UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
OMB APPROVAL
OMB Number: 3235-0420
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
E-FINANCIAL DEPOT.COM, INC.
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(Name of small business issuer in its charter)
DELAWARE 33-0809711
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 - 1875 CENTURY PARK EAST
CENTURY CITY, CALIFORNIA 90067
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (877) 739-3812
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Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, PAR VALUE $0.001
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(Title of class)
(Title of class)
<PAGE>
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED
IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
VALID OMB CONTROL NUMBER.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $1,197,813
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State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
3,458,000 common shares @ $5.1875 (1) = $17,938,375
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(1) Average of bid and ask closing prices on April 11, 2000
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
13,010,000 common shares, par value $0.001 outstanding as of March 31, 2000
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ ]
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
Following its incorporation on April 27, 1997, e-financial depot.com, Inc. (the
"Company") operated as a "blank check" company, and was originally organized to
engage in any lawful corporate business including, but not limited to,
participating in mergers with and acquisitions of other companies. The
Company's executive offices are located at 1875 Century Park East, Suite 150,
Century City, CA 90067 (Telephone: (877) 739-3812). The Company also has
corporate offices located at Suite 1005 - 750 West Pender Street, Vancouver,
British Columbia, Canada V6C 2T8 (Telephone: (604) 689-4195).
Other than as disclosed herein, the Company has not been involved in any
bankruptcy, receivership or similar proceedings, nor has it been a party to any
material reclassification, merger, consolidation, purchase or sale of a
significant amount of assets not in the ordinary course of its business.
The Company's financial statements are stated in United States Dollars (US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles.
In this Annual Report, unless otherwise specified, all dollar amounts are
expressed in United States Dollars. Herein, all references to "CDN$" refer to
Canadian Dollars and all references to "common shares" refer to common shares in
the capital stock of the Company.
Business Development of the Company of the Past Three Years
The Company is a Delaware corporation organized on April 21, 1997, under the
name "Ballynagee Acquisition Corp.". On November 2, 1999, the Company changed
its name to "e-financial depot.com, Inc." The Company was originally organized
as a "blank check" company, incorporated to engage in any lawful corporate
business including, but not limited to, participating in mergers with and
acquisitions of other companies.
On September 20, 1999, the Company entered into a Stock Exchange Agreement (the
"Exchange Agreement") with RJI Ventures, Inc., formerly Talk Stock With Me, Inc.
("RJI"), a Nevada Corporation . From inception until the date of the Exchange
Agreement, the Company was an inactive corporation with no assets or
liabilities. Subsequent to the Exchange Agreement, the resultant merged
corporation was re-named e-financial depot.com, Inc. At the same time, all
previously outstanding common stock, preferred stock, options and warrants owned
by RJI stockholders were exchanged for an aggregate of 2,000,000 shares of the
Company's common stock. RJI was incorporated in Nevada in November, 1998, and
began operations in the first quarter of 1999 as a developer, marketer and
operator of an internet web site devoted to the research of U.S. and Canadian
equity issues.
On October 13, 1999, the Company announced the approval of a "four-for-one"
stock dividend on its common stock, which resulted in five total shares in place
of one share. The record date for the stock dividend was October 14, 1999.
At a special meeting on November 2, 1999, the Company's stockholders unanimously
approved, through written consent, to amend the Company's certificate of
incorporation to:
(i) increase the capital stock to 110,000,000 shares from 30,000,000
shares, which included an increase of the authorized shares of common stock, par
value $0.001 per share, to 100,000,000 shares from 20,000,000 shares; and
(ii) change the name of the Company to e-Financial Depot.com, Inc.
On November 2, 1999 the Company amended its articles of incorporation to change
its name to e-Financial Depot.Com, Inc.
<PAGE>
On November 30, 1999, the Company entered into a share purchase agreement (the
"Share Purchase Agreement") with TradeFast Inc. ("TradeFast"), a private holding
company for an electronic stock brokerage that leverages direct-access
communications with the stock exchanges through its principal operating arm, to
provide investors and traders with real-time order matching and transaction
clearing, and Alan Cohen. Pursuant to the Share Purchase Agreement, the Company
acquired 100% of the issued and outstanding shares of TradeFast. Under the
terms of the Share Purchase Agreement, the Company issued a total of 4,000,000
shares of restricted stock to the sole shareholder of TradeFast. As a result of
TradeFast's achievement of profits in excess of $3,000,000 in the preceding
twelve-month period, none of the shares issued are subject to the escrow or
cancellation terms of the earlier agreement in principle governing the purchase.
In connection with the closing of the November Letter of Intent, the Company
entered into verbal management services agreements with certain of the
principals of TradeFast, pursuant to which the Company will pay fees equal to
20% (30% in the first year) of the net profits received by Trade-Fast Inc.
through the operations of its current business segments.
On January 19, 2000 the Company signed a letter of intent pursuant to which it
will acquire Westcor Mortgage (the "Westcor Letter of Intent"), a leading
mortgage banking company located in Calgary, Alberta, Canada. Westcor Mortgage
is a privately held company that provides real estate financial services both
through conventional methods and through its website, www.westcormortgage.com.
Through its extensive partner network of Canadian financial institutions,
Westcor has grown to become one of the largest-volume mortgage brokerage firms
in Western Canada. As a result of the Westcor Letter of Intent, Westcor
Mortgage will become a wholly-owned subsidiary of e financial depot.com. Under
terms of the Westcor Letter of Intent, Westcor will receive a total of $2.2
million in cash and stock.
Subsequent to the year ended December 31, 1999, on January 31, 2000, the Company
entered into a funding agreement (the "Funding Agreement") with Oxford Capital
Corporation ("Oxford"), which was completed on February 24, 2000 (the "Closing
Date"). Pursuant to the Funding Agreement, the Company issued to Oxford 6%
Convertible Debentures (the "Debentures") and a two year warrant to purchase
250,000 shares of common stock in the capital of the Company at US$5.00 per
share (the "Warrants"), in exchange for funding in the amount of $2,500,000.
The Debentures are due January 31, 2003 and bear interest at the rate of 6% per
year, payable upon conversion, redemption or maturity, whichever occurs first.
Interest is payable, at Oxford's option, in cash or in shares of the Company's
common stock. Pursuant to the Funding Agreement, the Debentures are convertible
into shares of common stock from time to time, in amounts specified by Oxford,
any time after the Closing Date at a conversion price which is the lower of:
(i) 80% (not lower than a floor price of US$3.00) of the average
closing bid price of the Company's common stock for the five (5) trading days
preceding the Conversion Date; or
(ii) US$5.00.
In addition, the Debentures are subject to a forced conversion into the
Company's common stock when the share price has traded above US$10.00 for 20
consecutive trading days and the liquidity covenants have not been broken. The
underlying warrants will be acquired and paid for within 30 trading days after
forced conversion.
The Debentures were issued from an exemption from the registration requirements
of the Securities Act of 1933, as amended, relying on Regulation S of the
Securities Act of 1933. However, the Company must prepare and file, within 60
days of January 31, 2000, a Registration Statement under the Securities Act of
1933 to register 200% of the shares the Debentures are currently convertible
into, and all of the shares underlying the Warrants. The Company must ensure
that the Registration Statement is declared effective within 120 days. In the
event that the Registration Statement is not filed within 60 days of January 31,
2000 or declared effective within 120 days, the Company will pay damages to
Oxford of 2% of the principal value of the Debentures outstanding every 30 day
<PAGE>
period, or a pro rata portion thereof. If at any time following the 120 day
period after the Closing Date, the market value of the volume of stock trades
less than $100,000 in value for 20 consecutive trading days, the Purchaser has
the right to return the unconverted Debentures to the Company at a premium of
30% of the principal outstanding. The Company has not, as of the date of this
Annual Report, filed the requisite Registration Statement.
Pursuant to the Agreement, the Debentures, the Warrants and the Common Stock
underlying the Debentures and Warrants have been delivered to Oxford Capital
Corporation, Calgary (the "Escrow Holder"). As security for the Debentures, the
Company deposited 500,000 shares of restricted common stock with the Escrow
Holder, which shares will be released upon conversion of the Debentures or in
the event that the Company defaults on the Debentures. In addition and upon
funding, the Company paid 10% of the gross amount of the Debentures to Oxford
Capital Corporation, Calgary (the "Placement Agent"), and issued a one year
warrant to purchase 50,000 shares of Common Stock at US$5.00 per share.
Current Business of the Company
The Company's goal is to use the Website to disseminate information available
over the internet to service the growing need for a centralized source of
information and services for the rapidly increasing number of online investors,
brokers, and investment students. Unlike many of its competitors, who first
build a website and then attempt to drive traffic to it, the Company has already
created an online investment-related community called Talk-Stock.com, currently
located at www.talk-stock.com (the "Talk Stock Website"). The Website and the
Talk Stock Website are collectively referred to as the "Websites". The
Company's target market includes individual investors of all sophistication
levels, professional investors such as brokers, analysts and money managers, and
general online enthusiasts looking for investment information, education and
professional financial services.
The Company intends to provide an easily navigable, consumer friendly,
vertically integrated destination website offering a wide variety of financial
products and services, including:
- - extensive investor education;
- - unbiased streaming news;
- - full service investment support, on-line trading, estate planning, life
insurance and mortgage banking; and
- - commentary on-line radio.
Another area of growth among Web use is the online community, which has brought
users together to communicate with one another and share information. This
particular Web medium has personalized the Internet for its users. To date, a
typical internet user's experience has been essentially one-way searching and
viewing websites containing professionally created content on topics of general
interest, such as current events, sports, finance, politics and weather. While
internet search and navigational sites have improved users' abilities to seek
out aggregated Web content, these sites are not primarily focused on providing a
platform for publishing the rapidly increasing volume of personalized content
created by users with similar interests, or enabling such users to interact with
one another. In contrast, the Company, through the Websites can offer its
users aggregated Web content aimed directly at their needs, such as investment
information and financial services.
Products & Services
News Media Communications
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The Company intends to provide unbiased news and information in a user-friendly
environment which is available 24 hours a day. Original content is planned to
bring both topical and educational materials to all subscribers. In addition,
the Company will provide public relations activities on behalf of publicly
traded companies. The Company, through the Talk Stock Website will host and
profile companies actively trading on the NYSE, AMEX, NASDAQ, as well as the
OTC:BB. The Company, through the Websites, intends to provide:
- - hosting and profiling of public companies, paid on a monthly basis;
<PAGE>
- - online radio services paid for on a lump sum and monthly basis;
- - hosting of annual meeting, global audience, live streaming audio or video;
- - banner advertisements;
- - attendance fees for Conference Rooms; and
- - original, topical financial and success site content
Trading Offices/Systems & On Line Financial Services
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Through TradeFast, the Company intends to pursue the trading markets.
Management plans to market its services and desires to have members open
accounts and utilize its competitive on line discount brokerage firm. There
are currently two TradeFast trading offices; up to seven more trading offices
are currently planned.
Once an account is open and a client is cleared for trading, he or she can come
into one of the Company's day-trading offices during market hours and trade live
utilizing TradeFast's licensed software system, TradeCast, which provides NASDAQ
Level II service. Unlike traditional online brokerage trades where a trade is
placed, enters "cyberspace" and confirmation is later received, at TradeFast,
clients can actually see the trade go directly to the market maker or specialist
and get executed. Screens in the offices display trading ideas through pre-set
parameters, such as those stocks that have made new highs or lows since the
previous day's close, those having record volume, or those hitting a certain
number of consecutive buy orders (momentum plays).
The Company is contemplating the integration of TradeFast into the Website by
branding the entire day-trading operation as the "Financial Depot Trade
Station". Management's plans include strategically locating the "Financial
Depot Trade Stations" in locations with heavy business traffic and visibility.
A model location for the "Financial Depot Trade Stations has been selected, and
services available inside the a Trade Station may include a cafe, ATM machine,
travel services, insurance services, mortgage banking services, state of the art
trading stations and discount brokerage and commodities desks. The Company
anticipates that this union of services and visibility will attract customers,
as well as provide a destination for the professional traders to work daily in a
convenient and energetic atmosphere, in addition to allowing professional
traders the opportunity to share their strategies and ideas with fellow traders.
Management anticipates that the Trade Stations will draw new traders, as well as
traders that are currently working independently from their homes.
In the TradeFast offices, Trade Station banners and screen shots will be
prominently displayed. On Talk-Stock and other departments of the
e-FinancialDepot.com financial portal, Trade Station will be prominently
displayed with banners and buttons. The Company is also going to feature live
newswire service during market hours to attract traders and maintain the
"stickiness" of the e-FinancialDepot.com site. It is expected that this live
news service will attract quality traffic to the site, thereby increasing
advertising rates and expanding e-commerce opportunities.
TradeFast will provide the management holding company for e-FinancialDepot.com.
The plan is to offer online brokerage, traditional brokerage services and
fee-based investment advice. To summarize, the Company will provide:
- - online and traditional brokerage;
- - fee-based investment advisory services; and
- - financial planning, including tax planning and tax advantaged investing.
Specialty Financial Services
<PAGE>
The Company intends to provide the following specialty financial services:
- - mortgage banking;
- - real estate services;
- - insurance sales and services;
- - tax preparation
- - full service securities broker, real estate agent, insurance agent,
mortgage banker directories;
- - consulting services, such as information with respect to securities laws
or becoming a public company;
- - e-commerce; and
- - tutorials and investment schools.
Investor Education
In addition to the above services, the Company intends to provide a series of
investor education materials and financial seminars designed to educate the
public on investment topics, such as learning about the markets, equities,
bonds, mutual funds, and the capital markets in general. In addition to
providing education, the Company will offer educational programs for both
professional and others with general interest in learning more about finance and
financial markets.
Intellectual Property
The Company intends to apply for trademark protection in the United States but
as yet has not commenced the application process. The Company has secured the
registration of the domain names "www.efinancialdepot.com" and
"www.talk-stock.com" with Network Solutions, Inc. (Internet).
Intellectual Property Protection
The Company relies on a combination of copyright, trade secret and trademark
laws and software security measures, along with employee and third-party
nondisclosure agreements, to protect its intellectual property rights, products
and technology. Despite its precautions taken to protect its intellectual
property, unauthorized parties may attempt to copy or obtain and use information
the Company regards as proprietary. Policing unauthorized use of its
proprietary information is difficult and software piracy is expected to be a
persistent problem. Additionally, the laws of some foreign countries do not
protect the Company's proprietary rights to the same extent as do the laws of
the United States.
The Company is not aware that its trademarks, or other proprietary rights
infringe the proprietary rights of third parties. However, from time to time,
the Company may receive notices from third parties asserting that the Company
has infringed their patents or other intellectual property rights. In addition,
the Company may initiate claims or litigation against third parties for
infringement of its proprietary rights or to establish the validity of its
proprietary rights. Any such claims could be time-consuming, result in costly
litigation, cause product shipment delays or lead the Company to enter into
royalty or licensing agreements rather than disputing the merits of such claims.
Any such claims, with or without merit, can be time consuming and expensive to
defend. An adverse outcome in litigation or similar proceedings could subject
us to significant liabilities to third parties, require expenditure of
significant resources to develop non-infringing technology, require disputed
rights to be licensed from others, or require the Company to cease the marketing
or use of certain information, any of which could have a material adverse effect
on its business, operating results and financial condition. See "Factors That
May Affect Future Results" in "Item 6 - Management Discussion and Analysis or
Plan of Operation".
<PAGE>
Employees
As of March 31, 2000, the Company had 4 full-time employees at its offices in
Vancouver, British Columbia, Canada and 15 employees at its office in Century
City, California.
The Company believes its future success depends in large part upon the continued
service of its key technical and senior management personnel and its ability to
attract and retain highly qualified technical and managerial personnel.
Competition for such personnel is intense, as certain of these personnel have
significant prior industry experience and are in great demand. There can be no
assurance that the Company will be able to retain its key technical and
managerial employees or that it can attract, assimilate or retain other highly
qualified technical and managerial personnel in the future. None of the
Company's employees are subject to any collective bargaining agreements.
Competition
The Company developed a proprietary information system consisting of integrated
web pages targeting the investment community and featuring an online investment
related community called through the Talk Stock Website.
The Company's main competitors (other comparably-sized companies that market
stock and investment information over the internet) include:
- - W3OTC Inc., which provides an editorial on emerging growth companies and
targets small-cap communities for the average investor;
- - Regent Group Inc., which through its websites (StockSiren.com,
StockSheet.com and StockTarget.com) delivers financial, economic and other
information to individual and institutional investors;
- - Internet Stock Market Resources, Inc., which operates an online
information service providing information on publicly traded companies; and
- - Financial Commerce Network, Inc., a company which provides internet
investment research and website design services. Its website provides links to
sites containing information on financial markets, market sectors and public
companies, as well as providing live market data.
The Internet contains a myriad of websites that provide similar services to
those provided by the Company, but no single website has emerged as the market
leader to date.
The online commerce market, particularly over the Internet, is new, rapidly
evolving and intensely competitive, and the Company expects that the competition
intensify in the future. Barriers to entry are minimal, and current and new
competitors can launch new websites at a relatively low cost.
The Company believes that the principal competitive factors in its market are
brand recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of editorial
and other site content and reliability and speed of fulfilment. Many of the
Company's potential competitors may have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing and other resources than the Company.
In addition, companies who provide information via the internet may be acquired
by, receive investments from or enter into other commercial relationships with
larger, well established and well-financed companies as use of the Internet and
other online services increases. Increased competition may result in reduced
operating margins, loss of market share and a diminished demand for the
Websites.
There can be no assurance that the Company will be able to compete successfully
against current and future competitors, and competitive pressures faced by the
Company may have a materially adverse effect on the Company's business,
prospects, financial condition and results of operations. Further, as a
strategic response to changes in the competitive environment, the Company may
<PAGE>
from time to time make certain pricing, service or marketing decisions or
acquisitions that could have a material adverse effect on its business,
prospects, financial condition and results of operations. See "Factors That May
Affect Future Results" in "Item 6 - Management Discussion and Analysis or Plan
of Operation".
ITEM 2. DESCRIPTION OF PROPERTY.
Vancouver, British Columbia Property
The Company co-leases 2,096 square feet of office space at 1005-750 West Pender
Street, Vancouver, British Columbia, Canada V6C 2T8 at an annual rate of $18,744
($1,562 per month), which figure includes operating expenses. The lease expires
in January, 2003.
Century City, CA Property
The Company leases 3,279 square feet of office space at 1875/1925 Century Park
East at an annual rate of $76,380 ($6,365 per month). The lease is for a one
year term ending August 31, 2000.
ITEM 3. LEGAL PROCEEDINGS.
The Company knows of no material, active or pending legal proceedings against
it, nor is the Company involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any director, officer or
affiliate of the Company, or any registered or beneficial shareholder is an
adverse party or has a material interest adverse to the Company.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At a special meeting on November 2, 1999, the Company's stockholders unanimously
approved, through written consent, to amend the Company's certificate of
incorporation to:
(i) increase the capital stock to 110,000,000 shares from 30,000,000
shares, and included an increase of the authorized shares of common stock, par
value $0.001 per share, to 100,000,000 shares from 20,000,000 shares; and
(ii) change the name of the Company to e-financial depot.com, Inc.
