SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20546
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
Small Business Issuers
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
FONECASH, INC
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(Name of Small Business Issuer in its charter)
Delaware 22-3530573
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
90 Park Avenue, Suite 1700, New York, New York 10016
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 984-0641
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Securities to be registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
COMMON STOCK, par value $.0001 per share
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(Title of Class)
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FORM 10-SB
TABLE OF CONTENTS
PART I
Item 1 Description of Business
Item 2 Management's Discussion and Analysis of Current Financial
Condition and Plan of Operation
Item 3 Description of Property
Item 4 Security Ownership of Certain Beneficial Owners & Management
Item 5 Directors and Executive Officers
Item 6 Executive Compensation
Item 7 Certain Relationship and Related Transactions
Item 8 Description of Securities
PART II
Item 1 Legal Proceedings
Item 2 Market Price of and Dividends on the Registrants Common
Equity and Other Shareholder Matter
Item 3 Changes in and Disagreements with Accountants
Item 4 Recent Sales of Unregistered Securities
Item 5 Indemnification of Directors and Officers
Item 6 Financial Statements
PART III
Item 1 Index to Exhibits
Item 2 Description of Exhibits
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Item 1 - Description of Business
(a) History of the Company
FoneCash, Inc. (the "Company") was incorporated under the laws of the State of
Delaware on August 7,1997. Based upon market research, the Company developed a
system of processing credit cards for an under served community of low volume
merchants and in-home salespersons. On October 10,1997, the Company signed an
agreement with Advance Data Information, Ltd., (hereinafter "ADI"), located in
Taipei, Taiwan, to supply the design engineering for the hardware and the
software of these various devices. ADI is a privately owned company of Dr. John
Wu, a U.S. citizen, who employs eight engineers in all stages of the engineering
process from concept to design of hardware and operating systems to selection of
a manufacturer and inspection and quality control of the final product. The
Company has plans to merge ADI into its own corporate structure and provide the
ongoing budget which will be needed in order for the Company to stay ahead of
rapidly developing trends.
Additionally, the Company has entered into a License agreement with Mr. Thomas
J. Ulrich by which it acquired exclusive, worldwide rights to a U.S. patent
which provides a method for powering telephone devices directly from the
telephone line without external power. The Company has agreed to pay Mr. Ulrich
a $30,000 execution fee plus royalty payments in exchange for the license. The
use of this patent allows the Company to make an electronic terminal that can be
used by merchants when payment is made with a credit or a debit card. The
terminal is called FoneCash and, in conjunction with the automated computer
system, is flexible enough to expand into many markets, including the
hospitality industry, mobile sales organizations, multi-level marketing
companies, home shopping, home banking, secure movie payment, pre-pay card
activation and many similar applications.
In general, the terminals provide greater convenience to purchasers and
providers of goods and services, reducing processing costs, settlement delays,
and, depending on the application, reducing losses from fraudulent use of credit
and debit cards. Terminals are electronic processors of credit and debit cards,
or medical and government benefit cards where the transaction is initiated by a
provider of products, services or benefits. In the case of debit and credit
cards, the largest market for terminals, the FoneCash System collects the data
and the means of payment and electronically charges the customer's account at
the bank issuing the card and electronically deposits payment in the merchant's
bank account, usually within 24 - 48 hours.
The Company markets a product line that is low cost, high quality and low
maintenance, and thus, not only is able to compete with the higher cost of the
current makers of terminals, but also uses a different, simplified method for
collecting and transmitting the credit card data. The Company expects growth in
each of the financial retail market, international market and the various
in-home shopping and mobile merchants markets.
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The Company has never operated under any other name, nor has is ever been
involved with any bankruptcy, receivership or similar proceeding or engaged in
any material reclassification, merger, consolidation, or purchase or sale of
assets.
Industry Background
Based upon its research, the Company believes that transaction automation
represents a major opportunity for consumers, retailers, manufacturers,
financial institutions and government agencies. Millions of transactions are
completed every day, including purchasing groceries, gasoline and restaurant
meals; filing insurance claims; validating credit eligibility; processing
pharmaceutical prescriptions; punching time clocks; and issuing government
welfare benefits. Until the 1980s, automating the processing of everyday,
routine transactions was not cost effective, and most transactions were
completed manually. Major changes in computer and telecommunication technology,
however, enabled the development of automated terminals that rapidly capture and
process transaction data electronically.
The most important development in this market in recent years has been the
proliferation of general purpose credit cards such as American Express,
Discover, MasterCard and VISA. When credit cards were first introduced more than
twenty-five years ago, they offered significant potential benefits to consumers,
merchants and financial institutions. However, losses from fraudulent credit
card use and the high costs of manual transaction processing were major factors
that originally limited their broad acceptance. To guarantee payment for a
credit card purchase, credit card associations, such as VISA and MasterCard,
required merchants to follow certain card authorization procedures. Initially,
these procedures involved searching through long printed lists of ineligible
card account numbers or telephoning a representative of VISA or MasterCard to
authorize the purchase. As a result, credit card purchases could take up to
several minutes to complete, causing higher transaction processing costs for the
merchant and the authorizing institution as well as frustration for the
consumer. These manual methods were cumbersome and often ignored. As a result,
through the 1970s, losses from credit card fraud continued to mount. In an
effort to reduce fraud losses and processing costs, and to stimulate more
consumer usage, VISA and MasterCard in 1983 offered merchants and their banks
reduced transaction fees if they converted to an automated electronic
authorization procedure. This procedure involves the use of an electronic
terminal to read the cardholder's account information from the card's magnetic
stripe and capture the amount of the sale from a keyboard. The terminal then
automatically transmits the transaction information over public or private
communications networks to a remote authorization computer and quickly displays
the approval response.
While terminals offered significant potential benefits, the initial terminals
introduced in the early 1980s were relatively expensive (between $500 and
$2,000) and generally slow, unreliable and difficult to use. The costs and risks
involved with using these early terminals often outweighed the economic
incentives provided by the credit card associations and, therefore, their
acceptance in the payment processing market was
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limited. From 1978 to 1983, the dominant equipment supplier in the industry was
Omron, a Japanese company, with a wholly-owned American subsidiary In 1981,
Verifone, the current leader in the industry, was founded and sold its first
terminals in 1983.
Industry Trends
The Company believes that several major economic, technological and regulatory
trends are currently under way which management of the Company expects to cause
transaction automated processing markets to increase over the next few years.
o Those markets which have traditionally accepted credit cards, specifically
the United States, Canada and Mexico, are undergoing extensive upgrades
and replacements of existing terminals, and are requiting more
sophisticated systems and more expansive payment processing applications.
o The cost of fraudulent credit card use is increasing the demand for
additional security features in terminals, such as signature and
fingerprint verification.
o Several states have converted to debit cards in place of paper food
stamps. The international market has been implementing national
telecommunication systems and payment processing networks within each
country.
o Catering vehicles are among many other new point of sale ("POS")
locations.
o The introduction of interactive cable television is beginning to open a
market for low cost terminals.
o Hand-held, portable, wireless terminals, using either cellular digital
packet data ("CDPD") or radio modem will become an increasingly important
part of the expansion of the cashless payment market.
o There has been an increased use of digital transmission of data, whether
over land-lines by the use of an integrated service digital network and
digital data over voice, or by wireless transmission by radio modems or
cellular networks. The advent of debit cards has resulted in an increase
of terminals in supermarkets, convenience stores. Mobile digital packet
data modems, all of which are faster than the standard dial-up analog
technology and cuts the 15-30 second verification response time for
transactions to 4-5 seconds.
In addition, in December, 1994, VISA and MasterCard changed their rules so that
nearly half of the existing terminals have become obsolete. There are an
estimated 4.5 million terminals needed replacement in the United States market
alone with an estimated 2 million to 2.5 million additional terminals outside
the U.S. needing replacement.
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Besides the replacement market, there are still untold numbers of merchants who
do not have an electronic transaction device and still use the obsolete method
of taking a hand impression of a credit card, using an old fashioned,
mechanical, hand, operated imprinter. The merchant takes these daily paper
receipts to a bank where they are then processed with the funds being received
in the merchant's account 4-5 days later. The process is long and the delay in
depositing the funds causes serious cash flow problems for the merchant. These
merchants are called "paper-based merchants", meaning that they do not have an
electronic, automated system for taking payment by credit or debit cards. In the
past, VISA and MasterCard printed a bi-monthly negative file report, which
listed faulty accounts. In December,1993, VISA and MasterCard made a decision to
stop printing this negative file report at the end of 1994. The result was that,
any merchant without an electronic terminal has no way to instantly verify the
card of the customer. The merchant has to either reject the idea of taking
credit cards, which may have a negative impact on the merchant's business, or
take the risk that the cards may be invalid. An additional negative impact on
the merchant is that the banks have absolute recourse to the merchant for
charges that are made without verification of the validity of the credit card,
whereas with electronic verification, VISA and MasterCard take the risk. Without
electronic verification, most banks do not want to be unnecessarily at risk and
have decided to almost triple the charge per transaction for merchants who do
not obtain an automatic, electronic terminal.
The number of merchants continuing to take paper transactions is estimated to be
in excess of 1 million. VISA and MasterCard estimate that a total of 1.2 million
to 1.3 million terminals are currently needed for such merchants. Now, for the
first time, FoneCash will offer a solution to both these paper based merchants
and to the banks who want to keep the portfolios of these customers who have
been loyal but find the cost of processing the paper receipts prohibitively
high. FoneCash is an integrated system that provides paper based merchants with
an automated conversion method for processing credit card transactions. These
merchants who typically have less than 100 transactions a month have been
targeted by the Company because the banks want to move them from paper receipts
to electronic based credit card authorization and electronic data capture.
The following table, based upon data from various industry sources, sets
forth the number of paper based merchants and the number of transactions
processed for these accounts.
Card Processors Paper Based Merchants Transactions Per Year
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Bank of America 119,000 55.3M
NaBanco 250,000 21.3M
NationsBank 65,497 23.3M
Equifax 40,000 12.5M
First Bank System 90,400 12.5M
Wells Fargo Bank 30,772 13.4M
Firstar 33,150 27.4M
Norwest 36,400 8.6M
BankOne 79,800 5.9M
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Markets and Applications
There are currently four markets for the Company's terminals: payment
processing, electronic benefits transfer, home market, and time and attendance.
Payment processing represents the largest of these markets.
Payment Processing Market
In order to understand the Company's potential role in this market, it is
important to examine the various participants' roles and motivations for using
the terminals. Based upon management knowledge of the industry, typical payment
processing transaction without an electronic transaction terminal may be
explained as follows:
After accepting a credit card from a consumer, the merchant makes an impression
of the credit card using a manual press, called an "imprinter". All the
information is entered on the paper receipt in ink pen by the merchant and,
after completing the various entries, the customer signs the receipt and is
given a copy. The merchant keeps a copy of this same receipt for his records and
takes all of the accumulated receipts from all his credit card transactions and
deposits credit card drafts with his bank (the merchant bank). The merchant's
bank then handles these paper drafts in a manner similar to the method for
processing paper checks, i.e., the drafts are sent to a clearinghouse; funds are
withdrawn form the payer's account and deposited in the account of the payee in
this case, that of the merchant who took the credit card for payment of goods or
service, less a percentage fee called the discount rate. The discount rate is
negotiated between the merchant and its bank and depends on a variety of factors
including the merchant's transaction volume and the competition for the
merchant's banking business. Through payment processing networks, the
cardholder's bank (the issuing bank) credits the merchant bank for the amount of
the draft less a fee called the interchange fee. Interchange fees are
established by credit card associations to govern transactions between all
merchant and issuing banks. The issuing bank is responsible for billing and
collecting from the cardholder. Increasingly, third-party service providers play
dominant roles in processing these transactions for merchant and issuing banks.
Credit card associations, such as VISA and MasterCard, seek to increase the use
of credit cards while minimizing processing costs and losses from their
fraudulent use. For this purpose, an electronic solution was invented to quicken
the transaction at the cash register and to add security features that would
apply automatically to each purchase. Now it was time for the entry of the
automated transaction terminal. Processing costs were lowered as a result of the
labor savings achieved through the automation of the authorization and
settlement process and losses were reduced due to the of on-line authorization
systems. For consumers and merchants, electronic authorization and settlement
resulted in an increase of speed and convenience of using credit cards, and
encouraged their wider use and acceptance
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Merchants achieve the additional benefit of more rapidly available funds
resulting from processing of credit card drafts. Instead, for instance, of
waiting six to seven days for a paper draft to clear and be deposited in his
account, the merchant, using an electronic terminal, now had his funds deposited
within 24 to 48 hours. The issuing bank also benefits through faster transaction
settlement cost, lower credit losses and higher transaction volume.
The merchant bank profits on the spread between the discount rate received and
the inter-change fee paid, net of processing costs. In order to stimulate
adoption of terminals, the credit card associations offered merchant banks
reduced interchange fees and other incentives beginning in 1983. On a typical
transaction, therefore, the merchant bank could significantly increase its
profit by adopting the automated transaction system while charging the same
discount fee. As a result, some banks, especially in developing countries, often
provided the system to merchants free of charge. As the market evolved, merchant
banks reduced discount rates to attract additional merchants and larger, more
sophisticated merchants began to negotiate lower rates more aggressively. As
competitive pressures further reduced discount rates, merchant banks were
required to process a high volume of transactions to make a profit. Many
merchant banks could not compete in this environment and sold their merchant
portfolios, or contracted with industry service providers ("ISPs"), who had the
transaction volume necessary to process credit card transactions efficiently. In
addition. merchant banks could no longer afford to give away the terminals, but
in certain cases, merchants were willing to pay for these terminals to obtain
lower discount rates. Merchant banks also found that it was often more efficient
to contract with independent sales organizations ("ISOs") to market and sell the
terminals. Currently, ISPs, ISOs and merchant banks seek to differentiate
themselves from competitors by offering to merchants additional applications
such as inventory reordering, payroll processing and tip reporting. The Company
works closely with such parties and credit card associations to develop such new
applications. The following are several of the sub-markets within the payment
processing market.
1. FoneCash and the Traveling Salesperson. The Company anticipates that a
large market for the FoneCash terminal will be the traveling salesperson.
FoneCash is portable and ideal for this application The salesperson carrying
this unit could be selling cosmetics, household products, insurance policies,
encyclopedias or a number of other item. After a demonstration of products or an
explanation of services, the in-home salesperson could accept payment by credit
or debit card by merely attaching the FoneCash terminal to the standard
telephone. It has been observed that, by accepting credit and debit cards for
payment, sales are increased. The Company believes that use of the FoneCash
terminal by in-home salesperson represents a significant expansion of the market
while sacrificing none of the security features of a secure electronic credit
and debit transaction.
2. FoneCash as Home Installed Unit. The Company has noted that a card
reader in every home has been a goal of many banks and suppliers of these
terminals. With new programs such as secure Pay Per-View TV, home banking, home
shopping
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clubs, groceries delivered to the home, restricted Internet access, payments of
income taxes, and a variety of other programs, instant credit card payment made
available through the FoneCash terminal. The home telephone system is the
largest wide area network (WAN) in the world and it literally is connected to
almost everything which gives FoneCash capability to act as a payment device for
most any service. FoneCash is user installed, cheap enough to be considered a
give-away item, and positioned to address multiple markets because its
Interactive Voice Response (IVR) system and data bases are designed to handle up
to thousands of separate customers with full service programming.
3. PrePay Calling Card Activation. The Company believes that the pre-pay
telephone calling card market has been evolving for years and has recently
experienced a heated market sensation. Pre-paid telephone calling cards are
often sold behind the counter at small merchant locations such as neighborhood
7/11 or gas station convenience stores. This has created a problem for the
merchant who has to deal with stolen cards from behind the counter. The better
arrangement is to have the card located on stands throughout the store instead
of behind the counter. The FoneCash terminal solves this problem. When installed
on the merchant's telephone line, the FoneCash terminal allows the merchant to
swipe the prepay card, activating the card in real time. This advantage means
the merchants can place cards anywhere in the store knowing they are useless
paper until activated by the terminal. The use of the FoneCash terminal to
activate cards also gives the provider other unique advantages such as tracking
sales, recharging cards on the fly, credit card purchases for cards, credit card
authorization services, and many other new services
4. Reloading of CashPurse Cards for Train and Subway Cards. Recently,
banks, including Wells Fargo, Chase Manhattan and other financial institutions,
such as Dean Witter and Discover, agreed to market cash card which is a plastic
card containing a computer chip that can be use to make purchases in vending
machines, via pay telephones and over the Internet. Customers can transfer money
from their savings or checking accounts onto this card at an automated teller
machine (ATM) or by using the FoneCash terminal in their home. Suburban trains
and subway system are increasing the use of a card to pay for trips within a
geographical area, usually between suburbs and cities, across bridges, and
within larger cities. An initial amount of money is transferred onto this smart
card and amounts are deducted as trips are used. In order to replenish the card,
commuters now have to stand in line at toll booths or in hot, over crowded
subway or train station. Using the FoneCash terminal, however, can allow a
commuter to transfer money onto the card from the privacy of his own home using
the telephone and accessing his account at the bank.
5. Fast Food Restaurants. Fast food restaurants are multi-lane retailers
because they have multiple payment sites. However, as a result of higher
transaction volumes and lower average transaction prices, fast food restaurants
require a different authorization technology to minimize transaction processing
time and costs. Management of the Company believes that the fast food segment
represents one of the largest potential opportunities for its FoneCash
terminals. In conjunction with the
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CashPurse cards mentioned above, fast food purchases could be made with a
FoneCash terminal located at each cash register station. If this becomes
possible, consumers would increase use of the CashPurse cards, using the
FoneCash terminal in their home to transfer money onto the cards, thereby
driving the fast food restaurants to increase usage of terminals at the point of
sale.
