----------- ------------
$ 2,109,610 $ 9,344,158
=========== ============
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE>

PRINCETON ECOM CORPORATION

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Service fees......................... $ 1,632,200 $ 2,332,995 $ 2,385,587
Interest............................. 204,205 698,602 1,436,448
----------- ----------- -----------
Total revenues.................... 1,836,405 3,031,597 3,822,035
----------- ----------- -----------
Operating expenses:
Cost of services..................... 1,363,278 1,800,368 1,966,956
Development costs.................... 833,899 820,335 895,152
Selling, general and
administrative..................... 1,823,284 2,536,791 3,282,669
Amortization of deferred
compensation....................... -- -- 1,017,744
----------- ----------- -----------
Total operating expenses.......... 4,020,461 5,157,494 7,162,521
----------- ----------- -----------
Operating loss......................... (2,184,056) (2,125,897) (3,340,486)
Interest expense....................... 6,467 15,687 14,150
----------- ----------- -----------
Net loss............................... $(2,190,523) $(2,141,584) $(3,354,636)
=========== =========== ===========
Basic and diluted net loss per share... $ (0.78) $ (0.75) $ (1.07)
=========== =========== ===========
Shares used in computing net loss per
share................................ 2,818,130 2,855,931 3,141,023
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE>

PRINCETON ECOM CORPORATION

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
Common Stock Additional
----------------- Paid-in Accumulated Subscriptions Deferred
Shares Amount Capital Deficit Receivable Compensation Total
--------- ------- ----------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 2,783,602 $27,836 $ 382,828 $ (3,207,086) $(258,157) $ -- $(3,054,579)
Sale of common stock... 58,000 580 6,270 -- (5,350) -- 1,500
Net loss............... -- -- -- (2,190,523) -- -- (2,190,523)
--------- ------- ----------- ------------ --------- ----------- -----------
Balance, December 31,
1996 2,841,602 28,416 389,098 (5,397,609) (263,507) -- (5,243,602)
Sale of common stock... 30,000 300 2,700 -- (3,000) -- --
Net loss............... -- -- -- (2,141,584) -- -- (2,141,584)
--------- ------- ----------- ------------ --------- ----------- -----------
Balance, December 31,
1997 2,871,602 28,716 391,798 (7,539,193) (266,507) -- (7,385,186)
Sale of common stock... 831,290 8,313 9,991,687 -- -- -- 10,000,000
Exercise of stock
options.............. 3,650 36 329 -- -- -- 365
Issuance of options to
purchase common stock
below fair market
value................ -- -- 1,884,500 -- -- (1,884,500) --
Amortization of
deferred
compensation......... -- -- -- -- -- 1,017,744 1,017,744
Net loss............... -- -- -- (3,354,636) -- -- (3,354,636)
--------- ------- ----------- ------------ --------- ----------- -----------
Balance, December 31,
1998 3,706,542 $37,065 $12,268,314 $(10,893,829) $(266,507) $ (866,756) $ 278,287
========= ======= =========== ============ ========= =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-5
<PAGE>

PRINCETON ECOM CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss............................... $(2,190,523) $(2,141,584) $(3,354,636)
Adjustments to reconcile net loss to
net cash provided by
(used in) operating activities--
Depreciation and amortization......... 152,479 226,466 276,791
Amortization of deferred
compensation........................ -- -- 1,017,744
Provision for bad debts............... 25,165 27,776 15,500
Issuance of common stock for
services............................ 1,500 -- --
Loss on disposal of assets............ -- -- 10,664
Changes in operating assets and
liabilities--
Accounts receivable.................. 82,952 (231,481) (46,032)
Prepaid expenses and other........... 232,371 25,540 (1,376,535)
Customer deposits payable............ (1,676,315) 4,247,161 (317,383)
Accounts payable..................... (76,578) 98,668 291,411
Accrued expenses..................... 10,526 196,608 76,372
Other liabilities.................... -- 68,256 8,800
----------- ----------- -----------
Net cash provided by (used in)
operating activities............. (3,438,423) 2,517,410 (3,397,304)
----------- ----------- -----------
Investing activities:
Purchases of property and equipment.... (298,369) (372,818) (257,327)
----------- ----------- -----------
Net cash used in investing
activities....................... (298,369) (372,818) (257,327)
----------- ----------- -----------
Financing activities:
Net increase (decrease) in bank
overdraft............................ 2,879,337 (2,133,248) (443,739)
Payments on long-term debt............. (26,810) (29,747) (44,386)
Proceeds from sale of common stock..... -- -- 10,000,000
Proceeds from exercise of stock
options.............................. -- -- 365
----------- ----------- -----------
Net cash provided by (used in)
financing activities............. 2,852,527 (2,162,995) 9,512,240
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents........................... (884,265) (18,403) 5,857,609
Cash and cash equivalents, beginning of
year.................................. 1,407,512 523,247 504,844
----------- ----------- -----------
Cash and cash equivalents, end of year.. $ 523,247 $ 504,844 $ 6,362,453
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. Background:

On January 25, 1984, Princeton eCom Corporation (the "Company") was
incorporated in the State of Delaware as Princeton TeleCom Corporation. In
March 1999, the Company changed its name to Princeton eCom Corporation. The
Company is a leading provider of electronic and Internet bill publishing and
payment services to businesses that generate a substantial number of consumer
bills in the United States. The Company's current customers consist primarily
of utilities and financial institutions.

The Company has incurred significant losses and expects to incur
significant losses on a quarterly and annual basis for the foreseeable future.
As of December 31, 1998, the Company had an accumulated deficit of $10,893,829
and during 1998 the Company incurred a net loss of $3,354,636. Since its
inception, the Company has incurred costs to develop and enhance its
technology, establish marketing and customer relationships and build its
administrative organization. The Company currently intends to substantially
increase its operating expenses to further develop its business. To the extent
that such expenses do not subsequently lead to increased revenues, the
Company's business, results of operations and financial condition will be
materially and adversely affected. In addition, the Company's business model is
unproven and evolving and is subject to possible changing governmental
regulations (see Note 6). Also, the Company may not realize the critical mass
necessary to achieve profitability.

The accompanying financial statements have been prepared in conformity with
principles of accounting applicable to a going concern. These principles
contemplate the realization of assets and the satisfaction of liabilities in
the normal course of business. Management believes that the Company's existing
cash and cash equivalents will provide sufficient funding for its operating
activities, capital expenditures and other obligations for at least the next
twelve months. Therefore, the accompanying financial statements do not include
necessary adjustments should the Company be unable to continue as a going
concern.

2. Significant Accounting Policies:

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

Service fees are based on contractual rates with customers. Service fee
revenues, which represent transaction fees charged to billers and financial
institutions are recognized as services are performed. Interest income on the
overnight investment of funds received from consumers pending payment
processing is recorded as earned.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original
maturities of three months or less and funds received from consumers pending
payment processing.

Prepaid Expenses and Other

In December 1998, the Company mistakenly made certain overpayments to
billers on behalf of consumers. Included in prepaid expenses and other at
December 31, 1998 is $862,906 of such overpayments, which were reimbursed to
the Company in early 1999. Prepaid expenses and other at December 31, 1998 also
includes certain related party amounts (see Note 12).

F-7
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Property and Equipment

Property and equipment are recorded at cost. Property and equipment
capitalized under capital leases are recorded at the present value of the
minimum lease payments due over the term of the lease. Depreciation and
amortization are provided using the straight-line method over the estimated
useful lives or the lease term, whichever is shorter. Expenditures for
maintenance, repairs and betterments that do not prolong the useful life of an
asset have been charged to operations as incurred. Additions and betterments
that substantially extend the useful life of the asset are capitalized. Upon
sale or other disposition of assets, the cost and related accumulated
depreciation and amortization are removed from the respective accounts, and the
resulting gain or loss, if any, is included in operating results.

The Company reviews its long-lived assets for possible impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. When factors indicate that such assets should be
evaluated for possible impairment, the Company uses an estimate of the related
future undiscounted cash flow in measuring whether the asset should be written
down to fair value. As of December 31, 1998, management believes that there are
no material impairment losses or needed revisions to remaining useful lives.

Customer Deposits Payable

Customer deposits payable represents funds received from consumers that are
held by the Company pending payment processing.

Development Costs

Research and development costs are expensed as incurred. In conjunction
with the development of its services, the Company incurs certain software
development costs. No costs have been capitalized pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed," since the
development period is relatively short and software development costs
qualifying for capitalization have been relatively insignificant.

Income Taxes

Income taxes are accounted for using the liability method. Accordingly,
deferred income tax assets and liabilities are determined based on differences
between the financial statement carrying amounts of assets and liabilities and
their respective income tax basis, measured using enacted tax rates.

Stock Compensation

The Company has elected to follow Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its employee stock options. Under APB No. 25,
if the exercise price of the Company's employee stock options equals or exceeds
the market price of the underlying stock on the date of the grant, no
compensation expense is recognized. If the exercise price of an option is below
the market price of the underlying stock on the date of grant, compensation
cost is recorded and is recognized in the statements of operations over the
vesting period (see Note 9).

Earnings Per Share

The Company follows SFAS No. 128, "Earnings Per Share," which requires a
dual presentation of "basic" and "diluted" earnings per share ("EPS") on the
face of the statements of operations. Basic EPS is computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding for the period. Diluted EPS includes the dilutive effect, if any,
from the potential exercise or

F-8
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

conversion of securities like stock options, which would result in the issuance
of additional shares of common stock. For each of the three years in the period
ended December 31, 1998, the impact of stock options was not considered as
their effect on EPS would be anti-dilutive.

Fair Value of Financial Instruments

Cash, accounts receivable, prepaid expenses, customer deposits payable,
accounts payable and accrued expenses are reflected in the accompanying
financial statements at fair value due to the short-term nature of those
instruments. The carrying amount of long-term debt obligations approximate fair
value at the balance sheet dates.

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 is effective for fiscal years
beginning after December 31, 1997. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income in a set of financial statements.
Comprehensive income is defined as the change in net assets of a business
enterprise during a period from transactions generated from non-owner sources.
It includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. The Company has no other
comprehensive income items, therefore, the adoption of SFAS No. 130 had no
impact on the financial statements.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 applies to all pubic companies and is effective for fiscal years beginning
after December 15, 1997. SFAS No. 131 requires that business segment financial
information be reported in the financial statements utilizing the management
approach. The management approach is defined as the manner in which management
organizes the segments within the enterprise for making operating decisions and
assessing performance. Management believes the Company operates in one business
segment, therefore, the adoption of SFAS No. 131 had no impact on the financial
statements.

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company adopted
SOP 98-1 in January 1999. The adoption had no material effect on the Company's
financial position or results of operations.

3. Supplemental Cash Flow Information:

For the years ended December 31, 1996, 1997 and 1998, the Company paid
interest of $6,467, $15,687 and $14,150, respectively. During 1996 and 1997,
the Company financed equipment purchases of $129,624 and $4,445 with
capitalized lease obligations, respectively.

4. Property and Equipment:

<TABLE>
<CAPTION>
December 31
Useful ----------------------
Lives 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Computer and telephone equipment..... 5 years $1,372,184 $1,404,057
Furniture and fixtures............... 5 years 50,290 67,452
Leasehold improvements............... Lease term 38,828 38,828
---------- ----------
1,461,302 1,510,337
Less--Accumulated depreciation and
amortization....................... (609,032) (688,195)
---------- ----------
$ 852,270 $ 822,142
========== ==========
</TABLE>

F-9
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Depreciation and amortization expense for the years ended December 31,
1996, 1997 and 1998 was $152,479, $226,466 and $276,791, respectively. At
December 31, 1997 and 1998, the Company had property and equipment under
capitalized lease obligations of $134,069, net of accumulated amortization of
$31,061 and $57,874, respectively.