With respect to both the proposal to increase the authorized capital stock and
to change the Company's name, 2,750,000 affirmative votes were cast. No
negative votes were cast in respect of either proposal. No other matters were
submitted to a vote of the stockholders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common shares trade in the United States on the National
Association of Securities Dealers Over-the-Counter Bulletin Board (the "OTC
Bulletin Board") under the symbol "FDPO" and CUSIP# 282246-10-7.
The table set forth below lists the volume of trading and high and low bid
prices on the OTC Bulletin Board for the Company's common shares since November
5, 1999 (1). The closing price on March 31, 2000 was $5.563.
QUARTER ENDED VOLUME HIGH LOW
Period ended April 12, 2000 57,000 $6.25 $4.875
March 31, 2000 351,100 $7.00 $4.37
December 31, 1999 98,600 $6.75 $5.25
=================== ====== ===== =====
(1) The quotations above reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
The Company's common shares are issued in registered form. Nevada Agency &
Trust Co., 50 West Liberty Street, Suite 880, Reno, Nevada (telephone: (775)
322-0626, facsimile (775) 3225623) is the registrar and transfer agent for the
Company's common shares.
<PAGE>
On March 31, 2000, the shareholders' list for the Company's common shares showed
31 registered shareholders and 13,010,000 common shares outstanding.
The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future. Although there are no
restrictions that limit the ability to pay dividends on the Company's common
shares, the intention of the Company is to retain future earnings for use in its
operations and the expansion of its business.
Recent Sales of Unregistered Securities
Under the terms of the Share Purchase Agreement, the Company issued a total of
4,000,000 common shares at a deemed price of $4.50 (subject to adjustment
pursuant to the Share Purchase Agreement) to the sole shareholder of TradeFast
for an aggregate value of $18,000,000, relying on the exemption from the
registration requirements of the Securities Act of 1933 provided by section
4(2). As a result of TradeFast's achievement of profits in excess of $3,000,000
in the preceding twelve-month period, none of the shares issued are subject to
the escrow or cancellation terms of the earlier agreement in principle governing
the purchase.
As reported in the Company's Form 8-K filed on September 20, 1999, and pursuant
to the Share Exchange Agreement between the Company and Talk Stock With Me,
Inc., the Company issued 2,000,000 common shares at a deemed price of $0.121127
to the shareholders of Talk Stock With Me, Inc. for an aggregate value of
$242,254.
In addition, subsequent to the date of the financial statements attached to this
Annual Report, the Company issued the Debentures through a private placement
with Oxford, which yielded $2,225,000, net of estimated offering costs and
placement fees of $275,000. The Debentures pay the holders 6%, payable annually
redeemable at the option of the Company after one year of issuance and once the
average daily closing price of the Company's common stock is $10.00 per share
for twenty (20) consecutive trading days. The Debentures are convertible at
the option of the holder of such debenture at any time after March 2, 2000 at a
price per share equal to the lesser of (i) 80% of the average closing bid price
of the Company's common stock for five days proceeding the date of conversion
notice is tendered, or (ii) five ($5.00) dollars per share. In no event shall
the conversion price be lower than $3.00 per share (see Item 1: Business
Development of the Company Over the Past Three Years).
ITEM 6. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION.
The following is a discussion of the financial condition and results of
operations of the Company. This discussion and analysis should be read in
conjunction with the accompanying audited Consolidated Financial Statements of
the Company, including the Notes thereto which are included elsewhere in this
Form 10-KSB.
GENERAL
On September 20, 1999, RJI Ventures, Inc., formerly Talk Stock With Me, Inc.
("RJI") completed a merger with Ballynagee Acquisition Corp. ("Ballynagee"), in
a transaction accounted for using the purchase method of accounting. Subsequent
<PAGE>
to the merger, Ballynagee was re-named e-financial depot.com, Inc. From its
inception, Ballynagee was an inactive corporation with no significant assets or
operations. Accordingly, the following is management's discussion and analysis
of the Company's financial condition, changes in financial condition and results
of operations.
The Company is an internet financial portal, offering a full spectrum of
financial services and investment information on the World Wide Web. The Company
is developing a proprietary information system consisting of integrated
financial web pages and featuring an online investment-related community through
Talk-stock.com.
REVENUE
For the year ended December 31, 1999, revenue from continuing operations , which
are comprised exclusively of client fee income, was $ 1,197,813. Total revenues
from continuing operations increased by $ 1,124,813, or 1,541%, from $ 73,000
for the period ended December 31, 1998. The Company reported net income from
continuing operations in 1999 of $63,385 compared to net income of $ 45,022 in
1998. The Company began operating and recognizing revenues in October, 1998.
Accordingly, the 1998 revenues represent a period less than three months and
1999 represents a full year's activity.
COSTS AND EXPENSES
The Company's expenses from operations for the year ended December 31, 1999
increased $1,007,602 or 4,849% to $1,026,875 from $ 19,273 during the same
period in 1998. Selling, general and administrative expenses increased
$1,004,582, or 4,953.8% to $ 1,023,355 in 1999 from $ 18,773 in 1998. The
increase was due to the Company incurring start up costs in connection with
establishing its world wide web information site, increase in personnel costs,
and an increase in the allowance for uncollectible accounts. Due to the change
in focus of the Company in October 1999, the Company's new management did an
in-depth analysis of the accounts receivable of Talk-Stock and consequently
$238,770 of receivables were written off during the year and a further $ 358,310
was set up as an allowance for uncollectible accounts. The Company will further
analyze the accounts during the first quarter ended March 31, 2000 to decided
whether any amounts should be written off.
In addition, the Company began operating and recognizing expenses in October,
1998. Accordingly, the 1998 expenses represent a period less than three months
and 1999 represents a full year's activity.
Depreciation and amortization expense for 1999 was $3,520, an increase of $
3,020 from $500 in 1998. The Company began operating October, 1998 and
accordingly, 1998 represents less than eight months of depreciation expense.
The Company recognized a net loss from the sale of securities available for sale
in 1999 in the amount of $32,203 as compared to a net gain of $625 in 1998. The
Company periodically receives securities from clients in exchange for services.
It is the Company's policy to liquidate the securities when it is in the best
interest of the Company. The loss in 1998 represents management's decision to
liquidate securities in order to improve the Company's liquidity and
accordingly, management from time to time will incur losses.
The Company's provision for taxes in 1999 was $75,350, an increase of $66,020
from $9,330 for the period ended December 31, 1998. The increase is a of the
increase of net income before taxes of $ 84,383 to $138,735 in 1999 as compared
to $54,352 in 1998. The Company began operating October, 1998 and accordingly,
1998 represents less than eight months of net income before taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, the Company had a working capital of $100,352 compared
to $ 36,844 at December 31, 1998, an increase in working capital of $ 63,508.
The increase in working capital was substantially due to the increase in client
accounts receivable and marketable securities on hand at December 31, 1999 as
compared to 1998.
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The Company used cash flow from operations of $ 264,988 for the year ended
December 31, 1999 and $ 32,759 for the period ended December 31, 1998. The use
of cash flow from operating activities for the year ended December 31, 1999 is
primarily attributable to the Company's $460,420 increase in accounts receivable
and the unrealized loss of $337,739 on securities available for sale. The use of
cash flow from operating activities for the year ended December 31, 1998 is
primarily attributable to the Company's $17,500 increase in accounts receivable
and the unrealized loss of $33,000 on securities available for sale.
Cash flows provided in investing activities was $267,939 during the year ended
December 31, 1999 and net cash used for the period ended December 31, 1998 was
12,447. During the 1999 the Company recognized proceeds from the sale of
securities in the amount of $275,401. During 1998, the Company invested $ 27,713
in new office equipment and computers at its Los Angeles, California location.
Cash flow provided in financing activities was $ 2,472 during the year ended
December 31, 1999 and cash flows generated from financing activities during the
year ended December 31, 1998 was $ 26,748. The principal source of financing in
1999 was the receipt of additional advances from a non-interest-bearing loan
from an entity related to the Company's significant shareholder. The principal
source of financing generated in 1998 were loans from the related entity in the
amount of $ 27,224 and the $1,000 of proceeds from the sale of the Company's
common stock.
While the Company has raised capital to meet its working capital requirements,
additional financing is required in order to complete the acquisition of related
businesses. The Company is seeking financing in the form of equity and debt in
order to provide for these acquisitions and for working capital. There are no
assurances the Company will be successful in raising the funds required.
The Company has borrowed funds from an entity related to a significant Company
shareholder of the Company in the past to satisfy certain obligations.
Subsequent to the date of the financial statements, the Company issued a $
2,500,000 convertible debenture due in February, 2003 through a private
placement yielding $2,225,000, net of estimated offering costs and placement
fees of $275,000. The debenture pays the holders 6%, payable annually redeemable
at the option of the Company after one year of issuance and once the average
daily closing price of the Company's common stock is $10.00 per share for
twenty (20) consecutive trading days. The convertible debenture is in
convertible at the option of the holder of such debenture at any time after
March 2, 2000 at a price per share equal to the lesser of (i) 80% of the average
closing bid price of the Company's common stock for five days proceeding the
date of conversion notice is tendered, or (ii) five ($5.00) dollars per share.
In no event shall the conversion price be lower than $3.00 per share.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS 131")
in the year ended December 31, 1998. SFAS establishes standards for reporting
information regarding operating segments in annual financial statements and
requires selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS 131 also establishes standards
for related disclosures about products and services and geographic areas.
Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions how to
allocate resources and assess performance. The information disclosed herein
materially represents all of the financial information related to the Company's
principal operating segment.
The Company adopted Statement of Financial Accounting Standards No. 132,
Employers' Disclosures about Pension and Other Post Employment Benefits (SFAS
132"), in the year ended December 31, 1999. SFAS 132 specifies amended
disclosure requirements regarding such obligations. SFAS No. 132 does not effect
the Company as of December 31, 1999.
In March 1998, Statement of Position No. 98-1 was issued, which specifies the
appropriate accounting for costs incurred to develop or obtain computer
software for internal use. The new pronouncement provides guidance on which
costs should be capitalized, and over what period such costs should be
amortized and what disclosures should be made regarding such costs. This
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pronouncement is effective for fiscal years beginning after December 15, 1998,
but earlier application is acceptable. Previously capitalized costs will not be
adjusted. The Company believes that it is already in substantial compliance
with the accounting requirements as set forth in this new pronouncement, and
therefore believes that adoption will not have a material effect on financial
condition or operating results.
In April 1998, Statement of Position No. 98-5 was issued which requires that
companies write-off defined previously capitalized start-up costs including
organization costs and expense future start-up costs as incurred. Adoption of
this statement does not have an effect on financial condition or operating
results.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, Accounting for Derivative Instruments
and for Hedging Activities, ("SFAS No. 133"). This new pronouncement requires
that certain derivative instruments be recognized in balance sheets at fair
value and for changes in fair value to be recognized in operations. Additional
guidance is also provided to determine when hedge accounting treatment is
appropriate whereby hedging gains and losses are offset by losses and gains
related directly to the hedged item. While the standard, as amended, must be
adopted in the fiscal year beginning after June 15, 2000, its impact on the
Company's consolidated financial statements is not expected to be material as
the Company has not historically used derivative and hedge instruments.
FORWARD LOOKING STATEMENTS
When included in this Annual Report on Form 10-KSB, the words "expects,"
"intends," "plans," "projects," and "estimates," and analogous or similar
expressions are intended to identify forward-looking statements. Such
statements, which include statements contained in Item 6 and Item 1 hereof, are
inherently subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those reflected in such forward-looking
statements. These forward-looking statements speak only as of the date of this
Annual Report on Form 10-KSB. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Penny Stock Rules
The Company's common shares are subject to rules promulgated by the SEC relating
to "penny stocks," which apply to companies whose shares are not traded on a
national stock exchange or on the NASDAQ system, trade at less than $5.00 per
share, or who do not meet certain other financial requirements specified by the
SEC. These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the such penny
stocks. These rules may discourage or restrict the ability of brokers to sell
the Company's common shares and may affect the secondary market for the
Company's common shares. These rules could also hamper the Company's ability to
raise funds in the primary market for the Company's common shares.
Limited Operating History
The Company recently initiated the Website, and as a result, it only has a
limited operating history. The Company's prospects must be considered in light
of the risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets like the one faced by the Company. Some of these
risks and uncertainties relate to the Company's ability to attract and maintain
a large base of users, develop and introduce desirable services and original
content to users, establish and maintain relationships with advertisers and
advertising agencies, respond effectively to competitive and technological
developments, and build an infrastructure to support the Company's business.
The Company cannot be sure that it will be successful in addressing these risks
and uncertainties and its failure to do so could have a material adverse effect
on its financial condition.
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Uncertainty of and Inability to Generate Significant Revenues
The Company's ability to generate significant revenues is uncertain. The
Company's short and long-term prospects depend upon it ability to:
- - develop a base of users of the Websites;
- - facilitate transactions of businesses listing products and services for
sale on the Websites;
- - develop and operate the Websites;
- - develop a base of businesses who will pay to advertise their products and
services on the Websites; and
- - develop a base of users and businesses who will pay to use banner ads and
page sponsorships on the Websites.
The Company has projected that a significant portion of its revenues will be
generated from such relationships and activities. Accordingly, the Company's
success is highly dependent on such relationships and activities and the Company
may never generate significant revenues if it does not establish such
relationships and activities. As its business evolves, the Company expects to
introduce a number of new products and services. With respect to both current
and future product and service offerings, the Company expects to significantly
increase its marketing and operating expenses in an effort to increase its user
base, enhance the image of the Websites and support its infrastructure. In
order for the Company to make a profit, its revenues will need to increase
significantly to cover these and other future costs. Even if it becomes
profitable, the Company may not sustain or increase its profits on a quarterly
or annual basis in the future.
Need for Additional Financing
Based on its current operating plan, the Company anticipates that it will
require additional financing of approximately $10,000,000 by June 30, 2000 in
order to finance increased promotion and marketing of the Websites and to
complete anticipated acquisitions. The Company may need additional capital
beginning in July, 2000, or may need to raise additional capital sooner, to fund
more rapid expansion, to develop new or enhanced services or to respond to
competitive pressures.
The Company's ability to continue in business depends significantly upon its
continued ability to obtain financing. There can be no assurance that any such
financing would be available upon terms and conditions acceptable to the
Company, if at all. The inability to obtain additional financing in a
sufficient amount when needed and upon acceptable terms and conditions could
have a material adverse effect upon the Company. Although the Company believes
that it can raise financing sufficient to meet its immediate needs, it will
require funds to finance its development, marketing and operating activities in
the future. There can be no assurance that such funds will be available or
available on terms satisfactory to the Company. If additional funds are raised
by issuing equity securities, further dilution to existing or future
stockholders is likely to result. If adequate funds are not available on
acceptable terms when needed, the Company may be required to delay, scale-back
or eliminate its promotional and marketing campaign, its development programs or
even its operations until such funds become available. Inadequate funding also
could impair the Company's ability to compete in the marketplace and could
result in its dissolution.
Unpredictability of Future Revenues
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are
based largely on its investment plans and estimates of future revenues and are
to a large extent fixed.
<PAGE>
Sales and operating results generally depend on the Company's ability to develop
a base of users and businesses who will pay to utilize the Websites or to
advertise their products and services on the Websites. The Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in estimated revenues
in relation to the Company's planned expenditures would have an immediate
adverse effect on the Company's business, prospects, financial condition and
results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions that could have a materially adverse effect on its business and
financial condition and results of operations.
Potential Fluctuations in Quarterly Operating Results
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include but are not limited to:
- - the Company's ability to retain existing users of the Websites, attract
new users at a steady rate and maintain user satisfaction;
- - the Company's ability to develop a base of businesses willing to pay to
advertise their products and services on the Websites;
- - the Company's ability to develop a base of businesses willing to utilize
the Websites to conduct transactions;
- - the announcement or introduction of new services and products by the
Company and its competitors;
- - the continued use of the Internet and online services and increasing
consumer acceptance of the Internet and other online services for the purchase
of consumer products and services such as those offered by the Company;
- - the Company's ability to upgrade and develop its systems and
infrastructure in connection with the Website and attract new personnel in a
timely and effective manner;
- - the level of traffic on the Websites;
- - technical difficulties, system downtime or Internet outages;
- - the amount and timing of operating costs and capital expenditures relating
to expansion of the Company's business, operations and infrastructure;
- - governmental regulation;
- - general economic conditions; and
- - economic conditions specific to the Internet and online commerce.
Seasonality
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Due to the foregoing factors, one or
more future quarters the Company's operating results may fall below the
expectations of securities analysts and investors. In such event, the financial
performance of the Company would likely be materially adversely affected.
<PAGE>
Capacity Constraints
A key element of the Company's strategy is to generate a high volume of traffic
on, and use of, the Websites. Accordingly, the satisfactory performance,
reliability and availability of the Websites, transaction processing systems and
network infrastructure are critical to the Company's reputation and its ability
to attract and retain users and maintain adequate user service levels.
The Company's revenues depend on the number of users who visit and purchase
goods and services through the Websites and the number of businesses who utilize
the Websites to advertise and sell their products and services. Any system
interruptions that result in the unavailability of the Websites or reduced order
fulfilment performance would reduce the volume of goods sold and the
attractiveness of the Company's product and service offerings.
Any substantial increase in the volume of traffic on the Websites or the number
of businesses utilizing the Websites will require the Company to expand and
upgrade further its technology, transaction-processing systems and network
infrastructure. There can be no assurance that the Company will be able to
accurately project the rate or timing of increases, if any, in the use of the
Websites or timely expand and upgrade its systems and infrastructure to
accommodate such increases.
Marketing
The Company has not incurred significant advertising, sales and marketing
expenses to date. To increase awareness for the Websites, the Company expects
to spend significantly more on advertising, sales and marketing in the future.
If the Company's marketing strategy is unsuccessful, it may not be able to
recover these expenses or even generate any revenues. The Company will be
required to develop a marketing and sales campaign that will effectively
demonstrate the advantages of the Websites, services and products. To date, the
Company's experience with respect to marketing the Websites is very limited.
The Company may also elect to enter into agreements or relationships with third
parties regarding the promotion or marketing of the Websites, and the products
and services available through the Websites. There can be no assurance that the
Company will be able to establish adequate sales and marketing capabilities,
that it will be able to enter into marketing agreements or relationships with
third parties on financially acceptable terms, or that any third parties with
whom it enters into such arrangements will be successful in marketing and
promoting the Websites, and the products and services offered on the Websites.
Dependence on Continued Growth of Online Commerce
The Company's future revenues and its ability to generate profits in the future
are substantially dependent upon the widespread acceptance and use of the
Internet and other online services as an effective medium of commerce. The
rapid growth surrounding the Internet and online services is a recent
phenomenon.
There can be no assurance that acceptance and use of the Internet will continue
to develop or that a sufficiently broad base of consumers will continue to use
the Internet and other online services as a medium of commerce. Demand and
market acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty and relatively few proven
services and products exist.
The Company relies on consumers who have historically used traditional means of
commerce to purchase merchandise. For the Company to be successful, these
consumers must accept and utilize novel ways of conducting business and
exchanging information. In addition, the Internet and other online services may
not be accepted as viable commercial marketplaces for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies and performance
improvements.
In addition, the Internet or other online services could lose their viability
due to delays in the development or adoption of new standards and protocols
required for handling of increased levels of Internet activity. Another factor
to consider is increased governmental regulation.