6. International. Management of the Company believes that the
international market presents a significant opportunity for the Company,
especially in developing countries of Eastern Europe, the former Soviet Union
and China, as well as other countries in Asia. Many of these countries have no
reliable land line type telephone systems and are just now investing to
upgrading and expansion. The cost of buried land-line telecommunications is
prohibitive so many of these governments are investing in wireless telephone
systems. FoneCash, using a wireless-modem operated by batteries, becomes a
completely portable terminal which can be used for any of the applications
already mentioned.
7. Electronic Benefits. Transfer Market. In 1998, the U.S. federal
government has announced that all Social Security benefits will be deposited
directly into a designated bank account of the beneficiary. The electronic
government benefits is a logical extension of payment processing automation.
Using the FoneCash terminal in conjunction with the CashPurse card, a
beneficiary can transfer money onto a smart card and use this card to make
various purchases, pay for rent and medical treatment and in any other number of
ways that cash is used. The key to all of these new programs is a low cost
terminal in the widest possible area of actual and potential usage.
Strategy
The Company's goal is to establish itself as a prominent force in the automated
transaction industry by pursuing the following strategies:
o Target first the paper based merchants which the Company estimates number
approximately 1.3 million accounts by some 83 banks and financial
institutions in the United States.
o Accelerate the replacement of existing terminals by providing new products
incorporating enhanced features and creating new software application
programs that provide customers with competitive advantages, such as
increasing the use of CashPurse cards and Smart Cards.
o Entering new segments of the payment processing market by developing
terminals for fast food chains, and in-home use to transfer money onto
pre-pay cards for buses, taxis and subways.
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o Develop opportunities for transaction automation in the international
payment processing market, which the Company believes is largely untapped
and potentially larger than the U.S. market.
o Develop other markets for transaction automation, such as in-home sales
and the home market, wireless transmission and accessing Social Security
benefits and payment of income taxes.
Management of the Company believes that the foregoing factors are the key
elements of its operational strategy.
Price/Performance
The Company seeks to obtain a share of the market for payment processing by
marketing its low cost FoneCash terminals that are more cost effective than
other terminals currently sold in the market. As compared to other systems that
typically sell from $130 to $580, the FoneCash terminals costs much less to make
and will sell for under $100 in most cases. Moreover, other terminals are not
sold outright but, in most instances, are leased for $28 to $75 a month for 36
or 48 months on a non-cancelable lease, which includes a terminal and a printer,
thus, making the real cost to the merchant for this automated transaction
payment system from $1,000 to $3,600. Most paper based merchants have fewer than
100 transaction per month and have resisted purchasing or leasing a more costly
higher-end use terminal system. As long as the banks continue to accept paper
receipts for credit card payment, the merchants are content to process credit
card payment in the old way. The banks, who would like to rid themselves of
paper receipts, do not want to do anything to end the relationship with
merchants who have been loyal and have many other accounts at these same banks.
The banks, therefore, have a problem that the Company believes FoneCash is in a
position to solve or alleviate.
Profits to FoneCash for Processing
The Company believes that of the total of 1.3 million paper based merchants in
the United States, it can gain a market share within five years of 38%, or
510,000 merchants. Assuming a transaction fee paid by the banks to FoneCash of
30 cents per transaction, the total yearly revenue would amount to $40 million,
or approximately $3.3 million monthly. This assumes that 510,000 terminals are
taking 20 transaction payments each month.
Beyond the present paper base merchants, the Company believes that, because of
new applications for the FoneCash terminals, within the same five year period,
500,000 terminals could be in use for in- home salesperson, pre-paid telephone
card merchants and other applications already mentioned above. The Company's
projections for growth in these markets may be incorrect. The Company may not be
able to sell its product in these markets even if they do grow as expected.
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Manufacturing and Distribution
The manufacturing of the Company's products is done under a license agreement
between the Company and an Yue-Shoung, Ltd. an electronic manufacturer of
telephones and telephone equipment, located in Taiwan, with revenues of $250
million in 1996. This supplier makes a line of electronic products, including
touch screen displays, close-circuit video security systems, video telephones
and similar electronic products.
The Company intends to establish up to three master distributors, one in the
Western United States, one in the mid-West and one on the East Coast with
comparable server Wide Area Network (WAN) system. The likely candidates for
these distributors are current ISO's who have a vested interest in obtaining
products at the lowest price for their own accounts, but also have the ability
to sell and distribute products to other smaller ISOs that they have contacts
with or have supplied in the past. The Company seeks to acquire these ISOs and
their sales agents and recruit technical staff capable of being trained on the
Company's products. Since many of these ISO's are under funded, the Company
believes that a capital infusion will be a positive incentive for these ISO's to
sell their organizations or, at least, to allow a majority interest in the
operation in return for funds.
As a distributor for its wireless system model, the Company will negotiate
agreements with several of the companies in the wireless communications market,
such as GTE, AT&T, Ameritech and Bell Atlantic. The Company plans to enter into
exclusive distributorships with sellers of cellular phone service, specific
industries such as taxi cabs and rental car companies and door-to-door service
companies, such as UPS, Federal Express and trucking services.
Sales and Marketing
As a general policy, the Company intends to make direct sales to the banks that
have the 1.3 million paper based merchants. The negotiation for these sales is
more complicated, and the technical aspects of the system must be thoroughly
explained. As part of this sales strategy, the Company is proposing to conduct a
cost-free test of the FoneCash terminal by delivering an IVR system to a
selected number of banks' paper based merchants, perhaps up to 50 to 100
merchants each. The Company will assume all the cost of placing the terminals,
training the merchants, and processing the transactions on a daily basis. The
bank will be asked to monitor it costs and profits and to compare them with its
costs and profits from processing paper receipts. The Company estimates that the
cost of processing a paper receipt is approximately $1.40. Usually the bank
would charge a merchant with an automated transaction terminal a rate of between
1.2% and 1.8%. On an average transaction amount of $75 dollars, this would
amount to between $0.90 and $1.35. The Company believes that a paper receipt
merchant, banks are charging between 7% and 10% because of the increased cost
for labor, cost to the clearinghouse and cost due to the increase risk
associated with taking a credit card without access to an electronic
authorization and approval system.
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The Company, in addition to direct sales to banks with paper based merchants,
plans to sell only to acquired distributors (ISOs) who in turn have full-time
salaries and commissioned salespeople to call on merchants. The selected
distributors can also sell to other ISOs and systems integrators who, while not
direct users of the terminals, sell terminals to banks and third party
processors of credit and debit transactions. The Company and its expanded
network of ISOs, however, will also attempt to make direct sales to individual
in-home salespersons, putting them on a processing system located in the region
of one of the Company's ISO's. Instead of each in-home salesperson having to
seek approval from a merchant bank, the Company's ISO can act as the one major
merchant and all of the in-home salesperson will be considered branches. For
example, a large department store can have many cash registers with a P0S
terminal. But each cash register is not a separate merchant account, only the
parent company Is considered the "merchant". At the end of the workday, all of
the transactions from each of the cash registers is collected in the "back-room"
computer and batched out for processing and settlement of accounts. The Company
can act as the "parent merchant' for all or these smaller in-home salespersons.
The Company anticipates that international sales will be handled through master
distributors in each country. Products, training and technical support are
expected to be supplied by the Company with royalties paid by the distributors
to cover these costs.
In addition, the Company intends to enter into discussions with a major supplier
of business products to discount office suppliers and other retail outlets.
These suppliers would package the FoneCash terminal supplied to them and display
it along with other business machines. The purchaser would be given an 800
telephone number to call; the Company would handle the arrangement for
connecting the purchaser with a bank to open a merchant account and explain the
operation of the terminals.
Marketing Strategy
The Company intends to engage a firm to create promotional brochures regarding
the Company's terminals and Company's services, emphasizing price, quality and
support services. This material is expected to be sold at cost to distributors
to be used in their sales presentation. Annually, the Company plans to
participate in 4 to 6 forums and exhibitions, such as the Retail Merchants'
Show, the Debit Forum, the American Bankers' Association, the Fraud and Security
Forum, the COMDEX show, where wireless products and innovative computer and
telecommunication products are presented, and the Food and Restaurant
exhibition. The Company also intends to engage a firm to design and place
advertisements in several of the industry's leading publications, including
Credit Card Management, the Blue Book Directory of the Credit Card Industry and
P0S News, a monthly publication from Faulkner & Gray, a publisher in New York.
The Company's own marketing executives also intends to visit executives and
decision makers among the banks and processors. At this level cost and
performance are top priorities, as banks are looking for solutions to overhead
and insisting that any change results in increased profits. At this time, the
Company intends to focus on marketing
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only one core product that it strongly believes is needed and wanted by banks
that have a problem with the cost of processing paper receipts. After sufficient
revenues have been achieved, the Company intends to enter more into developing
software and instilling the attitude that, as a software solution house, it, in
conjunction with customers' staff who have identified problems, can formulate
efficient software solutions. Solutions usual involve hardware, and the Company
has advantages from its Chairman's long association with suppliers in Asia. But,
more typically, software will be the answer to most of the customer's critical
needs. Because of this emphasis on software problem solving and solutions, the
Company plans to develop a hardware platform that will allow maximum flexibility
and programmability.
Marketing to Electronic Benefits Market
This sector of the market is divided between government benefits, such as Food
Stamps, Social Security payments, pensions, and family support payments. The
Company's marketing plan calls for the recruiting and hiring of a manager for
each of these specialized sectors; these individuals will report directly to the
Vice President of Marketing. While this sector of the market will not be
targeted immediately, it is important that the Company be kept informed of
developments and offer assistance to various study groups who are discussing
issues relating to this market.
Marketing to International Sector
The Company plans to have one master distributor in each major country outside
of the United States. In most cases, the Company will have to be registered in
each country in order to have a local presence for purposes of electrical and
telecommunication approvals of its equipment and have primary responsibility for
hardware and software support of its distributors. Overall responsibility for
the international distributors will be assigned to one manager who will report
to the Vice President of Marketing. Based on growth figures, the Company has
targeted 5 countries as overseas markets with the most potential, namely,
Mexico, China, Hungary, Chile and Greece.
Products
Terminal Hardware:
Currently there are two terminals, manufactured by Yue-Shoung, Ltd. in Taiwan,
and available for sale by the Company unlike any similar terminal in the market.
FoneCash can operate on an automated interactive Voice Response (IVR) network
completely under the control of a comprehensive Dual Tone Multi-Frequency (DTMF)
management system. The IVR system modem protocol would involve features such as,
hang-up, reprogramming itself, or a variety of other powerful on-line features.
FoneCash is unique for its store-and-forward line powered operation, defined and
developed over the years by the patent holder and has many unique features that
the Company believes sets FoneCash apart from the competition. The host computer
can provide a centralized platform for the FoneCash to collect call records,
transaction records, data-base
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management and terminal management. The protocol for the FoneCash terminal is
much different from the standard transaction terminal sold by the competition,
even though the protocol of the FoneCash IVR dialing into a third party
processor would be virtually identical to the standard terminal protocol.
FoneCash can work behind a Private Branch Exchange (PRX), a Switch or IVR system
and can he easily programmed.
FoneCash Terminals Main Unique Features
The Company believes that the main unique features that set FoneCash terminals
apart from the competition are:
o Low cost
o Telephone line powered/ no battery; no external power adapter needed
o 9 memory pre-dialer keys- easily programmable
o Sophisticated call routing; works on any analog system
o User friendly and user installable
Service and Support
The Company believes that the quality and reliability of its terminals and the
ongoing support of such terminals are important elements of its strategy. The
Company's service organization provides pre-sales consulting, application
software development and support, site survey, deployment, field installation,
24-hour toll-free hotline service, expedited system replacement programs and
repair. For customers using the Company's deployment services, the Company ships
programmed systems directly to end-user locations and downloads new application
programs and software updates across telephone lines directly to the end-user's
organizations.
The Company provides a five year warranty on its terminals. Warranty expenses
have not been calculated to date but are expected to be low. Extended
maintenance agreements following the warranty period are also available,
although revenues from such agreements are not expected to be great. Management
of the Company' plans for its customer support to be excellent and expects that
most customer problems may be resolved over the telephone through the 24-hour
toll-free hotline service.
Research and Product Development
The Company expects to work closely with its customers to define new product
concepts and identify emerging applications for its products. The Company's
research and development efforts are presently focused on modification of
existing products for new market opportunities, the development of advanced
transaction automation systems, new tools which allow programmers to develop
software applications more rapidly, products to exploit innovative
communications technologies and increasing semiconductor component integration.
There can be no assurance that any of the Company's research and product
development projects will be successfully completed.
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Competition
The industry is generally referred to as the as the transaction payment industry
and is divided into two major segments. In one segment are the manufacturers of
hardware, known as terminals, which are electronic devices for capturing the
data from some medium, such as a magnetic strip or from data stored on a
microchip embedded on a plastic card. In the other segment of this industry are
the data processors, such as First Data Corporation (FDC), Paymentech, Nova
Information Systems and some several other smaller processors, who, when the
data from these terminals is transmitted to their computers by wired or wireless
transmission, verify the card as being valid and authorize the purchase for the
specific amount indicated by the merchant.
Terminal Manufacturers
The leader among the terminal makers is Verifone, a U.S. based company, publicly
held and since 1997, part of Hewlett-Packard. it is generally conceded that
Verifone has market share of 65-67% of the terminal market worldwide, based upon
delivery and installation of product.
Hypercom was founded in Australia, and has a U.S. base in Phoenix, Arizona and
is a privately held company. Management believes Hypercom is the second largest
maker of on-line stationary terminals with approximately 16% share of the market
for sale and installation of these electronic devices.
Lipman is an Israeli based maker of terminals and, since 1995 has gained some 55
per cent of the market for sales of these terminals.
Dassault and Ingenico are both French companies and, along with some other
makers, such as Goldstar of South Korea, make a line of terminals used mostly in
these companies respective domestic markets. The Company believes their sales
amount to no more than 10,000 units a year.
The retail prices for all of these terminals range on average from $400 to $700
and, if other peripherals such as a printer are added, can add up to $800 to
$1000. But this equipment has generally been leased to the merchants with a
monthly payment scale of from $30 a month to a high of $70 a month for 36 to 48
months, thus bringing the real cost to the merchants over $1400 at even the
lowest payment schedule.
Payment Processors
The payment processor perform the services of collecting the data received from
any of the various makers' terminals and verifying the credit card as having
been issued by one of several hundred banks authorized to issue credit cards
and, most importantly, settling the accounts in each 24 hour period so that the
merchant who accepts a credit card in payment for goods or services actually
receives payment.
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The Company competes in the terminal manufacturing segment of the market on the
basis of product quality, price, customer support and responsiveness, product
features, availability of software application programs, the ability to program
new software applications efficiently and the number of network and government
certifications for its products and application programs. The Company believes
that it is competitive with respect to each of these factors.
Unique Competitive Pricing Factors
When the industry is viewed as a whole, the Company believes it does not compete
with any of the terminal makers because they only sell hardware, nor does it
compete with the processors because processing is their only service. Unique
among all other terminal manufacturers, sellers and distributors of automated
transaction systems is the Company's expectation that it, not only can market
hardware, i.e., the actual, physical terminal, but also is a vital link in the
processing of each and every transaction and can, therefore, charge the banks
for handling the approval and authorization of the payment. For the banks' paper
based merchants, for instance, FoneCash processing is priced as a fully bundled
transaction at 30 to 40 cents per transaction. No monthly fee for the terminal
will be charged since most banks are willing to purchase the terminals outright
and give them to the merchants. The reason being that the cost to process paper
receipts far outweighs the cost associated with electronic processing. The
merchant should not see any increase in the discount rate charged by their bank
and may even see a decrease due to the lower interchange rate charged to the
bank by VISA and MasterCard. In order to understand exactly what profits the
bank makes, a definition of terms is necessary.
Transaction Amount: This is the amount of the goods or services purchased by the
card-holder.
Discount Rate: This is the gross profit to the bank paid from VISA and/or
MasterCard for processing its credit cards and usually is approximately seven
percent of the transaction amount.
Interchange Rate: This is the amount paid by the bank to VISA and MasterCard for
accessing their data base to verify card numbers.
Processing Cost and Authorization Cost: This is the amount of money paid to the
payment processors such as FDC, Paymentech, Nova Information System mentioned
above, which maintains all the data bases and security features and aids in the
transfer of payments between the cardholders' bank and the merchants' bank.
Net Profit to the Bank: After deducting the cost for the interchange rate and
the processing cost, the remainder is considered the net profit to the bank.
The Company's research indicates that typical transaction amount of a paper
based merchant is approximately $75 and the average profit to the bank on this
transaction, after deducting the interchange rate and the processing costs, is
$2.59 per transaction. Using a FoneCash terminal and paying the 30 cent
transaction fee, the profit to the
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bank on this same $75 transaction would be $3.76, or a difference of $1.07. If a
bank had 30,000 paper based merchants doing 20 transactions of $75 each, this
difference alone would increase profits by $642,000 monthly, or $7,704,000
yearly. The foregoing assumptions may prove wrong, and the Company may not be
able to gain its anticipated market share, or any market share at all.
Also certain of the Company's competitors in at least one segment of the
industry, such as Verifone, which currently commands 67% of the terminal market,
have significantly larger financial, technical and marketing resources than the
Company, and there can he no assurance that the Company will become or remain
competitive in the future. While, at present, the Company believes that it has a
unique advantage because its research indicates that it alone combines the
manufacture of hardware with the actual processing of the payments, there is no
assurance that Verifone or others of the larger makers would not combine the
same services that the Company offers.
In addition, the Company often faces additional competitive factors in foreign
countries including, preferences for local vendors, difficulties in obtaining
necessary certifications and government tariff policies. Finally, the Company
believes that it will need to continue to introduce products containing enhanced
features and additional application software programs in order to remain
competitive. There can be no assurance that the Company will he successful. In
this regard, the Company believes that many of the same competitive factors
present in the payment processing market are also present in the expanded
markets for automated processing of other applications.
Employees
In the U.S., the Company employs 3 full time employees who, besides Mr.
Charboneau, are engaged in administrative and research activities. In Taiwan,
the Company employs 2 hardware engineers, 2 software engineers, 1 firmware
engineer , all of whom are engaged in research and development and ongoing
quality assurance.