5. Long-Term Debt:

<TABLE>
<CAPTION>
December 31
------------------
1997 1998
-------- --------
<S> <C> <C>
Note payable, repaid in 1998.......................... $ 20,293 $ --
Capitalized lease obligations......................... 103,148 79,055
-------- --------
123,441 79,055
Less--Current portion................................. (48,049) (29,441)
-------- --------
$ 75,392 $ 49,614
======== ========
</TABLE>

6. Commitments and Contingencies:

Lease Commitments

The Company leases facilities and equipment under capital and noncancelable
operating leases with expiration dates through September 2003. Rent expense for
the years ended December 31, 1996, 1997 and 1998 was $106,753, $111,830 and
$119,216, respectively. Future minimum lease payments as of December 31, 1998
are as follows:

<TABLE>
<CAPTION>
Operating Capital
Leases Leases
--------- --------
<S> <C> <C>
1999.................................................. $145,473 $ 38,666
2000.................................................. 141,348 38,666
2001.................................................. 141,704 16,375
2002.................................................. 100,148 --
2003.................................................. 5,691 --
-------- --------
Total minimum lease payments.......................... $534,364 93,707
========
Less--Amount representing interest.................... (14,652)
--------
Present value of future minimum lease payments........ 79,055
Less--Current portion................................. (29,441)
--------
$ 49,614
========
</TABLE>

Litigation

The Company is involved, from time to time, in various legal matters and
claims which are being defended and handled in the ordinary course of business.
None of these matters is expected, in the opinion of management, to have a
material adverse effect upon the financial position or results of operations of
the Company.

Employment Agreements

In early 1999, the Company entered into employment agreements with two
officers of the Company. The agreements provide for, among other things,
salaries, bonuses, severance payments and certain other payments payable upon a
change in control, as defined.

F-10
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Government Regulation

Management believes that the Company is not required to be licensed by the
Office of the Comptroller of the Currency, the Federal Reserve Board or other
federal or state agencies that regulate or monitor banks or other providers of
electronic commerce. However, the Company may be periodically audited by
banking authorities since the Company is a supplier of services to financial
institutions. Laws regulating Internet commerce may be enacted to address
issues such as user privacy, pricing, content, taxation and the characteristics
and quality of online products and services, among other things. If enacted,
these laws could have a material adverse effect on the Company's business.

7. Common Stock:

On September 4, 1998, the Company entered into an agreement with Billing
Concepts Corp. ("BCC") whereby BCC acquired 831,290 shares of the Company's
common stock for $10,000,000. BCC was also given the right to purchase
additional shares of the Company's common stock at $12.03 per share based on a
required level of working capital, as defined in the agreement. In addition,
this agreement provides for, among other things, the right of first refusal on
certain equity transactions. On March 30, 1999, the Company sold BCC 44,792
shares for $538,838 in full settlement of the working capital provision.

In February 1999, the Company's Chief Executive Officer sold 34,000 shares
of his holdings of the Company's common stock to certain BCC affiliates and to
a former director of the Company at $16.00 per share.

8. Income Taxes:
The reconciliation of the statutory federal income tax rate to the
Company's effective income tax rate is as follows:

<TABLE>
<CAPTION>
Year Ended
December 31
---------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Statutory federal income
tax rate.............. (34.0)% (34.0)% (34.0)%
State income taxes, net
of federal tax
benefit............... (6.3) (6.3) (6.3)
Nondeductible expenses.. -- 1.2 0.2
Operating losses not
benefited............. 40.3 39.1 40.1
----- ----- -----
-- % -- % -- %
===== ===== =====
</TABLE>

F-11
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Deferred taxes are determined based upon the estimated future tax effects
of differences between the financial statements and income tax basis of assets
and liabilities given the provisions of the enacted tax laws. The tax effect of
temporary differences that give rise to deferred taxes are as follows:

<TABLE>
<CAPTION>
December 31
----------------------
1997 1998
---------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............. $2,145,851 $3,485,424
Deferred compensation........................ -- 410,151
Development costs............................ 567,476 446,454
Accruals and reserves not currently
deductible................................. 109,555 124,403
Property and equipment....................... 60,223 --
---------- ----------
2,883,105 4,466,432
---------- ----------
Deferred tax liabilities:
Property and equipment....................... -- (141,987)
Other........................................ -- (20,132)
---------- ----------
-- (162,119)
---------- ----------
2,883,105 4,304,313
Less--Valuation allowance...................... (2,883,105) (4,304,313)
---------- ----------
Net deferred tax asset......................... $ -- $ --
========== ==========
</TABLE>

Due to the uncertainty surrounding the realization of the net deferred tax
asset, the Company has provided a full valuation allowance. As of December 31,
1998, the Company has net operating loss carryforwards of approximately
$8,600,000 for federal tax purposes, which begin to expire in 2003, and
$7,200,000 for state tax purposes, which begin to expire in 1999. The Tax
Reform Act of 1986 contains provisions that may limit the net operating loss
carryforwards available in any given year in the event of a 50% cumulative
change in ownership over a three-year period.

9. Stock Options:

Effective July 1, 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"). The Plan provides for the granting of incentive and non-qualified
stock options to employees of the Company. The Compensation Committee of the
Board of Directors administers the Plan and awards grants and determines the
terms of such grants at its discretion. The Company has reserved 1,500,000
shares of common stock for issuance pursuant to the Plan.

Effective October 20, 1998, the Company adopted the 1998 Non-Employee
Director Plan (the "Director Plan"). The Director Plan provides for the
granting of non-qualified stock options to non-employee directors of the
Company. The Director Plan provides for grants based on a formula, as defined,
and additional grants at the discretion of the Compensation Committee of the
Board of Directors. The Company has reserved 200,000 shares of common stock for
issuance pursuant to the Director Plan.

F-12
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Information with respect to the options under the Company's plans is as
follows:

<TABLE>
<CAPTION>
Weighted
Average
Exercise Exercise
Shares Price Price
------- ----------- --------
<S> <C> <C> <C>
Balance, January 1, 1996......................... -- $ -- $ --
Granted at fair market value................... 170,900 0.10 0.10
------- ----------- -----
Balance, December 31, 1996....................... 170,900 0.10 0.10
Granted at fair market value................... 232,000 0.10 0.10
Canceled....................................... (38,500) 0.10 0.10
------- ----------- -----
Balance, December 31, 1997....................... 364,400 0.10 0.10
Granted at fair market value................... 164,000 12.00 12.00
Granted below fair market value................ 244,500 0.10 0.10
Exercised...................................... (3,650) 0.10 0.10
Canceled....................................... (46,950) 0.10 0.10
------- ----------- -----
Balance, December 31, 1998....................... 722,300 $0.10-12.00 $2.80
======= =========== =====
Balance Exercisable, December 31, 1998........... 184,900 $ 0.10 $0.10
======= =========== =====
</TABLE>

All options have terms ranging from five to ten years and generally vest
over four years. The weighted average contractual life of options outstanding
as of December 31, 1998 was four years for options granted at $0.10 per share
and ten years for options granted at $12.00 per share. At December 31, 1998,
there were 977,700 shares available for future option grants under the plans.

In connection with certain options granted during 1998, the Company
recorded $1,884,500 of deferred compensation expense. This amount represents
the difference between the fair market value of the Company's common stock on
the date of grant and the exercise price of options to purchase 244,500 shares
of the Company's common stock. Deferred compensation is amortized over the
vesting periods of the options, which range from immediate vesting to periods
of up to four years. For the year ended December 31, 1998, $1,017,744 of
deferred compensation was charged to expense. At December 31, 1998, the Company
had $866,756 of deferred compensation to be amortized over the remaining
vesting periods, which range from one to four years.

Pro forma information provided below has been determined as if the Company
had accounted for its employee stock options in accordance with SFAS No. 123,
"Accounting for Stock-Based Compensation." The determination of the fair value
of the options noted above was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted-average assumptions
for the years ended December 31, 1996, 1997 and 1998: risk free interest rate
of 6.2%, 5.8%, and 4.9%, respectively, dividend yield of 0%, volatility factor
of the expected market price of the Company's common stock of 70%, and an
expected life of the options of four years.

The weighted average fair value of the options granted is as follows:

<TABLE>
<CAPTION>
Year Ended
December 31
-----------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Granted at fair market value........................... $0.06 $2.02 $6.73
Granted below fair market value........................ -- -- 8.41
</TABLE>

F-13
<PAGE>

PRINCETON ECOM CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option vesting periods. The Company's
pro forma information is as follows:

<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net loss, as reported............. $(2,190,523) $(2,141,584) $(3,354,636)
Net loss per share, as reported... (0.78) (0.75) (1.07)
Pro forma net loss................ (2,191,728) (2,144,657) (3,364,955)
Pro forma net loss per share...... (0.78) (0.75) (1.07)
</TABLE>

10. Employee Benefit Plan:

The Company has a Section 401(k) retirement savings plan (the "401(k)
Plan"). The 401(k) Plan allows employees to contribute 2% to 15% of their
annual compensation subject to statutory limitations. Company contributions to
the 401(k) Plan are discretionary and none have been made since the 401(k)
Plan's inception.

11. Concentration of Credit Risk:

For the years ended December 31, 1996, 1997 and 1998, the Company had four,
two and one customer(s) which accounted for 61%, 22% and 12% of service fee
revenues, respectively. At December 31, 1997 and 1998, these customers had
aggregate accounts receivable of $79,402 and $63,675, respectively. The loss of
one or more of these customers could have a materially adverse effect on the
Company's business.

12. Related Party Transactions:

Prepaid expenses and other at December 31, 1998 includes $64,000 of
advances made to the Company's Chief Executive Officer and certificates of
deposit in the aggregate of $370,000 pledged as collateral for a guarantee by
the Company of a personal bank loan to this individual. In early 1999, the
advances were repaid and the certificates of deposit and loan guarantee were
released.

13. Recapitalization and Public Offering Subsequent to December 31, 1998:

On March 30, 1999, the Company's Board of Directors authorized management
to file a Registration Statement with the SEC to permit the Company to commence
an initial public offering of shares of its common stock, of which none
will be sold by current stockholders. In connection therewith, on , 1999,
the Company's Board of Directors approved an amendment to the Company's
Articles of Incorporation to be filed prior to the Offering authorizing
shares of $.01 par value preferred stock and shares of common stock and
authorized a -for - split of its common stock to be effected prior to the
offering. The authorized preferred stock and common stock and the stock split
have been retroactively reflected in the financial statements.

F-14
<PAGE>

After the recapitalization and -for-1 stock split of each outstanding
share of common stock, as discussed in Note 13 to the financial statements, are
effected, we expect to be in a position to render the following audit report.

/s/ ARTHUR ANDERSEN LLP

Philadelphia, Pa.,
March 30, 1999

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Princeton eCom Corporation:

We have audited in accordance with generally accepted auditing standards,
the financial statements of Princeton eCom Corporation, formerly Princeton
TeleCom Corporation, included in this registration statement and have issued
our report thereon dated March 30, 1999. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
accompanying financial statement schedule is the responsibility of the
Company's management and is presented for purposes of complying with the SEC's
rules and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.

Philadelphia, Pa.,
March 30, 1999

S-1
<PAGE>

PRINCETON ECOM CORPORATION

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

Allowance for Doubtful Accounts:

<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
of Year Expenses Write-offs Year
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1998................... $52,941 $15,500 $(18,499) $49,942
December 31, 1997................... 25,165 27,776 -- 52,941
December 31, 1996................... -- 25,165 -- 25,165
</TABLE>

S-2
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All the amounts shown are estimated
except the SEC registration fee, the National Association of Securities Dealers
filing fee and the Nasdaq National Market listing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $12,788
NASD filing fee.................................................. 5,100
Nasdaq National Market listing fee............................... *
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Blue Sky fees and expenses (including legal fees)................ *
Transfer agent and registrar fees and expenses................... *
Miscellaneous.................................................... *
-------
Total $ *
=======
</TABLE>
- --------
* To be supplied by amendment.

Item 14. Indemnification of Directors and Officers

Section 102 of the Delaware General Corporation Law ("DGCL"), as amended,
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.

Section 145 of the DGCL provides, among other things, that we may 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 (other than an
action by or in our right) by reason of the fact that the person is or was a
director, officer, agent or employee of ours or is or was serving at our
request as a director, officer, agent, or employee of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgment, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding. The power to indemnify applies (a) if such person is
successful on the merits or otherwise in defense of any action, suit or
proceeding, or (b) if such person acted in good faith and in a manner he
reasonably believed to be in our best interest, or not opposed to our best
interest, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The power to indemnify
applies to actions brought by or in our right as well, but only to the extent
of defense expenses (including attorneys' fees but excluding amounts paid in
settlement) actually and reasonably incurred and not to any satisfaction of
judgment or settlement of the claim itself, and with the further limitation
that in such actions no indemnification shall be made in the event of any
adjudication of negligence or misconduct in the performance of his duties to
us, unless the court believes that in light of all the circumstances
indemnification should apply.