Changes in or insufficient availability of telecommunications services to
support the Internet or other online services also could result in slower
response times and adversely affect usage of the Internet and other online
services generally and the Company in particular. The Company's business,
prospects, financial condition and results of operations could be materially
adversely affected if:
<PAGE>
- - use of the Internet and other online services does not continue to grow or
grows more slowly than expected;
- - the infrastructure for the Internet and other online services does not
effectively support growth that may occur; or
- - the Internet and other online services do not become viable commercial
marketplaces for the products and services offered or intended to be offered
through the Websites.
Online Commerce Security Risks
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. The Company
relies on encryption and authentication technology licensed from third parties
to provide the security and authentication necessary to effect secure
transmission of confidential information, such as customer credit card numbers.
There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography, or other events or developments will
not result in a compromise or breach of the algorithms used by the Company to
protect customer transaction data.
If any such compromise of the Company's security were to occur, it could have a
materially adverse effect on the Company's reputation, business, prospects,
financial condition and results of operations. A party who is able to
circumvent the Company's security measures could misappropriate proprietary
information or cause interruptions in the Company's operations. The Company may
be required to expend significant capital and other resources to protect against
such security breaches or to alleviate problems caused by such breaches.
Concerns over the security of the Internet and other online transactions, and
the privacy of users may also inhibit the growth of the Internet and other
online services generally, and the Internet in particular, especially as a means
of conducting commercial transactions. To the extent that activities of the
Company or third-party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
damage the Company's reputation and expose the Company to a risk of loss or
litigation and possible liability. There can be no assurance that the Company's
security measures will prevent security breaches or that failure to prevent such
security breaches will not have a material adverse effect on the Company's
business, prospects, financial condition and results of operations.
Reliance on Internally Developed Systems & System Development Risks
Wherever possible, the Company will use off-the-shelf products for the Websites,
search engine and substantially all aspects of transaction processing, including
order management, cash and credit card processing, purchasing, inventory
management and shipping. The Company does, however, expect that it will have to
develop some custom software to support its requirements. Further, the
Company's inability to:
- - add additional software and hardware;
- - develop and upgrade further its existing technology and transaction
processing systems;
- - network infrastructure to accommodate increased traffic on its web site;
and/or
- - increase sales volume through its transaction processing systems;
may cause:
- - unanticipated system disruptions;
- - slower response times;
- - degradation in levels of customer service;
<PAGE>
- - impaired quality and speed of order fulfilment; and
- - delays in reporting accurate financial information.
In addition, although the Company works to prevent unauthorized access to
Company data, it is impossible to completely eliminate this risk. There can be
no assurance that the Company will be able to effectively upgrade and expand its
transaction-processing system or to integrate smoothly any newly developed or
purchased modules with its existing systems in a timely manner. Any inability
to do so could have a materially adverse effect on the Company's business,
prospects, financial condition and results of operations.
System Failure
The Company's success, in particular its ability to successfully receive orders
and provide high-quality customer service for its users, largely depends on the
efficient and uninterrupted operation of its computer and communications
hardware systems. The Company's systems and operations are vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events.
The Company does not presently have redundant systems or a formal disaster
recovery plan and does not carry sufficient business interruption insurance to
compensate it for losses that may occur. Despite the implementation of network
security measures by the Company, its servers are vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions, which could
lead to interruptions, delays, loss of data or the inability to accept and
fulfil customer orders. The occurrence of any of the foregoing risks could have
a materially adverse effect on the Company's business, prospects, financial
condition and results of operations.
Rapid Technological Change
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of the Company's online services.
The Internet and the online commerce industry are characterized by factors such
as rapid technological change, changes in user and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies and the emergence of new industry standards and practices. These
changes could render the Websites as they currently exist, and proprietary
technology and systems, obsolete.
The Company's success will depend, in part, on its ability to license leading
technologies useful in its business, enhance its existing services, develop new
services and technology to address the increasingly sophisticated and varied
needs of its prospective customers, and respond to technological advances and
emerging industry standards and practices on a cost-effective and timely basis.
The development of the Websites and other proprietary technology entails
significant technical and business risks. There can be no assurance that the
Company will successfully use new technologies effectively or adapt the
Websites, proprietary technology and transaction processing systems to customer
requirements or new emerging industry standards.
If the Company is unable to adapt in a timely manner to technical, legal,
financial changing market conditions or customer requirements, its business,
prospects, financial condition and results of operations could be materially
adversely affected.
Risks Associated with Entry into New Business Areas
The Company may choose to expand its operations by improving the Websites or
even developing new websites, promoting new or complementary products or sales
formats, expanding the breadth and dept of products and services offered on the
Websites or expanding its market presence through relationships with third
parties. In addition, the Company may pursue the acquisition of new or
complementary businesses, products or technologies, although it has no present
understandings, commitments or agreements with respect to any material
acquisitions or investments. There can be no assurance that the Company would
<PAGE>
be able to expand its efforts and operations in a cost-effective or timely
manner or that any such efforts would increase overall market acceptance.
Expansion of the Company's operations in this manner would also require
significant additional expenses and development, operations and editorial
resources and may strain the Company's management, financial and operational
resources. The lack of market acceptance of such efforts or the Company's
inability to generate satisfactory revenues from such expanded services or
products to offset their cost could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Uncertain Ability to Manage Growth
The Company's ability to achieve its planned growth is dependent upon a number
of factors including, but not limited to, its ability to hire, train and
assimilate management and other employees, the adequacy of the Company's
financial resources, the Company's ability to identify and efficiently provide
and perform such new products and services as the Company's customers may
require in the future and its ability to adapt its own systems to accommodate
its expanded operations. In addition, there can be no assurance that the
Company will be able to achieve its planned expansion or that it will be able to
manage successfully such expanded operations. Failure to manage anticipated
growth effectively and efficiently could have a material adverse effect on the
Company.
Dependence Upon Key Personnel
The Company's future success depends in large part on the continued services of
its key product development, technical, marketing, sales and management
personnel, and its ability to continue to attract, motivate and retain highly
qualified employees. Although the Company's management personnel serve at the
pleasure of the Board of Directors, there can be no assurance that such
arrangements will continue in the future. Competition for such employees is
intense, and the process of locating key technical, product development and
management personnel with the combination of skills and attributes required to
execute the Company's strategy is often lengthy. Accordingly, the loss of
services of key personnel or an inability to attract additional personnel as
needed could have a material adverse effect upon the Company. The Company's
present management do not receive a salary for their services and there is no
guarantee that they will continue to provide their services free of charge.
The success of the Company is therefore dependent upon its ability to identify,
hire and retain additional qualified personnel, for whose services the Company
will be in competition with other prospective employers, many of which may have
significantly greater resources than the Company. Additionally, demand for
qualified personnel conversant with certain technologies is intense and may
outstrip supply as new and additional skills are required to keep pace with
evolving telecommunications technology. There can be no assurance that the
Company will be able to hire and, if so, retain such additional qualified
personnel. Failure to attract and retain such personnel could have a materially
adverse effect upon the Company.
Government Regulation
Although there are few laws and regulations directly applicable to the Internet,
it is likely that new laws and regulations will be adopted in the United States
and elsewhere governing issues such as music licensing, broadcast license fees,
copyrights, privacy, pricing, sales taxes and characteristics and quality of
Internet services. It is possible that governments will enact legislation that
may be applicable to the Company in areas such as content, network security,
encryption and the use of key escrow, data and privacy protection, electronic
authentication or "digital" signatures, illegal and harmful content, access
charges and retransmission activities.
The adoption of restrictive laws or regulations could slow Internet growth. The
application of existing laws and regulations governing Internet issues such as
property ownership, libel, defamation, content, taxation and personal privacy is
also uncertain. The majority of such laws were adopted before the widespread
use and commercialization of the Internet and, as a result, do not contemplate
or address the unique issues of the Internet and related technologies.
<PAGE>
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease demand for the Website and
services, increase its cost of doing business or otherwise have a materially
adverse effect on its success and continued operations. Laws and regulations
may be adopted in the future that address Internet-related issues, including
online content, user privacy, pricing and quality of products and services. The
growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure in many areas, as a result of which local
exchange carriers have petitioned the FCC to regulate Internet service providers
in a manner similar to long distance telephone carriers and to impose access
fees on the Internet service providers. The Company cannot guarantee that the
United States, Canada or foreign nations will not adopt legislation aimed at
protecting Internet users' privacy. Any such legislation could negatively
affect the Company's business. Moreover, it may take years to determine the
extent to which existing laws governing issues like property ownership, libel,
negligence and personal privacy are applicable to the Internet.
Liability for Website Information
The Company may be subjected to claims for negligence, copyright, patent,
trademark, defamation, indecency and other legal theories based on the nature
and content of the materials that it broadcasts. Such claims have been brought,
and sometimes successfully litigated, against Internet content distributors. In
addition, the Company could be exposed to liability with respect to the content
or unauthorized duplication or broadcast of content. Any imposition of
liability that is not covered by insurance, is in excess of insurance coverage
or is not covered by an indemnification by a content provider could adversely
affect our business.
Market for the Company's Securities and Possible Volatility of Share Prices
The trading price of the Company's common shares has been and may continue to be
subject to wide fluctuations. Trading prices of the common shares may fluctuate
in response to a number of factors, many of which are beyond the Company's
control. In addition, the stock market in general, and the market for
Internet-related and technology companies in particular, has experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of such companies. The trading prices of many
technology companies' stocks are at or near historical highs and reflect price
earnings ratios substantially above historical levels. There can be no
assurance that these trading prices and price earnings ratios will be sustained.
These broad market and industry factors may adversely affect the market price of
the common shares, regardless of the Company's operating performance.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for the Company and
a diversion of management's attention and resources.
Dilution and Dividend Policy
The grant and exercise of warrants of creditors or otherwise or stock options
would likely result in a dilution of the value of the Company's common shares.
Moreover, the Company may seek authorization to increase the number of its
authorized shares and to sell additional securities and/or rights to purchase
such securities at any time in the future. Dilution of the value of the common
shares would likely result from such sales.
Anti-Takeover Provisions
At the present time, the Company's Board of Directors has not adopted any
shareholder rights plan or any anti-takeover provisions in its Articles.
ITEM 7. FINANCIAL STATEMENTS.
The Company's financial statements are stated in United States Dollars (US$) and
are prepared in accordance with United States Generally Accepted Accounting
Principles.
<PAGE>
The financial statements are attached hereto and are found immediately following
the text of this Annual Report. The Report of Independent Accountants of
Stefanou & Company, LLP, Certified Public Accountants, on the audited financial
statements for the fiscal years ended December 31, 1999 and 1998 is included
herein immediately preceding the audited financial statements.
The Company's Audited Financial Statements include:
Report of Independent Certified Public Accountants, dated March 28, 2000.
Consolidated Balance Sheet at December 31, 1999 and 1998.
Consolidated Statements of Income and Comprehensive Income for the periods
September 16, 1998 (date of inception) through December 31, 1998, and the year
ended December 31, 1999
Consolidated Statements of Stockholders' Equity for the periods September
16, 1998 (date of inception) through December 31, 1998, and the year ended
December 31, 1999
Consolidated Statements of Cash Flows for the periods September 16, 1998
(date of inception) through December 31, 1998, and the year ended December 31,
1999
Notes to Consolidated Financial Statements
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1999 AND 1998
FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
EFINANCIAL DEPOT. COM, INC.
<PAGE>
EFINANCIAL DEPOT. COM, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheet at December 31, 1999 and 1998 F-4
Consolidated Statements of Income and Comprehensive Income
for the periods September 16, 1998 (date of inception) through
December 31, 1998 and the year ended December 31, 1999 F-6
Consolidated Statements of Stockholders' Equity for
the periods September 16, 1998 (date of inception)
through December 31, 1998 and the year ended December 31, 1999 F-7
Consolidated Statements of Cash Flows for the periods
September 16, 1998 (date of inception) through December 31, 1998
and the year ended December 31, 1999 F-8
Notes to Consolidated Financial Statements F-9
<PAGE>
STEFANOU & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1360 Beverly Road
Suite 305
McLean, VA 22101-3621
703-448-9200
703-448-3515 (fax)
------------------
[email protected]
-------------------
Philadelphia, PA
----------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors
eFinancial Depot. Com, Inc.
Vancouver, British Columbia
We have audited the accompanying consolidated balance sheets of eFinancial
Depot. Com, Inc. and subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of income and comprehensive income, stockholders'
equity, and cash flows for the period September 16, 1998 (date of inception)
and the year ended December 31, 1999. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of eFinancial Depot.Com, Inc.
and subsidiaries as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the periods then ended, in conformity with
generally accepted accounting principles.
/s/ STEFANOU & COMPANY, LLP
--------------------------
Stefanou & Company, LLP
Certified Public Accountants
McLean, Virginia
March 28, 2000
F-3
<PAGE>
eFINANCIAL DEPOT. COM, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
-------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . $ 11,859 $ 6,436
Accounts receivable, less allowance for doubtful accounts
of $358,310 in 1999 and $0 in 1998, respectively. 119,610 17,500
Marketable securities in brokerage accounts(Note E). . . . . . 51,836 44,850
Accrued tax benefits (Note D). . . . . . . . . . . . . . . . . 17,980 -
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . 35,005 -
-------- -------
Total current assets . . . . . . . . 236,290 68,786
PROPERTY AND EQUIPMENT-AT COST:
Furniture, equipment and leasehold improvements. . . . . . . . 35,176 27,713
Less accumulated depreciation. . . . . . . . . . . . . . . . . 4,020 500
-------- -------
31,156 27,213
$267,446 $95,999
======== =======
See accompanying notes to consolidated financial statements
F-4
</TABLE>
<PAGE>
EFINANCIAL DEPOT. COM, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------- -------
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . $ 36,898 $ 924
Unearned revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . 30,750 -
Notes payable (Note C ) . . . . . . . . . . . . . . . . . . . . . . . 28,220 25,748
Income taxes payable (Note D) . . . . . . . . . . . . . . 40,070 5,270
--------- -------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 135,938 31,942
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 44,610 10,400
COMMITMENTS AND CONTINGENCIES (NOTE H)
STOCKHOLDERS' EQUITY (NOTE G)
Preferred stock, par value, $.001 per share; 10,000,000 shares
authorized ; none issued at December 31, 1999 and 1998 . . . . . . . . - -
Common stock, par value, $.001 per share at December 31,
1999;$.01 per share at December 31, 1998; 20,000,000 shares
authorized; 12,500,000 issued at December 31, 1999; 100,000
shares authorized ; 1,000 shares issued at December 31, 1998 . . . . . 12,500 10
Additional paid-in-capital . . . . . . . . . . . . . . . . . - 990
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 96,907 45,022
Unrealized gain or(loss) on securities available for resale
(Note E) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,509) 7,635
--------- -------
86,898 53,657
--------- -------
$267,446 $95,999
========= =======
See accompanying notes to consolidated financial statements
</TABLE>
F-5
<PAGE>
EFINANCIAL DEPOT. COM, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE PERIOD SEPTEMBER 16, 1998 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1998 AND THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Revenues:
Fee income. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,197,813 $ 73,000
Cost and expenses:
Selling, general and administrative . . . . . . . . . . . . . . . 1,023,355 18,773
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,520 500
------------ -----------
1,026,875 19,273
------------ -----------
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . 170,938 53,727
Realized gain(loss) on securities available for sale. (32,203) 625
------------ -----------
Net income before taxes. . . . . . . . . . . . . . . 138,735 54,352
Income (taxes) benefit . . . . . . . . . . . . . . . . 75,350 9,330
------------ -----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,385 $ 45,022
Other Comprehensive income, net of tax:
Unrealized gain (loss) from available for sale securities:
Unrealized holding gains (losses) arising during the period. . . . (22,509) 7,635
------------ -----------
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . $ 40,876 $ 52,657
============ ===========
Net income per common share (basic and assuming dilution). . . . . $ .00 $ .00
============ ===========
Weighted average common shares outstanding (Note I) . . . . . . . 12,500,000 12,500,000
See accompanying notes to consolidated financial statements
</TABLE>
F-6
<PAGE>
EFINANCIAL DEPOT. COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 16, 1998 (DATE OF INCEPTION) THROUGH
- ----------------------------------------------------------------------
DECEMBER 31, 1998 AND THE YEAR ENDED DECEMBER 31, 1999
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized Loss
on Securities
Common Stock Additional Retained
Shares Amount Paid-in-Capital Earnings
---------------- -------- ----------------- ----------
<S> <C> <C> <C> <C>
Common shares issued in exchange for cash to
founders at inception . . . . . . . . . . . . . . . . . . . 1,000 $ 10 $ 990 $ -
Unrealized gain(loss) on securities-available
- -for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Net income. . . . . . . . . . . . . . . . . . . . . . . . . - - - 45,022
---------------- -------- ----------------- ----------
Balance at December 31, 1998. . . . . . . . . . . . . . . . 1,000 10 990 45,022
Share issued in connection with merger of RJI
and Ballynagee (Note A) . . . . . . . . . . . . . . . . . . 2,000,000 2,000 - -
Retirement of RJI Ventures, Inc. shares
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000) (10) (990) -
Ballynagee Acquisition Corp. adjustment. . . . . . . . . . . - - - (1,500)
Shares retained by former Ballynagee
Acquisition Corp. shareholders (Note A). . . . . . . . . . . 500,000 500 - -
Stock dividend (Note G ) . . . . . . . . . . . . . . . . . . 10,000,000 10,000 - (10,000)
Unrealized gain(loss) on securities-available-
for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Net income. . . . . . . . . . . . . . . . . . . . . . . . . - - - 63,385
---------------- -------- ----------------- ----------
Balance at December 31, 1999 . . . . . . . . . . . . . . . 12,500,000 $12,500 $ - $ 96,907
================ ======== ================= ==========
See accompanying notes to consolidated financial statements
-Available-For
-Sale Total
---------------- ---------
<S> <C> <C>
Common shares issued in exchange for cash to
founders at inception . . . . . . . . . . . . . . . . . . . $ - $ 1,000
Unrealized gain(loss) on securities-available
- -for-sale. . . . . . . . . . . . . . . . . . . . . . . . . . 7,635 7,635
Net income. . . . . . . . . . . . . . . . . . . . . . . . . - 45,022
---------------- ---------
Balance at December 31, 1998. . . . . . . . . . . . . . . . 7,635 53,657
Share issued in connection with merger of RJI
and Ballynagee (Note A) . . . . . . . . . . . . . . . . . . - 2,000
Retirement of RJI Ventures, Inc. shares
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000)
Ballynagee Acquisition Corp. adjustment. . . . . . . . . . . - (1,500)
Shares retained by former Ballynagee
Acquisition Corp. shareholders (Note A). . . . . . . . . . . 500
Stock dividend (Note G ) . . . . . . . . . . . . . . . . . . -
Unrealized gain(loss) on securities-available-
for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . (30,144) (30,144)
Net income. . . . . . . . . . . . . . . . . . . . . . . . . - 63,385
---------------- ---------
Balance at December 31, 1999 . . . . . . . . . . . . . . . $ (22,509) $ 86,898
================ =========
See accompanying notes to consolidated financial statements
</TABLE>
F-7
<PAGE>
EFINANCIAL DEPOT. COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD SEPTEMBER 16, 1998 (DATE OF INCEPTION) THROUGH
- ----------------------------------------------------------------------
DECEMBER 31, 1998 AND THE YEAR ENDED DECEMBER 31, 1999
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
Cash flows from operating activities
Net income for the year. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,385 $ 45,022
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 3,520 500
Provision for uncollectible accounts receivable. . . . . . . . 358,310 -
Loss (gain) on sale of securities. . . . . . . . . . . . . . . 32,203 (625)
Available- for-sale securities paid in lieu of cash for services rendered. . - 1,100
Available-for-sale securities received for services rendered (337,739) (33,000)
(Increase) decrease in: . . . . . . . . . . . . . . . . . . . -
Accounts receivable . . . . . . . . . . . . . . . . . . . . (460,420) (17,500)
Advances and prepaid expenses. . . . . . . . . . . . . . . . (35,005) -
Accrued tax benefits . . . . . . . . . . . . . . . . . . . . (17,980) -
Marketable securities. . . . . . . . . . . . . . . . . . . . (6,986) (44,850)
Increase (decrease) in:
Accounts payable and accrued expenses, net. . . . . . . . . 35,964 924
Deferred tax expense. . . . . . . . . 34,210 10,400
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 34,800 5,270
Unearned revenues . . . . . . . . . . 30,750 -
---------- ---------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . (264,988) (32,759)
Cash flows used in investing activities:
Proceeds from available-for-sale securities . . . . . . . . . . 275,401 40,160
Capital expenditures, net of disposals . . . . . . . . . . . . . . . . . . . (7,462) (27,713)
---------- ---------
NET CASH (USED) PROVIDED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . 267,939 12,447
Cash flows used in financing activities:
Proceeds from sale of common stock, net of costs . . . . . . . . . . . . . . - 1,000
Proceeds from notes payable. . . . . . . . . . . . . . . . . . . . . . . . . 2,472 25,748
---------- ---------
NET CASH (USED) PROVIDED IN FINANCING ACTIVITIES . . . . . . . . . . . . . . 2,472 26,748
---------- ---------
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS. . . . . . . . . . . . . . . 5,423 6,436
Cash and equivalents at beginning of year . . . . . . . . . . . . . . . . . . 6,436 -
---------- ---------
Cash and equivalents at end of year . . . . . . . . . . . . . . . . . . . . . $ 11,859 $ 6,436
========== =========
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for interest. . . . . . . . . . . . . . . . . . . . $ - $ -
Acquisition:
Assets acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,910 -
Liabilities assumed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,410) -
Common stock issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (500) -
---------- ---------
Net cash paid for acquisition. . . . . . . . . . . . . . . . . . . . . . . . $ - $ -
========== =========
See accompanying notes to consolidated financial statements
</TABLE>
F-8
<PAGE>
EFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE A-BUSINESS COMBINATION
On September 20, 1999, RJI Ventures, Inc. , formerly Talk Stock With Me, Inc.