Over the past two years, approximately $360,000 has been expended in labor and
material for research and development by the two founders, but there are no
plans to recover these expenditures from the Company with the result that there
is no impact on investors or any cost to be borne by potential customers.
Proprietary Rights
The Company licenses the marketing rights to the technology underlying a United
States patent coveting the FoneCash terminal. The Company relies on copyrights
to protect its operating system and various other software programs. The Company
has registered the FoneCash trademark used in connection with its products and
services in the United States. The Company relies primarily upon its know-how,
rather than patents, to develop and maintain its competitive position. Tile
Company enters into confidentiality agreements with its employees and third
parties. However, there can be no assurance that others will not develop
products and internal safeguards equivalent or
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superior to those of the Company, or that the confidentiality agreements and
internal safeguards upon which the Company relies will be adequate to protect
its interests.
Government Approval and Regulation
Government regulatory policies affect charges and terms for both private line
and public network service. Therefore, changes in such policies which make it
more costly to communicate on such networks could adversely affect the demand
for terminals. The Company must also obtain product certification on the
applicable communications network both in the United States and other countries.
Any delays in obtaining necessary certifications with respect to future products
could delay their introduction. In addition, the Federal Communications
Commission requires that the Company's products comply with certain rules and
regulations governing their performance. The Company believes it has complied
with all such rules and regulations with respect to its existing products.
Item 2 - Management's Discussion and Analysis of Financial Condition and Plan of
Operation
General
All phases of the Company's operations are subject to influences outside of the
Company's control. Any one, or a combination, of these factors could materially
affect the results of the Company's operations. These factors include
competitive pressures, interest rates fluctuations, inflation, especially of
parts and labor, and other market conditions. Forward-looking statements are
made by or on behalf of the Company based on knowledge of its business and the
environment in which it operates, but because of the factors listed above, as
well as other commercial, environmental and business factors over which the
Company has no control, actual results may differ from those in the
forward-looking statement. Consequently, all of the forward-looking statements
made are qualified in their entirety by these cautionary statements and there
can be no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will have
the expected effect on the business and/or operations of the Company.
The Company was incorporated in the State of Delaware on August 7,1997 and
acquired the rights to a patent that allowed the Company to develop a low cost,
portable electronic terminal that could be used by mobile merchants and in-home
salespersons. The Company anticipates that it can generate revenues from sales
of the terminals and from charges collected from each transaction. As of October
31,1999, no revenues have been generated from sales but management anticipates
sales to commence in 2000 after real-time tests are performed with a select
group of merchants and in-home salespersons. While the Company currently has
limited internal and external sources of liquidity, the Company has no plans for
capital expenditures.
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The Company has financed its start up through capital infusion by Messrs. Daniel
Charboneau, the Chairman of the Board and Chief Executive Officer, and John Wu,
Director and owner of Advance Data Information, Ltd, a Taiwan based research and
development company, and founder with Mr. Charboneau in the Company. Messrs
Charboneau and Wu have paid certain expenses on behalf of the Company from
personal funds and from Mr. Wu's business. Also, The Company borrowed a total of
$91,547 from related parties to fund its initial operations of which $45,647 has
been repaid.
For the period ended December 31,1998, the Company raised seed capital of
$84,985 of which $75,357 was used for working capital, legal and accounting
expenses, and registering a domain name on the Internet. The cash balance at the
end of this period was $9,628.
Commencing January 1999 to June 30,1999, the Company raised a total of $701,916
to subsidize future operations through a private placement under exemption
provided by Rule 504 of Regulation D under the Securities Act of 1933, as
amended. The proceeds were used to manufacture a starting inventory of
terminals, marketing and sales activities, technical and engineering services,
and working capital, including the acquisition of certain targeted companies.
The Company's plan of operation for the next twelve months is as follows:
First Quarter 2000
1. Test 400 terminals with four banks for a period of 30 days.
2. Test 100 terminals with 2 groups of in-home salespersons for 30 days.
3. Analyze data from the test and compare cost and profits.
4. Continue manufacturing of 10,000 terminals in Taiwan.
Second Quarter 2000
5. Negotiate orders for installation of terminals with banks.
6. Hire additional personnel, including sales and marketing manager.
7. Negotiate with existing sales organizations for distribution and sales.
8. Start manufacture of 20,000 terminals in Taiwan.
Third Quarter 2000
9. Start R&D on wireless terminal.
10. Deliver and install 10,000 terminals by the end of September.
11. Continue manufacture of 10,000 terminals.
Fourth Quarter 2000
12. Complete delivery and installation of terminal, bringing total to 30,000.
13. Initiate test with wireless terminal.
14. Start manufacturing schedule of 10,000 units a month for 2001
The forgoing plan of operation contains statements of goals and objectives which
are forward-looking and are, therefore, subject to risks and uncertainties. The
Company may be unable to accomplish some or all of these goals and objectives.
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Capital Expenditures
The Company anticipates the need for additional computer equipment, servers, and
telephone exchange systems. This equipment is needed to have additional capacity
to process incoming data from the multiple terminals installed in various
location throughout the United States. This is estimated to cost $300,000. Until
the Company is able to acquire this equipment, it plans to lease the required
services from a third party vendor. Also, the Company has need for office
furniture and wireless communication devices for it managers who must be in
direct contact with the home office at all times.
The Company also has a need to finish construction of its website located at
www.fonecash.com. The Company has engaged Computer Solutions, located in North
Carolina, to construct the website encompassing products and services of the
Company, as well as investor relations. The cost is estimated at $6,500 with a
monthly Web hosting fee of $450.
Management is not aware of any trends, events or uncertainties that are expected
to have a material impact on the anticipated net sales or income from
operations. The business is not subject to seasonal aspects, but traditionally,
credit and debit usage is greatest during the Christmas season.
Capital Needs
The Company does anticipate the possible need for additional capital within a
few months after the testing of the terminals in the first quarter of 2000. The
Company estimates that it will need a total of $3 million to accomplish its
goals for the next twelve months, that is, manufacturing of terminals, hiring of
additional personnel and initiation of R&D on the wireless model. The Company
will need to sell additional shares in either a private or public offering.
Although the Company has no financing commitment from a commercial source of
funds or a letter of intent with an investment banker/underwriter, the Company
remains confident that the financing resources should be available to meet the
Company's future financing needs. There can be no assurance, however, that
favorable financing terms will be available at the time financing is desired.
Further, poor financial performance may adversely affect the Company's ability
to attract commercial lenders, investors, or investment bankers to underwrite
any future financing or stock offering.
FoneCash is very dependent on the active trading of its stock. The Company plans
on using its stock to acquire telecommunications and data processing companies
both for their revenues and for the equipment that can be utilized in the
operation of its core business. If the stock is not actively traded, the ability
of the Company to acquire these companies would be seriously jeopardized.
Without financing, it would be difficult to cover working capital requirements
and future capital expenditures. No assurance can be given that any trading
market will develop for the Company's common stock or that the Company will be
able to find financing.
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Year 2000 issues result from the inability of computer programs or computerized
equipment to accurately calculate, store or use a date subsequent to December
31,1999. The erroneous date can be interpreted in a number of different ways.
Typically, in the case of computers and microchips which have only two digits
representing the year, the concern is that the year 2000 will be interpreted as
the year 1900. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions.
The Company has reviewed the majority of its primary Information technology (IT)
systems and its own manufactured products and believes these systems and
products to be year 2000 compliant. The Company believes the potential impact,
if any, of these IT, non-IT, or third-party systems not being Year 2000
compliant should not materially impact the Company's ability to continue
activities.
The Company believes that the most likely worst case scenarios would involve the
interruption of crucial supplies as a result of infrastructure failures or third
party vendor failures. As a result, the Company is developing contingency plans
that will address the most likely cases of failure. These contingency plans are
expected to be complete no later than December 14,1999. The Company believes
that it is taking appropriate steps to assess and address its Year 2000 issues
and currently does not expect that its business will be adversely affected by
Year 2000 issues in any material aspect. Nevertheless, achieving Year 2000
readiness is dependent on many factors, some of which are not completely within
the Company's control. Should either the Company's internal systems and devices
or the internal systems and devices of one or more critical vendors fail to
achieve Year 2000 readiness, the Company's business and its results of
operations could be adversely affected. There can be no assurances that the
Company or its business will not be adversely affected by any Year 2000 problems
that may be experienced by its customers, suppliers, dealers, distributors or
others.
Acquisitions
As part of the operating plan, the Company anticipates that it will acquire
telecommunications companies and smaller processing companies who are in need of
capital or financing. The Company has identified three immediate targets and has
conducted in depth discussions with the management of these companies. As
planned, these acquisitions will be transacted with the use of cash and the
Company's common stock. In addition to the funds needed for operations and R&D,
the Company anticipates the need for $1.5 million to conclude such acquisitions.
Like the funds needed for operations, the Company will have to raise these funds
from the sale of share either private or public placements. The Company has no
commitment for the raising of these funds but is confident that a source of
financing will be found. Management is aware of the various tax consequences of
acquisitions and will strive at all times to ensure that the interest of the
shareholders is best served.
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Item 3 - Description of Property
The Company owns no property. The Company's principal office is located at 90
Park Avenue, Suite 1700, New York, New York 10016 and consist of 600 square feet
of space which is utilized for administrative and accounting operations whose
rental is on a monthly basis. The Company leases an additional location of
approximately 1200 square feet at 475 Dobbs Ferry Road, White Plains, New York
where it houses computers and inventory on a two year basis with an option to
renew for another two years. The Company plans to lease time on servers from
several competing companies in New York and Florida and is now in the process of
negotiating terms.
If, and when, the targeted acquisitions take place, one of the potential targets
will house all the telecommunications equipment and marketing and sales force
for the entire United States. If, for some reason. these acquisitions do not
take place, the Company can easily locate its servers and computer equipment
into one of several locations in Westchester County, New York which has several
Enterprise Zones where tax credits are available for companies relocating their
operations into these distressed areas.
Item 4 - Security Ownership of Certain Beneficial Owners & Management
The following table sets forth the stock ownership of each person known by the
Company to be a beneficial owner of five percent (5%) or more of the Company's
equity securities, each Director and executive officer individually and all
Directors and Officers of the Company as a group. Each person has sole voting
and investment power with respect to the shares shown unless otherwise
indicated. As of October 31,1999, there were 5,159,872 shares issued and
outstanding.
Name & Address Class Amount Owned Shares Beneficially
of Beneficial Owned % of Class
Owner
- --------------------------------------------------------------------------------
Daniel E. Charboneau Common 2,000,000 39.0
215 Central Park Ave.
Hartsdale, NY 10530
John Jiann-Shong Wu Common 2,000,000 39.0
21 Street, 6 Fl, No.211
Chung-Cheng 4 Road
Kaoshiung, Taiwan
Carmine Auditore Common 100,000 2.0
8 Bridlepath Drive
Old Westbury, NY
11568
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Arthur Murphy Common 20,000 0.4
18 East Huron St.
Chicago,IL 60611
Total Shares of Officers and 4,120,000 80.04%
Directors as a Group
There are no arrangements either presently or planned that will results in a
change of control of the Company.
Item 5 - Directors and Executive Officers
Name Age Position
Daniel E. Charboneau 67 CEO/Chairman/President
John Jiann-Shong Wu 47 Director
Daniel S. MacDonald 64 Director
Arthur Murphy 64 Director
Carmine Auditore 53 Director
John Gill 67 Vice President/CFO
H. Robert Mauti 57 Vice President/Technical
Robert Mosher 42 Vice President/Marketing
Gilbert Starr 52 Vice President/Engineering
Mr. Charboneau and Mr. Wu have five year employment contracts starting in August
1997. Other executives list are not currently full time employees but have
performed services and consultation to the Company and will have two year
contracts of employment starting in January 2000.
All directors hold office for one year or until the next annual stockholders'
meeting and until their successors have been elected or qualified or until their
death, resignation, retirement, removal, or disqualification. Vacancies on the
board will be filled by a majority vote of the remaining directors. Officers of
the Company serve at the discretion of the Board of Directors.
None of the directors holds other directorships in other reporting companies.
The Company's management comprises:
Daniel E. Charboneau, CEO/President/Chairman of the Board:
Mr. Charboneau is an experienced management executive with over twenty years of
accomplishments in the area of marketing, sales, organizational development,
manufacturing and profit-center responsibilities. He has worked with several
multi-national companies, including Bechtel International where he was
Organization Development Consultant from 1974 to 1980, and with 3M in Asia from
1980 to 1984. In a joint venture with A&H, a jewelry maker in Rhode Island, Mr.
Charboneau
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established a manufacturing plant in Taiwan whose products were exported
worldwide. In addition to his duties on the Board of Directors, Mr. Charboneau
directs the development of technologies, products, markets and manages business
relations with Asian suppliers.
John Jiann-Shong Wu, Director/Co-founder:
Born in China, Dr. Wu became an American citizen in 1978 and lives with his
family in San Jose, California when he is not in Taiwan. Educated in Taiwan, Dr.
Wu received His Master Degree in Computer Science from Florida Institute of
Technology and his doctorate in Electrical Engineering from Leland Stanford
Junior University. From 1975 to 1982 he was a Researcher with Taiwan National
Science , and from 1982 to 1988 a Senior Engineer and Project Manager with
General Electric Company in Singapore. From 1989 to 1990, he was a Project
Manger with Digital Equipment Corporation and from 1990 to 1991 he was Senior
Consulting Engineer with Hewlett Packard. Dr. Wu has designed many products,
both hardware and software, and founded his R&D facility to promote better
design of electrical and telephonic products. From 1991 to 1996, Dr. Wu was
co-founder and Vice President of V-Star Electronics, then, from 1997 until
present, Dr. Wu started his own advanced laboratory, Advance Data Information
and became a co-founder in Fonecash.
John P. Gill, Vice President & Chief Financial Officer:
Mr. Gill is a financial management professional, a Certified Public Accountant,
as well as an attorney. Mr. Gill spent 23 years from 1966 to 1989 with The
Ogilvy Group, as treasurer, Corporate Treasurer, and as a Director on the
Executive Committee. Mr. Gill is specialized in setting up accounting and
auditing procedures, as well as expert in establishing banking and investor
relationships.
H. Robert Mauti, Vice President, Systems Management and Product Support:
From 1984 to 1993, Mr. Mauti worked for with Omron Systems of America as
Regional Systems Manager and personally installed the world's first Omron
interactive touch video system for ATM equipment in the Western Hemisphere. Mr.
Mauti has been in charge of large data systems with RCA, Indiana National Bank,
and was Vice President and Manager of planing for on-line computer systems with
Atlantic National Bank. Mr. Mauti is responsible for all in-house software
programming and supports marketing and sales and technical reviews with clients
and customers.
Robert Mosher, Manager, Marketing and Sales:
From 1991 to 1994, Mr. Mosher worked as national manager or OEM products and
services for Verifone, the largest maker of credit and debit card systems in the
United States. From 1985 to 1991, he worked at National Cash Register
Corporation as Major Accounts Manager. He was Group Manager at Computer
Automation from
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1983 to 1985 and serves as a marketing client/server solutions sales
representative, using UMX, 0S2, Windows, and Oracle systems for health,
government and information services Mr. Mosher will direct all in-house
marketing and sale personnel, as well as giving guidance to distributors
worldwide.
Gilbert Starr, Manager, Engineering.
Mr. Starr holds a Ph.D in Electrical Engineering and is the author of many
monograms and papers on microprocessors and computer applications. As president
and owner of Micro Design Associates from 1974 to 1998, he installed network
office computer systems using Novel Network Lite and Novel Personal Netware. Mr.
Starr is in charge of all computer hardware systems as well as products
manufactured in Asia or in the United States.
Carmine Auditore, Director
Mr. Auditore has 17 years experience in the Marketing and Purchasing Divisions
at J.C. Penny Co. His responsibilities included the scheduling, budgeting,
development, purchasing, distribution and other matters related activities of
all point-of-sale advertising materials shipped to over 1700 stores with sales
of over 14 billion dollars throughout the United States. Since 1997, Mr.
Auditore has been the sole owner of East Coast Entertainment which performs
consulting in marketing, export, auto financing and ATM business.
Daniel S. MacDonald, Director
Mr. MacDonald has 22 years of experience in the mutual fund industry and is a
Certified Financial Planner and holds licenses in real estate, insurance and
securities. He has resided in Japan for from 1962 to 1972 as International
Liaison for the Japanese Chamber of Commerce; he speaks Japanese fluently. From
1972 to 1986, he serves in various capacities with Oppenheimer Management
Corporation, first in San Francisco as Regional Sales Manager and ending in New
York as Senior Vice President and National Sales Manager . In 1989,Mr. MacDonald
started MDIC, Inc. in Bronxville, New York, as a financial services corporation
specializing in mutual funds.
Arthur Murphy, Director
Mr. Murphy has 10 years experience in South Korea as administrator of various
voluntary agencies of the United States whose work was supported by both the
Korean and American governments. In 1970, Mr. Murphy was employed as Assistant
Assessor in the Office of the Cook County Assessor for Chicago and environs . In
1990, Mr. Murphy established Urban Real Estate Research, Inc, a company that
performs services for individual property owners who seek adjustment to their
real estate property taxes.
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Item 6 - Executive Compensation
On August 7,1997, the Company entered into an employment agreement with its
chairman and majority shareholder, Mr. Charboneau. Under the terms of this five
year agreement, Mr. Charboneau shall receive a salary of $120,000 per year. Mr.
Charboneau has never been paid this salary and has elected not to accrue this
back pay as a liability on the Company's books. The Company may terminate the
agreement for cause with notice. Disability for up to two years at 100% of
yearly salary is provided, and should the employee die during the term of
employment, the Company shall pay the employee's estate $250,000. The Company
pays for a keyman life insurance of $1 million with The Travelers Group with the
Company as beneficiary in case of the death of Mr. Charboneau.
Currently, no other officers or key personnel receive compensation. If the
Company becomes profitable and produces commensurate cash flow from operations,
the Company's Board of Directors will decide the level of compensation and the
timing for the commencement of this compensation.