Section 174 of the DGCL provides, among other things, that a director, who
willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption, may be held liable for such actions. A
director who was either absent when the unlawful actions were approved or
dissented at the time, may avoid liability by causing his or her dissent to
such actions to be entered in the books containing the

II-1
<PAGE>

minutes of the meetings of the board of directors at the time such action
occurred or immediately after such absent director receives notice of the
unlawful acts.

Our Amended and Restated Certificate of Incorporation includes a provision
that eliminates the personal liability of its directors for monetary damages
for breach of fiduciary duty as a director, except for liability:

. for any breach of the director's duty of loyalty to Princeton eCom or
its stockholders;

. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

. under the section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or

. for any transaction from which the director derived an improper personal
benefit.

Our Amended and Restated Bylaws provide that:

. we must indemnify our directors and officers to the fullest extent
permitted by Delaware law;

. we may indemnify our other employees and agents to the same extent that
we indemnified our officers and directors, unless otherwise determined
by our board of directors; and

. we must advance expenses, as incurred, to our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law.

Prior to the completion of this offering, we intend to enter into indemnity
agreements with each of our directors and executive officers to give them
additional contractual assurances regarding the scope of the indemnification
described above and to provide additional procedural protections. In addition,
we intend to obtain directors' and officers' insurance in the amount of $15.0
million providing indemnification for our directors, officers and certain
employees for certain liabilities. We believe that these indemnification
provisions and agreements are necessary to attract and retain qualified
directors and officers.

The limitation of liability and indemnification provisions in our Amended
and Restated Bylaws may discourage stockholders from bringing a lawsuit against
directors for breach of their fiduciary duty. They may also have the effect of
reducing the likelihood of derivative litigation against directors and
officers, even though such an action, if successful, might otherwise benefit us
and our stockholders. Furthermore, a stockholder's investment may be adversely
affected to the extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification provisions.

At present, there is no pending material litigation or proceeding involving
any of our directors, officers or employees regarding which indemnification is
sought, nor are we aware of any threatened litigation that may result in claims
for indemnification.

Item 15. Recent Sales of Unregistered Securities

In the last three years, we sold the following securities:

In June 1996, we amended a stock purchase agreement with C. Richard Corl
dated June 29, 1993. By the terms of this amended stock purchase agreement, an
adjustment was made for the issuance of an additional 3,000 shares of common
stock to Mr. Corl and an adjustment increasing the amount owed to us by Mr.
Corl under a promissory note for an additional $1,350. This sale of securities
was made under the exemption of (S)4(2) under the Securities Act of 1933.

In July 1996, we sold an aggregate of 40,000 shares of common stock, of
which 10,000 shares were sold to each of Lawrence Greenberg, Diane Hancharik,
Susan Hubbard-Walker, and Alex Peterhans at a purchase price of $1,000. The
consideration for each of these purchases was a promissory note with a
principal amount

II-2
<PAGE>

of $1,000 and 6% interest per annum. Each of these promissory notes was
satisfied in March 1999. In addition, in July 1996 we delivered 15,000 shares
to Benson Lapides in satisfaction of amounts which we owed Mr. Lapides for
consulting services which he performed for us. These sales of securities were
made under the exemption of (S)4(2) under the Securities Act of 1933.

In March 1997, we sold an additional 10,000 shares of common stock to Mr.
Peterhans for an aggregate purchase price of $1,000. The consideration for this
purchase was a promissory note with a principal amount of $1,000 and an
interest rate of 6% per annum.

In December 1997, we sold 20,000 additional shares of common stock, of
which an additional 10,000 shares were sold to Mr. Greenberg and 10,000 shares
were sold to Mrs. Hubbard-Walker, in each instance for an aggregate purchase
price of $1,000. The consideration for each of these purchases was a promissory
note with a principal amount of $1,000 and 6% per annum. Each of these
promissory notes was satisfied in March 1999. These sales of securities were
made under the exemption of (S)4(2) under the Securities Act of 1933.

On September 4, 1998, the Company sold 831,290 shares of common stock to
Billing Concepts Corp. for an aggregate purchase price of $10,000,000 in cash.
This sale of securities was made under the exemption of (S)4(2) and Rule 506 of
Regulation D under the Securities Act of 1933.

On March 30, 1999, the Company sold an additional 44,792 shares of common
stock to Billing Concepts Corp. for an aggregate purchase price of $538,838.
These shares were sold to Billing Concepts Corp. under the terms of an option
granted to Billing Concepts Corp. in connection with their September 1998
purchase, which option permitted the purchase of additional shares if the
Company's working capital deficit, for June 30, 1998, exceeded $8.5 million.
These shares were sold to Billing Concepts Corp. under the exemptions of
(S)4(2) and Rule 506 of Regulation D under the Securities Act of 1933.

Item 16. Exhibits and Consolidated Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
Form of Underwriting Agreement between Princeton eCom Corporation
*1.1 and the Underwriters.
Certificate of Incorporation, as amended, of Princeton eCom
3(i)(1) Corporation.
Amended and Restated Certificate of Incorporation of Princeton eCom
*3(i)(2) Corporation.
3(ii)(1) Amended and Restated Bylaws of Princeton eCom Corporation.
*3(ii)(2) Second Amended and Restated Bylaws of Princeton eCom Corporation.
*5.1 Opinion of Kelley Drye & Warren LLP (including the consent of such
firm) as to the validity of the securities being offered.
*10.1 Employment Agreement between Princeton eCom and Ronald W. Averett.
Employment Agreement between Princeton eCom and Christopher S.
*10.2 Sugden.
10.3 Amended 1996 Stock Option Plan.
10.4 1998 Non-Employee Director Plan.
*10.5 Form of Indemnification Agreement.
*10.6 Lease relating to 165 Wall Street, Princeton, New Jersey Agreement.
*23.1 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1).*
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of William Jennings.
24.1 Power of Attorney (on the signature page).
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.

II-3
<PAGE>

(b) Financial Statement Schedules

Schedule II--Valuation and Qualifying Accounts

All other schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements or
related notes.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

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 foregoing provisions, 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 Securities
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
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.

II-4
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on the 31st day of March, 1999.

PRINCETON ECOM CORPORATION

By:
/s/ Donald C. Licciardello
------------------------------
Donald C. Licciardello
Chairman and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that the persons whose signatures
appear below, constitute and appoint Donald C. Licciardello and Christopher S.
Sugden, and each of them, as their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for them and in
their names, places, steads, in any and all capacities, to sign this
Registration Statement to be filed with the Securities and Exchange Commission
and any and all amendments (including post-effective amendments) to this
Registration Statement, and any subsequent registration statement filed
pursuant to Rule 462 (b) under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as they might or
could do in person, thereby ratifying and confirming all that said attorneys-
in-fact and agents, or any of them, or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----

<S> <C> <C>
/s/ Donald C. Licciardello Chairman and Chief Executive March 31, 1999
______________________________________ Officer
Donald C. Licciardello (Principal Executive Officer)

/s/ Christopher S. Sugden Vice President and Chief March 31, 1999
______________________________________ Financial
Christopher S. Sugden Officer (Principal Financial and
Accounting Officer)

/s/ C. Richard Corl Executive Vice President, March 31, 1999
______________________________________ Secretary
C. Richard Corl and Director

/s/ Parris H. Holmes, Jr. Director March 31, 1999
______________________________________
Parris H. Holmes, Jr.

/s/ Kelly E. Simmons Director March 31, 1999
______________________________________
Kelly E. Simmons

</TABLE>

II-5
<PAGE>

Exhibit List

<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
Form of Underwriting Agreement between Princeton eCom and the
*1.1 Underwriters.
3(i)(1) Certificate of Incorporation, as amended, of Princeton eCom
Corporation.
*3(i)(2) Amended and Restated Certificate of Incorporation of Princeton eCom
Corporation.
3(ii)(1) Amended and Restated Bylaws of Princeton eCom Corporation.
*3(ii)(2) Second Amended and Restated Bylaws of Princeton eCom Corporation.
*5.1 Opinion of Kelley Drye & Warren LLP (including the consent of such
firm) as to the validity of the securities being offered.
*10.1 Employment Agreement between Princeton eCom and Ronald W. Averett.
Employment Agreement between Princeton eCom and Christopher S.
*10.2 Sugden.
10.3 Amended 1996 Stock Option Plan.
10.4 1998 Non-Employee Director Plan.
*10.5 Form of Indemnification Agreement.
*10.6 Lease relating to 165 Wall Street, Princeton, New Jersey.
*23.1 Consent of Kelley Drye & Warren LLP (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of William Jennings.
24.1 Power of Attorney (on the signature page).
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.

<PAGE>

EXHIBIT 3(i)(1)

CERTIFICATE OF INCORPORATION

Princeton TeleCom Corporation

-----------------

The undersigned, a natural person, for the purpose of forming a
corporation under the provisions and subject to the requirements of the laws of
the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and
the acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:

ARTICLE FIRST: The name of the corporation (hereinafter called the
"Corporation") is Princeton TeleCom Corporation.

ARTICLE SECOND: The address, including street, number, city, and
county, of the registered office of the Corporation in the State of Delaware is
229 South State Street, City of Dover, County of Kent; and the name of the
registered agent of the Corporation in the State of Delaware at such address is
The Prentice-Hall Corporation System, Inc.

ARTICLE THIRD: The nature of the business and the purpose to be
conducted and promoted by the Corporation, which shall be in addition to the
authority of the Corporation to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware, is as follows:

To carry on a general mercantile and industrial business in all its
branches; to devise, invent, manufacture, fabricate, buy, sell, license
as licensor or licensee, lease as lessor or lessee, distribute, and
generally deal in and with goods and other real, personal, and mixed
property of any and all kinds, including , but not limited to, computer
software, together with the components, resultants, and by-products
thereof.

The foregoing provisions of this Article THIRD shall be construed both
as purposes and powers and each as an independent purpose and power. The
foregoing enumeration of specific purposes and powers shall not be held to limit
or restrict

<PAGE>

in any manner the purposes and powers of the Corporation, and the purposes and
powers herein specified shall, except when otherwise provided in this Article
THIRD, be in no ways limited or restricted by reference to, or inference from,
the terms of any provision of this or any other Article of this Certificate of
Incorporation; provided, that the Corporation shall not conduct any business,
promote any purpose, or exercise any power or privilege in any state, territory
or country which, under the laws thereof, the Corporation may not lawfully
conduct, promote, or exercise.

ARTICLE FOURTH: The total number of shares which the Corporation shall
have authority to issue is one thousand. The par value of each of such shares
is $1.00. All such shares are of one class.

ARTICLE FIFTH: The name and the mailing address of the incorporator
are as follows:

NAME MAILING ADDRESS
---- ---------------

Kathleen Ann Kress c/o Guggenheimer & Untermyer
80 Pine Street
New York, New York 10005

ARTICLE SIXTH: The Corporation is to have perpetual existence.

ARTICLE SEVENTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement

<PAGE>

and the said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.

Signed on January 20, 1989.

/s/ Kathleen Ann Kress
-----------------------
Incorporator

<PAGE>

STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/23/1993
932085076 - 2026677

[LOGO] CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION

================================================================================

Princeton TeleCom Corporation
------------------------------------------------------------------------------
a corporation organized and existing under and by virtue of the General
Corporation law of the State of Delaware.

DOES HEREBY CERTIFY:

FIRST: That at a meeting of the Board of Directors of Princeton TeleCom
-----------------
Corporation
------------------------------------------------------------------------
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to
be advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is
as follows:

RESOLVED, that the Certificate of Incorporation be amended by changing the
Article thereof numbered "Article Fourth" so that, as amended, said Article
--------------
shall be and read as follows: "The Corporation is authorized to issue one
------------------------------------------
class of shares to be designated as 'Common Stock.' The total number of
------------------------------------------------------------------------
shares which the Corporation is authorized to issue is 6,000,000 shares,
------------------------------------------------------------------------
and the par value of each of such shares is One Cent. ($.01).
------------------------------------------------------------

SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
special meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation
Law of the State of Delaware at which meeting the necessary number of shares
as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.

FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.

IN WITNESS WHEREOF, said corporation
----------------------------------------------------
has caused this certification to be signed by

Dr. Donald C. Licciardello , its President,
------------------------------------------------------------
and Marilyn Lawley , its Secretary,
--------------------------------------------------------
this 1st day of May, 1993.
--- ---

BY: /s/ D. C. Licciardello
---------------------------------
President

ATTEST: /s/ Marilyn Lawley
------------------------------
Secretary

<PAGE>

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

PRINCETON TELECOM CORPORATION

PRINCETON TELECOM CORPORATION, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies as follows:

FIRST: The name of the Corporation is Princeton TeleCom Corporation.

SECOND: The Certification of Incorporation is hereby amended by
striking out Article One thereof and by substituting in lieu of said Article the
following new Article:

"ARTICLE FIRST: The name of the Corporation (hereinafter called the
"Corporation") is Princeton eCom Corporaton."

THIRD: The amendment of the Certification of Incorporation herein
certified has been duly adopted and written consent has been given in accordance
with the provisions of Section 228 and 242 of the General Corporation law of the
State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its President and Chief Executive Officer this 17th day of March,
1999.

Princeton TeleCom Corporation

By: /s/ Donald C. Licciardello
------------------------------
Donald C. Licciardello
President and Chief Executive Officer

<PAGE>

EXHIBIT 3(ii)(1)

PRINCETON TELECOM CORPORATION
__________________________

AMENDED & RESTATED BY-LAWS
_________________________
October 20, 1998

ARTICLE I
Offices
-------

1.01. Registered Office. The registered office shall be established
-----------------
and maintained at 229 South State Street in the County of Kent in the State of
Delaware.

1.02. Other Offices. The Corporation may have other offices at such
-------------
other places within and without the State of Delaware as the Board of Directors
may from time to time appoint or as the business of the Corporation may require.

ARTICLE II
Meetings of Shareholders
------------------------

2.01. Place of Meetings. All meetings of the shareholders shall be
-----------------
held at such place, within or without the State of Delaware, as the directors
may, from time to time fix. Whenever the directors shall fail to fix such
place, the meeting shall be held at the Corporation's principal place of
business.

2.02. Annual Meeting. An annual meeting of the shareholders of the
--------------
Corporation shall be held on the date and at the time fixed, from time to time,
by the directors provided, that the first annual meeting shall be held on a date
within thirteen months after the organization of the corporation and each
successive annual meeting shall be held on a date within thirteen months after
the date of the preceding annual meeting.

2.03. Special Meetings. Special meetings of shareholders may be
----------------
called by the President whenever he deems it necessary or advisable, and shall
be called by the President or the Secretary upon the written request of
majority of the entire Board of Directors or of the holders of the shares of the
Corporation entitled to vote at such meeting.

2.04. Notice of Meetings. Written notice of all meetings stating the
------------------
place, date and hour of the meeting shall be given personally or by mail to each
shareholder entitled to vote at such meeting, not less than ten nor more than
sixty days before the date of the meeting. Notice of each special meeting shall
state the purpose or purposes for which the meeting is called and shall indicate
that it is being called by or at the direction of the person or persons calling
the meeting. If mailed, a notice of meeting shall be deemed given when
deposited in the United States mail, with postage prepaid, directed to the
shareholder at his address as it appears on the record of shareholders, or at
such other address for mailing of notices as any shareholder may in writing file
with the Secretary of
<PAGE>

the Corporation. Notice of a meeting need not be given to any shareholder who
submits a signed waiver of notice before or after the meeting. The attendance of
a shareholder at a meeting without protesting prior to its conclusion the lack
of notice of such meeting shall constitute a waiver of notice by him.

2.05. Record Date for Shareholders. For the purpose of determining
----------------------------
the shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or to express consent to or dissent from any
proposal without a meeting, or for the purpose of determining shareholders
entitled to receive payment of any dividend or the allotment of any rights or
for the purpose of any other action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, nor more than sixty days prior to any other action.
If no record date is fixed, the record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if no notice is given, the day on which the meeting is held; the record date
for determining shareholders entitled to express consent to or dissent from any
proposal without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent or dissent, as
the case may be, is expressed; and the record date for determining shareholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination of
shareholders of record entitled to notice of or to vote at any meeting of
shareholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

2.06. Proxy Representation. Every shareholder may authorize another
--------------------
person or persons to act for him by proxy in all matters in which a shareholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting or expressing consent or dissent without a meeting.
Every proxy must be signed by the shareholder or by his attorney-in-fact. No
proxy shall be valid after the expiration of three years from the date thereof
unless such proxy provides for a longer period. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as may be otherwise
provided by law.

2.07. Voting at shareholders' Meetings. Each outstanding share of
--------------------------------
stock having voting power shall be entitled to one vote on each matter submitted
to a vote at a meeting of shareholders. Directors shall be elected by the vote
of the holders of a plurality of the shares present at a meeting and entitled to
vote in the election. Unless otherwise provided by statute, any other corporate
action shall be authorized by the vote of the holders of majority of the
shares present at a meeting of shareholders and entitled to vote thereon.
Voting need not be by ballot.

2.08. Quorum and Adjournment. Unless otherwise provided by
----------------------
statute, the holders of a majority of the shares of the Corporation shall
constitute a quorum for the transaction of any business. When a quorum is once
present to organize a meeting, it shall not be broken by the subsequent
withdrawal of any shareholders. If a quorum is not present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until

2
<PAGE>

a quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.

2.09. List of Shareholders. The officer who has charge of the record
--------------------
of shareholders of the Corporation shall prepare, make and certify, at least ten
days before every meeting of shareholders, a complete list of the shareholders,
as of the record date fixed for such meeting, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares registered
in each shareholder's name. Such list shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, at the principal
office of the Corporation or at a place within the city, municipality or
community where the meeting is to be held, and shall be available for the
examination of any share holder at the place and during the time of the
meeting. If the right of any shareholder to vote at any meeting is challenged,
the inspectors of election, if any, or the person presiding, shall require such
list of shareholders to be produced as evidence of the right of the persons
challenged to vote, and all persons who appear from such list to be shareholders
entitled to vote thereat may vote at such meeting.

2.10. Action Without Meeting. Unless otherwise provided by the
----------------------
Certificate of Incorporation, whenever the vote of stockholders at an annual or
special meeting of such stockholders is required or permitted to be taken in
connection with any corporate action by any provisions of law, of the
Certificate of Incorporation, or of these By-Laws, such action may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.

ARTICLE III
Directors
---------

3.01. Number of Directors. The number of directors may be fixed from
-------------------
time to time by action of a majority of the entire Board of Directors or of the
shareholders at an annual or special meeting. The initial Board of Directors
elected by the incorporator shall consist of two persons. No decrease in the
number of directors shall shorten the term of any incumbent director.

3.02. Election and Term. Each director shall be classified, with
-----------------
respect to the time for which they severally hold office, into three classes, as
nearly equal as possible, as determined by the Board of Directors, one class to
be originally elected in 1998 for a term expiring at the annual meeting of
shareholders to be held in 2001, another class to be originally elected in 1998
for a term expiring at the annual meeting of shareholders to be held in 2000,
and another class to be originally elected in 1998 for a term expiring at the
annual meeting of shareholders to be held in 1999, with each class to hold
office until its successors is elected and qualified. At each annual meeting of
the shareholders of the Corporation, the successors of the class of directors
whose term expires at that annual meeting of shareholders held in the third year
following the year of their election. Any directors elected to fill

3
<PAGE>

a vacancy on the Board of Directors or any newly created directorships resulting
from any increase in the number of directors shall hold office for the remainder
of the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been duly elected and qualified.

3.03. Filling Vacancies, Resignation and Removal. Any director may be
------------------------------ -----------
removed, with or without cause, by vote of the shareholders. In the interim
between annual meetings of shareholders or special meetings of shareholders
called for the election or removal of one or more directors, newly created
directorships and any vacancies in the Board of Directors, including vacancies
resulting from the resignation or removal of directors, may be filled by the
vote of a majority of the remaining directors then in office, although less than
a quorum, or by the sole remaining director.

3.04. Qualifications and Powers. Each director shall be at least
-------------------------
eighteen years of age. A director need not be a shareholder, a citizen of the
United States or a resident of the State of Delaware. The business of the
Corporation shall be managed by the Board of Directors, subject to the
provisions of the Certificate of Incorporation. In addition to the powers and
authorities expressly conferred upon it by these By-laws, the Board may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-laws
directed or required to be exercised or done exclusively by the shareholders.

3.05. Regular and Special Meetings of the Board. The Board of
------------------------------- ---------
Directors may hold its meetings, regular or special, within or without the State
of Delaware.

The newly elected Board may meet at such place and time as shall be fixed
by the vote of the shareholders at the annual meeting or by the consent in
writing of all the directors for the purpose of organization or otherwise. No
notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting provided a majority of the entire Board
shall be present.

Regular meetings of the Board may be held with or without notice at such
time and place as shall from time to time be determined by resolution of the
Board. Whenever the time or place of regular meetings of the Board shall have
been determined by resolution of the Board, no regular meetings shall be held
pursuant to any resolution of the Board altering or modifying its previous
resolution relating to the time or place of the holding of regular meetings,
without first giving at least three days written notice to each director, either
personally or by telegram, or at least five days written notice to each director
by mail, of the substance and effect of such new resolution relating to the time
and place at which regular meetings of the Board may thereafter be held without
notice.

Special meetings of the Board shall be held whenever called by the
President, a Vice-President, the Secretary or any director in writing. Notice
of each special meeting of the Board shall be delivered personally to each
director or sent by telegraph to his residence or usual place of business at
least three days before the meeting, or mailed to him in his residence or usual
place of business at least five days before the meeting.

Meetings of the Board, whether regular or special, may be held at any time
and place, and for

4
<PAGE>

any purpose, without notice, when all the directors are present or when all
directors not present shall, in writing, waive notice of such meeting and such
waiver may be given after the holding of such meeting. All or any of the
directors may waive notice of any meeting and the presence of a director at any
meeting of the Board shall be deemed a waiver of notice thereof by him. A
notice, or waiver of notice, need not specify the purpose or purposes of any
regular or special meeting of the Board.

3.06. Quorum and Action. A majority of the entire Board of Directors
-----------------
shall constitute a quorum except that when a vacancy or vacancies prevents such
majority, a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the entire
Board. A majority of the directors present, whether or not they constitute a
quorum, may adjourn a meeting to another time and place. Except as may be
otherwise provided by these By-laws or by law, the vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board.

3.07. Telephonic Meetings. Any member or members of the Board of
-------------------
Directors, or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time, and
participation in a meeting by such means shall constitute presence in person at
such meeting.

3.08. Action Without a Meeting. Any action required or permitted to
------------------------
be taken by the Board of Directors, or any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent in writing to the adoption of a resolution authorizing the action. The
resolution and the written consents thereto by the members of the Board or
committee shall be filed with the minutes of proceedings of the Board or
committee.

3.09. Compensation of Directors. By resolution of the Board of
-------------------------
Directors, the directors may be paid their expenses, if any, for attendance at
each regular or special meeting of the Board or of any committee designated by
the Board and may be paid a fixed sum for attendance at such meeting. In
addition, directors may be paid an annual fee as may be fixed from time to time
by the Board of Directors. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor; provided, however, that directors who are also
salaried officers shall not receive fees as directors.

ARTICLE IV
Committees
----------

4.01. In General. The Board of Directors may, by resolution or
----------
resolutions passed by the affirmative vote of a majority of the entire Board,
designate an Executive Committee and such other committees as the Board may from
time to time determine, each to consist of one or more directors, and each of
which, to the extent provided in the resolution or in the Certificate of
Incorporation or in the By-laws, shall have all the powers of the Board, except
that no such committee shall have power to fill vacancies in the Board, or to
change the membership of or to fill vacancies in any committee, or to make,
amend, repeal or adopt By-laws of the Corporation, or to submit to the

5
<PAGE>

shareholders any action that needs shareholder approval under these By-laws or
the law, or to fix the compensation of the directors for serving on the Board or
any committee thereof, or to amend or repeal any resolution of the Board which
by its terms shall not be so amendable or repealable. Each committee shall serve
at the pleasure of the Board. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.