("RJI") completed a merger with Ballynagee Acquisition Corp. ("Ballynagee") ,
in a transaction accounted for using the purchase method of accounting.
Subsequent to the merger, Ballynagee was re-named eFinancial Depot.Com, Inc.
("Company"). From its inception, Ballynagee was an inactive corporation with no
significant assets or operations. From its inception in September, 1998, RJI has
developed, marketed and operated an internet web site devoted to the research of
U. S. and Canadian equity issues. Effective with the merger, all previously
outstanding common stock of RJI was exchanged for common stock of Ballynagee ,
resulting in the previous security holders of RJI owning approximately 80% of
the voting stock of the Company in an exchange ratio of 1 share of RJI common
stock for 2,000 shares of Ballynagee common stock.
In accordance with APB Opinion 16, the consolidated financial statements include
the accounts of RJI as the acquiring entity and Ballynagee Acquisition Corp. as
the wholly owned subsidiary. Significant intercompany transactions have been
eliminated in consolidation.
The total purchase price and carrying value of net assets acquired by RJI of
Ballynagee Acquisition Corp. was $ 500. The net assets acquired were as
follows:
Net assets $ -
Accumulated deficit 1,910
Net liabilities (1,410)
-------
$ 500
=======
As Ballynagee Acquisition Corp. was an inactive corporation with no significant
operations, the Company recorded the carryover historical basis of net tangible
assets acquired, which did not differ materially from their historical cost.
The results of operations subsequent to the date of acquisition are included in
the Company's consolidated statement of losses.
NOTE B-SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.
Business and Basis of Presentation
- --------------------------------------
eFinancial Depot. Com, Inc. (formerly Ballynagee Acquisition Corp.) (the
"Company") was formed on April 21, 1997. The Company is incorporated under the
laws of the State of Delaware. Up until September, 1999, the Company was
inactive, had no significant business operations and was classified as a
development stage company. On September 20, 1999, the Company completed a merger
with RJI, Inc. ("RJI"), a company that develops, markets and operates an
internet web site devoted to the research of U.S. and Canadian equity issues.
The resulting merged corporation was named eFinancial Depot.Com, Inc.
F-9
<PAGE>
eFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
NOTE B - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue Recognition
The Company's contracts frequently call for a lump sum at the time the contract
is signed following by monthly billings for services rendered. The lump sum,
which is to be paid either in cash or common stock, is non-refundable.
Therefore, the cash or fair market value of the common stock is reflected in
income at the time the contract is signed. The contracts call for monthly
service fees to be paid at the beginning of each month with the first and last
month's fees due at the time the contract is signed. The unearned portion of
these fees is recorded as a liability.
Allowance for Doubtful Accounts
It is the policy of management to review the outstanding accounts receivable at
year-end and establish an allowance for doubtful accounts for uncollectible
amounts.
Marketable Securities
Common stock received by the Company for services is usually freely traded stock
and is recorded at its fair market value on the date the contract is signed.
All of the Company's marketable securities are categorized as available-for-sale
securities, as defined by the Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities." None
of the securities held have been included in cash equivalents.
These securities are stated at estimated fair value based upon market quotes.
Unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported, net of tax, as a separate component of
stockholders' equity. Realized gains and losses for securities classified as
available-for-sale are reported in earnings when sold based upon the adjusted
cost of the specific security sold.
Advertising
- -----------
The Company follows the policy of charging the costs of advertising to expenses
incurred. For the years ended December 31, 1999 and 1998, advertising costs were
$ 654 and $ 0, respectively.
Property and Equipment
- ------------------------
Property and equipment is stated at cost, maintenance and repairs are charged to
operations. Depreciation expense is calculated on a straight-line basis over 5
years using a half-year convention for the year of purchase. For the years
ended December 31, 1999 and 1998, depreciation expense was $ 3,520 and $ 500,
respectively.
F-10
<PAGE>
eFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 and 1998
NOTE B-SUMMARY OF ACCOUNTING POLICIES (continued)
Intangible Assets
- ------------------
Organization costs incurred after December 31, 1998 will be expensed as incurred
in accordance with AICPA Statement of Position 98-5.
Income Taxes
- -------------
Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statements of Financial Standards
No. 109, "Accounting for Income Taxes". Under this method 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 are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be removed or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the consolidated statements of operations
in the period that includes the enactment date.
Cash Equivalents
- -----------------
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.
Impairment of Long-Lived Assets
- ----------------------------------
The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS 121). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS No.121 also requires assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less costs to sell.
Use of Estimates
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly actual results
could differ from those estimates.
Concentrations of Credit Risk
Financial instruments and related items which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with credit quality institutions. At times, such investments may be in excess
of the FDIC insurance limit. The Company's customers are not geographically
concentrated and it periodically reviews its trade receivables in determining
its allowance for doubtful accounts.
<PAGE>
F-11
- ----
EFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE B-SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION
The Company accounts for stock transactions in accordance with APB Opinion 25,
"Accounting for Stock Issued to Employees." In accordance with statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company has adopted the proforma disclosure requirements.
Comprehensive Income
- ---------------------
"Reporting Comprehensive Income," was adopted during the period ended December
31, 1998. The standard establishes guidelines for the reporting and display of
comprehensive income and its components in financial statements. Comprehensive
income includes unrealized gains and losses on debt and equity securities
classified as available-for-sale and included as a component of stockholders'
equity.
New Accounting Pronouncements
- -------------------------------
The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS 131")
in the year ended December 31, 1998. SFAS establishes standards for reporting
information regarding operating segments in annual financial statements and
requires selected information for those segments to be presented in interim
financial reports issued to stockholders. SFAS 131 also establishes standards
for related disclosures about products and services and geographic areas.
Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision making group, in making decisions how to
allocate resources and assess performance. The information disclosed herein
materially represents all of the financial information related to the Company's
principal operating segment.
The Company adopted Statement of Financial Accounting Standards No. 132,
Employers' Disclosures about Pension and Other Post Employment Benefits (SFAS
132"), in the year ended December 31, 1999. SFAS 132 specifies amended
disclosure requirements regarding such obligations. SFAS No. 132 does not effect
the Company as of December 31, 1999.
In March 1998, Statement of Position No. 98-1 was issued, which specifies the
appropriate accounting for costs incurred to develop or obtain computer
software for internal use. The new pronouncement provides guidance on which
costs should be capitalized, and over what period such costs should be
amortized and what disclosures should be made regarding such costs. This
pronouncement is effective for fiscal years beginning after December 15, 1998,
but earlier application is acceptable. Previously capitalized costs will not be
adjusted. The Company believes that it is already in substantial compliance
with the accounting requirements as set forth in this new pronouncement, and
therefore believes that adoption will not have a material effect on financial
condition or operating results.
F-12
<PAGE>
EFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE B-SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
In April 1998, Statement of Position No. 98-5 was issued which requires that
companies write-off defined previously capitalized start-up costs including
organization costs and expense future start-up costs as incurred. Adoption of
this statement does not have an effect on financial condition or
operating results.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, Accounting for Derivative Instruments
and for Hedging Activities, ("SFAS No. 133"). This new pronouncement requires
that certain derivative instruments be recognized in balance sheets at fair
value and for changes in fair value to be recognized in operations. Additional
guidance is also provided to determine when hedge accounting treatment is
appropriate whereby hedging gains and losses are offset by losses and gains
related directly to the hedged item. While the standard, as amended, must be
adopted in the fiscal year beginning after June 15, 2000, its impact on the
Company's consolidated financial statements is not expected to be material as
the Company has not historically used derivative and hedge instruments.
Earnings Per Share
- --------------------
The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings per share has
been calculated based upon the weighted average number of common shares
outstanding. Stock options and warrant's have been excluded as common stock
equivalents in the diluted earnings per share because they are either
antidilutive, or their effect is not material. There is no effect on earnings
per share information for the year ended December 31, 1998 relating to the
adoption of this standard.
NOTE C - NOTE PAYABLE
The Company has an unsecured demand loan from an entity controlled by the
Company's President, which bears no interest. The amount of the advances due on
December 31, 1999 and 1998 were $ 28,220 and $ 25,748, respectively.
NOTE D- INCOME TAXES
The Company has adopted Financial Accounting Standard number 109 which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statement or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.
F-13
<PAGE>
EFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
The provision for income taxes at December 31 , 1999 and 1998 consists of the
following:
1999 1998
---- ----
Current:
Federal $ 27,600 3,410
State 7,200 1,860
----- -----
34,800 5,270
------ ------
Deferred tax:
Federal $37,200 2,590
State 3,350 1,470
-------- -----
40,550 4,060
------- -----
Total provision for
income taxes $75,350 9,330
======= =====
The deferred tax liability is the result of differences in depreciation for tax
and financial statement presentation purposes.
The Company has deferred tax benefits of $ 17,980 ($15,790 federal income tax
and $2,190 state income tax) related to the unrealized loss on securities
available for sale at December 31, 1999 and deferred income liabilities of
$6,340 ($5,540 federal income tax and $890 state income tax) related to the
unrealized gain on securities available-for-sale on December 31, 1998.
NOTE E- MARKETABLE SECURITIES
- --------------------------------
The Company in exchange for services receives securities. The securities
received are recorded at fair market value and are classified as
available-for-sale. Securities classified as available-for-sale may be sold in
response to changes in interest rates, liquidity needs, and for other purposes.
The Company does not currently have any held-to-maturity or trading securities.
None of the securities held have been included in cash equivalents.
Unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported net of tax as a separate component of
stockholder's equity. Realized gains and losses for securities classified as
available-for-sale are reported in earnings based upon the adjusted cost of the
specific security sold.
Marketable securities consisted of the following at December 31,
1999 1998
---- ----
Fair market value on the date acquired $ 92,325 $ 30,875
Fair market value on December 31 51,836 44,850
------ ------
Unrealized gain or (loss) (40,489) 13,975
Deferred income tax asset or (liability) 17,980 (6,340)
------ -------
(22,509) 7,635
======= =====
Stocks held in brokerage accounts 86,987 36,298
Deferred income tax benefit $ - $22,834
F-14
<PAGE>
EFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE F-MAJOR CUSTOMERS
Revenue from three (3) major customers approximated $366,000 or 30.5% of sales
for the year ended December 31, 1999. There were no significant customers for
the year ended December 31, 1998.
NOTE G - CAPITAL STOCK
Talk Stock With Me, Inc. ("Talk Stock") was formed under the laws of the State
of Nevada in October, 1998. In 1998, Talk Stock issued a total of 1,000 shares
of common stock to its founders in exchange for $1,000. In September 1999 Talk
Stock changed its name to RJI Ventures, Inc. ("RJI").
In September , 1999, RJI completed a merger with Ballynagee Acquisition Corp., a
Nevada corporation with no material operations. The shareholders of RJI
exchanged all of the outstanding shares of common stock of RJI in an exchange
ratio of 1 share of RJI common stock for 2,000 shares of common stock in
Ballynagee Acquisition Corp. common stock.
Immediately following the merger, Ballynagee Acquisition Corp. was renamed
eFinancial Depot. Com, Inc.
In December, 1999, the Company's Board of Directors approved a four (4) share
for one (1) common stock dividend. Share amounts presented in the consolidated
balance sheets and consolidated statements of stockholders' equity reflect the
actual share amounts outstanding for each period presented.
NOTE H-COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
- ------------------
The Company leases office space on a month-to-month basis in Los Angeles,
California from an entity controlled by an individual related to a significant
shareholder of the Company,. The Company also sub-
leases office space in Vancouver, British Columbia from an entity owned by a
Company officer. The future minimum annual lease payments in excess of one year
were as follows:
NOTE H-COMMITMENTS AND CONTINGENCIES (CONTINUED)
Year Amount
2000 $ 18,744
2001 18,744
2002 18,744
2003 1,562
---- -----
$ 57,794
=========
The Company incurred no rental expense during the years ended December 31, 1999
and 1998
F-15
<PAGE>
EFINANCIAL DEPOT. COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE I-NET INCOME PER COMMON SHARE
The following table presents the computation of basic and diluted income per
share:
1999 1998
---- ----
Net income available for common shareholders $ 63,385 $ 45,022
Basic and fully diluted income per share $ .00 $ .00
Weighted average common shares outstanding 12,500,000 12,500,000
============ ==========
NOTE J-NET INCOME PER COMMON SHARE
Net income per share is based upon the weighted average number of shares of
common stock outstanding In September, 1999, RJI shareholders exchanged for
common stock of the Ballynagee Acquisition Corp. "Ballynagee") 1 share of RJI
common stock for 2,000 shares of the Ballynagee common stock (See Note A). In
December 1999, a four (4) for one (1) stock dividend of the Company's common
stock was effected (See Note H). Accordingly, all historical weighted average
share and per share amounts have been restated to reflect this merger and the
stock dividend
NOTE K-SUBSEQUENT EVENTS
Subsequent to the date of the Company's financial statements, the Company
entered into letters of intent to acquire Trade-Fast, Inc., a privately held
financial communication firm for 4,000,000 shares of the Company's restricted
common stock and Westcor Mortgage, Inc., a privately held commercial mortgage
banking firm for $2,200,000 in the form of cash and the Company's restricted
common stock.
In addition, subsequent to the date of the financial statements, the Company
issued a $ 2,500,000 convertible debenture due in February, 2003 through a
private placement yielding $2,225,000, net of estimated offering costs and
placement fees of $275,000. The debenture pays the holders 6%, payable annually
redeemable at the option of the Company after one year of issuance and once the
average daily closing price of the Company's common stock is $10.00 per share
for twenty (20) consecutive trading days. The convertible debenture is
convertible at the option of the holder of such debenture at any time after
March 2, 2000 at a price per share equal to the lesser of (i) 80% of the average
closing bid price of the Company's common stock for five days proceeding the
date of conversion notice is tendered, or (ii) five ($5.00) dollars per share.
In no event shall the conversion price be lower than $3.00 per share.
<PAGE>
eFINANCIAL DEPOT. COM, INC.
COMPUTATION OF LOSSES PER COMMON
AND COMMON EQUIVALENT SHARES
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Shares outstanding at beginning of period. . . . . . 12,500,000 12,500,000
Weighted average of common shares issued
during the period. . . . . . . . . . . . . . . . . . 12,500,000 12,500,000
Weighted average of common shares
outstanding during the period (adjusted for 4 for 1
stock dividend in 1999). . . . . . . . . . . . . . 12,500,000 12,500,000
Stock options and warrants outstanding-not
included as they have no dilutive effect . . . . . . - -
Shares used in computing earnings per
common share . . . . . . . . . . . . . . . . . . . . 12,500,000 12,500,000
Income per common share ($63,385/12,500,000) . . . . $ .00
Income per common share ($45,722/12,500,000) . . . . $ .00
</TABLE>
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On February 21, 2000, the Company engaged Stefanou & Company, LLP, Certified
Public Accountants, to audit its financial statements for the fiscal years ended
December 31, 1999 and 1998. During the Company's two most recent fiscal years,
and any subsequent interim periods preceding the change in accountants, there
were no disagreements with Gregory M. Montagna, CPA, P.C. on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope procedure. Mr. Montagna provided the Company with a letter confirming
that he agreed with the Company's disclosure on Form 8-K in connection with the
change of accountants.
The Company did not consult Stefanou & Company LLP, Certified Public
Accountants, regarding the application of accounting principles to any specific
completed or contemplated transaction or the type of audit opinion that might be
rendered on the Company's financial statements.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table and text sets forth the names and ages of all directors,
executive officers and significant employees of the Company as of March 31,
2000. All of the directors serve until the next Annual General Meeting of
shareholders and until their successors are elected and qualified, or until the
earlier of death, retirement, resignation or removal. Subject to any applicable
employment agreement, executive officers serve at the discretion of the Board of
Directors, and are appointed to serve until the first Board of Directors meeting
following the annual meeting of shareholders. Also provided is a brief
description of the business experience of each director, executive officer and
significant employee during the past five years and an indication of
directorships held by each director in other companies subject to the reporting
requirements under the federal securities laws.