The Company currently has no employee stock option, annuity, or pension plans in
place although the Company does intent to provide these benefits at some future
date if it can establish sales and positive cash flow.
Directors do not currently receive any cash compensation.
Item-7- Certain Relationships and Related Transactions
On October 10,1997, the Company entered into an agreement with Advance Data
Information, Ltd. (ADI) for technical services in electrical engineering and
software development. Dr. John Jiann-Shong Wu, the Company's director and
co-founder, is the sole owner of ADI . The Company agreed to issue 200,000
shares of common stock at the signing of this agreement in return for services
connected with the research and development of the Company's products. In
addition, the Company shall have exclusive rights to any and all products
developed as a result of this collaboration. Dr. Wu was also given a five year
option to purchase 200,000 shares of common stock at 120% of the price of the
initial public offering. Subsequently, in June, 1999, the Board of Directors
approved a resolution issuing another 800,000 shares of common stock upon the
agreement of Dr. Wu to merge ADI with the Company.
On February 4,1998, the Company signed an agreement with East Coast
Entertainment, a company owned solely by Mr. Carmine Auditore, a director of the
Company, for professional consulting services relating to public relations,
publicity, advertising, investor relations and development of the Company's
printed material. After the Company attains gross revenues of $300,000, annual
compensation of $50,000 shall be paid in 12 equal installments and after the
Company attains gross revenues of $500,000, the annual fee will be raised to
$100,000.
27
<PAGE>
The Company provided loans to Mr. Charboneau totaling $47,976, payable in one
year at a rate of 6% interest.
There are no other transactions between the Company and officers, directors or
promoters of the Company.
Item 8 --Description of Securities
Common Stock
The Company is authorized to issue 20,000,000 shares of common stock at $0.0001
par value. The holders of the shares are entitled to one vote for each share
held and are entitled to dividend when, and if, declared by the Board of
Directors. No dividends have ever been declared. As of November 30,1999, common
shares issued and outstanding totaled 5,159,872.
There are currently no preemptive rights connected with the common stock.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of no par value preferred
stock. No shares were issued and outstanding as of November 30,1999. Each share
of preferred stock is entitled to dividends when, and if, declared by the Board
of Directors. There are currently no voting, conversion and liquidation rights,
nor redemption or sinking fund provisions for the preferred stock.
Part II
Item 1 - Legal Proceedings
The Company is not aware of any legal proceedings threatened or contemplated
against any of its officers or directors. In addition, the Company is not a
party to any pending legal proceedings.
Item 2 - Market Price of and Dividends on the Registrant's Common Equity and
Other Shareholder Matters
There is no public trading market for the Company's Common Stock. The Company
intends to apply to have the Common Stock traded on the OTC Bulletin Board. No
assurance can be given that such application will be approved and, if approved,
that an active trading market for the Common Stock will be established or
maintained.
As of the date hereof, there are 4, 502,500 shares of Common Stock that could be
sold pursuant to Rule 144 under the Securities Act of 1933, as amended.
As of October 31,1999, there were 153 shareholders of record of the Company's
Common Stock.
28
<PAGE>
None of the common stock is (i) subject to outstanding options or warrants to
purchase, or securities convertible into, common equity of the Company, or (ii)
being or proposed to be, publicly offered by the Company, the offering of which
could have a material adverse effect on the market price of the Company's common
equity.
While there are no restrictions that limit the Company's ability to pay
dividends on common equity, the Company has not paid, and does not anticipate,
paying dividends in the foreseeable future.
Item 3 - Changes in and Disagreements with Accountants None.
Item 4 - Recent Sales of Unregistered Securities
As of October 31,1999, the Company has 5,159,622 shares of its common stock
issued and outstanding of which shares were issued in transactions exempt by
reason of Section 4(2) of the Securities Act of 1933, as amended, and were
issued in transactions exempt by reason of Rule 504 of Regulation D and
promulgated pursuant to Section 3(b) of the Securities Act of 1933, as amended.
In connection with its formation, the Company issued a total of 4,502,250 at par
value of $0.0001 for a total consideration of $167,500. This issuance was exempt
by reason of Section 4(2) of the Securities Act of 1933, as amended.
Shares issued to: Class of Shares Amount
Robert Ahr Common 5,000
Carmine Auditore Common 100,000
Harold Blachly Common 20,000
Herbert Blachly Common 20,000
Christopher Castaldo Common 148,750
Jerry Castaldo Common 10,000
Gerald Castaldo Common 2,500
E.R. Chillag Common 5,000
Leonard Cohen Common 10,000
Donald Daigle Common 40,000
Leonard Cohen Common 10,000
Barry Enders Common 10,000
Michael Eggleston Common 1,250
Rick Genzink Common 40,000
Henry Hoffman Common 10,000
Ernest Koeppen Common 10,000
Joseph A. Lampe Common 12,500
29
<PAGE>
Marc LeFevre Common 500
Timothy Lynch Common 2,000
Jennifer E. Nelson Common 5,000
Virgil R. Plagge Common 10,000
Lindsey Perry, Jr. Common 10,000
Glen D. Primeau Common 10,000
Mitch Warnike Common 10,000
On January 4,1999, the Company issued a Offering Circular pursuant to Rule 504
of Regulation D of the Securities Act of 1933, as amended, for 660,000 shares of
$0.0001 par value common stock at $1.50 a share. The offering was closed by
October 31,1999 with 657,372 shares having been subscribed for a the total of
$821,621. Because the Company offered discounts on certain quantities of shares
purchased, the effective price of the stock offering was $1.25 per share.
Shares Issued to: Class of Shares Amount
Robert Arh Common 5,000
Rui Albuquerque Common 1,000
Ralph Amanna Common 15,000
Robert Amend Common 9,506
Gene Aydt Common 5,000
Calvert Arthur Common 2,000
Shad Ayoub Common 1,000
Vegan Badlian Common 3,500
Glenn Baille Common 10,000
Robert Blane Common 5,000
Nelson Lee Blane Common 3,100
Aeyal Bohodona Common 1,000
Todd Bouton Common 5,000
William Boyton Common 2,500
Jerry Bratton Common 10,000
Dennis Burroughs Common 2,600
David Bulbow Common 400
Joseph Bushman Common 1,000
Joseph P. Camarda Common 1,000
Joseph V. Camarda Common 1,000
Rosemary Charboneau Common 3,000
Keith Chesnut Common 2,500
Robert Mark Chris Common 10,000
Roy Clemes Common 1,000
Roy Victor Clemes Common 1,000
30
<PAGE>
Roberta Coco Common 1,000
Gloria Conzett Common 1,000
James Creglan Common 1,000
Donald Daigle Common 25,000
Darkenwald Family, L.P. Common 1,000
Joseph DeRosa Common 2,500
John Dewey Common 1,000
Andre Dobison Common 2,500
Michael Dobison Common 6,000
Milton Dobison Common 1,000
Grace Donegan Common 4,000
Dorothy Hawkins Trust Common 10,000
Philip Drummond Common 5,000
Dudley Larson Common 10,000
James A. DuHaime Common 7,500
Bryan Eisenhauer Common 5,000
Heidari Farhad Common 3,000
Douglas Fox Common 1,000
G. Jehosehba Holdings, Ltd Common 30,000
Harry Galekovich Common 2,500
David Goldman Common 10,000
George Geogatos Common 1,000
George Gonzales Common 1,000
John Gonzales Common 1,000
Edmund Gould Common 2,500
Daniel Griffin Common 10,000
Elizabeth Hagger Common 1,000
Steve Heckart Common 2,500
Mele & Koloa Heimuli Common 1,000
Henry Heyer Common 1,000
Michael Himmelberger Common 7,500
Alan Hochster Common 2,000
Thomas Hudson Common 1,000
Soane Huhane Common 2,000
Wallace Hunt Common 1,000
William Irvine Common 1,000
Nick Iskanian Common 2,500
Raghunath Jalapti Common 300
Donald Kapan Common 5,000
31
<PAGE>
Mardiros Keoshgerian Common 2,000
Elias Khalil Common 5,000
Kitchen Studio of Monterey Common 2,000
Ernest Koeppen Common 12,300
Daniel Kowkabany Common 2,500
Navin Kumar Common 1,000
Peter Latu Common 4,000
In Lee Common 10,000
Aaron Lehmann Common 1,000
Jeffrey Levinger Common 3,000
Mark Lomazzo Common 1,500
Steven Lynch Common 2,000
Antonio Mangano Common 5,000
Doyle McEacharn Common 2,000
W.Bruce McEacharn Common 5,000
Philip Melfi Common 3,000
Derrick Miles Common 1,000
Joseph Miller Common 12,500
John Monnette Common 2,000
B.R. Moore Common 1,000
Arthur Murphy Common 20,000
Jennifer Nelson Common 5,000
Donald Neuen Common 1,000
David Nute Common 1,000
Gui Chul Park Common 5,000
Peter Park Common 5,000
Rosa Park Common 5,000
Pio Park Common 5,000
Young Hee Park Common 5,000
George Pedersen Common 1,000
Jacob Perl Common 75,000
Robert Pendleton Common 3,000
Lindsey Perry Common 5,000
Dan Pettit Common 1,000
Larry Pickett Common 10,000
Shams Pirbhai Common 2,500
Joseph Ponchart Common 5,000
Quality Filing System Common 2,500
Andrea Ramirez Common 2,000
32
<PAGE>
Martin Ray Common 1,000
David Ruiz Common 666
J.E. Sanders Common 1,000
Jay Schiesser Common 5,000
Christine M. Sofranko Common 25,000
Jay Hyung Son Common 25,000
C. Scott Stanley Common 5,000
Jonathan Studer Common 3,000
Eleanor Svedi Common 1,000
Thomas L. & Euna M. Sulzbach Common 2,000
Richard Thompson Common 10,000
Ed Toon Common 5,000
James Trapp, Jr. Common 10,000
Ronald Velarde Common 1,000
Thomas Vellia Common 4,000
Scott Walstead Common 1,000
Mitchell Warnike Common 10,000
Scott Warnike Common 1,000
Francis Weber Common 1,000
John Welker Common 25,000
Gwen Whitcomb Common 1,000
Brian Wilson Common 1,000
Steven Zuckerman Common 1,500
Gilles de Clerck Common 5,000
The Company's transfer agent is Manhattan Transfer Registrar Co., 58 Dorchester
Road, Lake Ronkonkoma, New York 11779, (516) 585-7341
Item 5 - Indemnification of Directors and Officers
Pursuant to the Delaware General Corporation Law, officers and directors of the
Company, as well as former officers and directors, are entitled to
indemnification from the Company to the full extent permitted by law. Neither
the by-laws nor the Articles of Incorporation provide for the indemnification
for directors' liability in any way. However, the Company's by-laws generally
provide for such indemnification for claims arising out of acts or omissions of
the Company's officers and directors in their capacity as such, undertaken in
good faith and in a manner reasonable believed to be in, or not opposed to, the
best interests of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that his/her conduct was
unlawful. The conditions and extent of indemnification are set forth in the
By-laws of the Company. Insofar as indemnification for liabilities arising under
the
33
<PAGE>
Securities Act of 1933, as amended, may be permitted to officers and directors
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
Item 6 - -Financial Statements
INDEX TO FINANCIAL STATEMENTS PAGE
FINANCIAL STATEMENT (Inception to December 31,1998)
Independent Auditor's Report 35
PAGE
Balance Sheet 36
Statement of Income(Loss) 37
Statement of Changes in Stockholders' Equity 38
Statement of Cash Flow 39
FINANCIAL STATEMENT (JANUARY1,1999 TO September 30,1999)
Independent Auditor's Report 40
Balance Sheet 41
Statement of Income (Loss) 42
Statement of Changes in Stockholders' Equity 43
Statement of Cash Flow 44
Notes to Financial Statements 45
34
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P. C.
27 SHELTER HILL ROAD
PLAINVIEW, NY 11803
TELEPHONE: (516) 933-9781
FACSIMILE: (516) 827-1203
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
FoneCash, Inc.
White Plains, New York
I have audited the accompanying balance sheets of FoneCash, Inc. (a Delaware
corporation in the development stage) as of December 31, 1998 and 1997, and the
related statements of operations, stockholders' equity, and cash flows for the
year ended December 31, 1998 and the period August 7, 1997 (inception) to
December 31, 1997, and for the period August 7, 1997 (inception) to December 31,
1998. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of FoneCash, Inc. as of December 31,
1998 and 1997, and the results of its operations and cash flows for the year and
period then ended and from August 7, 1997 (inception) to December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Stewart H. Benjamin
Certified Public Accountant, P.C.
Plainview, New York
August 27, 1999
35
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P. C.
FONECASH, INC.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
ASSETS
December 31,
1998 1997
------- -------
<S> <C> <C>
Current assets:
Cash $ 9,628 $ --
Due from an officer/stockholder 12,764 --
------- -------
22,392 --
------- -------
Other assets: (Note 1)
Organization costs, net 263 337
------- -------
$22,655 $ 337
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 977 $ --
Loans payable 5,000 10,572
------- -------
5,977 10,572
------- -------
Stockholders' equity (deficit): (Note 2)
Preferred stock; $.0001 par value;
authorized - 5,000,000 shares;
issued - none -- --
Common stock; $.0001 par value;
authorized - 20,000,000 shares;
issued and outstanding - 4,204,500
shares in 1998 and 4,000,000 in 1997 420 400
Additional paid-in capital 84,965 --
Deficit accumulated during the
development stage (68,707) (10,635)
------- -------
Total stockholders' equity (deficit) 16,678 (10,235)
------- -------
$22,655 $ 337
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P. C
FONECASH, INC.
(A Development Stage Company)
Statements of Operations
Aug. 7, 1997 Aug. 7, 1997
Year Ended (Inception) to (Inception) to
December 31, December 31, December 31,
1998 1997 1998
--------- --------- ---------
Costs and expenses:
Amortization $ 74 $ 31 $ 105
General and administrative 57,998 10,604 68,602
--------- --------- ---------
Net loss $ 58,072 $ (10,635) $ 68,707
========= ========= =========
Loss per common share $ (.014) $ .003
========= =========
Weighted average common shares
outstanding 4,045,685 4,000,000
========= =========
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
STEWART H. BENJAMIN
CERTTPIED PUBLIC ACCOUNTANT, P.C.
FONECASH, INC.
(A Development Stage Company)
Statements of Changes in Stockholders' Equity
For the Period August 7, 1997 (Inception) to December 31, 1998
<TABLE>
<CAPTION>
Deficit
Common Stock Additional Accumulated
------------------------ Paid-in from
Shares Amount Capital Inception
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balances, August 7, 1997 (Inception) -- -- -- --
Common stock issued for services
and costs advanced, valued at
$.0001 per share 4,000,000 400 -- --
Net loss for the period (10,635)
--------- --------- --------- ---------
Balances, December 31, 1997 4,000,000 400 -- (10,635)
Common stock issued 204,500 20 84,965 --
Net loss (58,072)
--------- --------- --------- ---------
Balances, December 31, 1998 4,204,500 $420 $84,965 $(68,707)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
FONECASH, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Aug. 7, 1997 Aug. 7, 1997
Year Ended (Inception) to (Inception) to
December 31, December 31, December 31,
1998 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(58,072) $(10,635) $(68,707)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization 74 31 105
Common stock issued for services -- -- --
Changes in assets and liabilities:
(Increase) decrease in amounts due from
an officer/stockholder (12,764) -- (12,764)
Increase (decrease) in accounts payable 977 -- 977
Increase (decrease) in short-term loans (5,572) 10,572 5,000
-------- -------- --------
Net cash used in operating activities (75,357) (32) (75,389)
-------- -------- --------
Cash flows from investing activities:
Organization costs -- (368) (368)
-------- -------- --------
Net cash used in investing activities -- (368) (368)
-------- -------- --------
Cash flows from financing activities:
Proceeds from sale of common stock 84,985 400 85,385
-------- -------- --------
Net cash provided by financing
activities 84,985 400 85,385
-------- -------- --------
Net increase (decrease) in cash 9,628 -- 9,628
Cash at beginning of year -- -- --
-------- -------- --------
Cash at end of year $ 9,628 $ -- $ 9,628
======== ======== ========
Supplemental disclosure of noncash investing and
financing activities:
Common stock issued for organizational costs $ -- $ -- $ --
======== ======== ========
Common stock issued for services and costs advanced $ -- $ -- $ --
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
27 SHELTER HILL ROAD
PLAINVIEW, NY 11803
---------
TELEPHONE: (516) 933-9781
FACSIMILE: (516) 827-1203
To the Board of Directors and Stockholders
FoneCash, Inc.
White Plains, New York
I have reviewed the accompanying balance sheets of FoneCash, Inc. (a development
stage company) as of September 30, 1999 and December 31, 1998, and the related
statements of operations, stockholders' equity and cash flows, for the nine
months ended September 30, 1999 and 1998, and for the period from August 7, 1997
(inception), to September 30, 1999, in accordance with Statements on Standards
for Accounting and Review Services, issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of FoneCash, Inc.
A review consists principally of inquiries of Company personnel analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, I do not express such an opinion.
Based on my reviews, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
/s/ Stewart H. Benjamin
Certified Public Accountant, P.C.