ARTICLE V
Officers
--------

5.01. Designation, Term, Removal and Vacancies. The officers of the
----------------------------------------
Corporation shall be a President, one or more Vice presidents, a Secretary, a
Treasurer, and such other officers as the Board of Directors may from time to
time deem necessary. Such officers may have and perform the powers and duties
usually pertaining to their respective offices, the powers and duties
respectively prescribed by law and by these by-laws, and such additional powers
and duties as may from time to time be prescribed by the Board. The same person
may hold any two or more offices, except that the offices of President and
Secretary may not be held by the same person unless all the issued and
outstanding stock of the Corporation is owned by one person, in which instance
such person may hold all or any combination of offices.

The initial officers of the Corporation shall be appointed by the initial
Board of Directors. Thereafter, the officers of the Corporation shall be
appointed by the Board as soon as practicable after the election of the Board at
the annual meeting of shareholders, and shall hold office until the meeting of
the Board of Directors following the next annual meeting of stockholders and
until their successors have been appointed and qualified; provided, however,
that the Board of Directors may remove any officer at any time, with or without
cause. Vacancies occurring among the officers of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.

5.02. President. The President shall preside at all meetings of the
---------
shareholders and at all meetings of the Board of Directors at which he may be
present. Subject to the direction of the Board of Directors, he shall be the
chief executive officer of the Corporation, and shall have general charge of the
entire business of the Corporation. He may sign certificates of stock and sign
and seal bonds, debentures, contracts or other obligations authorized by the
Board, and may, without previous authority of the Board, make such contracts as
the ordinary conduct of the Corporation's business requires. He shall have the
usual powers and duties vested in the president of a corporation. He shall have
power to select, appoint and remove all necessary officers and employees of the
Corporation, except those selected by the Board of Directors, and make new
appointments to fill vacancies. He may delegate any of his powers to a Vice
President of the Corporation.

5.03. Vice President. The Vice President or, if there be more than
--------------
one, each Vice

6
<PAGE>

President, shall have such of the President's powers and duties as the President
may from time to time delegate to him, and shall have such other powers and
perform such other duties as may be assigned to him by the Board of Directors.
During the absence or incapacity of the President, the Vice President, or, if
there be more than one, the Vice President designated by the Board of Directors,
shall perform the duties of the President, and when so acting shall have all the
powers and be subject to all the responsibilities of the office of President.

5.04. Treasurer. The Treasurer shall have custody of such funds and
---------
securities of the Corporation as may come to his hands or be committed to his
care by the Board of Directors. Whenever necessary or proper, he shall endorse
on behalf of the Corporation\\, \\for collection, checks, notes, or other
obligations, and shall deposit the same to the credit of the Corporation in such
bank or banks or depositories, approved by the Board of Directors, as the Board
of Directors or President may designate. He may sign receipts or vouchers for
payments made to the Corporation, and the Board of Directors may require that
such receipts or vouchers shall also be signed by some other officer to be
designated by them. Whenever required by the Board of Directors, he shall
render a statement of his cash accounts and such other statements respecting the
affairs of the Corporation as may be required. He shall keep proper and
accurate books of account. He shall perform all acts incident to the office of
Treasurer, subject to the control of the Board.

5.05. Secretary. The Secretary shall have custody of the seal of the
---------
Corporation and when required by the Board of Directors, or when any instrument
shall have been signed by the President or by any other officer duly authorized
to sign the same, or when necessary to attest any proceedings of the
shareholders or directors, shall affix it to any instrument requiring the same
and shall attest the same with his signature, provided that the seal may be
affixed by the President or any Vice President or other officer of the
Corporation to any document executed by either of them respectively on behalf of
the Corporation which does not require the attestation of the Secretary. He
shall attend to the giving and serving of notices of meetings. He shall have
charge of such books and papers as properly belong to his office or as may be
committed to his care by the Board of Directors. He shall perform such other
duties as appertain to his office or as may be required by the Board of
Directors.

5.06. Delegation. In case of the absence of any officer of the
----------
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may temporarily delegate the powers or duties, or any of
them, of such officer to any other officer or to any director.

ARTICLE VI
Shares
------

6.01. Certificates Representing Shares. All certificates representing
--------------------------------
shares of the Corporation shall be signed by the President or a Vice President
and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, shall bear the seal of the Corporation and shall not be valid unless
so signed and sealed. Certificates countersigned by a duly appointed transfer
agent or registered by a duly appointed registrar shall be deemed to be so
signed and sealed whether the signatures be manual or facsimile signatures and
whether the seal be a facsimile seal or any other

7
<PAGE>

form of seal. All certificates shall be consecutively numbered and the name of
the person owning the shares represented thereby, his residence, with the number
of such shares and the date of issue, shall be entered on the Corporation/'/s
books. All certificates surrendered shall be canceled and no new certificates
issued until the former certificates for the same number of shares shall have
been surrendered and canceled, except as provided for herein.

In case any officer who signed or whose facsimile signature was affixed
to any certificate shall have ceased to be such officer before such certificate
is issued, it nevertheless may be issued by the Corporation as if he were such
officer at the date of its issuance.

Any restrictions on the transfer or registration of transfer of any shares
of any class or series shall be noted conspicuously on the certificate
representing such shares.

6.02. Stolen, Lost or Destroyed Certificates. The Board of Directors
--------------------------------------
may in its sole discretion direct that a new certificate for shares be issued in
place of any certificate for shares issued by the Corporation alleged to have
been stolen, lost or destroyed. When authorizing such issuance of a new
certificate, the Board of Directors may, in its discretion, and as a condition
precedent thereto, require the owner of such stolen, lost or destroyed
certificate or his legal representatives to give the Corporation a bond in such
sum as the Corporation may direct not exceeding double the value of the shares
represented by the certificate alleged to have been stolen, lost or destroyed.

6.03. Transfers of Shares. Upon compliance with all provisions
-------------------
restricting the transferability of shares, if any, transfers of shares shall be
made upon the books of the Corporation only by the holder in person or by his
attorney thereunto authorized by power of attorney duly filed with the Secretary
of the Corporation or with a transfer agent or registrar, if any, and upon the
surrender and cancellation of the certificate or certificates for such shares
properly endorsed and the payment of all taxes due thereon. The Board of
Directors may appoint one or more suitable banks or trust companies as transfer
agents or registrars of transfers, for facilitating transfers of any class or
series of shares of the Corporation by the holders thereof under such
regulations as the Board of Directors may from time to time prescribe. Upon
such appointment being made, all certificates of shares of such class or series
thereafter issued shall be countersigned by one of such transfer agents or one
of such registrars of transfers, and shall not be valid unless so countersigned.

ARTICLE VII
Dividends and Finance
---------------------

7.01. Dividends. The Board of Directors shall have power to fix and
---------
determine and to vary, from time to time, the amount of the working capital of
the Corporation before declaring any dividends among its shareholders, to
determine the date or dates for the declaration and payment of dividends and the
amount of any dividend, and the amount of any reserves necessary in their
judgment before declaring any dividends among its shareholders, and to determine
the amount of surplus of the Corporation from time to time available for
dividends.

7.02. Fiscal Year. The fiscal year of the Corporation shall be the
-----------
calendar year.

8
<PAGE>

ARTICLE VIII

8.01. Notices. Whenever any notice is required by these By-laws to be
-------
given, personal notice is required only if it is expressly so stated, and when
not so expressly stated notice shall be deemed sufficient if given by depositing
the same in a post office box in a sealed post-paid wrapper, addressed to the
person entitled thereto at his last known post office address, and such notice
shall be deemed to have been given on the day of such mailing.

Any person may waive the right to receive any notice by signing a
written waiver thereof.

8.02. Amendments. Except as otherwise provided herein, these By-laws
----------
may be altered, amended or repealed and new By-laws may be adopted by the
shareholders or the Board of Directors. Notwithstanding the foregoing, the By-
Laws may only be amended by the Board of Directors by unanimous vote or consent
of the Board of Directors.

8.03. Seal. The corporate seal shall have inscribed thereon the name
----
of the Corporation, the year of its organization and the words "Corporate Seal,
Delaware." One or more duplicate dies for impressing such seal may be kept and
used.

8.04. Indemnification of Corporate Agents. To the fullest extent
-----------------------------------
permitted by Delaware law: (a) the Corporation shall indemnify any person made
a party to an action by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that he, his testator or intestate, is or was
a director or officer of the Corporation, against the reasonable expenses
including attorneys' fees, actually and necessarily incurred by him in
connection with the defense of such action, or in connection with an appeal
therein, except in relation to matters as to which such person is adjudged to
have breached his duty to the Corporation; (b) the Corporation shall also
indemnify any person made or threatened to be made a party to an action or
proceeding other than one by or in the right of the Corporation to procure a
judgment in its favor, whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation, by reason of the fact that he, his
testator or intestate, was a director or officer of the Corporation or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity at the request of the Corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted in good
faith, for a purpose which he reasonably believed to be in or, in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the Corporation and in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful; and (c) in the
discretion of and to the extent authorized by the Board of Directors, the
Corporation may indemnify any employee of the Corporation or his personal
representatives under circumstances similar to those hereinabove set forth.

<PAGE>

EXHIBIT 10.3

PRINCETON TELECOM CORPORATION
1996 STOCK OPTION PLAN
As Amended
December 16, 1998

1. Purpose.
-------

Princeton TeleCom Corporation, a Delaware corporation (the "Company") has
adopted the 1996 Stock Option Plan, effective as of July 1, 1996.

The purpose of this 1996 Stock Option Plan (the "Plan") is to enable the
Company and its subsidiaries to attract, retain and reward employees and
officers (collectively referred to as "Employees") and consultants (Employees
and consultants are collectively referred to as "Participants") by offering them
an opportunity to have a greater proprietary interest in and closer identity
with the Company and its financial success. The Plan will provide a means
whereby such Participants may purchase shares of the Company's $.01 par value
common stock (or any class of stock into which the Common Stock is converted or
reclassified as provided in Section 22 hereof) (the "Common Stock") pursuant to
(i) options which will qualify as incentive stock options ("ISO") under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") or (ii) non-
qualified stock options ("NSO") (collectively the ISO's and NSO's are referred
to as "Options"). An Option that is not an ISO shall be an NSO.

2. Administration.
---------------

The Plan shall be administered by the Board of Directors of the Company
(the "Board"), which, to the extent it shall determine, may delegate its powers
with respect to the administration of the Plan (except its powers under Section
22) to a committee of directors. If the Board chooses to appoint a Committee,
references hereinafter to the Board (except in Section 22) shall be deemed to
refer to the Committee.

Subject to the provisions of the Plan, the Board shall have authority (i)
to construe and interpret the Plan, (ii) to define the terms used herein, (iii)
to prescribe, amend and rescind rules and regulations relating to the Plan, (iv)
to determine the individuals to whom and the time or times at which options
shall be granted, whether such options will be incentive stock options or non-
qualified stock options, the number of shares to be subject to each option, the
option price, the vesting period of each option, the number of installments, if
any, in which each option may be exercised, and the duration of each option, (v)
to approve and determine the duration of leaves of absence which may be granted
to participants without constituting a termination of their employment for the
purposes of the Plan, and (vi) to make all other determinations necessary or
advisable for the administration of the Plan. All determinations and
interpretations made by the Board shall be binding and conclusive on all
Participants in the Plan and their legal representatives and beneficiaries. No
member of the Board shall be liable for any action taken or determined to be
made in good faith.

1
<PAGE>

3. Shares Subject to the Plan.
---------------------------

Subject to adjustment as provided in Section 22 hereof, the shares to be
offered under the Plan shall consist of the Company's authorized but unissued
Common Stock, and the aggregate amount of such stock which may be issued upon
exercise of all Options under the Plan shall not exceed 1,500,000 shares. If any
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
again be available for options to be granted under the Plan.