Directors, executive officers and other significant employees:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DATE FIRST ELECTED OR
NAME . . . . . . . . . POSITION HELD WITH THE COMPANY AGE APPOINTED
- ---------------------- ------------------------------ --- ----------------
John Huguet. . . . . . Director, CEO, and President 54 October 18, 1999
- ---------------------- ------------------------------ --- ----------------
Christina Cepeliauskas Chief Financial Officer 36 October 18, 1999
------------------------------ --- ----------------
Randy Doten. . . . . . Director 35 October 18, 1999
====================== ============================== === ================
</TABLE>
The backgrounds and experience of the Company's directors, executive officers
and other significant employees are as follows:
John Huguet, C.M.A., F.C.M.A., President & CEO
Mr. Huguet brings to Company over 35 years of diverse, international executive
management and resource development experience. Much of Mr. Huguet's career has
focused on the development and execution of major international projects
incorporating creative and innovative partnership formations, financing
arrangements and equity structures. His global experience includes complex
business dealings in such markets as Peru, Chile, Venezuela, Argentina,
Thailand, Philippines and Singapore. His expertise in the global arena is
expected to prove invaluable to the Company's development internationally. Mr.
Huguet was employed for over 33 years with the Atkinson group of companies,
serving as President and Managing Director of Atkinson Holdings and Commonwealth
Construction until April, 1997. Since May, 1997, Mr. Huguet has been the
President and CEO of Andean American Mining Corp., and is currently a director
of Oriole Systems Inc
Christina Cepeliauskas, Chief Financial Officer
Ms. Cepeliauskas is a professional accountant whose focus is working with public
sector resource and technology companies. Currently, Ms. Cepeliauskas is
Controller of Andean American Mining Corp., a company she joined in 1996 when it
became publicly listed. In addition, she provides financial consulting services
to Oriole Systems Inc., an e-commerce company. Ms. Cepeliauskas is a member of
the Certified General Accountants Association where she was recognized for
achieving the highest aggregate standing in Level IV studies.
Randy Doten, Vice President, Technical Development, Director
Mr. Doten has over ten years experience in online development, strategy and
marketing. He has successfully implemented online production campaigns for talk
shows and game shows, including The Sinbad Show, The Howie Mandell Show, The
Roseanne Show, Judge Judy, Hollywood Squares and Wheel of Fortune. Mr. Doten's
expertise in targeting the online community is expected to be a major asset to
the Company. Mr. Doten is currently President of Talk-Stock, a 100% owned
subsidiary of e-financial depot.com, Inc. Mr. Doten has also instructed at
respected computer technical schools, and has implemented and managed Local and
Wide Area Networks in both Windows NT and Unix environments. He is fluent in
several programming languages, including those vital to online development and
production. Mr. Doten is currently pursing his graduate studies at the
University of Phoenix of Southern California, and expects to graduate in June,
2000.
There are no family relationships between any of the directors and officers of
the Company. There are no arrangements or understandings between any two or
more directors or executive officers, pursuant to which he/she was selected to
be a director or executive officer.
None of the Company's directors, executive officers, promoters or control
persons have been involved in any of the following events during the past five
years:
1. any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
<PAGE>
3. being subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's executive officers and directors and persons who own more than 10% of
a registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial statements of beneficial ownership,
reports of changes in ownership and annual reports concerning their ownership of
common stock and other equity securities of the Company, on Forms 3, 4 and 5
respectively. Executive officers, directors and greater than 10% shareholders
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. The Company was informed that none of its
officers and directors (including Mr. Huguet, Ms. Cepeliauskas or Mr. Doten)
filed a Form 3 within the prescribed period following which each became an
officer, director or 10% beneficial owner of the Company's outstanding common
stock. However, all three officers have assured the Company that they will file
Form 3s prior to the end of April, 2000.
ITEM 10. EXECUTIVE COMPENSATION.
The Company's chief executive officer did not receive any cash or other
compensation during the fiscal years ended December 31, 1998 and 1997. No other
executive officer of the Company received annual salary and bonus in excess of
$100,000 for the fiscal years ended December 31, 1999, 1998 or 1997. During the
fiscal year ended December 31, 1999, the Company's chief executive officer
received a salary of $50,000 (pro-rated from September 1, 1999 (the date he
commenced his position with the Company, and based on an annual salary of
$150,000). The Company is in the process of finalizing employment agreements
with each of Mr. Huguet, Ms. Cepeliauskas and Mr. Doten.
The Company granted options to acquire shares in its common stock pursuant to
certain agreements (not presently finalized). The following table sets forth
the name of each optionee and the number of options in the common stock of the
Company granted during the year ended December 31, 1999:
NAME OF OPTIONEE NUMBER OF OPTIONS(1)
---------------- --------------------
John F. Huguet
President & Director 1,000,000 (2)
-------------------- -------------
Christina Cepeliauskas
Chief Financial Officer 60,000 (3)
---------------- --------------------
Randy Doten
Director 250,000 (4)
---------------- --------------------
(1) Shares of Common Stock which the person has the right to acquire within
60 days of December 31, 1999 are deemed outstanding in calculating the
percentage of ownership of the persons, but not deemed outstanding as to any
other person.
(2) 1,000,000 options to purchase shares of the Company's common stock at
$1.25 per share.
(3) 60,000 options to purchase shares of the Company's common stock at $1.25
per share.
(4) 250,000 options to purchase shares of the Company's common stock at
$1.25 per share.
<PAGE>
On March 28, 2000, the Company registered its 1999 Stock Option Plan with the
Securities and Exchange Commission. The above-noted options were granted to Mr.
Huguet, Ms. Cepeliauskas and Mr. Doten pursuant to the Company's 1999 Stock
Option Plan.
The Company has no formal plan for compensating its directors for their service
in their capacity as directors although such directors are expected to receive
in the future options to purchase common shares as awarded by the Board of
Directors or (as to future options) a Compensation Committee which may be
established. Directors are entitled to reimbursement for reasonable travel and
other out-of-pocket expenses incurred in connection with attendance at meetings
of the Board of Directors. The Board of Directors may award special
remuneration to any director undertaking any special services on behalf of the
Company other than services ordinarily required of a director. Other than
indicated below, no director received and/or accrued any compensation for his
services as a director, including committee participation and/or special
assignments.
Other than as discussed above, the Company has no plans or arrangements in
respect of remuneration received or that may be received by executive officers
of the Company to compensate such officers in the event of termination of
employment (as a result of resignation, retirement, change of control) or a
change of responsibilities following a change of control, where the value of
such compensation exceeds $100,000 per executive officer.
There are no arrangements or plans in which the Company provides pension,
retirement or similar benefits for directors or executive officers. Other than
the management agreements discussed herein, the Company has no material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to the Company's directors or executive officers, except that stock
options may be granted at the discretion of the Board of Directors or a
committee thereof.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Beneficial Ownership
As used in this section, the term "beneficial ownership" with respect to a
security is defined by Regulation 228.403 under the Securities Exchange Act of
1934, as amended, as consisting of: (1) any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares voting power (which includes the power to vote, or to direct the
voting of such security) or investment power (which includes the power to
dispose, or to direct the disposition of, such security); and (2) any person
who, directly or indirectly, creates or uses a trust, proxy, power of attorney,
pooling arrangement or any other contract, arrangement or device with the
purpose or effect of divesting such person of beneficial ownership of a security
or preventing the vesting of such beneficial ownership.
Each person has sole voting and investment power with respect to the common
shares, except as otherwise indicated. Beneficial ownership consists of a
direct interest in the common shares, except as otherwise indicated.
As of March 31, 2000, the Company had a total of 13,010,000 common shares
($0.001 par value per common share) issued and outstanding. On October 14,
2000, the Company's directors approved a forward stock split of the Company's
common shares on a 4:1 basis for all record shareholders, increasing the then
issued and outstanding shares from 2,500,000 to 12,500,000 common shares.
As of March 31, 2000, no person known to the Company was the beneficial owner of
more than five percent (5%) of the outstanding common shares of the Company
except the following:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS(1)
- ------------------------------------ ----------------------- ----------------------
<S> <C> <C>
Gold Crown Holdings Ltd.
Herald House, 22 Hill Street
St. Hlr, Jersey JE48X2. . . . . . . 9,552,000 common shares 73.4%
- -------------------------------------------------------------------------------------
<PAGE>
Langley Investment Advisory Group
1875 Century Park East, #150
Century City, CA 90067. . . . . . . 1,000,000 common shares 7.69%
==================================== ======================= ======================
<FN>
(1) Based on 13,010,000 common shares outstanding as of March 31, 2000.
</TABLE>
The following table sets forth the beneficial ownership of shares of the
Company's common stock as of March 31, 2000, for each officer and director of
the Company, and for all directors and officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS(1)
- ------------------------------------ --------------------------- ----------------------
<S> <C> <C>
John F. Huguet
President & Director
1005 - 750 West Pender Street
Vancouver, BC, Canada V6C 2T8 . . . 1,000,000 common shares (2) 7.69%
- -----------------------------------------------------------------------------------------
Christina Cepeliauskas
Chief Financial Officer
1005 - 750 West Pender Street
Vancouver, BC, Canada V6C 2T8 . . . 60,000 common shares (3) 0.5%
- -----------------------------------------------------------------------------------------
Randy Doten
Director
150 - 1875 Century Park East
Century City, CA 90067. . . . . . . 250,000 common shares (4) 2.0%
- -----------------------------------------------------------------------------------------
Directors and Officers as a Group. . 1,310,000 common shares 9.9%
==================================== =========================== ======================
<FN>
(1) Based on 13,010,000 common shares outstanding as of March 31, 2000
(2) Options to purchase 1,000,000 shares of the Company's common stock at $1.25 per
share.
(3) Options to purchase 60,000 shares of the Company's common stock at $1.25 per
share.
(4) Options to purchase 250,000 shares of the Company's common stock at $1.25 per
share.
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as described below, there have been no transactions, or proposed
transactions, which have materially affected or will materially affect the
Company in which any director, executive officer, or beneficial holder of more
than 10% of the outstanding common stock, or any of their respective relatives,
spouses, associates or affiliates, has had or will have any direct or material
indirect interest.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K
On October 1, 1999, the Company filed a report on Form 8-K with respect to a
change in control of the Company; and the Share Exchange Agreement between the
Company and Talk Stock With Me, Inc., dated September 8, 1999.
On December 8, 1999, the Company filed a report on Form 8-K/A, attaching the
financial statements of Talk Stock With Me, Inc. and the Company's pro-forma
financial information.
On February 25, 2000, the Company filed a report on Form 8-K with respect to a
change in the Company's independent auditor, and announcing that the Company had
engaged Stefanou & Company, LLP Certified Public Accountants to audit its
financial statements.
Financial Statements Filed as Part of the Company's Annual Report
Report of Independent Certified Public Accountants, dated March 28, 2000.
Consolidated Balance Sheet at December 31, 1999 and 1998.
Consolidated Statements of Income and Comprehensive Income for the periods
September 16, 1998 (date of inception) through December 31, 1998, and the year
ended December 31, 1999
Consolidated Statements of Stockholders' Equity for the periods September
16, 1998 (date of inception) through December 31, 1998, and the year ended
December 31, 1999
Consolidated Statements of Cash Flows for the periods September 16, 1998
(date of inception) through December 31, 1998, and the year ended December 31,
1999
Notes to Consolidated Financial Statements
Exhibits Required by Item 601 of Regulation S-B:
(3) Articles of Incorporation and Bylaws
3.1 Certificate of Incorporation of the Company (filed as exhibit 3.1 to the
Company's Registration Statement on Form 10SB (file# 000-26899) on July 30,
1999, and incorporated herein by reference).
3.2 Bylaws of the Company (filed as exhibit 3.2 to Registration Statement on
Form 10-SB (file#000-26899) on July 30, 1999, and incorporated herein by
reference).
3.3 Certificate of Amendment of Certificate of Incorporation dated November
2, 1999 (filed as exhibit 3 (a) to the Company's Quarterly Report on Form 10-QSB
(file # 000-26899) on November 22, 1999, and incorporated herein by reference).
(10) Material Contracts
10.1 Share Exchange Agreement between Ballynagee Acquisition
Corporation and Talk Stock With Me, Inc., dated September 8, 1999 (filed on
October 1, 1999 as an exhibit to the Company's Current Report on Form 8-K on
October 1, 1999 and incorporated herein by reference).
10.2 Share Purchase Agreement between the Company, Trade-Fast, Inc. and
Alan Cohen, dated November 30, 1999.
10.3 Letter of Intent between the Company and Westcor Mortgage Inc.,
dated January 19, 2000
10.4 Consulting Agreement between the Company and Oxford Capital
Corporation, dated January 27, 2000
10.5 Registration Rights Agreement between the Company and Oxford
Capital Corporation, dated February 2, 2000
(20) Other
20.1 e-financial depot.com, Inc. 6% Convertible Debenture, dated
February 2, 2000
(21) Subsidiary of the Company
Talk Stock With Me, Inc. is a 100% wholly owned subsidiary of the Company.
(27) Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
E-FINANCIAL DEPOT.COM
By: /s/ John Huget
John Huguet, President/Director
Date: April 14, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ John Huget
John Huguet, President/Director
Date: April 14, 2000
By: /s/ Christina Cepeliauskas
Christina Cepeliauskas, Chief Financial Officer
Date: April 14, 2000
By: /s/ Randy Doten
Randy Doten, Director
Date: April 14, 2000
* Print the name and title of each signing officer under his signature.
SHARE PURCHASE AGREEMENT
------------------------
THIS dated for reference 30th day of November, 1999.
AMONG:
TRADE-FAST, INC., a Delaware corporation with an office at 585 Stewart Ave.,
Suite 412, Garden City, New York, 11530
(herein called the "Company")
AND:
ALAN COHEN
(herein "Vendor")
AND:
E-FINANCIAL DEPOT.COM, INC., a Delaware corporation with an office at 1005 - 750
West Pender Street, Vancouver, British Columbia, Canada, V6C 2T8.
(herein "Purchaser")
WHEREAS:
A. The Vendor is the registered and beneficial owners of all of the
issued and outstanding shares of the Company (the "Vendor's Shares");
B. Pursuant to a Letter of Intent dated November 10, 1999 between the
Company and the Purchaser, the Purchaser agreed, subject to completion of a due
diligence review to acquire the Vendor's Shares; and
C. Upon the terms and subject to the conditions set forth in this
Agreement, the Vendor has agreed to sell to the Purchaser, and the Purchaser has
agreed to purchase, the Vendor's Shares for the consideration set forth below;
THEREFORE in consideration of the premises and of the mutual covenants and
agreements herein set forth, the parties hereto covenant and agree each with the
other as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:
(a) "Accounts Payable" means all of the trade accounts and other debts and
accrued charges owed by the Company as at the date hereof (other than the
Permitted Liens), and which are enumerated and described in the Financial
Statements, together with those trade accounts reasonably incurred in the normal
and ordinary course of the Business between the date hereof and the Closing
Date, whether the same are due or to become due at or after the Closing Date;
<PAGE>
(b) "Accounts Receivable" means all of the trade accounts, notes,
commissions and other debts arising out of the operation of the Business owing
to the Company as at the Closing Date, whether due or to become due as at or
after the Closing Date;
(c) "Business" means the business of managing the broker-dealer business
currently carried on by New World Securities in accordance with the terms of the
Management Services Agreement;
(d) "Business Assets" means all of the real property, personal property,
choses in action, intangible or intellectual property and all other assets of
whatsoever nature owned or leased by any of the Entities, or in which any of the
Entities has any right or interest or the right to acquire an interest,
including the Accounts Receivable, the Contracts and the assets listed in
Schedule "A";
(e) "Closing" means the completion of the transactions contemplated hereby
in accordance with the terms hereof;
(f) "Closing Date" means three business days following the satisfaction or
waiver of the conditions hereto, but in any event no later than November 30,
1999, unless otherwise agreed to by the parties.
(g) "Consents" means the consents, waivers and approvals set forth in
Schedule "B";
(h) "Contracts" means all of the commitments, agreements, contracts,
instruments, leases and other documents entered into by any of the Entities, by
which any of the Entities is bound or to which any of the Entities or the
Business Assets are subject (other than the Permitted Liens) and which are
described in Schedule "C";
(i) "Due Diligence Period" means the period commencing on November 10, 1999
and ending on November 26, 1999;
(j) "Entities" means collectively the Company, the Subsidiary and New World;
(k) "Escrow Agent" has the meaning set forth in Section 3.5;
(l) "Escrow Agreement" means the escrow agreement attached hereto as
Schedule "N";
(m) "Escrow Shares" has the meaning set forth in Section 3.1;
(n) "Execution Date" means the date of signing of this Agreement;
(o) "Financial Statements" means the most current financial statements of
the Company, copies of which are attached as Schedule "D";
<PAGE>
(p) "Indebtedness" means any and all advances, debts, duties, endorsements,
guarantees, liabilities, obligations, responsibilities and undertakings of a
person assumed, created, incurred or made, whether voluntary or involuntary,
however arising, whether due or not due, absolute, inchoate or contingent,
liquidated or unliquidated, determined or undetermined, direct or indirect,
express or implied, and whether such persons may be liable individually or
jointly with others;
(q) "Intellectual Property" means all, copyrights, copyright registrations
and applications, trade names or brand names, Internet domain names, business
names, trade-marks, trade-mark registrations and applications, service marks,
service mark registrations and applications, trade secrets, proprietary
programming information and know-how, patents and patent applications, and other
patent rights, processes, technology, software (in both source code and object
code format), documentation in relation to software, firmware and other
intellectual property, together with all rights under licences, registered user
agreements, technology transfer agreements, and other agreements or instruments
relating to any of the foregoing, owned by any of the Entities or otherwise used
in connection with the Business or the New World Business, including the
intellectual property described on Schedule "M";
(r) "Lien" means any mortgage, debenture, charge, hypothecation, pledge,
lien, or other security interest or encumbrance of whatever kind or nature,
regardless of form and whether consensual or arising by laws, statutory or
otherwise that secures the payment of any Indebtedness or the performance of any
obligation or creates in favour of or grants to any person any proprietary
right;
(s) "Management Services Agreement" means that management services agreement
between the Company and New World Securities Inc. dated for reference November
30, 1999;
(t) "NASD" means the National Association of Securities Dealers Inc. and its
associated companies including, but not limited to, NASD Regulation, Inc.;
(u) "New World" means Lynn Kitchen Inc., d.b.a. New World Securities Inc., a
licensed broker dealer;
(v) "New World Business" means the broker-dealer business as currently
conducted by New World;
(w) "New World Financial Statements" means the most current financial
statements of the Company filed with the NASD, copies of which are attached as
Schedule "E";
(x) "New World Option" means the option to be granted to the Purchaser by
the Vendor entitling the Purchaser to acquire all of the issued and outstanding
shares at a price of $1.00 in total;
(y) "OTC BB" means the OTC Bulletin Board;
<PAGE>
(z) "Permitted Liens" means the liens described in Schedule "F";
(aa) "Purchase Price" means, for the purposes of section 2 hereof, the
amount of $18,000,000, subject to adjustment pursuant to paragraph 3 herein,
payable by way of issuance of the Purchaser Shares;
(bb) "Purchaser's Closing Documents" means those documents to be delivered
by the Purchaser at Closing as referenced in Section 16.1 hereof;
(cc) "Purchaser Shares" means Four Million (4,000,000) shares of the
Purchaser having a deemed price of $4.50 per share subject to adjustment in
accordance with section 2.3 herein;
(dd) "Purchaser's Solicitors" means Clark, Wilson, Barristers and
Solicitors;
(ee) "SEC" means the Unites States Securities and Exchange Commission;
(ff) "Securities Exchange Act" means the United States Securities Exchange
Act of 1934;
(gg) "Securities Act" means the United States Securities Act of 1933;
(hh) "Subsidiary" means EZ Trade.com, Inc.;
(ii) Vendor's Closing Documents" means those documents, instruments,
resolutions and share certificates referenced in Section 15.1 hereof; and
(jj) "Vendor's Shares" has the meaning set forth in Recital A above.