Plainview, New York
December 28, 1999
40
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
FONECASH, INC
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
ASSETS
September 30 December 31
1999 1998
--------- ---------
<S> <C> <C>
Current assets:
Cash $ 389 $ 9,628
Notes receivable (Note 4) 40,382
Inventory (Note 1) 15,789 --
Prepaid expenses 25,000 --
--------- ---------
81,560 9,628
--------- ---------
Property and equipment, net (Note 5) 18,750 --
Other assets:
Organization cost, net (Note 1) 208 263
Patent rights, net (Note 6) 4,250 --
Investment, related party (Note 9) 50,000 --
Cash surrender value of life insurance (Note 7) 12,297
Deposits (Note 8) 271,650
338,405 263
438,715 9,891
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 6,539 $ 977
Due to an officer/stockholder (Note 9) 32,270 45,344
Loans payable -- 5,000
--------- ---------
38,809 51,321
Stockholders' equity(deficit): (Note 2)
Preferred stock; $.0001 par value; authorized -
5,000,000 shares; issued - none -- --
Common stock; $.0001 par value; authorized -
20,000,000 shares; issued and outstanding -
5,126,172 shares in 1999 and 4,204,500 in 1998 513 420
Additional paid-in capital 752,629 84,965
Deficit accumulated during the development stage (353,236) (126,815)
--------- ---------
Total stockholders' equity 399,906 (41,430)
--------- ---------
$ 438,715 $ 9,891
========= =========
</TABLE>
See accompanying notes and accountant's review report
41
<PAGE>
Stewart H. Benjamin
CERTIFIED PUBLIC ACCOUNTANT, P.C.
FONECASH, INC.
(A Development Stage Company)
Statements of Operation
<TABLE>
<CAPTION>
Nine Nine Aug.7,1997
Months Ended Months Ended (Inception) to
September 30, September 30, September 30,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cost and expenses
Depreciation $ 6,250 $ -- $ 6,250
Amortization 805 55 910
General and administrative 222,748 56,381 349,458
----------- ----------- -----------
229,803 56,436 356,618
----------- ----------- -----------
Other Income (expenses)
Interest income 3,382 -- 3,382
----------- ----------- -----------
Net loss $ (226,421) $ (56,436) $ (353,236)
=========== =========== ===========
Loss per common share $ (.047) $ (.014)
=========== ===========
Weighted average common shares
outstanding 4,797,484 4,000,000
=========== ===========
</TABLE>
See accompanying notes and accountant's review report
42
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
FONECASH, INC.
(A Development Stage Company)
Statements of Change in Stockholders' Equity
For the period August 7,1997 (Inception) to September 30,1999
<TABLE>
<CAPTION>
Deficit
Additional Accumulated
Common Stock Paid-in from
Shares Amount Capital Inception
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balances, August 7,1997 (Inception) -- $ -- $ -- $ --
---------- ---------- ---------- ----------
Common stock issued for services
and costs advanced, valued at $.0001
per share 4,000,000 400 --
Net loss for the period (31,605)
---------- ---------- ---------- ----------
Balances, December 31,1997 4,000,000 400 -- (31,605)
Common stock issued 204,500 20 84,965 --
Net Loss (95,210)
---------- ---------- ---------- ----------
Balances, December 31,1998 4,204,500 420 84,965 (126,815)
Common stock issued 921,672 93 667,664 --
Net loss for the period (226,421)
---------- ---------- ---------- ----------
Balances, September 30,1999 5,126,172 $ 513 $ 752,629 $ (353,236)
========== ========== ========== ==========
</TABLE>
See accompanying notes and accountant's review report.
43
<PAGE>
FONECASH, INC
(A Development Stage Company)
Statements of Cash Flow
<TABLE>
<CAPTION>
Nine Nine Aug. 7,1997
Months Ended Months Ended (Inception) to
September 30, September 30, September 30,
1999 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(226,421) $ (56,436) $(353,236)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 6,250 -- 6,250
Amortization 805 55 910
Cash surrender value of life insurance (12,297) -- (12,297)
Common stock issued for services -- -- --
Changes in assets and liabilities:
(Increase) in inventory (15,789) -- (15,789)
(Increase) in prepaid expenses (25,000) -- (25,000)
(Increase) in utility deposit (250) -- (250)
(Decrease) in accounts payable 5,562 -- 5,562
Increase (decrease) in amounts due to
officer/stockholder (13,074) 20,493 32,270
Increase (decrease) in short-tern loans (5,000) -- --
--------- --------- ---------
Net cash used in operating activities (285,214) (34,488) (360,603)
--------- --------- ---------
Cash flows from investing activities:
Organization costs -- -- (368)
Purchase of property and equipment (25,000) -- (25,000)
Acquisition of patent rights (5,000) -- (5,000)
Increase in notes receivable (40,382) -- (40,382)
Investment in related company (50,000) -- (50,000)
Deposit (271,400) -- (271,400)
--------- --------- ---------
Net cash used in investing activities (391,782) -- (392,150)
--------- --------- ---------
Cash flow from financing activities:
Proceeds from sale of common stock 667,757 34,585 753,142
--------- --------- ---------
Net cash provided by financing activities 667,757 34,585 753,142
--------- --------- ---------
Net increase (decrease) in cash (9,239) 97 389
Cash at beginning of period 9,628 -- --
--------- --------- ---------
Cash at end of period $ 389 $ 97 $ 389
========= ========= =========
Supplemental disclosure of noncash investing and
financing activities:
Common stock issued for organizational costs $ -- $ -- $ --
========= ========= =========
Common stock issued for services and costs advanced $ -- $ -- $ --
========= ========= =========
</TABLE>
See accompanying notes and accountant's review report.
44
<PAGE>
STEWART H. BENJAMIN
CERTIFIED PUBLIC ACCOUNTANT, P.C.
FONECASH, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Description of Business
The financial statements presented are those of FoneCash, Inc., a development
stage company (the "Company"). The Company was incorporated under the laws of
the State of Delaware on August 7, 1997. The Company has acquired the rights to
market a patented electronic terminal that is used by retail merchants and
in-home salespersons when payment is made with a credit or debit card. Revenues
will be generated from sales of the terminals and from transaction charges to
banks. No revenues have been earned as of September 30, 1999, but management
anticipates to commence sales in the 2000 after real-time tests are performed
with a select group of merchants and in-home salespersons.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reporting 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 period. Actual results
could differ from those estimates.
Inventory
Inventory is stated at the lower of cost or market, with cost determined on a
first-in, first-out basis and market based on the lower of replacement cost or
realizable value.
Property and equipment and depreciation
Property and equipment are stated at cost. Depreciation for both financial
reporting and income tax purposes is computed using the straight-line method
over the estimated lives of the assets. Maintenance and repairs are charged to
expense when incurred. When property and equipment are retired or otherwise
disposed of, the related cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is credited or charged to income.
Intangible Assets
Intangible assets consist of organization costs and patent rights. Intangible
assets
45
<PAGE>
are amortized on a straight-line basis over five years. Amortization expense for
the nine months ended September 30, 1999 was $805.
Fair Value of Financial Instruments
The fair value of the Company's receivables due from an officer/stockholder is
not practicable to estimate due to the related party nature of the underlying
transactions and the indefinite payment terms.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in the statement of
operations in the period that includes the enactment date.
Loss Per Common Share
Loss per common share is computed by dividing the net loss by the weighted
average shares outstanding during the period.
Note 2 - Stockholders' Equity
Common Stock
Since the date of inception, the Company has issued 5,126,172 shares of common
stock, 4,000,000 of which were for services and costs advanced, valued at $.0001
per share. These shares were issued to officers and directors of the Company.
Dividends may be paid on outstanding shares as declared by the Board of
Directors from time to time. Each share of common stock is entitled to one vote.
Preferred Stock
No shares of the Company's no par value preferred stock have been issued or are
outstanding. Dividends, voting rights and other terms, rights and preferences of
the preferred shares have not been designated but may be designated by the Board
of Directors from time to time.
Note 3 - Income Taxes
There is no provision for income taxes since the Company has incurred net
operating losses. At September 30, 1999, the Company has net operating loss
carry forwards of $343,348, of which $311,743 may be available to offset future
taxable income
46
<PAGE>
through 2018 and $31,605 may be available to offset future taxable income
through 2012.
Note 4-- Note Receivable
Pursuant to a letter of intent dated June 5, 1999 to purchase a majority of the
common stock of Fusion Capital Corp. ("Fusion"), a Florida corporation, entered
into by the Company and Fusion, the Company simultaneously issued a loan to
Fusion of $37,000 to be paid in 10 equal installments. Ten separate promissory
notes of $3,700 were executed, each providing for interest at a rate of 6% and
payable within 6 months. The balance due on the notes was $40,382 as of
September 30, 1999 includes accrued interest of $3,382.
Note 5-- Property and Equipment
Property and equipment consist entirely of a production mold purchased on
February 24, 1999 for $25,000. The mold has an estimated useful life of 3 years
and is depreciated using the straight-line method. Depreciation expense was
$6,250 for the nine months ended September 30, 1999.
Note 6-- Patent Rights
On November 1, 1997 the Company entered into a license agreement with Thomas J.
Ulrich. Under this agreement the Company will acquire an exclusive license under
the licensor's patent rights for U.S. patent number 4,803,719, pertaining to
telephone line powered applications, for the primary purpose of utilizing the
licensor's invention through sales of products and services. The Company is
required to make payments for a license execution fee based upon capital
funding, and for royalties based upon gross sales of all licensed products sold.
As of September 30, 1999 a license execution fee of $5,000 was capitalized and
is being amortized over the remaining life of the patent of 5 years.
Note 7-- Cash Surrender Value of Life Insurance
The variable universal life insurance policy carried on the life of the
president of the Company has a cash value of $12,297 on September 30,1999. There
were no borrowings against the cash surrender value.
Note 8-- Deposits
Deposits consists of a utility deposit of $250 and an escrow deposit of
$271,400. On June 14, 1999 the Company's Board of Directors approved a
resolution to purchase a reporting company with publicly trading stock
registered on the OTC Bulletin Board. The deposit is held with an escrow agent
who has knowledge of various "shell" companies. The escrow agreement terminates
and the escrow balance becomes refundable if the Escrowee is unable to locate a
target "shell" company within 180 days. The Company has indicated its intention
to purchase one of two "shell"
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<PAGE>
companies that are currently being reviewed.
Note 9 - Related Party Transactions
The Company was indebted to an officer/stockholder for expenses advanced on
behalf of the Company, in the amount of $32,270 at September 30,1999. There are
no specific terms for repayment.
The Company leases its executive offices and storage facilities from the
president of the Company under a month-to-month operating lease. Rent expenses
of $17,373 was charged to operations during the nine months ended September
30,1999.
The Company purchased 1,000,000 shares representing an 8% interest in
Tradeandswap.com, Inc. ("Trade and Swap") for $50,000. A consultant of the
Company is a shareholder and principal officer of Trade and Swap.
Tradeandswap.com, Inc. is a privately-held corporation that facilitates barter
and trade swaps for individuals and businesses over a proprietary internet web
site. The investment in Trade and Swap is carried at cost, as there is no
readily available market for these shares.
Note 10-- Consulting Agreements
On February 4, 1998 the Company entered into a consulting agreement with East
Coast Entertainment, Inc. ("ECE") requiring payments of $50,000 per year in
monthly installments once the Company attains gross revenues of $300,000. ECE is
entitled to $100,000 annually once the Company achieves $500,000 in gross
revenues. ECE is entitled to participate in the Company's stock option plans and
group health plans pursuant to the same terms that apply to all senior key
executives and other employees of the Company. The agreement is renewable
annually for a period often years. No expenses have been recognized under this
arrangement for the six months ended September 30, 1999.
The Company entered into another consulting agreement with Advance Data
Information Corporation ("ADI"), a Taiwan corporation owned by a
director/stockholder of the Company, in which ADI will act as the research and
development laboratory for the Company. The Company shall have exclusive
ownership rights to any and all products that are developed as a result of this
agreement. The Company will issue 200,000 shares of its common stock to ADI for
services rendered. No shares have been issued under this arrangement as of
September 30, 1999.
PART III
Item 1 - Index to Exhibits
The Following list describes the exhibits filed as part of this Registration
Statement on Form 10-SB:
48
<PAGE>
Exhibit
Number Description of Document
- ------- -----------------------
3.1 Certificate of Incorporation as filed on August 7,1997 with
3.2 Amendment to Certificate of Incorporation as filed on November
4, 1997
3.3 Bylaws
4.1 Form of Stock Certificate
10.1 Employment Agreement dated August 1, 1997 by and between the Company
and Mr. Daniel E. Charboneau
10.2 License Agreement for Patent Rights dated November 1, 1997
10.3 Consulting Agreement with East Coast Entertainment dated February
4, 1998
10.4 Consulting Agreement with Advance Data Information dated October
10, 1997
10.5 Employment Agreement dated
27.1 Financial Data Schedule
Item 2 - Description of Exhibits
The required exhibits are attached hereto, as noted in Item 1 above.
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized
Fonecash, Inc
Date: ____________ /s/ Daniel E. Charboneau
49
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 08/07/1997
971263523 - 2782513
Certificate of Incorporation
FIRST: The name of the Corporation is FoneCash, Inc.
SECOND: Its registered office is to be located at Suite 606, 1220 N. Market St.,
Wilmington, DE 19801, County of New Castle. The registered agent is American
Incorporators Ltd. whose address is the same as above.
THIRD: The nature of business and purpose of the organization is to engage in
any lawful act or active for which corporations may be organized under the
Delaware General Corporation Laws.
FOURTH: The total number of shares of stock which the corporation shall have
authority to issue is one thousand five hundred (1500). All such shares are to
be without par value and are to be of one class.
FIFTH: The name and address of the incorporator are as follows:
Amanda P. Conway
Suite 606
1220 N. Market St.
Wilmington, DE 19801
SIXTH: The powers of the undersigned incorporator will terminate upon filing of
the certificate of incorporation. The name and mailing address of the person(s)
who will serve as initial director(s) until the first annual meeting of
stockholders or until a successor(s) is elected and qualified are:
Daniel E. Charboneau
177 Main St., Suite 367
Fort Lee, NJ 07024
SEVENTH: Each person who serves or who has served as a director shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, provided that this provision shall
not eliminate or limit the liability of a director (i) for any breach of loyalty
to the corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law:
(iii) for unlawful payment of dividend or unlawful stock purchase or redemption
as such liability is imposed under Section 174 of the General Corporation Laws
of Delaware; or (iv) for any transaction from which the director derived an
improper personal benefit.
I, THE UNDERSIGNED, for the purpose of forming a corporation under the laws of
the State of Delaware, do make, file and record this certificate, and do certify
that the facts stated herein are true, and I have accordingly set my hand.
/s/ Amanda P. Conway
INCORPORATOR
50
Certificate of Amendment
Of
Certificate of Incorporation
FoneCash, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That by unanimous written consent of the Board of Directors of FoneCash,
Inc., the following resolution was duly adopted setting forth a proposed
amendment of the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and calling a special 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 of this corporation be amended
by changing the Article thereof numbered "FOURTH" so that, as amended, said
Article shall be and read as follows: The total number of shares of stock which
the corporation shall have authority to issue is twenty five million
(25,000,000). Of such shares, twenty million (20,000,000) are to be Common
Stock, with a par value of $.0001 per share and five million (5,000,000) are to
he Preferred Stock, with a par value of $.0001 per share.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, the
Stockholders of the said corporation, by unanimous written consent in lieu of a
special meeting in accordance with Section 228 of the General Corporation Law of
the State of Delaware, 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 THEREOF, said FoneCash, Inc., has caused this certificate to be
signed by Daniel E. Charboneau, its President, this 4th day of November. 1997.
By: /s/ Daniel E. Charboneau
President
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATION.
FILED 09:00 AM 11/04/19
51
FONECASH, INC
BY-LAWS
ARTICLE I - OFFICES
Section 1. The registered office of the corporation in the State of Delaware
shall be at 1220 N. Market Street, suite 606 Wilmington, Delaware 19801
The registered agent in charge thereof shall be American Incorporators, Ltd.
Section 2. The corporation may also have offices at such other places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II - SEAL
Section 1. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware".
ARTICLE III - STOCKHOLDERS' MEETINGS
Section 1. Meetings of stockholders shall be held at the registered office of
the corporation in this state or at such place, either within or without this
state, as may be selected from time to time by the Board of Directors.
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<PAGE>
Section 2. Annual Meetings: The annual meeting of the stockholders shall be held
on the 15th.of February in each year if not a legal holiday, and if a legal
holiday, then on the next secular day following at 10 o'clock a.m., shall be
filed with the Secretary of the meeting before being voted upon.
Section 7. Notice of Meetings: Whenever stockholders are required or permitted
to take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Unless
otherwise provided by law, written notice of any meeting shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 8. Consent in Lieu of Meetings: Any action required to be taken at any
annual or special meeting of stockholders of a corporation, or any action which
may be taken at any annual or special meeting of such stockholders, 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. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
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Section 9. List of Stockholders: The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
No share of stock upon which any installment is due and unpaid shall be voted at
any meeting. The list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
ARTICLE IV - DIRECTORS
Section 1. The business and affairs of this corporation shall be managed by its
Board of Directors, in number. The directors need not be residents of this state
or stockholders in the corporation. They shall be elected by the stockholders at
the annual meeting of stockholders of the corporation, and each director shall
be elected for the term of one year, and until his successor shall be elected
and shall qualify or until his earlier resignation or removal.
54
<PAGE>
Section 2. Regular Meetings: Regular meetings of the Board shall be held without
notice at the registered office of the corporation, or at such other time and
place as shall be determined by the Board.
Section 3. Special Meetings: Special Meetings of the Board may be called by the
President on - days notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of a majority of the directors
in office.
Section 4. Quorum: A majority of the total number of directors shall constitute
a quorum for the transaction of business.
Section 5. Consent in Lieu of Meeting: Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee. The Board of Directors may
hold its meetings, and have an office or offices, outside of this state.
Section 6. Conference Telephone: One or more directors may participate in a
meeting of the Board, of a committee of the Board or of the stockholders, by
means of conference telephone or similar communications equipment by means of
which all
55
<PAGE>
persons participating in the meeting can hear each other; participation in this
manner shall constitute presence in person at such meeting.
Section 7. Compensation: Directors as such, shall not receive any stated salary
for their services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any may be allowed for attendance at each regular or special
meeting of the Board PROVIDED, that nothing herein contained shall be construed
to preclude any director from serving the corporation in any other capacity and
receiving compensation thereof.
Section 8. Removal: Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except that when cumulative voting
is permitted, if less than the entire Board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election of the class of
directors of which he is a part.