4. Eligibility and Participation.
------------------------------

All Employees and consultants of the Company or any of its subsidiary
corporations shall be eligible for selection to participate in the Plan. For
all purposes of the Plan, subsidiary corporations shall have the meaning
provided in Section 424(f) of the Code. An individual who has been granted an
option may, if such individual is otherwise eligible, be granted an additional
Option or options if the Board shall so determine, subject to the other
provisions of the Plan. No ISO may be granted to any person who, at the time
the ISO is granted, is not an employee of the Company.

5. Options
-------

The following provisions shall apply to each Option granted to
Participants:

(a) Options may be granted to Participants at any time and from time
to time as shall be determined by the Board. The Board shall have complete
discretion in determining the number of shares of Common Stock subject to
Options granted to each Participant. The Board may grant any type of Option to
purchase Common Stock that is permitted by law at the time of the grant,
including ISOs. Unless otherwise expressly provided at the time of grant,
Options granted under the Plan will not be ISOs.

(b) Each Option shall be evidenced by a written agreement specifying
the type of Option granted, the Option exercise price, the terms for payment of
the exercise price, the duration of the Option, the number of shares of Common
Stock to which the Option pertains (the "Option Agreement"). An Option Agreement
may also contain a vesting schedule, a noncompetition agreement, a
confidentiality provision, provisions for forfeiture in the event of termination
of Participant's employment by the Company and such restrictions and conditions
and other terms as the Board shall determine. Option Agreements need not be
identical.

(c) The Board, in its discretion, shall have the power to accelerate
the dates for exercise of any or all Options, or any part thereof, granted to a
Participant under the Plan.

6. Required Terms and Conditions of ISOs
-------------------------------------

The provisions of each ISO granted to an Employee under this Section 6
shall be interpreted in a manner consistent with Section 422 of the Code and
with all regulations issued thereunder. Each ISO granted to an Employee shall be
in such form and subject to such restrictions and conditions and other

2
<PAGE>

terms as the Board may determine at the time of grant, subject to the general
provisions of the Plan, Section 422 of the Code, the applicable Option Agreement
and the following specific rules:

(a) Exercise Price. Except as otherwise provided, the per share
---------------
exercise price of each ISO shall be at least 100% of the Fair Market Value of
the Common Stock at the time such ISO is granted, provided that in the case of
an ISO granted to an Employee who at the time of grant owns (as defined in
Section 424(d) of the Code) stock of the Company or its parent or subsidiaries
possessing more than 10% of the total combined voting power of all classes of
stock of any such corporation, the exercise price shall be at least 110% of the
Fair Market Value of the Common Stock subject to the ISO at the time such ISO is
granted and the ISO by its terms shall not be exercisable after the expiration
of five years from the date the ISO is granted. In no event may the exercise
price be less than the par value of the Common Stock subject to such ISO.

(b) Maximum Term. Subject to earlier termination as provided in
-------------
Section 8, each ISO shall expire on the date determined in the applicable Option
Agreement at the time the ISO is granted, provided that no ISO shall be
exercisable after the expiration of 10 years from the date it is granted, except
as otherwise provided in subsection (a) next above.

(c) Time of Exercise. The Board shall specify in the Option Agreement,
-----------------
at the time each ISO is granted, the duration of each ISO and the time or times
within which (during the term of the ISO) all or portions of each ISO may be
exercised, except to the extent that other terms of exercise are specifically
provided by other provisions of the Plan.

(d) Value of Shares. The aggregate Fair Market Value (determined at
----------------
the time of grant) of Common Stock with respect to which ISOs are exercisable
for the first time by an Employee during any calendar year (under all option
plans of the Company or of a corporation which, at the time such ISO was
granted, is a parent or subsidiary of the Company, or is a predecessor
corporation of any such corporation) shall not exceed $100,000. If the aggregate
Fair Market Value (determined at the time of grant) of the stock subject to an
Option, which first becomes exercisable in any calendar year and during this
period exceeds the limitation of this subsection, so much of the Option that
does not exceed the applicable dollar limit shall be an ISO and the remainder
shall be an NSO; but in all other respects, the original Option Agreement shall
remain in full force and effect.

(e) Conversion. The Board may, in its sole discretion, cause the
-----------
Company to convert an ISO to an NSO upon such terms and conditions and in such
manner as the Board deems equitable.

7. Required Terms and Conditions of NSOs
-------------------------------------

Each NSO granted to a Participant shall be in such form and subject to such
restrictions and conditions and other terms as the Board may determine at the
time of grant, subject to the general provisions of the Plan, the applicable
Option Agreement, and the following specific rules:

(a) Exercise Price. The number of shares of Common Stock subject to
---------------
each NSO and the per share exercise price of each NSO shall be determined by the
Board at the time the NSO is granted. In no event may the exercise price be less
than the par value of the Common Stock subject to

3
<PAGE>

such NSO.

(b) Maximum Term. Subject to earlier termination as provided in
-------------
Section 8, each such NSO shall expire on the date determined in the applicable
Option Agreement at the time the NSO is granted, provided that such date shall
not be more than ten (10) years after the date of grant.

(c) Time of Exercise. The Board shall specify in the Option Agreement
-----------------
at the time each NSO is granted, the duration of each NSO and the time or times
within which (during the term of the NSO) all or portions of each NSO many be
exercised, except to the extent that other terms of exercise are specifically
provided by other provisions of the Plan.

8. Expiration of Options Granted to Participants; Termination of
-------------------------------------------------------------
Employment, Disability or Death, or Retirement and Expiration of Restrictions
- -----------------------------------------------------------------------------
Upon Occurrence of Specified Events
- -----------------------------------

(a) General Rule. Except with respect to Options expiring pursuant to
-------------
subsection 8(b) or (c) below, each Option granted to a Participant shall expire
on the expiration date or dates set forth in the applicable Option Agreement.
Each ISO expiring pursuant to subsection 8(b) or (c) below shall expire on the
date set forth in subsection 8(b) or (c) notwithstanding any restrictions and
conditions that may be contained in an Option Agreement.

(b) Expiration Upon Termination of Employment. An Option granted to an
------------------------------------------
Employee shall expire on the first to occur of (i) the applicable date or dates
determined pursuant to subsection 8(a), or (ii) the date that the employment of
the Employee with the Company or its subsidiaries terminates for any reason
other than death or disability pursuant to subsection 8(c). Notwithstanding the
preceding provisions of this subsection 8(b), the Board, in its sole discretion,
may permit an Employee (i) to exercise an Option that is exercisable immediately
prior to the termination of employment, notwithstanding any restrictions and
conditions that may be contained in his Option Agreement, during a period not to
exceed ninety days following his termination of employment, and/or (ii) to
exercise an Option that becomes exercisable after termination of employment and
prior to the termination of such ninety day period, during such period. In no
event, however, may the Board permit such Employee to exercise an Option under
this subsection 8(b) after the expiration date or dates set forth in the
applicable Option Agreement.

(c) Expiration Upon Disability or Death. If the employment of an
------------------------------------
Employee with the Company and its subsidiaries terminates by reason of
disability (as determined by the Board) or death, his unexpired Options or
portions thereof, if any, held on the date of disability or death that would
expire pursuant to the terms of his Option Agreement during the 12-month period
commencing on the date of disability or death, shall expire on the last day of
such 12-month period. During such 12-month period, any such Option or portion
thereof referred to in the preceding sentence may be exercised by such Employee,
or the person specified in Section 9, with respect to the same number of shares
and in the same manner and to the same extent as if the Employee had continued
as a full-time employee of the Company or its subsidiaries during such 12-month
period. Any unexpired Option or portion thereof held by the Employee on the date
of disability or death, that would expire pursuant to the terms of his Option
Agreement on a date more than 12 months after the date of disability or death,
shall expire unexercised on the date of disability or death.

4
<PAGE>

9. Method of Exercise of Options. Any Option granted under the Plan may
-----------------------------
be exercised by the Participant, by a legatee or legatees of such Option under
the Participant's last will, by his executors, personal representatives or
distributees, or in the case of NSO's, by his assignee or assignees as
provided in Section 11 below, by delivering to the Secretary of the Company
written notice of the number of shares of Common Stock with respect to which the
Option is being exercised, accompanied by full payment to the Company of the
exercise price of the share being purchased under the Option, and by satisfying
all other conditions provided for in the Plan. Except as otherwise provided in
the Plan, the exercise price of Common Stock upon exercise of any Option by a
Participant shall be paid in full (i) in cash, (ii) in Common Stock valued at
its Fair Market Value on the date of exercise, (iii) in cash by a broker-dealer
to whom holder of the Option has submitted an exercise notice consisting of a
fully endorsed Option; (iv) by agreeing to surrender Options then exercisable by
him valued at the excess of aggregate Fair Market Value of the Common stock
subject to such Options on the date of exercise over the aggregate option price
of such Common Stock,; (v) by directing the Company to withhold such number of
shares of Common Stock otherwise issuable upon exercise of such Option having an
aggregate Fair Market Value on the date of exercise equal to the exercise price
of the Option; or (vi) by such other medium of payment as the Board, in its
discretion, shall authorize, or any combination of (i), (ii), (iii), (iv) or
(v), at the discretion of the Board or in any manner provided in the Option
Agreement. In the case of payment pursuant to (ii), (iii), (iv) or (v) above,
the Participant's election must be made on or prior to the date of the exercise
of the Option and must be irrevocable.

10. Terms and Conditions of Options
-------------------------------

(a) Each Participant shall agree to such restrictions and conditions and
other terms in connection with the exercise of an Option, including restrictions
and conditions on the disposition of the Common Stock acquired upon the
exercise, grant or sale thereof, as the Board may deem appropriate. The
certificates delivered to a Participant or to the Secretary of the Company
evidencing the shares of Common Stock acquired upon exercise of an Option, bear
a legend referring to the restrictions and conditions and other terms contained
in the respective Option Agreement and the Plan, and the Company may place a
stop transfer order with its transfer agent against the transfer of such shares.
If requested to do so by the Board at the time of exercise of an Option, each
Participant shall execute a written instrument stating that he is purchasing the
Common Stock for investment and not with any present intention to sell same. In
addition, if at the time the Stock Option is exercised the Company's shares of
Common Stock are not publicly traded on a national securities exchange or
market, the Participant shall be required to execute a Stock Restriction
Agreement in a form acceptable to the Board, which among other things, restricts
the sale and transfer of the shares of Common Stock and grants to the Company a
right to repurchase the shares until such time as the shares of the Company's
Common Stock are publicly traded on a national securities exchange or market.

(b) The obligation of the Company to sell and deliver Common Stock under
the Plan shall be subject to all applicable laws, regulations rules and
approvals, including, but not by way of limitation, the effectiveness of a
registration statement under the Securities Act of 1933, if deemed necessary or
appropriate by the Board, of the Common Stock, Options and other securities
reserved for issuance or that may be offered under the Plan. A Participant
shall have no rights as a stockholder with respect to any shares covered by an
Option granted to, or exercised by, him until the date of delivery of a stock

5
<PAGE>

certificate to him for such shares. No adjustment shall be made for dividends
or rights for which the record date is prior to the date such stock certificate
is delivered.

11. Nontransferability.
------------------

(a) Except as provided in subsection (b) next below, Options granted under
the Plan and any rights and privileges pertaining thereto, may not be
transferred, assigned, pledged or hypothecated in any manner, by operation of
law or otherwise, other than by will or by the laws of descent and distribution
and shall not be subject to execution, attachment or similar process. The
granting of an Option shall impose no obligation upon the applicable Participant
to exercise such Option.

(b) Notwithstanding the provisions of subsection (a) above, a Participant,
at any time prior to his death, may assign all or any portion of an NSO granted
to him to (i) his spouse or lineal descendant, (ii) the trustee of a trust for
the sole benefit of his spouse and lineal descendant, or (iii) a partnership of
which his spouse and lineal descendants are the only partners. In such event,
the spouse, lineal descendant, trustee or partnership will be entitled to all of
the rights of the Participant with respect to the assigned portion of such
Option, and such portion of the Option will continue to be subject to all of the
terms, conditions and restrictions applicable to the Option, as set forth herein
and in the related Option Agreement, immediately prior to the effective date of
the assignment. Any such assignment will be permitted only if (i) the
Participant does not receive any consideration therefore, and (ii) the
assignment is expressly permitted by the applicable Option Agreement as approved
by the Board. Any such assignment shall be evidenced by an appropriate written
document executed by the Participant, and a copy thereof shall be delivered to
the Company on or prior to the effective date of the assignment in a form
acceptable to the Board.