1.2 In this Agreement, except as otherwise expressly provided:
(a) "Agreement" means this share purchase agreement, including the preamble
and the Schedules hereto, as it may from time to time be supplemented or amended
and in effect;
(b) all references in this Agreement to a designated "Section" or other
subdivision or to a Schedule is to the designated Section or other subdivision
of, or Schedule to, this Agreement;
(c) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision or Schedule;
(d) the headings are for convenience only and do not form a part of this
Agreement and are not intended to interpret, define, or limit the scope, extent
or intent of this Agreement or any provision hereof;
(e) the singular of any term includes the plural, and vice versa; the use of
any term is equally applicable to any gender and, where applicable, a body
corporate; the word "or" is not exclusive; the word "including" means including
without limitation or prejudice to the generality of any description,
definition, term or phrase preceding that word, and the word "include" and its
derivatives will be construed accordingly; the expression "to the knowledge of"
or any similar expression as applied to a corporation or individual, refers to,
(A) in the case of an individual, the knowledge as at the relevant date that
such individual had or would have had had he exercised due diligence in making
enquiries in relation to the matter in question from all sources of information
likely to provide him with knowledge of same, and (B) in the case of a corporate
person, the knowledge (as aforementioned) of a director or officer thereof as at
the relevant date;
<PAGE>
(f) any accounting term not otherwise defined has the meanings assigned to
it in accordance with generally accepted accounting principles applicable in the
United States;
(g) except as otherwise provided, any dollar amount referred to in this
Agreement means the lawful currency of the United States;
(h) any other term defined within the text of this Agreement has the meaning
so ascribed.
1.3 The following are the Schedules to this Agreement:
SCHEDULE DESCRIPTION
- -------- -----------
A Business Assets
B Consents
C Contracts
D Financial Statements
E New World Financial Statements
F Permitted Liens
G Authorized and Issued Capital
H Directors and Officers
I Banking Arrangement
J Employee List
K Employee Benefit Plans
L Litigation
M Intellectual Property
N Escrow Agreement
O Insurance Policies
2. PURCHASE AND SALE
2.1 Upon and subject to the terms and conditions of this Agreement, the
Purchaser hereby agrees to purchase from the Vendor, and the Vendor hereby
undertakes to sell or procure the sale of and transfer to the Purchaser, all
legal and beneficial interest in the Vendor's Shares.
<PAGE>
2.2 The Purchase Price will be paid on the Closing Date by the Purchaser by
issuing the Purchaser Shares to the Vendor.
2.3 Notwithstanding the above, in circumstances during the period ending 12
months from the Closing Date, the Purchaser issues shares in its capital stock
(a "Dilutive Issuance"), other than pursuant to options or other agreements
existing as of the date hereof and, incentive stock options subsequently granted
to bona fide employees and consultants to the Purchaser, at a price less than
$4.50 per share (the "Dilutive Price"), the Purchase Price shall be adjusted by
issuing to the Vendor such further number of shares of the Purchaser in order
that the Vendor shall have received the Purchase Price in shares of the common
stock of the Purchaser having a deemed price per share equal to the Dilutive
Price and in circumstances where there is more than on Dilutive Issuance, this
Section shall apply to each such Dilutive Issuance.
3. ESCROW SHARES
3.1 Seven Hundred Thousand (700,000) of the Purchaser Shares issued as a
portion of the Purchase Price (the "Escrow Shares") will be escrowed in
accordance with the terms of this Agreement and the Escrow Agreement attached
hereto as Schedule "N".
3.2 The Escrow Shares will be returned to the Purchaser in circumstances
where the Company does not have earnings prior to any distributions of at least
Three Million ($3,000,000) Dollars for the Twelve Month period ending March 31,
2000 as evidenced by the financial statements of the Company for such period
provided that, in circumstances where the Closing Documents are not released
from escrow as contemplated under Section 17.1 by December 15, 1999, the ending
date for the above referenced Twelve Month period will be extended to June 30,
2000.
3.3 For the purpose of calculating earnings, the Company will use accounting
practices consistent with generally accepted accounting principles applicable in
the United States and the Company's prior practices.
3.4 The Vendor agrees that in circumstances where the Escrow Shares are
otherwise to be released to the Vendor as contemplated herein, the Purchaser
will be entitled to have returned to it such number of Escrow Shares, having a
deemed value of $4.50 per Escrow Share, as represent a value equal to the
amount, if any, of the liabilities of the Company or New World at Closing which
are in excess of the liabilities as disclosed in the focus report of New World
as at November 30, 1999 and the unaudited financial statements of the Company as
at November 30, 1999 delivered to the Purchaser prior to the Closing or
otherwise disclosed in writing to the Purchaser prior to the Closing.
3.5 At the Closing, the Vendor will be deemed to have received and deposited
with the Escrow Agent (as defined below) the Escrow Shares, without any act of
any Vendor. As soon as practicable after Closing, the Escrow Shares will be
deposited with Clark, Wilson, Barristers and Solicitors (or other entity
acceptable to the Vendor and the Purchaser), as Escrow Agent (the "Escrow
Agent"), to be governed by the terms set forth herein and in the Escrow
Agreement. The Escrow Shares will be held in a trust and will not be subject to
any lien, attachment, trustee process or any other judicial process of any
creditor of any party, and will be held and disbursed solely for the purposes
and in accordance with terms of this Section 3 and the Escrow Agreement.
<PAGE>
3.6 Concurrent with the execution of this Agreement, the Vendor and the
Purchaser will execute and deliver the Escrow Agreement attached as Schedule "N"
to this Agreement.
4. RESTRICTED SECURITIES
4.1 The Vendor understands that the Purchaser Shares may not be sold,
transferred or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Purchaser Shares or an available exemption
from registration under the Securities Act, the Purchaser Shares must be held
indefinitely. In particular, the Vendor is aware that the Purchaser Shares may
not be sold pursuant to Rule 144 promulgated under the Securities Act unless all
of the conditions of that Rule are met. In this connection, the Vendor
represents that the Vendor understands that under Rule 144, the Purchaser Shares
must be held for at least one year after purchase thereof from the Purchaser
prior to resale (two years in the absence of public current information about
the Purchaser) and that, under certain circumstances, the conditions for use of
Rule 144 include the availability of public current information about the
Purchaser, that sales be effected through a "broker's transaction" or
transactions with a "market maker," and that the number of shares being sold not
exceed specified limitations. In this regard the Purchaser shall take steps to
cause the Company to facilitate such sales of the Purchaser Shares as shall be
proposed to be made in accordance with Rule 144. Such public current
information about the Purchaser for purposes of Rule 144 is now available, but
may not be in the future.
4.2 It is understood and agreed that the certificates evidencing the
Purchaser Shares may bear one or all of the following legends:
(a) "The shares represented by this certificate have not been registered
under the United States Securities Act of 1933. They may not be sold, offered
for sale, pledged, hypothecated or otherwise transferred in the absence of a
registration statement in effect with respect to such shares under such Act or
an opinion of counsel or other evidence satisfactory to e-financial depot.com,
Inc. and its counsel that such registration is not required."; or
(b) Any legend required by any other jurisdiction.
5. PURCHASER'S COMMITMENTS
5.1 Upon and subject to the completion of the transactions contemplated
herein, the Purchaser will provide a commitment in a form satisfactory to the
principal shareholders of the Company, acting reasonably:
(a) to invest up to Three Million Five Hundred Thousand ($3,500,000) Dollars
in the Company during the Twelve (12)-month period after Closing, to be applied
for the purpose of implementing the Company's' business plan with the intention
that One Million ($1,000,000) Dollars is to be invested on or about December 15,
1999;
<PAGE>
(b) to investigate the opportunities for, and the logistics of. setting up
online trading in Europe; and
(c) to retain all current employees, consultants and licensed staff of the
Company at current salaries for a minimum of Twenty (24) months after closing
subject to the right to terminate any such employees for cause.
6. FINDER'S FEE
6.1 The Vendor and the Purchaser will each assume liability for 50% of any
finder's fee or commission payable to Dan Najor in respect of the transactions
contemplated by this Agreement.
7. CLOSING
7.1 The Closing will take place at 4:00 p.m. local time, on the Closing Date
at the offices of the Purchaser's Solicitors, or at such other place, date and
time, as the parties agree upon.
8. WARRANTIES AND REPRESENTATIONS OF THE VENDOR
8.1 The Vendor warrants and represents to the Purchaser, with the intent
that the Purchaser will rely thereon in entering into this Agreement and in
concluding the purchase and sale contemplated herein, that:
(a) the Vendor is the registered holder and beneficial owner of the Vendor's
Shares, free and clear of all Liens and the Vendor has no interest, legal or
beneficial, direct or indirect, in any shares of, or the assets or business of,
the Company other than the such Vendor's Shares;
(b) the Vendor has the power and capacity and good and sufficient right and
authority to enter into this Agreement on the terms and conditions herein set
forth and will on the Closing Date have the rights to transfer the legal and
beneficial title and ownership of the Vendor's Shares to the Purchaser;
(c) the Vendor does not have any specific information relating to the
Company which is not generally known or which has not been disclosed to the
Purchaser and which if known could reasonably be expected to have a materially
adverse effect on the value of the Vendor's Shares;
(d) the Vendor understands that the Purchaser Shares are not registered
under the Securities Act on the ground that the sale provided for in this
agreement and the issuance of the securities hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
Purchaser's reliance on such exemption is based on such Vendor's representation;
and
(e) the Vendor has had adequate opportunity to obtain from representatives
of the Purchaser such information, in addition to the representations set forth
in this Agreement, as is necessary to evaluate the merits and risks of such
Vendor's investment in the Purchaser Shares and such Vendor has sufficient
experience in business, financial and investment matters to be able to evaluate
the risks involved in the acquisition of the Purchaser Shares to be issued to
such Vendor pursuant to the terms of this Agreement and to make an informed
investment decisions with respect to such investment.
<PAGE>
(f) the Vendor's Shares represent all of the issued and outstanding shares
of the Company;
(g) the Company is the sole registered and beneficial owner of all of the
issued and outstanding shares of the Subsidiary, free and clear of any Liens;
(h) the Vendor is also the sole registered and beneficial owner of all of
the issued and outstanding shares of New World, free and clear of any Liens;
(i) the authorized and issued capital of the Company is as described in
Schedule "G";
(j) no person has any agreement, right, option or privilege, consensual or
arising by law, present or future, contingent or absolute, or capable of
becoming an agreement, right or option:
(i) to require any of the Entities to issue any further or other shares in
its capital or any other security convertible or exchangeable into shares in its
capital or to convert or exchange any securities into or for shares in the
capital of any of the Entities;
(ii) for the issue or allotment of any of the authorized but unissued shares
in the capital of any of the Entities;
(iii) to require any of the Entities to purchase, redeem or otherwise
acquire any of the issued and outstanding shares in the capital of such Entity;
(iv) to purchase or otherwise acquire any shares in the capital of any of
the Entities; or
(v) which is capable of becoming an agreement for the acquisition of any of
the Business Assets.
(k) each of the Entities is a private company limited by shares and duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation;
(l) the directors and officers of the Company are identified in Schedule
"H";
(m) all alterations to the constating documents of the Company since its
incorporation, have been duly approved by the shareholders of the Company in
accordance with applicable corporate law and registered with the relevant state
authorities;
<PAGE>
(n) the Company carries on the Business in New York and does not carry on
any business in any other state or territory of the United States or in any
other county and does not carry on any business other than the Business;
(o) New World is registered in all jurisdictions in which it currently
carries on the New World Business;
(p) each of the Entities has the power, authority and capacity to carry on
its business as presently conducted by it;
(q) each of the Entities has the power, authority and capacity to own and
use all of the Business Assets owned or used by it;
(r) the Entities own and possess all right, title and interest in, and has
good and marketable title to and possession of, all the Business Assets free and
clear of all Liens (with the exceptions of the Permitted Liens, those Business
Assets subject to the leases included in the Material Contracts and the Excluded
Assets) and neither the Vendor, the Company nor New World has received notice
from any third party claiming an interest in and to the Business Assets other
than an interest which constitutes a Permitted Lien, and neither the Vendor, the
Company nor New World has any reason to believe any such claim may be made;
(s) the Entities have no bank, trust, savings, chequing or other accounts or
deposits, safety deposit boxes or other depositaries except as set out in
Schedule "I", which Schedule is a true and complete list showing the name of
each bank, trust company or similar financial institution in which the Entities
have accounts, deposits or safety deposit boxes and the names of all persons
authorized to draw thereon or have access thereto;
(t) each of the Entities and all employees of the Entities hold all
licences, permits and other regulatory approvals required for the conduct in the
ordinary course of the Business or the New World Business, as the case may be,
and for the uses to which the Business Assets have been or may be put and all
such licences, permits and regulatory approvals are in good standing and the
conduct and uses of the same by each of the Entities or the employees of the
Entities, as the case may be, are in compliance with all laws, zoning and other
bylaws, building and other restrictions, rules, regulations and ordinances
applicable to the Entities, the employees of the Entities, the Business, the New
World Business or the Business Assets, and neither the execution and delivery of
this Agreement nor the completion of the purchase and sale hereby contemplated
will give any person the right to terminate or cancel the said licences, permits
or regulatory approvals, or affect such compliance;
(u) the making of this Agreement and the completion of the transactions
contemplated hereby and the performance of and compliance with the terms hereof
does not and will not:
<PAGE>
(i) conflict with or result in a breach of or violate any of the terms,
conditions, or provisions of the constating documents of the Company;
(ii) conflict with or result in a breach of or violate any of the terms,
conditions or provisions of any law, judgment, order, injunction, decree,
regulation or ruling of any court or governmental authority, domestic or
foreign, to which any of the Entities or the Vendor is subject or constitute or
result in a default under any agreement, contract or commitment to which any of
the Entities or the Vendor are a party;
(iii) subject to obtaining the Consents, give to any person any remedy,
cause of action, right of termination, cancellation or acceleration in or with
respect to any agreement, contract, or commitment to which any of the Entities
is a party including the Contracts and the Permitted Liens;
(iv) give to any government or governmental authority of the United States
or any state or any regional district, district or municipality or any
subdivision thereof, including any governmental department, commission, bureau,
board, or administrative agency any right of termination, cancellation, or
suspension of, or constitute a breach of or result in a default under any
permit, license, control, or authority issued to any of the Entities and which
is necessary or desirable in connection with the conduct and operation of the
Business, the New World Business and the ownership, leasing or use of the
Business Assets; or
(v) subject to obtaining the Consents, constitute a default by any of the
Entities or an event which, with the giving of notice or lapse of time or both,
might constitute an event of default or non-observance under any agreement,
contract, indenture or other instrument relating to any Indebtedness of any of
the Entities which would give any person the right to accelerate the maturity
for the payment of any amount payable under that agreement, contract, indenture,
or other instrument including the Contracts and the Permitted Liens;
(v) the Financial Statements were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior
reporting periods, are true and correct in every material respect and present
fairly and accurately the financial condition and position of the Company as at
the date hereof and the results of the operations of the Company;
(w) the New World Financial Statements were prepared in accordance with
generally accepted accounting principles applied on a basis consistent with
prior reporting periods, are true and correct in every material respect and
present fairly and accurately the financial condition and position of New World
as at the date hereof and the results of the operations of New World;
(x) the Financial Statements and New World Financial Statements meet or
exceed all federal and/or state financial disclosure requirements applicable to
securities brokers and dealers;
<PAGE>
(y) the provisions for doubtful accounts receivable of the Company on a
consolidated basis as recorded in the Financial Statements are, and collections
since the date hereof have proven them to be, adequate;
(z) the provisions for doubtful accounts receivable of New World on a
consolidated basis as recorded in the New World Financial Statements are, and
collections since the date hereof have proven them to be, adequate;
(aa) the Accounts Receivable of the Company and New World on a consolidated
basis are bona fide, good and collectable without set-off or counterclaim save
and except as described in Schedule "A";
(bb) there is no Indebtedness of the Company which is not disclosed or
reflected in the Financial Statements except Accounts Payable;
(cc) there is no Indebtedness of New World which is not disclosed or
reflected in the New World Financial Statements except Accounts Payable;
(dd) each of the Entities has been assessed for federal and state income tax
for all years to and including fiscal year 1998, and the Company and New World
have withheld and remitted to the relevant taxing authorities except those items
listed and accrued in such Entity's financial statements as attached hereto all
amounts required to be remitted to relevant tax collecting authorities
respecting payments to employees or to non-residents, or otherwise and has paid
all instalments of corporate taxes due and payable;
(ee) all tax returns and reports of the Company and New World and the
Subsidiary required by law to be filed prior to the Execution Date (including
all federal and state income tax returns), have been filed and are true,
complete and correct, and all taxes and other government charges (including all
income, excise, sales, business and property taxes and other rates, charges,
assessment, levies, duties, taxes, contributions, fees and licenses) have been
accrued in such Entity's financial statements as attached hereto;
(ff) adequate provision has been made for taxes payable by each of the
Entities for which tax returns are not yet required to be filed and there are no
agreements, waivers or other arrangements providing for an extension of time
with respect to the filing of any tax return by or payment of any tax,
governmental charge or deficiency by any of the Entities, and to the knowledge
of the Vendor, there are no contingent tax liabilities or any grounds which
would prompt a re-assessment, including aggressive treatment of income and
expenses in filing earlier tax returns;
<PAGE>
(gg) each of the Entities has made all elections required to be made under
applicable tax legislation in connection with any distributions by the Entities
and all such elections were true and correct and in the prescribed forms and
were made within the prescribed time periods;
(hh) none of the Entities has prior to the Execution Date:
(i) acquired or had the use of any property from a person with whom such
Entity was not dealing at arm's length;
(ii) disposed of anything to a person with whom such Entity was not dealing
at arm's length for proceeds less than or greater than the fair market value
thereof; or
(iii) discontinued carrying on any business in respect of which non-capital
losses were incurred;
(ii) other than approvals and filings required under applicable securities
laws, no authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by the Vendor or any of the Entities with any such
governmental authority, regulatory body or court is required in order for the
Vendor to complete the contemplated purchase and sale, to duly perform and
observe the terms and provisions of this Agreement, and to render this Agreement
legal, valid, binding and enforceable in accordance with its terms;
(jj) the Business, the New World Business and the Business Assets comply
with all applicable laws, judgments, decrees, orders, injunctions, rules,
statutes and regulations of all courts, arbitrators or governmental authorities,
including all environmental, health and safety statutes and regulations;
(kk) all material transactions of each of the Entities has been promptly and
properly recorded or filed in or with its respective books and records, and the
minute books of each of the Entities contains all records required to be kept as
provided by applicable state law;
(ll) with respect to the Intellectual Property:
(i) Schedule "M" contains a complete and accurate list of all:
A. trade-names, trade-marks and service marks;
B. trade-mark applications and service mark applications;
C. registered copyrights and copyright applications;
D. Internet domain name registrations,
owned, used, made or applied for by each of the Entities setting out, in detail,
the relevant dates, reference numbers and jurisdictions of each;
<PAGE>
(ii) to the Vendor's knowledge, there is no state of facts which casts doubt
on the validity or enforceability of the Intellectual Property;
(iii) the use of any Intellectual Property will not infringe the industrial,
commercial or intellectual property rights of any other person;
(iv) except as disclosed in Schedule "L", to the Vendor's knowledge, there
are no existing or threatened legal proceedings, claims, or allegations (formal
or informal), or any basis for such proceedings, claims or allegations, in
respect of the use or ownership of any Intellectual Property;
(v) none of the Entities is in default of any of its obligations as licensee
under any technology licence pursuant to which it is a licensee;
(vi) neither the entering into of this Agreement nor the completion of the
transactions contemplated hereby constitute or will constitute a breach of any
agreement in respect of Intellectual Property; and
(vii) no past or present employee, consultant or contractor of any of the
Entities has any right, title, or interest in or to any of any Intellectual
Property, all such employees, consultants and contractors have assigned and
waived in writing their rights (including moral rights) in and to the
Intellectual Property, and all of the present employees of the Entities have
executed and delivered to such Entity or employs them confidentiality and
non-competition agreements in relation to any information or data of such Entity
obtained in the course of his or her employment or other arrangement with such
Entity, copies of which agreements have been provided to the Purchaser prior to
the Closing Date.