ARTICLE V - OFFICERS
Section 1. The executive officers of the corporation shall be chosen by the
directors and shall be a President, Secretary and Treasurer. The Board of
Directors may also choose a Chairman, one or more Vice Presidents and such other
officers as it shall deem necessary. Any number of offices may be held by the
same person.
56
<PAGE>
Section 2. Salaries: Salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 3. Term of Office: The officers of the corporation shall hold office for
one year and until their successors are chosen and have qualified. Any officer
or agent elected or appointed by the Board may be removed by the Board of
Directors whenever in its judgment the best interest of the corporation will be
served thereby.
Section 4. President: The President shall be the chief executive officer of the
corporation; he shall preside at all meetings of the stockholders and directors;
he shall have general and active management of the business of the corporation,
shall see that all orders and resolutions of the Board are carried into effect,
subject, however, to the right of the directors to delegate any specific powers,
except such as may be by statute exclusively conferred on the President, to any
other officer or officers of the corporation. He shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation. He
shall be ex-officio a member of all committees, and shall have the general power
and duties of supervision and management usually vested in the office of
President of a corporation.
Section 5. Secretary: The Secretary shall attend all sessions of the Board and
all meetings of the stockholders and act as clerk thereof, and record all the
votes of the corporation and the minutes of all its transactions in a book to be
kept for that purpose, and shall perform like duties for all committees of the
Board of
57
<PAGE>
Directors when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or President,
and under whose supervision he shall be. He shall keep in safe custody the
corporate seal of the corporation, and when authorized by the Board, affix the
same to any instrument requiring it.
Section 6. Treasurer; The Treasurer shall have custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall keep the moneys
of the corporation in a separate account to the credit of the corporation. He
shall disburse the funds of the corporation as may be ordered by the Board,
taking proper vouchers for such disbursements, and shall render to the President
and directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the financial
condition of the corporation.
ARTICLE VI - VACANCIES
Article 1. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise, shall be filled by the Board of Directors.
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in corporation by death, resignation, removal or otherwise, shall office,
although less than a quorum, or by a sole remaining director. If at any time, by
reason of death or resignation or other cause, the corporation should have no
directors in office, then any officer or any
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<PAGE>
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of these By-Laws.
Section 2. Resignations Effective at Future Date: When one or more directors
shall resign from the Board, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective.
ARTICLE VII - CORPORATE RECORDS
Section 1. Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records, and to make copies or extracts therefrom A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the corporation at its registered office in this state or at its principal place
of business.
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<PAGE>
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
Section 1. The stock certificates of the corporation shall be numbered and
registered in the share ledger and transfer books of the corporation as they are
issued. They shall bear the corporate seal and shall be signed by the
Section 2. Transfers: Transfers of shares shall be made on the books of the
corporation upon surrender of the certificates therefor, endorsed by the person
named in the certificate or by attorney, lawfully constituted in writing. No
transfer shall be made which is inconsistent with law.
Section 3. Lost Certificate: The corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 4. Record Date: In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change,
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<PAGE>
conversion or exchange of stock or for the purpose of any other lawful 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:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or,
if notice is waived, at the close of business on the day next preceding
the day on which the meeting is held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed.
(c) The record date for determining stockholders 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.
(d) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders 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.
Section 5. Dividends: The Board of Directors may declare and pay dividends upon
the outstanding shares of the corporation, from time to time and to such extent
as
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<PAGE>
they deem advisable, in the manner and upon the terms and conditions provided by
statute and the Certificate of Incorporation.
Section 6. Reserves: Before payment of any dividend there may be set aside out
of the net profits of the corporation such sum or sums as the directors, from
time to time, in their absolute discretion, think proper as a reserve fund to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the corporation, or for such other purpose as the directors
shall think conducive to the interests of the corporation, and the directors may
abolish any such reserve in the manner in which it was created.
ARTICLE IX - MISCELLANEOUS PROVISIONS
Section 1. Checks: All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the Board of Directors may from
time to time designate.
Section 2. Fiscal Year: The fiscal year shall begin on the first day of January.
Section 3. Notice: Whenever written notice is required to be given to any
person, it may be given to such person, either personally or by sending a copy
thereof through the mail, or by telegram, charges prepaid, to his address
appearing on the books of the corporation, or supplied by him to the corporation
for the purpose of notice. If the notice is sent by mail or by telegraph, it
shall be deemed to have been given to the person entitled thereto when deposited
in the United States mail or with a telegraph office for transmission to such
person. Such notice shall specify the place, day and hour of the meeting and, in
the case of a special meeting of stockholders, the general
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<PAGE>
nature of the business to be transacted.
Section 4. Waiver of Notice: Whenever any written notice is required by statute,
or by the Certificate or the By-Laws of this corporation a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Except in the case of a special meeting of stockholders, neither
the business to be transacted at nor the purpose of the meeting need be
specified in the waiver of notice of such meeting. Attendance of a person either
in person or by proxy, at any meeting shall constitute a waiver of notice of
such meeting, except where a person attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting was not
lawfully called or convened.
Section 5. Disallowed Compensation: Any payments made to an officer or employee
of the corporation such as a salary, commission, bonus, interest, rent, travel
or entertainment expense incurred by him, which shall be disallowed in whole or
in part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer or employee to the corporation to the full extent of
such disallowance. It shall be the duty of the directors, as a Board, to enforce
payment of each such amount disallowed. In lieu of payment by the officer or
employee, subject to the determination of the directors, proportionate amounts
may be withheld from his future compensation payments until the amount owed to
the corporation has been recovered.
Section 6. Resignations: Any director or other officer may resign at anytime,
such
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resignation to be in writing, and to take effect from the time of its receipt by
the corporation, unless some time be fixed in the resignation and then from that
date. The acceptance of a resignation shall not be required to make it
effective.
ARTICLE X - ANNUAL STATEMENT
Section 1. The President and Board of Directors shall present at each annual
meeting a full and complete statement of the business and affairs of the
corporation for the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Directors shall deem advisable and
need not be verified by a certified public accountant.
ARTICLE XI - AMENDMENTS
Section 1. These By-Laws may be amended or repealed by the vote of stockholders
entitled to cast at least a majority of the votes which all stockholders are
entitled to cast thereon, at any regular or special meeting of the stockholders,
duly convened after notice to the stockholders of that purpose. ARROVED AND
ADOPTED by the Board of directors as of August 7, 1997
SECRETARY'S CERTIFICATION
I, the undersigned Secretary of this corporation, hereby certify that the
foregoing Bylaws were duly adopted by its Board of directors on the date above
indicated and that the foregoing text of the Bylaws are currently in full force
and effect and have not been revoked, suspended or amended.
/s/ Judy Park
Secretary
SEAL
64
COMMON STOCK INCORPORATED UNDER THE LAWS COMMON STOCK
OF THE STATE OF DELAWARE
===NUMBER=== ===SHARES===
FC-
============ ============
FONECASH, INC.
-----------------
CUSIP 3446OA 10 9
-----------------
SEE REVERSE SIDE FOR CERTAIN DEFINITIONS
THIS IS TO CERTIFY THAT
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $0.0001 PAR VALUE OF
FONECASH, INC.
(thereinafter called the "Corporation") transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Certificate of Incorporation and By-Laws of the Corporation and the amendments
from time to time made thereto, copies of which are or will be on file at the
principal office of the Corporation, to all of which the holder by acceptance
hereof assents. This Certificate is not valid unless countersigned by the
Transfer Agent and Registrar.
FONECASH, INC.
CORPORATE
SEAL
1997
DELAWARE
/s/ Judy Pauls /s/ Daniel E. Charboneau
SECRETARY PRESIDENT
Countersigned and Registered:
MANHATTAN TRANSFER REGISTRAR CO.
(HOLBROOK, N.Y.)
By Transfer Agent
and Registrar
Authorized Signature
65
CONTRACT OF EMPLOYMENT
THE AGREEMENT, entered into as of the 1st. ,day of August, 1997 between
FoneCash, Inc., a Delaware Corporation, located at 475 Dobbs Ferry, White
Plains, NY 10607 (hereinafter called the "Corporation"). And Daniel E.
Charboneau (hereinafter called the Executive.)
WITNESSETH :
WHEREAS, the Corporation is engaged in the business of marketing a patented
automated transaction terminal, deriving income from both the sale of the
terminals (hardware) and also from the fees collected as a result of
transmission of data information connected to the processing of credit and debit
cards which are used as a means of payment for goods and services by authorized
merchants both domestic and international;
WHEREAS, the Executive has considerable experience, talent and ability in the
business of the corporation and has developed a favorable reputation in business
generally; and
WHEREAS, the Corporation is desirous of employing the Executive in order to take
advantage of his knowledge, ability and skills;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, it is agreed as follows:
1. EMPLOYMENT, DUTIES and PERFORMANCE.
The Corporation hereby employs the above mentioned individual as Chairman,
President and Chief Executive Officer and/or such other positions and offices
which the Board of Directors of the Corporation (the "Board") may elect him. The
Executive's powers and duties in any capacity so elected shall be such as may be
determined by the Board of Directors of the Corporation consistent with his
position. The Executive consents to such employment, agrees to devote 100 per
cent of his working time, attention and efforts to complete the task assigned to
him by the Corporation, and further agrees to occupy those positions and office,
if any to which he may be elected by the board.
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2. TERMS of EMPLOYMENT
Except in the case of earlier termination as hereafter provided in paragraphs 10
and 15, the term of the Contract of Employment shall start as of the date above
written and shall continue for a term of Five (5) year.
3. COMPENSATION.
For all services to be rendered by the Executive in any capacity under this
Agreement, the Corporation shall pay the Executive at an annual rate of $
120,000 per annum and paid according to the Salary and Wage payroll schedule as
established by the Corporation, with such additional commissions, bonuses and
stock option plans established by the Board as incentives to key senior
executives of the Corporation.
4. FRINGE BENEFITS.
The Executive shall be a participant in all fringe benefits of the Corporation
as shall be approved by the Board of Directors from time to time, subject to the
satisfaction of any condition of eligibility therein set forth and further
subject to the right of the Board to amend, modify or terminate any such fringe
benefit program as it applies to all senior key executives in a similar position
as Executive.
5. DEATH BENEFIT.
In the event of the death of the Executive during the term of this Contract or
any renewals thereof, the sum of Two Hundred Fifty Thousand ($250,000.00)
Dollars shall be paid as soon thereafter as shall be practicable, to the
Executive's surviving spouse, or to the estate of the Executive, provided that
the Executive may at any time prior to his death designate in writing to the
Corporation another beneficiary arrangement which shall, until revoked, be
recognized by the Corporation.
6. RESTRICTIONS.
During the term of this agreement, the Executive agrees, covenants and warrants
to devote his best efforts to advance the interests of the Corporation and shall
not, directly or indirectly, become associated with, nor engage in, nor render
services to, any other business without first obtaining the written consent of
the Corporation. However, these restrictions shall not be construed to prevent
the Executive from investing any assets in such form or manner as will not
require his expenditure of any time in the operation of the affairs of the
business or businesses in which such investments are made.
7. WORKING FACILITIES.
The Executive shall be furnished at a place of the Corporation's and the
Executive's mutual choosing with the necessary office of
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offices, equipment facilities and supplies appropriate to his employment and
adequate for the performance of his duties.
8. EXPENSES.
This Corporation shall pay or reimburse the Executive for all reasonable and
necessary expenses incurred by him for or on behalf of the Corporation,
including but not limited to the following items : approved national, state and
local professional society dues or assessments, professional travel,
professional entertainment, convention costs, and expenses incurred by the
Executive through the use of an automobile and mobile telephone in connection
with his employment by the Corporation.
9. VACATIONS.
The Executive shall be entitled each year to vacations not exceeding four (4)
weeks during which time his salary be paid in full.
10. DISABILITY.
In the event the Executive shall become disabled while employed with the
Corporation so as to prevent him from performing the duties of his employment,
then when such disability commences, the following benefits shall be payable. An
amount equal to his full base salary otherwise payable shall be paid in lieu of
salary of wages during such period of disability, not extending, however, beyond
the end of the twenty-fourth calendar month following the month in which such
disability commenced. The amounts, if any, of any disability benefits with
respect to those months, actually paid to or on behalf of the Executive under
policies of insurance on the Executive paid for by the Corporation shall be
applied as payments thereunder. In the event of any disability, the Executive
shall continue as an Executive (with or without compensation, as the case may
be) throughout the entire period of such disability until the earliest of (a)
his death, (b) his voluntary resignation form the employment of the Corporation,
(c) the continuation of said disability for a period of such disability for a
period of (2) years, or (d) the determination in writing by any two
reputable physicians that such disability will continue for a period of
indefinite duration. Upon the termination of employment of the Executive as
provided for in this section, this Contract of Employment shall also terminate
except as to any rights which may have already accrued hereunder.
In the event the disability of the Executive ceases and he resumes complete
activity for a period of at least six (6) months, and thereafter a subsequent
disability occurs, the prior disability shall
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not be considered as one together with the new disability time insofar as
determining the disability period provided for herein.
11. NOTICES.
All notices necessary or required according to the terms of this Contract of
Employment shall be deemed sufficient if in writing and sent by registered mail
or certified mail to the Corporation and its registered office, and to the
Executive at his last know residence, or at such other address as the party to
receive notice may designate in writings to the other prior to the time such
notice is necessary or required to be sent.
12. GOVERNING LAW.
This Agreement shall be subject to and governed by the laws of the State of
Delaware.
13. INVALID PROVISIONS.
The invalidity of all or any part of any paragraph or paragraphs of this
Agreement shall not invalidate the remainder of this Agreement or the remainder
of any paragraph not invalidated.
14. BINDING EFFECT.
This Agreement shall inure to the benefit of and bind the personal
representative, successors and assigns of the Executive and the successors and
assigns of the Corporation. However, insofar as the Executive is concerned, this
Contract of Employment being personal, cannot be assigned, transferred, pledged
or hypothecated in any way, nor made subject to execution, attachment or similar
process.
15. TERMINATION.
The following provision, in addition to any other similar provisions herein,
shall govern termination of this Agreement :
(a) The Corporation, upon a vote of the Board of Directors, may terminate
for any reason by written notice given to the Executive not less then one
hundred and eighty (180) days prior to the effective date of such notice,
provided that such notice shall not be given before the completion of one year
of employment.
(b) The Corporation may terminate by written notice given to the Executive
effective as of the time of receipt of said notice by Executive in the event the
Executive shall have engaged in any conduct or practice that in the reasonable
opinion of the Corporation as expressed by a vote of the members of the Board,
Executive has a material and negative effect upon the good name,
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goodwill, or reputation of Corporation.
(c) Corporation may terminate by written notice given to the Executive,
effective immediately, in the following events :
(i) Conviction in a court of competent jurisdiction which is no
longer able to be appealed of the Executive or final ruling or order
no longer subject to appeal process or procedure by any Governmental
Agency regarding any violation of law or regulation tending, in
Corporation's opinion, to affect adversely the ability of the
Executive to perform his duties, obligations and responsibilities
herein or the good name, goodwill, or reputation of the Corporation;
or
(ii) Submission by the Executive to the Board of any materially
false or fraudulent information, reports or statement.
(d) The Executive may terminate his employment at any time by notice given
to Corporation not less than sixty (60) days prior to the effective date of such
notice.
(e) Notwithstanding anything herein to the contrary, all representations,
warranties, covenants, agreements and undertakings made or accepted herein by
Executive along with all causes of action at law or in equity arising from the
actual breach of attempted or threatened breach, shall survive the termination
of the Agreement and inure to the benefit or Corporation, its successors and
assigns.
16. MISCELLANEOUS.
(a) This Contract constitutes the entire agreement between the parties
hereto and contains all of the agreements between said parties with respect to
the subject matter hereof. Further, this Contract supersedes any and all other
agreements, either oral or in writing, between the parties hereto, with respect
to the subject matter hereof.
(b) This Contract may only be amended or revoked at any time by a written
agreement executed by the parties hereto.
(c) If any provision of this Contract is judged unenforceable by a court
of competent jurisdiction, that fact will not invalidate the other provisions.
FoneCash, Inc.
/s/
Executive
/s/ Daniel E. Charboneau
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LICENSE AGREEMENT
THIS AGREEMENT is entered into on November 1, 1997 between Thomas J.
Ulrich, (herein called LICENSOR), and FoneCash, Inc , a corporation of Delaware,
having its principal place of business at 177 Main Street, Suite 367, Fort Lee,
New Jersey 07024(herein called LICENSEE).
I. Background of Agreement
1.0 LICENSOR, filed patent No. 4,803,719, pertaining to telephone line
powered applications, on June 4,1987 with the United States Patent
Office, and has never assigned patent to any person or entity.
1.2 LICENSEE wishes to acquire an exclusive, worldwide license under
LICENSOR'S patent rights for the primary purpose of utilizing
LICENSOR'S invention through sales of products and services.
II. Definitions
As used herein, the following terms shall have the meanings set forth
below:
2.0 PATENT or PATENTS means the following United States patents and/or
patent applications, patents to be issued thereto, and all divisions,
continuations, reissues, substitutes, and extensions thereof:
Letters Patent
U.S. Patent No 4,803,719 Method for powering telephone
apparatus powered directly from the telephone line
without external power.
2.1 LICENSED TERRITORY means the United States of America, its territories
and possessions, North America, South America, and worldwide.
2.2 LICENSEE IMPROVEMENTS means all developments LICENSEE may make in the
PATENTS prior to the termination of this Agreement, whether or not patentable,
which are invented, developed, discovered or otherwise acquired by LICENSEE.
2.4 GROSS SALES PRICE for the purpose of computing royalties, means LICENSEE'S
invoice price, f.o.b. factory, after deduction of regular trade and quantity
discounts, but before deduction of any other items, including but not limited to
freight
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allowances, cash discounts, and agent's commissions. where products are not
sold, but are otherwise disposed of, the GROSS SALES PRICE of such products for
the purpose of computing royalties shall be the selling price at which products
of similar kind and quality, sold in similar quantities. are currently being
offered for sale by LICENSEE
III. License Grant
3.0 LICENSOR hereby grants to LICENSEEE to the extent of the LICENSED
TERRITORIES an exclusive license for the PATENTS to make, use, and sell products
that utilize said patent.