12. Indemnification of the Board.
----------------------------

In addition to such other rights of indemnification as they may have as
members of the Board, or as members of the Committee, or as its delegatees, the
members of the Board and its delegatees shall be indemnified by the Company
against (a) the reasonable expenses (as such expenses are incurred), including
attorney's fees actually and necessarily incurred in connection with the defense
of any action, suit or proceeding (or in connection with any appeal therein), to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan, any Option or Option
Agreement; and (b) against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Board member or delegatee
is liable for gross negligence or misconduct in the performance of his duties;
provided that within 60 days after institution of any such action, suit or
proceeding a member or delegatee shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.

13. No Contract of Employment.
-------------------------

Neither the adoption of the Plan nor the grant of any Option shall be
deemed to obligate the Company or any Subsidiary to continue the employment of
any Employee for any particular period,

6
<PAGE>

nor shall the granting of any Option constitute a request or consent to postpone
the retirement date of any Employee.

14. Termination and Amendment of Plan.
---------------------------------

(a) No ISOs shall be granted under the Plan more than ten years after the
first to occur of (i) the date the Plan was adopted by the Board or (ii) the
date the Plan was approved by the stockholders of the Company. The Board may at
any time terminate, suspend or modify the Plan without the authorization of
stockholders to the extent allowed by law.

(b) The Board may at any time suspend or terminate the Plan. The Board may
also at any time amend or revise the terms of the Plan, provided that no such
amendment or revision shall, unless appropriate shareholder approval of such
amendment or revision is obtained, increase the maximum number of shares in the
aggregate which may be sold pursuant to Options granted under the Plan, except
as permitted under the provisions of Section 22, or change the minimum purchase
price of ISOs set forth or increase the maximum term of ISOs as provided for in
Section 6, or permit the granting of Options to anyone other than as provided in
Section 4.

(c) No termination, suspension or modification of the Plan shall adversely
affect any right acquired by any Participant under an Option granted before the
date of such termination, suspension or modification, unless such Participant
shall consent; but it shall be conclusively presumed that any adjustment for
changes in capitalization as provided for herein does not adversely affect any
such right. Any member of the Board who is an officer or employee of the Company
shall be without vote on any proposed amendment to the Plan, or on any other
matter which might affect that member's individual interest under the Plan.

15. Effective Date of Plan.
----------------------

The Plan shall become effective upon adoption by the Board; provided,
however, that it shall be submitted for approval by the holders of a majority of
the outstanding shares of common stock of the Company present, or represented,
and entitled to vote at a stockholders' meeting held within 12 months
thereafter, and Options granted prior to such stockholder approval shall become
null and void if such stockholder approval is not obtained.

16. Withholding Taxes
-----------------

Whenever the Company proposes or is required to issue or transfer shares of
Common Stock to a Participant under the Plan, the Company shall have the right
to require the Participant to remit to the Company an amount sufficient to
satisfy all federal, state and local withholding tax requirements prior to the
delivery of any certificate of certificates for such shares. If such
certificates have been delivered prior to the time a withholding obligation
arises, the Company shall have the right to require the Participant to remit to
the Company an amount sufficient to satisfy all federal, state or local
withholding tax requirements at the time such obligation arises and to withhold
from other amounts payable to the Participant, as compensation or otherwise, as
necessary. Whenever payments under the Plan are to be made to a Participant in
cash, such payments shall be net of any amounts sufficient to satisfy all
federal,

7
<PAGE>

state and local withholding tax requirements.

If the holder of shares of Common Stock purchased in connection with the
exercise of an ISO disposes of such shares within two years of the date of such
ISO was granted or within one year of such exercise, he shall notify the
Company of such disposition and remit such amount necessary to satisfy
applicable withholding requirements including those arising under federal income
tax laws. If such holder does not remit such amount, the Company may withhold
all or a portion of any salary then or in the future owed to such holder as
necessary to satisfy such requirements.

17. Leaves of Absence.
-----------------

The Board shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan regarding any leave of
absence taken by an Employee who is the recipient of any Option. Without
limiting the generality of the foregoing, the Board shall be entitled to
determine (a) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan, and (b) the impact, if
any, of any such leave of absence on Options under the Plan theretofore made to
any Employee who takes such leave of absence.

18. Governing Law.
-------------

The Plan, and all agreements hereunder, shall be construed in accordance
with and governed by the laws of the State of New Jersey and, in the case of
ISOs, Section 422 of the Code and regulations issued thereunder.

19. Fair Market Value.
-----------------

"Fair Market Value" as of a given date for all purposes of the Plan and any
Option Agreement, mean (a) if the Common Stock is listed on a national
securities exchange, the average of the closing prices of the Common Stock on
the composite tape for the five (5) consecutive trading days immediately
preceding such given date; (b) if the Common Stock is traded on an exchange or
market in which prices are reported on a bid and asked price, the average of the
mean between the bid and the asked price for the Common Stock at the close of
trading for the five (5) consecutive trading days immediately preceding such
given date; and (c) if the Common Stock is not listed on a national securities
exchange nor traded on the over-the-count market, such value as the Board, in
good faith, shall determine. Notwithstanding any provision of the Plan to the
contrary, no determination made with respect to the Fair Market Value of Common
Stock subject to an ISO shall be inconsistent with Section 422 of the Code or
regulations issued thereunder.

20. Successors.
----------

In the event of a sale of substantially all of the assets of the Company,
or a merger, consolidation or share exchange involving the Company, all
obligations of the Company under the Plan with respect to Option granted
hereunder shall be binding on the successor to the transaction. Employment of
an Employee with such a successor shall be considered employment of the
Employee with the Company for purposes of the Plan.

8
<PAGE>

21. Notices.
-------

Notices given pursuant to the Plan shall be in writing and shall be deemed
received when personally delivered or five days after mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid. Notice to the Company shall be directed to the President.

22. Adjustments.
------------

If the outstanding shares of the Common Stock of the Company (or any other
class of shares or securities which shall have become eligible for grant under
the Plan pursuant to this sentence) are increased, decreased, changed into or
exchanged for a different number or kind of shares or securities of the Company
through reorganization, reclassification, stock dividend, stock split, reverse
stock split or other similar transaction, an appropriate and proportionate
adjustment shall be made in the maximum number and kind of shares as to which
Options may be granted under this Plan. A corresponding adjustment changing the
number of kind of shares allocated to unexercised Options or portions thereof,
which shall have been granted prior to any such change, shall likewise be made.
Any such adjustment in the outstanding Options shall be made without change in
the aggregate purchase price applicable to the unexercised portion of the Option
but with a corresponding adjustment in the price for each share or other unit of
any security covered by the Option.

Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all the property or more than eighty percent
(80%) of the then outstanding stock of the Company to another corporation(s),
the Plan shall terminate, and all Options theretofore granted hereunder shall
terminate; provided, however, that notwithstanding the foregoing, the Board
shall provide in writing in connection with such transaction for one or all of
the following alternatives (separately or in combinations): (i) for the options
theretofore granted to become immediately exercisable; (ii) for the assumption
by the successor corporation of the Options theretofore granted or the
substitution by such corporation for such Options and rights of new Options and
rights covering the stock of the successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices; (iii) for the continuance of the Plan by such successor
corporation in which event the Plan and the Options theretofore granted shall
continue in the manner and under the terms so provided; or (iv) for the payment
in cash or stock in lieu of and in complete satisfaction of such Options.

Adjustments under this Section 22, shall be made by the Board, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan on any such adjustment.

23. Change of Control.
--- -----------------

(a) In the event of a "Change of Control" (as defined below) of the
Company, all Options granted shall vest in their entirety.

9
<PAGE>

(b) "Change of Control" is defined to mean such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act),
becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of more than 50% of the total voting power of the then outstanding
voting stock of the Company on a fully diluted basis or (ii) individuals who at
the beginning of any period of two consecutive calendar years constituted the
Board (together with any new directors whose election by the Board or whose
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the members of the Board then still in office who either
were members of the Board at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board then in office.

<PAGE>

EXHIBIT 10.4
1998 NON-EMPLOYEE
DIRECTOR PLAN
PRINCETON TELECOM CORPORATION
Dated October 20, 1998

1. PURPOSE. The purpose of this Plan is to advance the interests of
Princeton TeleCom Corporation, a Delaware corporation (the /"/Company"), by
providing an additional incentive to attract and retain qualified and competent
directors, upon whose efforts and judgment the success of the Company is largely
dependent, through the encouragement of stock ownership in the Company by such
persons.

2. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:

(a) "Board" shall mean the Board of Directors of Princeton TeleCom
Corporation.

(b) "Committee" shall mean the committee, if any, appointed by the Board
pursuant to Section 12 hereof.

(c) "Date of Grant" shall mean the date on which an Option is granted to an
Eligible Person pursuant to Section 4 hereof.

(d) "Director" shall mean a member of the Board.

(e) "Eligible Person(s)" shall mean those persons who are Directors of the
Company and who are not employees of the Company or a Subsidiary.

(f) "Fair Market Value" of a Share on any date of reference shall be the
closing price on such date, or, if such date is not a business day, the business
day immediately preceding such date. For this purpose, the closing price of the
Shares on any business day shall be (i) if the Shares are listed or admitted for
trading on any United States national securities exchange, the last reported
sales price of the Shares on such exchange, as reported in any newspaper of
general circulation, (ii) if actual transactions in the Shares are included in
the Nasdaq National Market or are reported on a consolidated transaction
reporting system, the closing sales price of the Shares on such system, (iii) if
Shares are otherwise quoted on the Nasdaq system, or any similar system of
automated dissemination of quotations of securities prices in common use, the
mean between the closing high bid and low asked quotations for such day of the
Shares on such system, and (iv) if none of clause (i), (ii) or (iii) is
applicable, the mean between the high bid and low asked quotations for Shares as
reported by the National Daily Quotation Service if at least two securities
dealers have inserted both bid and asked quotations for the Shares on at least
five (5) of the ten (10) preceding trading days. If none of clauses (i), (ii),
(iii), or (iv) is applicable, then the Fair Market Value shall be such value as
the Board in good faith shall determine. Notwithstanding the foregoing the
value assigned by the Board of a share for options granted to Eligible Persons
as of the date of this Plan is adopted shall be $.10 per share.

(g) "Internal Revenue Code" or "Code" shall mean the Internal Revenue Code
of 1986, as it now exists or may be amended from time to time.
<PAGE>

(h) "Non-qualified Stock Option" shall mean an option that is not an
incentive stock option as defined in Section 422 of the Internal Revenue Code.

(i) "Option" shall mean any option granted under Section 4 of this Plan.

(j) "Optionee" shall mean a person to whom an Option is granted under this
Plan or any successor to the rights of such person under this Plan by reason of
the death of such person.

(k) "Plan" shall mean this 1998 Non-Employee Director Plan of Princeton
TeleCom Corporation, as amended from time to time.

(1) "Share(s)" shall mean a share or shares of the common stock; par value
one cent ($0.01) per share, of the Company.

(m) "Subsidiary" shall mean a subsidiary corporation of the Company as
defined in Section 424(f) of the Code.

3. SHARES AND OPTIONS. The maximum number of Shares to be issued pursuant
to Options under this Plan shall be TWO HUNDRED THOUSAND (200,000) Shares.
Shares issued pursuant to Options granted under this Plan may be issued from
Shares held in the Company's treasury or from authorized and unissued Shares If
any Option granted under this Plan shall terminate, expire or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares Any Option granted hereunder shall be a Non-qualified Stock Option.

4. AUTOMATIC GRANT OF OPTIONS. (a) Options shall automatically be
granted to Directors as provided in this Section 4 Each Option shall be
evidenced by an option agreement (an "Option Agreement") and shall contain such
terms as are not inconsistent with this Plan or any applicable law Any person
who files with the Committee, in a form satisfactory to the Committee, a written
waiver of eligibility to receive any Option under this Plan shall not be
eligible to receive any Option under this Plan for the duration of such waiver

(b) The Options automatically granted to Directors under this Section 4
shall be in addition to any other Options granted pursuant to this Plan, regular
director's fees and other benefits with respect to the Director's position with
the Company or its Subsidiaries. Neither the Plan nor any Option granted under
the Plan shall confer upon any person any right to continue to serve as a
Director.