(mm) each of the Entities is in full compliance with the rules and
regulations of the applicable top level domain managers, including the domain
managers of the .ca, .com, .net, .gov, and .org top level domains, to maintain
its domain name registrations. To the Vendor's knowledge, there is currently no
libellous, scandalous or illegal content in any of the websites maintained by
any of the Entities in respect of which any complaint has been received by any
of the Entities from any member of the public or from any government or
authority or from any top level domain manager;
(nn) each of the Entities has in effect contingency plans and technologies
for each of the following possible occurrences:
(i) failure of any of the major systems of such Entity's business to
function in accordance with specifications due to the year 2000; and
(ii) failure of any data processing hardware and software, communications
hardware and software, hardware and software storing and/or controlling
databases or any other component of any data processing or communications device
or system used in the Business;
<PAGE>
(oo) the Company has not experienced nor, to the knowledge of the Company or
the Vendor, has there been any occurrence or event which has had, or might
reasonably be expected to have, a materially adverse effect on the Business or
the result of its operations;
(pp) New World has not experienced nor, to the knowledge of New World or the
Vendor, has there been any occurrence or event which has had, or might
reasonably be expected to have, a materially adverse effect on the New World
Business or the result of its operations;
(qq) the name of each present employee or consultant of each of the
Entities, the duration of the employment of each such employee or consultant and
the remuneration and benefit obligations in respect of each such employee or
consultant is accurately set out in Schedule "J";
(rr) the Vendor has not received notice of any complaints filed by any
employees against any of the Entities and are not aware of any facts or
circumstances that may give rise to any complaints claiming that any of the
Entities has violated applicable employee or human rights or similar legislation
in jurisdictions which the Business or the New World Business, as the case may
be is conducted or any complaints or proceedings of any kind involving the
Vendor. All levies, assessments and penalties made against any of the Entities
pursuant to applicable worker's compensation legislation have been paid without
reassessment;
(ss) there are no pension, profit sharing, incentive, bonus, group insurance
or similar plans or other compensation plans affecting any of the Entities other
than those described in Schedule "K" and any of the Entities there is no
unfunded or unpaid liability in respect of any such plan;
(tt) except for existing oral and written employment agreements with the
individuals listed in Schedule "J", none of the Entities have any contract,
agreement, undertaking or arrangement, whether oral, written or implied, which
cannot be terminated on not more than one month's notice and none of the
Entities have any outstanding agreement, contract or commitment (whether written
or oral) whatsoever relating to or affecting the conduct of the Business, the
New World Business or any of the Business Assets or for the purchase, sale or
lease of any of the Business Assets other than the Contracts and the Permitted
Liens;
(uu) there is no basis for and there are no actions, suits, judgments,
investigations or proceedings outstanding or pending or to the knowledge of the
Vendor threatened against or affecting any of the Entities at law or in equity
or before or by any court or federal, state, municipal or other governmental
authority, department, commission, board, tribunal, bureau or agency and none of
the Entities are a party to or threatened with any litigation, with the
exception of the matters described in Schedule "L";
<PAGE>
(vv) none of the Entities:
(i) is in breach of any of the terms, covenants, conditions, or provisions
of, is not in default under, and has not done or omitted to do anything which,
with the giving of notice or lapse of time or both, would constitute a breach of
or a default under any Contract;
(ii) is in violation of nor is any present use by any of the Entities of any
Business Assets in violation of or contravention of any applicable law, statute,
order, rule or regulation of the United States or any state or any regional
district, district or municipality or any subdivision thereof; and
(iii) is in breach or default under any judgment, injunction or other order
or aware of any judicial, administration, governmental, or other authority or
arbitrator by which any of the Entities is bound or to which any of the Entities
or any Business Assets are subject;
and the Vendor has not received notice that any default, breach, or violation is
being alleged;
(ww) the Company has not guaranteed, or agreed to guarantee, any
Indebtedness or other obligation of any person except as described in the
Financial Statements;
(xx) New World has not guaranteed, or agreed to guarantee, any Indebtedness
or other obligation of any person except as described in the New World Financial
Statements;
(yy) reasonable wear and tear excepted, the Business Assets are in good
working order and in a functional state of repair and to the knowledge of the
Vendor, there are no latent defects;
(zz) since the applicable date hereof:
(i) no dividends of any kind or other distribution on any shares of any of
the Entities has been declared or paid by the Entities;
(ii) there has been no material adverse change in the financial condition or
position of any of the Entities on a consolidated basis and no damage, loss or
destruction materially affecting the Business Assets or the right, capacity, or
ability of the Entities to carry on the Business or the New World Business as
the case may be;
(iii) none of the Entities has increased the pay of or paid or agreed to pay
any pension, bonus, share of profits or other similar benefit to or for the
benefit of any agent, employee, director, or officer of the Company or the
Subsidiaries, except increases in the normal course of business to employees
other than officers and directors;
<PAGE>
(iv) the Company and New World have conducted the Business and the New World
Business as applicable in the usual and normal manner and the Entities have
maintained the Business Assets in as good condition as prevailed prior to the
date hereof and have made all necessary repairs and replacements thereto;
(v) none of the Entities has waived or surrendered any right of material
value; and
(aaa) none of the Entities are in breach of any federal or state rules or
regulations governing securities brokers in the United States including, but not
limited to, NASD rules and federal securities laws, rules and regulations; and
(bbb) without limiting the generality of the foregoing, the Management
Services Agreement is in good standing and remains in full force and effect.
9. PURCHASER'S WARRANTIES AND REPRESENTATIONS
9.1 The Purchaser warrants and represents to the Vendor, with the intent
that the Vendor will rely thereon in entering into this Agreement and in
concluding the purchase and sale contemplated herein that:
(a) the Purchaser is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware and has the power, authority and
capacity to enter into this Agreement and to carry out its terms;
(b) the execution and delivery of this Agreement and the completion of the
transactions contemplated hereby has been duly and validly authorized by all
necessary corporate action on the part of the Purchaser, and this Agreement
constitutes a legal, valid and binding obligation of the Purchaser in accordance
with its terms except as limited by laws of general application affecting the
rights of creditors;
(c) no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority is required by or with
respect to Purchaser in connection with the execution and delivery of this
Agreement by the Purchaser or the consummation by the Purchaser of the
transactions contemplated hereby, except for such consents, approvals, orders,
authorizations, registrations, declarations, qualifications or filings as may be
required by the OTC BB and under applicable federal and state securities laws in
connection with the transactions set forth herein;
(d) the authorized capital stock of the Purchaser is One Hundred Ten Million
(110,000,000) common shares without par value, of which Two Million, Seven
Hundred Fifty Thousand (2,750,000) common shares are issued and outstanding as
of the date hereof, fully paid and non-assessable;
<PAGE>
(e) there is no litigation, proceeding or governmental investigation in
progress, pending, threatened or contemplated against or relating to the
Purchaser, the business of the Purchaser, or the transactions contemplated by
this Agreement;
(f) the following documents have been filed under the Purchaser's former
name, Ballynagee Acquisition Corp., with the SEC under the Securities Exchange
Act and the rules and regulations promulgated thereto: Schedule 14C Information
Statement filed October 13, 1999, Form 8K dated September 20, 1999, Pre 14C
filed October 1, 1999 and Form 10SB filed July 30, 1999. As of their respective
filing dates, the Purchaser's SEC filings complied in all material respects with
the Securities Exchange Act, as of their respective filing dates, the
Purchaser's SEC filings did not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading;
(g) the Purchaser Shares to be issued to the Vendor hereunder on the Closing
Date, will be validly issued, fully paid and non-assessable; and
(h) there are no orders ceasing or suspending trading in the securities of
the Purchaser and to the best of the knowledge of the Purchaser, no proceedings
for this purpose have been instituted or are pending, contemplated or
threatened.
10. COVENANTS
10.1 Between the Execution Date and the Closing, the Vendor:
(a) will cause the Company to afford to the Purchaser and its authorized
representatives access during normal business hours to all properties, books,
contracts, commitments, records of each of the Entities and furnish such copies
(certified if requested) thereof and other information as the Purchaser may
reasonably request, and to permit the Purchaser and its authorized
representatives to make such audit of the books of account of the Entities and
physical verification of the Business Assets as the Purchaser may reasonably see
fit;
(b) will diligently take all reasonable steps to obtain, prior to the
Closing, all consents and approvals required to complete the transactions
contemplated herein in accordance with the terms and conditions hereof including
the Consents;
(c) will cause each of the Entities to conduct their business and affairs
diligently and only in the ordinary course, and preserve and maintain the
goodwill of each of the Entities, the Business Assets, the Business and the New
World Business;
(d) will cause each of the Entities to maintain insurance coverage of the
scope and in the amounts presently held as more particularly set out in Schedule
"O";
<PAGE>
(e) will not permit any of the Entities to make or agree to make any payment
to any director, officer, employee or agent of any of the Entities except in the
ordinary course of business and at the regular rates of salary and commission
for such person or as reasonable reimbursement for expenses incurred by such
person in connection with the Company.
11. NON-MERGER
11.1 The representations, warranties, covenants and agreements of the Vendor
contained herein and those contained in the documents and instruments delivered
pursuant hereto will be true at and as of the Closing as though made at the
Closing and will survive the Closing Date for a period ending 24 months after
Closing, and notwithstanding the completion of the transactions herein
contemplated, the waiver of any condition contained herein (unless such waiver
expressly releases the Vendor of such representation, warranty, covenant or
agreement), or any investigation by the Purchaser, the same will remain in full
force and effect for the said same 24 month period after Closing.
11.2 The representations, warranties, covenants and agreements of the
Purchaser contained herein and those contained in the documents and instruments
delivered pursuant hereto will be true at and as of the Closing as though made
at the Closing and will survive the Closing Date, and notwithstanding the
completion of the transactions herein contemplated, the waiver of any condition
contained herein (unless such waiver expressly releases the Purchaser of such
representation, warranty, covenant or agreement), or any investigation by the
Vendor, the same will remain in full force and effect.
12. DUE DILIGENCE
12.1 The Vendor will, during the remainder of the Due Diligence Period,
provide or cause the Entities to provide the Purchaser and its representatives
with access to, and will permit the Purchaser and its representatives to make
such investigations of the operations, properties, assets and records of the
Entities and of their financial and legal condition as the Purchaser deems
necessary or advisable for the Purchaser to assess the value thereof and to
familiarise itself with same. The Vendor will cause the Entities to sign such
consents as may be requested by the Purchaser in order for the Purchaser to
conduct due diligence searches at the relevant regulatory or statutory offices
and will permit the Purchaser and its representatives to have access to the
premises leased by the Entities and the other assets of the Entities at
reasonable times so as no to disrupt the routine daily affairs of the Entities,
and will produce for inspection and provide copies to the Purchaser of:
(a) all of the Entities' material contracts, leases of real or personal
property, permits, licences, title documents, title opinions, insurance
policies, pension plans, information relating to employees, information relating
to customer lists, documents relating to indebtedness and credit facilities,
documents relating to legal or administrative proceedings and other documents of
or in possession of the Company or relating to their business and operations;
and
(b) the record books for the Entities and all other corporate documents of
the Entities.
<PAGE>
13. CONFIDENTIALITY
13.1 Each party agrees that all information provided to it by another party
(collectively "Confidential Information") shall be held in complete confidence
by it and by its advisors and representatives and shall not, without the prior
written consent of that other party, be disclosed to any other person, nor used
for any other purpose, other than in connection with the evaluation, negotiation
and finalization of the transactions contemplated herein. However, a party's
obligation does not apply to Confidential Information:
(a) which is generally available to third parties (unless available as a
result of a breach of this Agreement);
(b) which is lawfully in the possession of a party and which was not
acquired directly or indirectly from another party; or
(c) the disclosure of which is required by any applicable law or by any
supervisory or regulatory body to whose rules a party is subject.
14. CONDITIONS PRECEDENT
14.1 The obligations of the Purchaser to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following conditions
at the times stipulated:
(a) the representations and warranties of the Vendor contained herein shall
be true and correct in all respects at and as of the Closing except as may be in
writing disclosed to and approved by the Purchaser;
(b) all covenants, agreements and obligations hereunder on the part of the
Vendor to be performed or complied with at or prior to the Closing, including
the Vendor's obligation to deliver the documents and instruments herein provided
for, shall have been performed and complied with at and as of the Closing;
(c) between the Execution Date and the Closing, none of the Entities shall
have experienced any event, circumstance or condition or have taken any action
or become subject to any action of any character adversely affecting such
Entities, the Business or the New World Business or as would materially reduce
the value of the Company, the Business, the New World Business or the Vendor's
Shares to the Purchaser;
(d) the Business Assets shall have suffered no material adverse damage or
change since the Execution Date and prior to the Closing which, in the sole
opinion of the Purchaser, will materially and adversely affect the Business
Assets, the Business, the New World Business or the Entities' operations,
prospects or earnings;
(e) on or before the Closing Date, no federal, state, regional or municipal
government of any country applicable to the Business or the New World Business
or any agency thereof will have enacted any statute or regulation, announced any
policy or taken any action that will materially and adversely affect the
Business, the New World Business or the Business Assets;
<PAGE>
(f) the Purchaser is satisfied in its sole discretion as to the state of the
Business Assets and the operations of the Entities after completion of its
investigation thereof during the Due Diligence Period;
(g) with the exception of Alan Cohen, concurrent with the Closing, the
Purchaser will receive the resignations of the directors and officers of the
Company and the Subsidiary set out in Schedule "H", to be effective immediately
upon Closing;
(h) no action, suit or proceeding concerning any of the Entities or the
Vendor will be pending or threatened by or before any court of competent
jurisdiction or governmental entity wherein an unfavourable judgment, order,
decree, stipulation or injunction would affect materially and adversely the
right of the Entities to own, operate or control the Business or New World
Business or the Business Assets owned by such Entities, and no such judgment,
order, decree stipulation or injunction will be in effect;
(i) Alan Cohen will have agreed to remain a director of the Company and
entered into an employment contract with the Company and New World, effective as
of the Closing, on terms satisfactory to Mr. Cohen and to the Purchaser;
(j) New World shall have entered into such agreement with the Company to
elaborate and expand on the terms of the Management Services Agreement as the
Purchaser, acting reasonably, shall request; and
(k) the Vendor shall have granted to the Purchaser the New World Option and
shall have entered into such agreements and done such things in furtherance of
the New World Option as the Purchaser, acting reasonably shall request.
14.2 The conditions set forth in Section 14.1 are for the exclusive benefit
of the Purchaser and may be waived by the Purchaser in writing in whole or in
part at any time.
14.3 The obligations of the Vendor to consummate the transactions herein
contemplated are subject to the fulfilment of each of the following conditions
at the times stipulated, that:
(a) the representations and warranties of the Purchaser contained herein are
true and correct in all material respects at and as of the Closing except as may
be in writing disclosed to and approved by the Vendor;
(b) all covenants, agreements and obligations hereunder on the part of the
Purchaser to be performed or complied with at or prior to the Closing, including
in particular the Purchaser's obligations to deliver the documents and
instruments herein provided for, have been performed and complied with as at the
Closing;
<PAGE>
(c) between the Execution Date and the Closing, the Purchaser has not
experienced any event, circumstance or condition or have taken any action or
become subject to any action of any character adversely affecting the Purchaser
or as would materially reduce the value of the Purchaser Shares;
(d) the Vendor is satisfied in its sole discretion as to the state of the
business assets and the operations of the Purchaser after completion of its
investigation thereof during the Due Diligence Period;
(e) the Purchaser will appoint a nominee of the Vendor to the Board of
Directors of the Purchaser effective as of the Closing; and
(f) on or before the Closing Date, no federal, state, regional or municipal
government of any country applicable to the Purchaser's business or any agency
thereof will have enacted any statute or regulation, announced any policy or
taken any action that will materially and adversely affect the Purchaser, its
business or its assets.
14.4 The conditions set forth in Section 14.3 are for the exclusive benefit
of the Vendor and may be waived by the Vendor in whole or in part at any time.
14.5 The respective obligations of each party to this Agreement to
consummate the transactions herein contemplated are subject to the satisfaction
at or prior to the Closing of the following conditions:
(a) all consents, approvals, authorizations, waivers and orders of any
regulatory authorities, shareholders or third parities required or necessary or
desirable for the completion of the transactions contemplated herein shall have
been obtained or received by the Company and the Purchaser with the exception of
the requisite NASD approval, if any; and
(b) the Vendor, the Purchaser and a duly authorized escrow agent enter into
the Escrow Agreement attached hereto as Schedule "N".
15. TRANSACTIONS OF THE VENDOR AT THE CLOSING
15.1 At the Closing, the Vendor will execute and deliver or cause to be
executed and delivered all documents, instruments, resolutions and share
certificates as are necessary to effectively transfer and assign the Vendor's
Shares to the Purchaser, free and clear of all Liens, including:
(a) certified copies of resolutions of the directors of the Company
authorizing the transfer of the Vendor's Shares and the registration of the
Vendor's Shares in the name of the Purchaser and authorizing the issue of new
share certificates representing the Vendor's Shares in the name of the
Purchaser;
(b) share certificates representing the Vendor's Shares in the name of the
Vendor, duly endorsed for transfer to the Purchaser;
<PAGE>
(c) duly issued share certificates in the name of the Purchaser representing
the Vendor's Shares;
(d) with the exception of Alan Cohen, resignations in writing of any of the
directors and officers and signing officers of the Company;
(e) all corporate records and books of account of the Company including,
minute books, share register books, share certificate books and annual reports;
(f) the corporate seal of the Company;
(g) the employment and consulting contracts for all of the current employees
and consultants of the Company;
(h) releases, in form and substance satisfactory to the Purchaser, acting
reasonably, executed by the Vendor in favour of the Company releasing the
Company from any and all manner of actions, causes of action, suits,
proceedings, debts, dues, profits, expenses, contracts, damages, claims, demands
and liabilities whatsoever, in law or equity, which the Vendor ever had, now
has, or may have against either of the Company for or by reason of any matter,
cause or thing whatsoever done or omitted to be done by the Company up to the
Closing other than in respect of obligations of the Company to the Vendor
arising in respect of:
(i) earned but unpaid salary and unpaid benefits for the then current pay
period; and
(ii) any obligations pursuant to indemnities granted to the Vendor by the
Company in connection with his acts as director of the Company provided that
such indemnities shall be ineffective in respect of any act or omission which
would constitute a default or breach pursuant to this Agreement or which render
any representation or warranty given hereunder untrue or inaccurate;
(i) the Consents;
(j) a Closing Warranty and Certificate from the Vendor confirming that the
conditions to be satisfied by the Vendor, unless waived, set out in Section 14.3
have been satisfied at the Closing and that all representations and warranties
of the Vendor contained in this Agreement are true at and as of the Closing;
(k) an opinion of the Vendor's Solicitors addressed to the Purchaser and the
Purchaser's Solicitors in a form reasonably satisfactory to the Purchaser's
Solicitors;
(l) the Escrow Agreement duly executed by the Vendor;
(m) the New World Option and related agreements and documents, duly executed
by the Vendor; and
<PAGE>
(n) all such other documents and instruments as the Purchaser's Solicitors
may reasonably require.