IV. License Fees and Royalty
4.0 LICENSEE, for and in consideration of, and as a condition of granting
this license, hereby agrees to pay LICENSOR the fees and royalties set forth in
Schedule A, which is attached hereto and made a part hereof by reference.
V. Sub-licensing
5.0 Sub-licensing in the LICENSED TERRITORY shall be the responsibility of
LICENSEE and it is the intent of the Parties that sub-licenses shall be
available to qualified third parties on fair and reasonable terms. Sub-licenses
shall be non-exclusive and non-transferable. LICENSEE shall supply LICENSOR
with: copy of each such sub-license agreement within thirty (30) days of the
execution of the sub-license agreement.
5.1 No sub-license shall become effective until LICENSEE has obtained the
written approval of the LICENSOR.
5.2 If this Agreement is terminated for any reason, LICENSEE shall
immediately assign all of its right, title, and interest to all sub-licenses to
LICENSOR including the right to receive all income from sub-licenses. LICENSEE
shall prior to execution of each sub-license make the sub-licensee aware of this
contingency.
VI. Payments
6.0 Not later than the last day of each January, April, July and October,
LICENSEE shall furnish to LICENSOR a written statement in such detail as
LICENSOR may reasonably require of all amounts due pursuant to Schedule A for
the quarterly periods ended the last day of the preceding December, March, June
and September, respectively. and shall pay to LICENSOR all amounts due to
LICENSOR. If no amount is accrued during any quarterly period, a written
statement to that effect shall be furnished.
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6.1 Payments provided for in this Agreement, when overdue; shall bear
interest at a rate per annum equal to two percent (2%) in excess: of the "Prime
Rate" published by "The Wall Street Journal" at the time such payment is due,
and for the time period until payment is received by LICENSOR.
6.2 If this Agreement is for any reason terminated before all of the
payments herein provided for have been made, LICENSEE shall immediately submit a
terminal report and pay to LICENSOR any remaining unpaid balance even though the
due date as above provided has not been reached.
VII. Representations and Disclaimer of Warranties
7.0 LICENSOR MAKES NO REPRESENTATIONS, EXTEND NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, AND ASSUMES NO RESPONSIBILITIES WHATEVER WITH
RESPECT TO USE, SALE, OR OTHER DISPOSITION BY LICENSEE OR ITS VENDEES OR OTHBR
TRANSFEREES OF PRODUCTS INCORPORATING OR MADE BY USE OF (i) INVENTIONS LICENSED
UNDER. THIS AGREEMENT OR (ii) INFORMATION, IF ANY, FURNISHED UNDER THE
AGREEMENT. LICENSEE WILL INDEMNIFY LICENSOR FOR ALL DAMAGES, COSTS AND EXPENSES,
INCUIDING ATTORNEY'S FEES, ARISING OUT OF USE BY LICENSEE OR ITS TRANSFEREES OF
INVENTION LICENSED OR INFORMATION FURNISHED UNDER THIS AGREEMENT OR (iii) OUT OF
ANY USE, SALE, OR OTHER DISPOSITION BY LICENSEE OR ITS TRANSFEREES OF PRODUCTS
MADE BY USE OF SUCH INVENTIONS OR NFORMATION.
VII. Patenting
8.0 LICENSEE and LICENSOR agrees to disclose all LICENSE IMPROVEMENTS to
each other within three (3) months after the IMPROVEMENT has been invented,
developed, discovered or otherwise acquired by LICENSOR and/or LICENSEE. Such
disclosure to be of sufficient technical detail to enable each party to practice
such LICENSE IMPROVEMENT.
8.1 LICENSEE agrees to prepare, file and prosecute all patent applications
necessary and as applicable to secure PATENTS in the name of the LICENSOR in all
countries wherein the LICENSEE intends to use, sell or sub-license. Such patent
applications shall be filed in accordance with the laws, regulations and
practices of the country tar which a PATENT is desired. All expenses associated
with preparing, filing, prosecuting and maintaining such PATENTS shall be paid
by LICENSEE.
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8.2 Not less than sixty (60) days before the expiration of a response
period for any action required by any Patent Office world wide, LICENSEE shall
notify LICENSOR of any decision not to file or continue prosecution of the
patent application and deliver to LICENSOR executed instruments granting
LICENSOR a power of attorney to prosecute such patent applications.
8.3 Each Party agrees to provide to the other party all relevant
documentation, drawings, diagrams, specifications and electrical diagrams which
may be necessary to build, start-up and maintain the technology. Such
documentation shall be provided to the other party within three (3) weeks of the
Effective Date of this Agreement All documentation is to be returned to LICENSOR
upon termination of Agreement.
IX. Termination
9.0 This Agreement shall terminate upon the expiration of the last to
expire PATENTS included herein, or will be included in the future, or upon the
abandonment of the last to be abandoned patent applications included herein,
whichever is later unless the Agreement is sooner terminated.
9.1 LICENSEE may terminate this Agreement at any time upon sixty (60) days
written notice in advance to LICENSOR.
9.2 If either Party shall be in default of any obligation hereunder, or
shall be adjudged bankrupt, or become insolvent, or make an assignment for the
benefit of creditors, or be placed in the hands of a receiver trustee in
bankruptcy, the other Party may terminate this Agreement by giving sixty (60)
days notice by Registered Mail to the other Party, specifying the basis for
termination. If within sixty (60) days after the receipt at such notice, the
Party receiving notice shall remedy the condition forming the basis for
termination, such notice shall cease to be operative, and this Agreement shall
continue in full force.
9.3 The word "termination" and cognate words, such as "term" and
"terminate" used in this Article IX and elsewhere in this Agreement are to be
read, except where the contrary is specifically indicated, as omitting from
their effect the following rights and obligations, all of which survive any
termination to the degree necessary to permit their complete fulfillment or
discharge;
(a) LICENSEE'S obligation to supply a terminal report as specified in
paragraph 6.2 of this Agreement
(b) LICENSOR'S right to receive or recover and LICENSEE'S obligation to
pay royalties accrued or accruable for payment at the time of any termination's.
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(c) LICENSEE'S obligation to maintain records under paragraph 11.0 of this
Agreement.
(d) Licenses, releases, and agreements of non-assertion running in favor
of customers or transferred by LICENSEE prior to any termination and on which
royalties shall have been paid as provided in Articles IV and V of this
Agreement.
(e) Any cause of action or claim of LICENSOR accrued or to accrue, because
of any breach or default by LICENSEE.
(f) The representation and disclaimer of warranties of paragraph 8.0.
X. Litigation
10.0 Each Party shall notify the other Party in writing of any suspected
infringement(s) of the PATENTS in the LICENSED TERRITORY and shall inform the
other Party of any evidence of such infringement(s).
10.1 LICENSEE shall have the first right to institute suit for
infringement(s) in the LICENSED FIELD and the LICENSED TERRITORY so long as this
Agreement remains exclusive. LICENSOR agrees to join as a party plaintiff in any
such lawsuit initiated by LICENSEE, if requested by LICENSEE, with all costs,
attorney fees, and expenses to be paid by LICENSEE. However, if LICENSEE does
not institute suit for infringement(s) within ninety (90) days of receipt of
written notice from LICENSOR of LICENSOR'S desire to bring suit for infringement
in its own name and on its own behalf, then LICENSOR may, at its own expense,
bring suit or take any other appropriate action.
10.2 If this Agreement is non-exclusive at the time of infringement(s),
the sole right to institute suit far infringement and to recover damages shall
rest with LICENSOR.
10.3 LICENSEE shall be entitled to any recovery of damages resulting from
a lawsuit brought by it pursuant to paragraph 10.1. LICENSOR shall be entitled
to recovery of damages resulting from any lawsuit brought by LICENSOR to enforce
any PATENT, pursuant to paragraph 10.1.
10.4 Neither Party may settle with an infringer without the prior approval
of the other Party if such settlement would affect the rights of the other Party
under the PATENTS.
XI. Records
11.0 LICENSEE shall keep accurate records or all operations affecting
payments hereunder, and shall permit LICENSOR or its duly authorized agent to
inspect all such records and to make copies of or extracts from such records
during
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regular business hours throughout the term of this Agreement and for a
reasonable period of not less than three (3) years thereafter.
XII. Non-assignability
12.0 The Parties agree this Agreement imposes particular, specific,
corporate obligations on LICENSEE. LICENSES shall not assign any rights under
this Agreement not specifically transferable by its terms without the written
consent of LICENSOR.
XIII. Severability
13.0 The Parties agree that if any part, term, or provision of the
Agreement shall be found illegal or in conflict with any valid controlling law,
the validity of the remaining provisions shall not be affected thereby
13.1 In the event the legality or any provision of this Agreement is
brought into question because of a decision by a court of competent jurisdiction
LICENSOR. by written notice to LICENSEE, may revise the provision in question or
may delete it entirely so as to comply with the decision of said court.
XIV. Export Control
14.0 The Parties understand that the export of goods and/or technical data
from the United States may require some form of export control license from the
United States Government and that, failure to obtain such export control
license, may result in criminal or civil liability under the United States laws.
XV. Waiver, Integration, Alteration
15.0 The waiver of a breach hereunder may be effected only by a writing
signed by the waiving Party and shall not constitute a waiver of any other
breach.
15.1 This Agreement represents the entire understanding between the
Parties concerning the patent and the license of the patent, and supersedes all
other agreements about this subject, express or implied, between the Parties
concerning PATENTS.
15.2 A provision of this Agreement may be altered only by a writing
XVI. Marking
16.0 When possible to so mark, LICENSE shall place in a conspicuous
location on LICENSED PRODUCTS, a patent notice in accordance with 35 U.S.C.
ss.282. LICENSEE agrees to mark any products made using a process covered by any
PATENT with the number of each such patent and, with respect to such
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PATENTS to respond to any request for disclosure under 35 U.S.C ss.217(6)(4)(5)
by only notifying LICENSOR of the request for disclosure.
XVII. Applicable Law
17.0 This Agreement shall be construed in accordance with the substantive
laws of the State of New York. Any and all litigation involving either Party's
rights and duties under this Agreement shall be brought in. Court of competent
jurisdiction in the State of New York.
XVIII. Notices Under the Agreement
18.0 For the purpose of all written communication and notices between the
parties, their addresses shall be:
LICENSEE: LICENSOR
Daniel E. Charboneau Thomas J. Ulrich
President and CEO 14 Brookfield Road
FoneCash, Inc Binghamton, NY 13903
177 Main Street, Suite 367
Fort Lee, NJ 07024
or any other addresses of which either Party shall notify the other Party in
writing.
IN WITNESS WHEREOF the Parties have caused this Agreement to be executed
on duplicate originals by their duly authorized officers on the respective dates
and at the respective places hereinafter set forth.
LICENSOR LICENSEE
Thomas J. Ulrich FoneCash, Inc.
/s/ Thomas J. Ulrich /s/ Daniel E. Charboneau
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Schedule A
Business Sensitive Information
I. License Fee and Royalty
In consideration of the License grant of Article IV, LICENSEE agrees to pay
LICENSOR, in United States Currency, the following amounts:
1.0 A license execution fee in the amount of thirty thousand dollars
($30,000.00) which shall be non-refundable to be paid in accordance with the
following Schedule:
AMOUNT DUE
$ 5,000.00 Thirty (30) after signing this
Agreement, or after due
diligence by FoneCash, whichever
is first.
$25,000.00 Upon first funding of the IPO or
any other financing over
$500,000.
1.1 LICENSEE shall pay to LICENSOR a royalty rate of three percent (3%)
of the GROSS SALES PRICE of all LICENSED PRODUCTS sold or otherwise
disposed of under the license granted under article IV of this
Agreement.
1.2 LICENSEE shall, upon funding from the IPO or the first financing
over $500,000, sign a consulting agreement with LICENSOR for
personal engineering services at the rate of $100 an hour with a
minimum of 20 hours a month whether or not these services concern
the patent design or some other product that Licensor has developed.
This agreement for personal service will be signed upon funding of
the company operations, or when $500,000 of financing has been
received. This is additional compensation over and above the
royalties from the exclusive use of the patent.
II. Minimum Annual Royalties
2.0 LICENSEE shall pay to LICENSOR following the first quarterly report
after each new calendar year:
Year Amount Due
1999 $ 10,000.00 January 31,2000
2000 $ 20,000.00 January 31,2001 and each year
thereafter
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2.1 In the event this Agreement is terminated by either Party, the minimum
annual amounts of paragraph 2.0, above, for the year of termination shall be
prorated on the basis of the number of days in the calendar year that this
Agreement was in effect, divided by 365.
III. Performance Requirements
3.0 Notwithstanding any other obligation imposed on LICENSEE under this
Agreement, LICENSEE agrees to comply with the following sales milestones
beginning calendar year 1998;
US Pat No 4,803,719
Minimum Annual Sales Year
$ 500,000.00 2000
$1,000,000.00 2001
$1,500,000.00 2002
$2,000,000.00 2003 and all following years
3.1 Failure to meet the above milestones will be considered a default of
this Agreement and this Agreement may be terminated by LICENSOR as provided in
Article IX, but only after good faith effort to negotiate a mutually acceptable
modification.
IV. Equity
4.0 For and in consideration of the license grant of Article IV, LICENSEE
further agrees that LICENSOR shall be issued 50,000 shares of common stock in
FoneCash, Inc which is valued at the IPO price and shall be granted a stock
option to purchase another 100,000 shares at the option price of $120 % over the
Initial Public Offering price, in accordance with the Underwriter Agreement and
all relevant rules and regulations of the Securities and Exchange Commission
regarding the granting of options.
V. Payments
5.0 All license fees and royalty payments should be sent to:
Thomas J. Ulrich
14 Brookfield Road
Binghamton, NY 13903
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CONSULTING AGREEMENT
This Agreement, made this 4th day of February,1998 between FoneCash, Inc,
a corporation registered in Delaware, located at 475 Dobbs Ferry Road, White
Plains, New York 10607 (hereinafter referred to as "Company") and East Coast
Entertainment, Inc., a corporation registered in New York, located at 8
Bridlepath Drive, Old Westbury, NY 11568 (hereinafter referred to as
"Consultant".
WITNESSETH THAT:
Consultant is hereby employed by Company in accordance with the terms and
conditions herein provided:
1. Services. During the term of this Agreement, Consultant agrees to provide
professional services to Company as set forth in Attachment A to this Agreement.
2. Term. The term of this Agreement shall commence for one year from the date
written above and can be renewed at the option of E.C.E and the Board of
Directors of Company for a period of ten (10) years.
3. Payment. As payment for services by Consultant, Company agrees to payment in
accordance with Attachment A. Consultant shall submit monthly invoices which
shall be paid upon receipt.
4. Expenses. Company shall reimburse Consultant for out-of-pocket expenses
incurred in the course of performing services for Company. Expenditures made on
behalf of the Company must first have approval of Company's Comptroller.
5. Stock Options. Under this Agreement, the Consultant shall be eligible to
participate in such stock option plans established by the Board as incentives
which are made available to Company's key senior executives.
6. Benefits. The Consultant, and employees and members of their families shall
be allowed to participate in the group health plans of the Company as shall be
approved by the Board of Directors from time to time, subject to the
satisfaction of any condition of eligibility therein set forth and further
subject to the right of the Board to amend, modify or terminate any such health
benefit program as it applies to all senior key executives and other employees
of the Company.
7. Termination. The Company shall be entitled to terminate this Agreement upon
written notice to Consultant in the event of a breach of this Agreement. The
following provision, in addition to any other similar provisions herein, shall
govern termination of this Agreement :
(a) The Company, upon a vote of the Board of Directors, may
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terminate for any reason by written notice given to the Consultant
not less then thirty (30) days.
(b) The Company may terminate by written notice given to the Consultant
effective as of the time of receipt of said notice by Consultant in
the event the Consultant shall have engaged in any conduct or
practice that in the reasonable opinion of the Company as expressed
by a vote of the members of the Board, Consultant has a material and
negative effect upon the good name, goodwill, or reputation of
Company.
(c) Company may terminate by written notice given to the Consultant,
effective immediately, in the following events :
(i) Conviction in a court of competent jurisdiction which is
no longer able to be appealed of the Consultant or final ruling or
order no longer subject to appeal process or procedure by any
Governmental Agency regarding any violation of law or regulation
tending, in Company's opinion, to affect adversely the ability of
the Consultant to perform his duties, obligations and
responsibilities herein or the good name, goodwill, or reputation of
the Company; or (ii) Submission by the Consultant to the Board of
Directors any materially false or fraudulent information, reports or
statement.
(d) Notwithstanding anything herein to the contrary, all
representations, warranties, covenants, agreements and undertakings
made or accepted herein by Consultant along with all causes of
action at law or in equity arising from the actual breach of
attempted or threatened breach, shall survive the termination of the
Agreement and inure to the benefit or Company, its successors and
assigns.
8. Independent Contractor. Consultant is an independent contractor and is not an
employee of the Company, as that term is defined by various laws and decisions
of the Internal Revenue Service. Consultant shall be solely responsible for
payment of all local, state and federal taxes resulting from, or on account of,
compensation, reimbursement, or other payment received by Consultant.
9. Not An Agent. Nothing in this Agreement shall be construed to imply a joint
venture, partnership or principal/agent relationship between the parties, and
neither party by virtue of this Agreement shall have any right, power or
authority to act or create any obligations, express or implied, on behalf of the
other party.
10. Indemnification. Consultant shall indemnify and hold Company harmless from
any liabilities, claims or demands (including costs, expenses and reasonable
attorney fees on account thereof) resulting from, or on account of (a)
Consultant's obligations to its employees, (b) for withholding and/or payment of
local, state or federal taxes
81
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with respect to any compensation, reimbursement, or other payment received by
Consultant, or (c) injuries to persons, including death or damage to property,
including theft, resulting from Consultant's acts or omissions or those of
Consultant's employees, if any.