(i) Each Director who is an Eligible Person on the date of this Plan
shall automatically receive an Option for an amount of Shares, equal to
the product of number of years he is ELECTED to serve as Director of the
Company and TEN THOUSAND (10,000), and such Options shall vest as to TEN
THOUSAND (10,000) Shares on the Date of Grant and each of the first two
anniversaries of the Date of Grant (a maximum of two anniversaries).

2
<PAGE>

(ii) Thereafter, each Director who is an Eligible Person will receive,
on the first business day after the date of each annual meeting of
stockholders of the Company at which such Director is re-elected to the
Board of Directors of the Company an option to purchase an amount of
Shares equal to the number of years he is elected to serve as a Director
of the Company multiplied by Ten Thousand (10,000) and such option shall
vest as to Ten Thousand (10,000) Shares on the Date of Grant and on each
of the Anniversaries of the Date of Grant.

(d) Any Option that may be granted pursuant to subparagraph (c) of this
Section 4 prior to the approval of this Plan by the stockholders of the Company
may be exercised on or after the Date of Grant subject to the approval of this
Plan by the stockholders of the Company within twelve (12) months after the
effective date of this Plan. If any Optionee exercises an Option prior to such
stockholder approval, the Optionee must tender the exercise price at the time of
exercise and the Company shall hold the Shares to be issued pursuant to such
exercise until the stockholders approve this Plan. If this Plan is approved by
the stockholders, the Company shall issue and deliver the Shares as to which the
Option has been exercised. If this Plan is not approved by the stockholders,
the Company shall return the exercise price to the Optionee.

5. DISCRETIONARY GRANT OF OPTIONS. In addition to the Options
automatically granted under Section 4 of this Plan, the Committee may grant
Options at any time during the term of this Plan to any Eligible Person.
Subject only to the applicable limitations set forth in this Plan and applicable
law, the number of Shares to be covered by an Option shall be as determined by
the Committee. Each Option granted pursuant to this Section 5 shall be
evidenced by an Option Agreement and shall contain such terms as are not
inconsistent with this Plan or any applicable law.

6. OPTION PRICE. The Option price per Share of any Option granted
pursuant to this Plan shall be one hundred percent (100%) of the Fair Market
Value per Share on the Date of Grant.

7. EXERCISE OF OPTIONS. Options may be exercised at any time after the
date on which the Options, or any portion thereto are vested until the Option
expires pursuant to Section 8. An Option shall be deemed exercised when (i) the
Company has received written notice of such exercise in accordance with the
terms of the Option Agreement, (ii) full payment of the aggregate Option price
of the Shares as to which the Option is exercised has been made, and (iii)
arrangements that are satisfactory to the Committee in its sole discretion have
been made for the Optionee's payment to the Company of the amount, if any that
the Committee determines to be necessary for the Company to withhold in
accordance with applicable federal or state income tax withholding requirements.
Pursuant to procedures approved by the Committee, tax withholding requirements,
at the option of an Optionee, may be met by withholding Shares otherwise
deliverable to the Optionee upon the exercise of an Option. Unless further
limited by the Committee in any Option Agreement, the Option price of any Shares
purchased shall be paid solely in cash, by certified or cashier's check, by
money order, with Shares (but with Shares only if permitted by the Option
Agreement or otherwise permitted by the Committee in its sole discretion at the
time of exercise) or by a combination of the above, provided, however, that the
Committee in its sole discretion may accept a personal check in full or partial

3
<PAGE>

payment of any Shares. If the exercise price is paid in whole or in part with
Shares, the value of the Shares surrendered shall be their Fair Market Value on
the date the Shares are received by the Company.

8. TERMINATION OF OPTION PERIOD. The unexercised portion of an Option
shall automatically and without notice terminate and become null and void at the
time of the earliest to occur of the following:

(a) with respect to Options granted automatically pursuant to Section 4(c)
and Section 5, thirty (30) days after the date that an Optionee ceases to be a
Director regardless of the reason therefor other than as a result of such
termination by death of the Optionee;

(b) with respect to Options granted automatically pursuant to Section 4(c),
(y) one (1) year after the date that an Optionee ceases to be a Director by
reason of death of the Optionee or (z) six (6) months after the Optionee shall
die if that shall occur during the thirty-day period described in Subsection
8(a); or

9. ADJUSTMENT OF SHARES. (a) If at any time while this Plan is in
effect or unexercised Options are outstanding, there shall be any increase or
decrease in the number of issued and outstanding Shares through the declaration
of a stock dividend or through any recapitalization resulting in a stock split-
up, combination or exchange of Shares, then and in such event:

(i) appropriate adjustment shall be made in the maximum number of
Shares then subject to being optioned under this Plan, so that the
same proportion of the Company's issued and outstanding Shares shall
continue to be subject to being so optioned, and

(ii) appropriate adjustment shall be made in the number of Shares
and the exercise price per Share thereof then subject to any
outstanding Option, so that the same proportion of the Company's
issued and outstanding Shares shall remain subject to purchase at the
same aggregate exercise price

In addition, the Committee shall make such adjustments in the Option price
and the number of shares covered by outstanding Options that are required to
prevent dilution or enlargement of the rights of the holders of such Options
that would otherwise result from any reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, issuance of
rights, spin-off or any other change in capital structure of the Company.

(b) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with a direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or

4
<PAGE>

exercise price of Shares then subject to outstanding Options granted under this
Plan.

(c) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under this Plan shall not affect in any manner the
right of power of the Company to make, authorize or consummate (i) any or all
adjustments recapitalizations, reorganizations, or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise

10. TRANSFERABILITY OF OPTIONS. Each Option Agreement shall provide that
such Option shall not be transferable by the Optionee other than by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order and that, so long as an Optionee lives, only such Optionee or his guardian
or legal representative shall have the right to exercise the related Option.

11. ISSUANCE OF SHARES. No person shall be, or have any of the rights or
privileges of, a stockholder of the Company with respect to any of the Shares
subject to an Option unless and until certificates representing such Shares
shall have been issued and delivered to such person. As a condition of any
transfer of the certificate for Shares, the Committee may obtain such agreements
or undertakings, if any, as it may deem necessary or advisable to assure
compliance with any provision of this Plan, any Option Agreement or any law or
regulation, including, but not limited to, the following:

(i) A representation, warranty or agreement by the Optionee to the
Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him or her for investment and not with a view to, or
for sale in connection with, the distribution of such Shares; and

(ii) A representation, warranty or agreement to be bound by any legends
that are, in the opinion of the Committee, necessary or appropriate to
comply with the provisions of any securities law deemed by the Committee to
be applicable to the issuance of the Shares and are endorsed upon the Share
certificates.

Share certificates issued to an Optionee who is a party to any stockholder
agreement or a similar agreement shall bear the legends contained in such
agreements. Shares issued upon exercise of the option are "restricted
securities" as that term is defined in the Securities Act of 1933, as amended
("Securities Act"), and many not be sold, offered, or transferred except
pursuant to an effective registration statement under the Securities Act or
unless the Company has received an opinion of counsel reasonably satisfactory to
counsel for the Company, that the transaction is exempt from the registration
requirements of the Securities Act and in accordance with state securities laws.
The Certificate issued to Optionee shall bear a legend containing the foregoing.

12. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by a
stock option committee (the "Committee") consisting of not fewer than two (2)
members of the Board, provided,

5
<PAGE>

however, that if no Committee is appointed, the Board shall administer this Plan
and in such case all references to the Committee shall be deemed to be
references to the Board. The Committee shall have all of the powers of the Board
with respect to this Plan. Any member of the Committee may be removed at any
time, with or without cause, by resolution of the Board, and any vacancy
occurring in the membership of the Committee may be filled by appointment by the
Board.

(b) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of this Plan The determinations and the interpretation
and construction of any provision of this Plan by the Committee shall be final
and conclusive.

(c) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a meeting or
(ii) without a meeting by the written approval of a majority of the members of
the Committee.

(d) This Plan is intended and has been drafted to comply with Rule 16b-3,
as amended, under the Securities Exchange Act of 1934, as amended. If any
provision of this Plan does not comply with Rule 16b-3, as amended, this Plan
shall be automatically amended to comply with Rule 16b-3, as amended.

13. INTERPRETATION. (a) If any provision of this Plan is held invalid for
any reason, such holding shall not affect the remaining provisions hereof, but
instead this Plan shall be construed and enforced as if such provision had never
been included in this Plan.

(b)THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE EXCEPT
TO THE EXTENT SUPERSEDED BY THE LAWS OF THE UNITED STATES OR THE PROPERTY LAWS
OF ANY STATE.

(d) Any reference to the masculine, feminine or neuter gender shall be a
reference to such other gender as is appropriate.

14. SECTION 83(b) ELECTRON. If as a result of exercising an Option an
Optionee receives Shares that are subject to a "substantial risk of forfeiture"
and are not "transferable" as those terms are defined for purposes of Section
83(a) of the Code, then such Optionee may elect under Section 83(b) of the Code
to include in his gross income, for his taxable year in which the Shares are
transferred to such Optionee, the excess of the Fair Market Value of such Shares
at the time of transfer (determined without regard to any restriction other than
one which by its terms will never lapse), over the amount paid for the Shares.
If the Optionee makes the Section 83(b) election described above, the Optionee
shall (i) make such election in a manner that is satisfactory to the Committee,
(ii) provide the Company with a copy of such election, (iii) agree to promptly
notify the Company if any Internal Revenue Service or state tax agent, on audit
or otherwise, questions the validity or correctness of such election or of the
amount of income reportable on account of such election, and (iv) agree to such
withholding

6
<PAGE>

as the Committee may reasonably require in its sole and absolute discretion.

15. EFFECTIVE DATE AND TERMINATION DATE. This Plan is adopted as of
October 20, 1998. The effective date of any amendment to the Plan is the date
on which the Board adopted such amendment, provided, however, if this Plan is
not approved by the stockholders of the Company within twelve (12) months after
the effective date, then, in such event, this Plan and all Options granted
pursuant to this Plan shall be null and void. This Plan shall terminate on
October 20, 2008, and any Option outstanding on such date will remain
outstanding until it has either expired or has been exercised.

16. CHANGE OF CONTROL. (a) In the event of a "Change of Control" (as
defined below) of the Company, all Options granted shall vest in their entirety.

<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement.

/s/ Arthur Andersen LLP

Philadelphia, Pa.,
March 30, 1999

<PAGE>

Exhibit 23.3

William C. Jennings
317 Elm Street
New Canaan, CT 06840
(203) 566-5194

March 31, 1999

Mr. Chris Sugden
Chief Financial Officer
Princeton eCom Corporation

Dear Mr. Sugden:

By this letter I give my consent to the inclusion of my name as future director
of Princeton eCom in its S-1 Registration Statement.

/s/ William C. Jennings
-------------------------------
William C. Jennings

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1996 DEC-31-1997 DEC-31-1998
<CASH> 0 505 6,362
<SECURITIES> 0 0 0
<RECEIVABLES> 0 660 688
<ALLOWANCES> 0 (53) (50)
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 1,228 8,512
<PP&E> 0 1,461 1,510
<DEPRECIATION> 0 (609) (688)
<TOTAL-ASSETS> 0 2,110 9,344
<CURRENT-LIABILITIES> 0 9,136 8,820
<BONDS> 0 123 79
0 0 0
0 0 0
<COMMON> 0 29 37
<OTHER-SE> 0 (7,414) 241
<TOTAL-LIABILITY-AND-EQUITY> 0 2,110 9,344
<SALES> 0 0 0
<TOTAL-REVENUES> 1,836 3,032 3,822
<CGS> 0 0 0
<TOTAL-COSTS> 1,363 1,800 1,967
<OTHER-EXPENSES> 2,657 3,357 5,196
<LOSS-PROVISION> 25 28 16
<INTEREST-EXPENSE> 6 16 14
<INCOME-PRETAX> (2,191) (2,142) (3,355)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (2,191) (2,142) (3,355)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (2,191) (2,142) (3,355)
<EPS-PRIMARY> (0.78) (0.75) (1.07)
<EPS-DILUTED> (0.78) (0.75) (1.07)

</TABLE>