11. Notices. All notices necessary or required according to the terms of this
Agreement shall be deemed sufficient if in writing and sent by registered mail
or certified mail to the Company and its registered office, and to the
Consultant at the last known office, or at such other address as the party to
receive notice may designate in writings to the other prior to the time such
notice is necessary or required to be sent.
12. Governing. Law. This Agreement shall be subject to and governed by the laws
of the State of New York and that any dispute or question, either of fact or of
law which arises out of this agreement, shall be resolved solely by reference to
the laws of the State of New York. Any controversy or claim arising out of or in
relation to this agreement or the breach thereof, and that is not amicably
settled between the parties shall be settled in the manner established by, and
will be subject to the provisions of the Arbitration laws of the State of New
York, as supplemented by the current rules of the American Arbitration
Association. Any award ordered by the Arbitrator may include, but not be limited
to, hearing costs, lawyer fees, and any other charges and damages deemed
appropriate by the Arbitrator. Judgment on any award rendered may be entered in
any court having jurisdiction over the parties
13. Invalid Provisions. The invalidity of all or any part of any paragraph or
paragraphs of this Agreement shall not invalidate the remainder of this
Agreement or the remainder of any paragraph not invalidated.
14. Binding Effect. This Agreement cannot be assigned, transferred, pledged or
hypothecated in any way, nor made subject to execution, attachment or similar
process.
15 Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
hereto and contains all of the understandings between said parties
with respect to the subject matter hereof. Further, this Agreement
supersedes any and all other agreements, either oral or in writing,
between the parties hereto, with respect to the subject matter
hereof.
(b) This Agreement may only be amended or revoked at any time by a
written agreement executed by the parties hereto.
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(c) If any provision of this Agreement is judged unenforceable by a
court of competent jurisdiction, that fact will not invalidate the
other provisions.
In Witness Whereof, the parties to this Agreement do hereby agree to the
terms set out above and have hereunto set their respective hands and seal.
FoneCash, Inc.
/s/ Daniel E. Charboneau, Chairman
East Coast Entertainment, Inc
/s/ Carmine Auditore
President
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Attachment A
1. Services.
FoneCash will contract with East Coast Entertainment Inc., (hereafter referred
to as E.C.E.) to assign administrative duties, including but not limited to,
publicity, advertising, public relations, investor relations programs, news
releases, hiring of all necessary outside contractors for any specialized
projects, printing and development of Company's annual reports, preparation of
any design, print or art work, camera ready art, distribution of reports and
corporate releases to State and Federal securities agencies.
Additionally, E.C.E. shall be invited to fill one seat on the Company's
Board of Directors in accordance with the Company's By-laws and amendments as
approved by the Board.
2. Compensation
(a) Until FoneCash attains total gross revenues of $300,000.00 E.C.E. shall not
be paid a monthly retainer, but that after $300,000 in gross revenues are
attained, E.C.E shall be paid at the reduced rate of $50,000.00 a year. Retainer
will be paid in 12 equal monthly payments on the first day of each month
commencing on the first day or the month following the revenue target of
$300,000 having been attained. E.C.E will be reimbursed for all the cost of
providing services as necessary. Invoices prepared by E.C.E. to FoneCash shall
be paid on the first day of the first month following the invoice date. Costs
will include but not limited to, expenses related to the preparation and outside
contracting of all necessary skills and services deemed after approvals by the
FoneCash President or his Executive Representative. This includes the cost of
printing, travel, overhead, hiring of necessary skills and services necessary to
the completion of any approved project (b) After FoneCash Inc. has achieved $
500.000,00 in gross revenues , E.C.E. shall receive compensation at the rate of
$100,000 annually, payable in (12) equal monthly payments on the first day of
each month. After the first year, if FoneCash attains gross sales of
$1,000,000.00, E.C.E. annual compensation will increase 2 per cent ($20,000) for
each million dollars in gross increase in sales over the previous year. (c) In
the event the Company is purchased or acquired and/or merged with a third party
firm, E.C.E. will share in bonuses or other compensation commensurate with other
members of the Board of Directors or other executives.
3 Choice of payment
If the value of FoneCash stock is greater than $ 1.00, E.C.E has the option of
taking 10 per cent of annual compensation in FoneCash common stock at a rate
equivalent to 25 per cent below the average market price of the last 10 days
preceding the date stock is to be issued. This option is available only once
each year and notification of the intent to exercise this option must be given
to the Company by the 15th day preceding the date the option is to exercised.
84
AGREEMENT
This Agreement is made and entered into on this 10th day of October 1997
by and between FoneCash, Inc, a Delaware corporation, located at 177Main Street,
Suite 367 Fort Lee, NJ 07024 ("Company") and Advance Data Information,Ltd.,
located in , Taipei, Taiwan,R.O.C., whose owner and director is John Jiann-Shung
Wu, ("Wu"),
Whereas, Company is in the business of a developing, manufacturing,
marketing and distribution of various electronic devices whose main feature is a
circuit that connects to a standard telephone, whose purpose is processing
credit and debit cards;
Whereas, Wu is a recognized research and development laboratory and has
much experience in the development of hardware and software for the processing
of credit and debit cards and various other electronic devices;
Now, Therefore, the parties hereto, for good and valuable consideration,
receipt of which is hereby acknowledged, and intending to be legally bound
hereby, agree as follows:
1. Wu will supply technical engineering and know-how to Company for the
development and proto-typing of various electronic system hardware for the
processing of credit and debit card generally referred to as a transaction
terminal (Terminal).
2. Wu and Company will develop and have certified software for the
operation of these terminals and , based upon specifications, Wu and the Company
will jointly design, develop, and test software application programs suitable
for the purpose of the Company's products.
3. Wu will procure all governmental approvals regulating such devices,
such as F.C.C. Parts 15 and 68 approvals, and where necessary UL approval.
4. When applicable, Wu and Company will collaborate in composing the
narrative description and engineering drawings necessary for the submission of
an application for U.S. patents. All patents developed for Company will be
assigned to Company exclusively.
6. Wu hereby acknowledges and agrees that Company shall have exclusive
ownership rights to any and all products that are developed as a result of this
collaboration and that all rights, title and interest in the firmware, the
source coding, engineering drawing and finished product shall inure to Company.
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<PAGE>
7. In return for this Agreement to act as the Research and Development
laboratory for Company, it is agreed:
a. Company will issue 200,000 shares of common stock in the name of
Wu, or his laboratory;
b. Company will give Wu, or his laboratory, a five year option to
purchase another 200,000 shares of common stock at 120% above the price of
the first initial public offering,
c. Company will give 3% royalty to Wu, or his laboratory, on the
gross revenues of the Company.
8. Wu agrees as follows:
a. As part of his contribution to the Company, Wu agrees to use his
laboratory, and his staff of engineers to perform the research and
development for all the products that Company intends to make and market;
b. On any product that Wu develops independently of specifications
given by the Company or any third party, Wu will give the Company the
first right of refusal to market and distribute said product which
agreement would be subject to a separate contract.
9. This Agreement shall commence on the date hereof and shall be for a
term indefinite. This Agreement may be terminated upon the occurrence of any of
the following events:
a. The mutual written consent of Company and Wu.
b. A material breach of this Agreement either by Company or Wu, and
the failure of the breaching party to cure said breach within fifteen (15)
days of the date of written notice thereof from the non-breaching party.
c. Either Company or Wu makes an assignment for the benefit of its
creditors or admits in writing its inability to pay its debts as they
become due, or files a voluntary petition in bankruptcy or any petition
seeking reorganization, arrangement, composition or similar relief under
the present or any future bankruptcy act or any federal, state, or local
laws;
10. Without the prior consent of both Parties, no information about the
terminals and products or the manufacture or assembly thereof shall be disclosed
to any third party.
11. All terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by each of the parties hereto and
their respective
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<PAGE>
successors and assigns. Neither party may assign any of its rights or delegate
any of its duties hereunder to any person without the prior written consent of
the other party.
12. All notices or other communication which are required or permitted
hereunder shall be in writing and delivered personally or by certified mail,
postage prepaid as follows:
If to Company: FoneCash, Inc
177 Main Street, Suite 367
Fort Lee, New Jersey 07024
Attention: Daniel E. Charboneau, President
If to Advance Data Information, Ltd.
3F,No.200, Sec 2, Nam Chang Street
Taipei, Taiwan, R.O. C.
Attention: John Jiann-Sung Wu, President
13. This Agreement shall be governed by, and constructed in accordance
with the laws of the State of New York.
14. This Agreement set forth the entire understanding of the parties
hereto with respect to the transact contemplated hereby and shall be amended or
terminated except by a written instruction duly executed by each of the parties
hereto. All previous agreements, oral and written, are hereby extinguished and
this Agreement is the sole understanding between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
FoneCash, Inc
/s/ Daniel E. Charboneau
President
Advance Data Information, Ltd
/s/ John Jiann-Sung Wu
87
CONTRACT OF EMPLOYMENT
THE AGREEMENT, entered into as of the 5th.,day of July 1999 between
FoneCash, Inc., a Delaware Corporation, located at 90 Park Avenue, Suite 1700,
New York, New York 10016 (hereinafter called the "Corporation"). and John
Jiann Shong Wu (hereinafter called the Executive.)
WITNESSETH
WHEREAS, the Corporation is engaged in the business of marketing a
patented automated transaction terminal, deriving income from both the sale of
the terminals (hardware) and also from the fees collected as a result of
transmission of data information connected to the processing of credit and debit
cards which are used as a means of payment for goods and services by authorized
merchants both domestic and international;
WHEREAS, the Executive has considerable experience, talent and ability in
the business of the corporation and has developed a favorable reputation in
business generally ; and
WHEREAS, the Corporation is desirous of employing the Executive in order
to take advantage of his knowledge, ability and skills;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, it is agreed as follows :
1. EMPLOYMENT, DUTIES and PERFORMANCE.
The Corporation hereby employs the above mentioned individual as Vice President
and Director , and such other positions and offices which the Board of Directors
of the Corporation (the "Board") may elect him. The Executive's powers and
duties in any capacity so elected shall be such as may be determined by the
Board of Directors of the Corporation consistent with his position. The
Executive consents to such employment, agrees to devote 100 per cent of his
working time, attention and efforts to complete the task assigned to him by the
Corporation, and further agrees to occupy those positions and office, if any to
which he may be elected by the Board.
2. TERMS of EMPLOYMENT
Except in the case of earlier termination as hereafter provided in paragraphs 10
and 15, the term of the Contract of Employment shall start as of the date above
written and shall continue for a term of Five (5) year.
88
<PAGE>
3. COMPENSATION.
For all services to be rendered by the Executive in any capacity under this
Agreement, the Corporation shall pay the Executive at an annual rate of $
100,000 per annum and paid according to the Salary and Wage payroll schedule as
established by the Corporation, with such additional commissions, bonuses and
stock option plans established by the Board as incentives to key senior
executives of the Corporation.
4. FRINGE BENEFITS.
The Executive shall be a participant in all fringe benefits of the Corporation
as shall be approved by the Board of Directors from time to time, subject to the
satisfaction of any condition of eligibility therein set forth and further
subject to the right of the Board to amend, modify or terminate any such fringe
benefit program as it applies to all senior key executives in a similar position
as Executive.
5. DEATH BENEFIT.
In the event of the death of the Executive during the term of this Contract or
any renewals thereof, the sum of Two Hundred Fifty Thousand ($250,000.00)
Dollars shall be paid as soon thereafter as shall be practicable, to the
Executive's surviving spouse, or to the estate of the Executive, provided that
the Executive may at any time prior to his death designate in writing to the
Corporation another beneficiary arrangement which shall, until revoked, be
recognized by the Corporation.
6. RESTRICTIONS.
During the term of this agreement, the Executive agrees, covenants and warrants
to devote his best efforts to advance the interests of the Corporation and shall
not, directly or indirectly, become associated with, nor engage in, nor render
services to, any other business without first obtaining the written consent of
the Corporation. However, these restrictions shall not be construed to prevent
the Executive from investing any assets in such form or manner as will not
require his expenditure of any time in the operation of the affairs of the
business or businesses in which such investments are made.
7. WORKING FACILITIES.
The Executive shall be furnished at a place of the Corporation's and the
Executive's mutual choosing with the necessary office of offices, equipment
facilities and supplies appropriate to his employment and adequate for the
performance of his duties.
8. EXPENSES.
This Corporation shall pay or reimburse the Executive for all reasonable and
necessary expenses incurred by him for or on behalf of the Corporation,
including but not limited to the following items: approved national, state and
local professional society dues or assessments, professional travel,
professional entertainment, convention costs, and expenses incurred by the
Executive through the use of an
89
<PAGE>
automobile and mobile telephone in connection with his employment by the
Corporation.
9. VACATIONS.
The Executive shall be entitled each year to vacations not exceeding four (4)
weeks during which time his salary be paid in full.
10. DISABILITY.
In the event the Executive shall become disabled while employed with the
Corporation so as to prevent him from performing the duties of his employment,
then when such disability commences, the following benefits shall be payable. An
amount equal to his full base salary otherwise payable shall be paid in lieu of
salary of wages during such period of disability, not extending, however, beyond
the end of the twenty-fourth calendar month following the month in which such
disability commenced. The amounts, if any, of any disability benefits with
respect to those months, actually paid to or on behalf of the Executive under
policies of insurance on the Executive paid for by the Corporation shall be
applied as payments thereunder. In the event of any disability, the Executive
shall continue as an Executive (with or without compensation, as the case may
be) throughout the entire period of such disability until the earliest of (a)
his death, (b) his voluntary resignation form the employment of the
Corporation, (c) the continuation of said disability for a period of such
disability for a period of (2) years, or (d) the determination in writing by
any two reputable physicians that such disability will continue for a period of
indefinite duration. Upon the termination of employment of the Executive as
provided for in this section, this Contract of Employment shall also terminate
except as to any rights which may have already accrued hereunder.
In the event the disability of the Executive ceases and he resumes complete
activity for a period of at least six (6) months, and thereafter a subsequent
disability occurs, the prior disability shall not be considered as one together
with the new disability time insofar as determining the disability period
provided for herein.
11. NOTICES.
All notices necessary or required according to the terms of this Contract of
Employment shall be deemed sufficient if in writing and sent by registered mail
or certified mail to the Corporation and its registered office, and to the
Executive at his last know residence, or at such other address as the party to
receive notice may designate in writings to the other prior to the time such
notice is necessary or required to be sent.
12. GOVERNING LAW.
This Agreement shall be subject to and governed by the laws of the State of
Delaware.
90
<PAGE>
13. INVALID PROVISIONS.
The invalidity of all or any part of any paragraph or paragraphs of this
Agreement shall not invalidate the remainder of this Agreement or the remainder
of any paragraph not invalidated.
14. BINDING EFFECT.
This Agreement shall inure to the benefit of and bind the personal
representative, successors and assigns of the Executive and the successors and
assigns of the Corporation. However, insofar as the Executive is concerned, this
Contract of Employment being personal, cannot be assigned, transferred, pledged
or hypothecated in any way, nor made subject to execution, attachment or similar
process.
15. TERMINATION.
The following provision, in addition to any other similar provisions herein,
shall govern termination of this Agreement :
(a) The Corporation, upon a vote of the Board of Directors, may
terminate for any reason by written notice given to the Executive
not less then one hundred and eighty (180) days prior to the
effective date of such notice, provided that such notice shall not
be given before the completion of one year of employment.
(b) The Corporation may terminate by written notice given to the
Executive effective as of the time of receipt of said notice by
Executive in the event the Executive shall have engaged in any
conduct or practice that in the reasonable opinion of the
Corporation as expressed by a vote of the members of the Board,
Executive has a material and negative effect upon the good name,
goodwill, or reputation of Corporation.
(c) Corporation may terminate by written notice given to the Executive,
effective immediately, in the following events :
(i) Conviction in a court of competent jurisdiction which is
no longer able to be appealed of the Executive or final ruling or
order no longer subject to appeal process or procedure by any
Governmental Agency regarding any violation of law or regulation
tending, in Corporation's opinion, to affect adversely the ability
of the Executive to perform his duties, obligations and
responsibilities herein or the good name, goodwill, or reputation of
the Corporation ; or
(ii) Submission by the Executive to the Board of any
materially false or fraudulent information, reports or statement.
(d) The Executive may terminate his employment at any time by notice
given to Corporation not less than sixty (60) days prior to the
effective date of such notice.
(e) Notwithstanding anything herein to the contrary, all
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<PAGE>
representations, warranties, covenants, agreements and undertakings
made or accepted herein by Executive along with all causes of action
at law or in equity arising from the actual breach of attempted or
threatened breach, shall survive the termination of the Agreement
and inure to the benefit or Corporation, its successors and assigns.
16. MISCELLANEOUS.
(a) This Contract constitutes the entire agreement between the parties
hereto and contains all of the agreements between said parties with
respect to the subject matter hereof. Further, this Contract
supersedes any and all other agreements, either oral or in writing,
between the parties hereto, with respect to the subject matter
hereof.
(b) This Contract may only be amended or revoked at any time by a
written agreement executed by the parties hereto.
(c.) If any provision of this Contract is judged unenforceable by a court
of competent jurisdiction, that fact will not invalidate the other
provisions.
FoneCash, Inc.
By: /s/ Daniel E. Charboneau
Chairman & CEO
Executive
By: /s/ John Jiann-Shong Wu
92
<TABLE> <S> <C>
<ARTICLE> 5
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<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<CASH> 389 9,628
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<RECEIVABLES> 40,382 0
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<PP&E> 18,250 0
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<TOTAL-ASSETS> 438,715 9,891
<CURRENT-LIABILITIES> 38,809 51,321
<BONDS> 0 0
0 0
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<COMMON> 5,126,172 4,204,500
<OTHER-SE> 399,906 (41,430)
<TOTAL-LIABILITY-AND-EQUITY> 438,715 9,891
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<INCOME-PRETAX> (226,421) (56,436)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (226,421) (56,436)
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