16. TRANSACTIONS OF THE PURCHASER AT THE CLOSING
16.1 The Purchaser will deliver the following at the Closing:
(a) certificates representing the Purchaser Shares less the Escrow Shares in
the names of the Vendor;
(b) certificates representing the Escrow Shares in the names of the Vendor
to be delivered to the Escrow Agent in accordance with the terms of the Escrow
Agreement;
(c) a Closing Warranty and Certificate from the Purchaser confirming that
the conditions to be satisfied by the Purchaser, unless waived, set out in
Section 14.1 have been satisfied at the Closing and that all representations and
warranties of the Purchaser contained in this Agreement are true at and as of
the Closing;
(d) an opinion of the Purchaser's Solicitors addressed to the Vendor and the
Vendor's Solicitors in a form reasonably satisfactory to the Vendor's
solicitors;
(e) certified copies of the resolutions of the directors of the Purchaser
authorizing the acquisition of the Vendor's Shares and the issuance of the
Purchaser Shares to the Vendor and share certificates evidencing same as
provided herein; and
(f) all such other documents and instruments as the Vendor's Solicitors may
reasonably require.
17. CLOSING ESCROW
17.1 At the Closing the Vendor shall cause the Vendor's Closing Documents
and the Purchaser shall cause the Purchaser's Closing Documents to be lodged
with the Purchaser's Solicitors to be held in escrow subject to the following
conditions:
(a) receipt by the Purchaser of such approvals of the NASD to the
transactions contemplated in this Agreement as shall be required as evidenced by
a letter from counsel to New World; and
(b) the investment of a minimum of $1,000,000 by the Purchaser in the
Company by way of equity or shareholder's loan
following which the Vendor's Closing Documents shall be released to the
Purchaser and the Purchaser's Closing Documents shall be released to the Vendor
provided that, in circumstances where such release does not occur by 4:00 p.m.
Vancouver time on January 31, 2000, the Vendor's Closing Documents shall be
released to the Vendor and the Purchaser's Closing Documents shall be released
to the Purchaser and this Agreement shall terminate and be of no further force
<PAGE>
and effect in which case the parties hereto shall have no further obligation or
liability to one another in respect of the matters dealt with herein.
17.2 Notwithstanding the date of release from escrow in accordance with
Section 17.1 herein, the Closing shall for all purposes be deemed to have
occurred effective as at the Closing Date.
18. POST CLOSING AGREEMENTS
18.1 The Vendor will indemnify and hold harmless the Purchaser from and
against:
(a) any and all losses, damages or deficiencies resulting from any
misrepresentation, breach of warranty or non-fulfilment of any covenant on the
part of the Vendor under this Agreement or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
to the Purchaser hereunder;
(b) any and all losses, damages or deficiencies resulting from any
Indebtedness of any of the Entitles existing as of the Closing Date save and
except the Accounts Payable and Permitted Liens and regular payments pursuant to
the Contracts;
(c) any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses incidental to any of the foregoing
whose cause existed as of the Closing Date;
and the Purchaser is hereby authorized to settle such claims and make any
payment in relation thereto as the Purchaser reasonably sees fit after
consulting and reasonably inquiring of Vendor, and all moneys so paid or any
losses, costs or expenses so incurred by the Purchaser will constitute
indebtedness of the Vendor to the Purchaser hereunder.
18.2 The Vendor will provide reasonable assistance in preparing and filing
all financial statements, tax returns and other documents required by law in
respect of any government charges or in respect of any domestic or foreign
federal, provincial, municipal, state, territorial or other taxing statute for
fiscal periods of the Company ending for tax purposes on or before the time of
Closing.
19. TIME OF THE ESSENCE
19.1 Time is of the essence of this Agreement.
20. FURTHER ASSURANCES
20.1 The parties will execute and deliver all such further documents and
instruments and do all such acts and things as may be reasonably necessary or
required to carry out the full intent and meaning of this Agreement and to
effect the transactions contemplated by this Agreement.
<PAGE>
21. SUCCESSORS AND ASSIGNS
21.1 This Agreement will enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns. This Agreement may not be assigned by a party hereto
without the prior written consent of the other parties.
22. COUNTERPARTS
22.1 This Agreement may be executed in several counterparts and by fax
transmission, each of which will be deemed to be an original and all of which
will together constitute one and the same instrument.
23. NOTICE
23.1 Any notice required or permitted to be given under this Agreement will
be validly given if in writing and delivered or sent by pre-paid registered
mail, to the following addresses:
(a) If to the Vendor:
585 Stewart Avenue, Suite 412
Garden City, NY 11530
(b) If to the Purchaser:
1005-740 West Pender Street
Vancouver, B.C., V6C 2T8
Attention: John F. Huguet
with a copy to the Purchaser's Solicitors as follows:
Clark, Wilson
Barristers and Solicitors
#800 - 885 West Georgia Street
Vancouver, BC, V6C 3H1
Attention: David Cowan
or to such other address as any party may specify in writing to the other
parties.
23.2 Any notice delivered on a business day will be deemed conclusively to
have been effectively given on the date notice was delivered.
23.3 Any notice sent by prepaid registered mail will be deemed conclusively
to have been effectively given on the third business day after posting; but if
at the time of posting or between the time of posting and the third business day
thereafter there is a labour disturbance affecting postal service, then the
notice will not be effectively given until actually delivered.
<PAGE>
24. ENTIRE AGREEMENT
24.1 This Agreement contains the sole and entire agreement between the
parties and any modifications must be in writing and signed by each party. The
parties will in good faith investigate and negotiate the most tax effective
method of carrying out the intentions of this Agreement.
25. TENDER
25.1 Tender may be made upon the Vendor or Purchaser or upon the Purchaser's
Solicitors and money may be tendered by cheque certified by a chartered bank or
by electronic wire transfer.
26. PROPER LAW
26.1 This Agreement will be governed by and construed in accordance with the
province of the laws of the State of New York and the parties will attorn to the
Courts thereof.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed and
delivered this 30th day of November, 1999.
SIGNED, SEALED and DELIVERED by )
ALAN COHEN in the presence of: )
)
)
Signature )
)
Print Name )
)
Address )
) /s/ Alan Cohen
) ----------------
Occupation ) ALAN COHEN
TRADE-FAST, INC.
Per: /s/ Jonathan Bekhor
---------------------
Authorized Signatory
E-FINANCIAL DEPOT.COM, INC.
Per: /s/ John Huguet
-----------------
Authorized Signatory
<PAGE>
SCHEDULE "A"
SEE ATTACHMENTS
<PAGE>
SCHEDULE "B"
CONSENTS
NIL
<PAGE>
SCHEDULE "C"
CONTRACTS
<PAGE>
SCHEDULE "D"
FINANCIAL STATEMENTS
<PAGE>
SCHEDULE "E"
NEW WORLD FINANCIAL STATEMENTS
<PAGE>
SCHEDULE "F"
PERMITTED LIENS
NIL
<PAGE>
SCHEDULE "G"
AUTHORIZED AND ISSUED CAPITAL
I TRADE-FAST, INC.
AUTHORIZED CAPITAL:
ISSUED CAPITAL:
<PAGE>
SCHEDULE "H"
DIRECTORS AND OFFICERS
TRADE-FAST, INC.
DIRECTORS
- ---------
1. Alan Cohen
OFFICERS
- --------
1. Alan Cohen
2.
<PAGE>
SCHEDULE "I"
BANKING ARRANGEMENT
<PAGE>
SCHEDULE "J"
EMPLOYEE LIST
<PAGE>
SCHEDULE "K"
EMPLOYEE BENEFIT PLAN
<PAGE>
SCHEDULE "L"
LITIGATION
NIL
<PAGE>
SCHEDULE "M"
INTELLECTUAL PROPERTY
<PAGE>
SCHEDULE "N"
ESCROW AGREEMENT
<PAGE>
SCHEDULE "O"
INSURANCE POLICIES
E-FINANCIAL DEPOT.COM, INC.
1875 CENTURY PARK EAST, SUITE 150
CENTURY CITY, CALIFORNIA 90067
TELEPHONE: (877) 739-3812
January 19, 2000
Patricia Kirkham
President
Westcor Mortgage Inc.
#204, 1109 17 Avenue, S.W.
Calgary, Alberta T2T 5R9
Dear Pat:
This Letter of Intent ("Letter") is intended to set forth the material terms and
conditions of what we hope you will find to be an acceptable agreement in
principle respecting the acquisition (the "Acquisition") by e-financial
depot.com, Inc. ("Acquiror") of 100% of the outstanding stock of Westcor
Mortgage Inc. ("Acquiree") from the shareholders thereof (the "Vendors").
As we have discussed, we contemplate entering into a subsequent definitive
written agreement containing all of the material terms and conditions of the
proposed Acquisition (the "Definitive Agreement"), not later than 30 days
following the date hereof (the "Effective Date"), including, without limitation,
customary representations, warranties and conditions precedent appropriate to
the Acquisition. It is further contemplated that closing of the Acquisition
will take place on or before February 29, 2000 (the "Closing Date").
Subject to entering the Definitive Agreement and the terms and conditions
thereof, the terms of Acquisition shall be as follows:
1. Acquisition
As a result of the Acquisition, the Acquiree will become a wholly-owned
subsidiary of the Acquiror. The consideration for the Acquisition will be US
$2,200,000, payable as follows:
(a) deposit of US $50,000 worth of securities to be deposited into trust
with Clark, Wilson (solicitors for the Acquiror) upon execution of this Letter
as evidence of good faith and to be returned to the Acquiror on the Closing
Date;
(b) US $600,000 less a holdback equal to 10% of the accounts receivable of
the Acquiree as at the Effective Date to be paid on the Closing Date, with the
holdback to be applied to reimburse the Acquiror in respect of any accounts
receivable of the Acquiree as at the Closing Date which are not collected within
12 months thereafter;
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(c) US $1,600,000 of shares of the Acquiror to be issued as at the Closing
Date, said shares to be issued at a deemed price equal to the average closing
price of the Acquiror's shares for the 20 trading days prior to the Closing
Date, said shares to be restricted shares under Rule 144 of the Securities Act
of 1933 and to be held in escrow pending any post closing purchase price
adjustment as a result of any liabilities or assets of the Acquiree existing at
the Effective Date which were not recorded, said adjustment to be concluded
within 12 months of the Closing Date.
In effecting the Acquisition, the Acquiror will, where reasonable, accommodate
the Vendors requests for structuring the consideration in a tax effective
manner.
2. Access
During the period commencing on the date of your execution and return to us of a
counterpart copy of this Letter through the earlier of the consummation or
termination of the Acquisition, the Acquiree shall continue to provide full and
unrestricted access and shall make available, or cause to be made available, to
Acquiror and its affiliates, agents and representatives (collectively, our
"Agents") such of the properties and other assets and such of the books,
documents and records of, and such other information (the "Information")
concerning Acquiree and any of its affiliated entities as any of our Agents may
request. Such Information and materials shall include, without limitation, any
and all audits or reports conducted by third persons (such as accountants'
reviews consultant's reports, governmental agency examination reports and
similar materials). Acquiree shall also instruct all of its officers,
employees, agents, accountants, outside counsel, affiliated entities, and other
persons connected with its officers, employees, agents, accountants, outside
counsel, affiliated entities and other persons connected with its business and
affairs (including third parties subject to its direction or authorization) to
respond promptly and fully to all inquiries made by our Agents regarding any
aspect of the assets, liabilities, business or affairs of Acquiree or any of its
affiliated entities.
3. Confidentiality
The parties to this letter shall continue to be subject to that certain
Confidentiality Agreement dated January 4, 2000 entered into by and between
Acquiree and Acquiror.
4. Conditions
The Acquisition will be subject, among other things, to the following conditions
precedent:
(a) each party completing a due diligence review of the other on terms
satisfactory to it on or before the Effective Date;
(b) the execution and delivery by the Acquiree and the Acquiror of a
Definitive Agreement in form and content mutually satisfactory to both Acquiree
and Acquiror;
(c) the approval of the Acquisition and the Definitive Agreement by the
Board of Directors of both the Acquiree and the Acquiror;
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(d) the approval of the Acquisition and Definitive Agreement by the
shareholders of the Acquiree;
(e) the Approval of the Acquisition by all appropriate regulatory agencies,
and the satisfaction of such other requirements as may be imposed by applicable
law and regulations or by the respective articles of incorporation/charters and
bylaws of both Acquiree and Acquiror. In order to be acceptable, all such
approvals shall have been obtained without imposition of any unusual or unduly
burdensome conditions, as determined by and in the sole discretion of our group;
(f) the satisfaction of all other ordinary and customary conditions for
transactions similar to the Acquisition, including, without limitation, the
continued accuracy, on the Closing Date of each of the representations and
warranties of the parties to the Definitive Agreement, the receipt of favourable
opinions of counsel regarding the subject matter of the Acquisition, and the
receipt of reports of independent public accountants and other experts, as well
as the absence of any material adverse change in the business, prospects or
operations of Acquiree and its affiliated entities between the date of execution
of Definitive Agreement and the Closing Date;
(g) Patricia Kirkham entering into an employment agreement with the Acquiror
or its nominee; and
(h) the Acquiror having completed a financing of an amount sufficient to
enable it to complete the Acquisition.
5. Exclusivity
Until the Effective Date, Acquiree will conduct its business and affairs only in
the ordinary course as currently conducted and will not, without written prior
consent of Acquiror:
(a) change its existing operations, or its existing loan, investment or
management policies, except in the ordinary course of business; or
(b) authorize or knowingly permit any of its representatives, directly or
indirectly, to entertain, solicit or encourage, or participate in any
discussions or negotiations with, or provide any information to any corporation,
partnership, person, or other entity or group (other than Acquiror and its
representatives) concerning any Acquisition Proposal (as hereinafter defined)
other than the Acquisition Proposal set forth in this Agreement; or
(c) issue or sell any shares of any class of stock or other beneficial
interest or issue or grant any portion or right to purchase shares of any class
of stock or other beneficial interest in it, other than pursuant to options that
have been previously granted under existing employee stock options.
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The Acquiree shall immediately notify the Acquiror if it becomes aware of any
inquiry regarding an Acquisition Proposal. For purposes of this Letter
"Acquisition Proposal" means any (i) proposal pursuant to which any corporation,
partnership, person or entity or group would acquire or participate in a merger
or other business combination involving Acquiree; (ii) proposal by which any
corporation, partnership, person, or other entity of group would acquire the
right to vote five percent or more of the capital stock of Acquiree entitles to
vote thereon for the election of directors, other than persons designated as
proxy holders by Acquiree's Board of Directors; (iii) acquisition of the assets
of Acquiree other than in the ordinary course of business; (iv) acquisition of
in excess of five percent of the outstanding capital stock of Acquiree, other
than as contemplated by this Letter; or (iv) any other reorganization or
recapitalization of Acquiree.
The foregoing Section 6(b) shall not be construed to prohibit the Board of
Directors of Acquiree from taking any action if such Board determines in good
faith and upon written advice of counsel, that such action is required for such
Board to comply with its fiduciary obligations.
6. Press Releases
No Press Release or Public announcement with respect to the Acquisition shall be
made without written consent of Acquiree and Acquiror.
7. Costs
Each party shall bear its own costs in respect of the Acquisition.
In the event that you find the foregoing proposal agreeable, kindly so indicate
by dating, executing and returning to us enclosed copy of this Letter.
Yours truly,
e-financial depot.com, Inc.
Per: /s/ John Huguet
Authorized Signatory
OXFORD CAPITAL CORPORATION
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CONSULTING AGREEMENT
1. PARTIES
1.1 This Consulting Agreement (this "Agreement") is made and entered into
effective as of January 27, 2000, by and between EFINANCIALDEPOT.COM Inc.(the
"Company"), whose address is 150 - 1875 Century Park East, Century City,
California, 90067, and Oxford Capital Corporation (the "Consultant"), whose
address is 1013 -17th Avenue SW, Calgary, Alberta T2T 0A7.
2. RECITALS
2.1 This Agreement is made with reference to the following facts and
circumstances:
(a) the Company wishes to engage the services of the Consultant to advise
and consult with the Company on certain business and financial matters as set
forth in this Agreement.
(b) the Consultant is willing to accept such engagement, on the terms set
forth in this Agreement.
2.2 In consideration of the premises, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Company and the
Consultant agree as follows.
3. ENGAGEMENT
3.1 The Company hereby engages the services of the Consultant, as an
independent contractor for a period of twelve months beginning on February 1st,
2000, and ending on January 31st, 2001 (the "Term"), and the Consultant hereby
accepts such engagement, for the purposes set forth in section 3.2. below.
3.2 The scope of the services to be rendered by the Consultant to the
Company are and are limited to the following:
(a) The Consultant shall, from time to time as the Company may request,
advise and consult with the Company's board of directors and executive officers
regarding (i) the Company's merger and acquisition strategies, including the
evaluation of targets and the structuring of transactions; (ii) the Company's
corporate financing activities, including debt and equity transactions; (iii)
the identification and evaluation of underwriters for the Company's securities'
offerings in the United States of America; (iv) the Company's business
development activities, including major geographic and service expansion plans;
and (v) the retainment of an E-Strategist in order to craft and validate an
appropriate business plan geared towards the financial community.
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(b) The Consultant shall devote such time to this engagement as is
reasonably necessary, but the manager need not devote his full time or attention
to the engagement. The Company recognizes that the Consultant has numerous
clients and engagements, and that this engagement is not exclusive.
4. THE CONSULTANT'S FEES AND EXPENSES.
4.1 The Company shall pay the Consultant as a fee for its services
under this Agreement $10,000 cash per month (the "Consultant's Fee"), and
$10,000 in shares of the capital stock of the Company (the "Consultant's
Shares"), the price of the Consultant's Shares will be based upon the average
price of the previous thirty (30) days closing bids for the Companies shares as
traded on the OTC Bulletin Board or the NASDAQ National Market . The
Consultant's fee is payable on the last business day of each month during the
Term and the Consultant's Shares shall accure for the benefit of the Consultant
until the Consultant's Shares are registered pursuant to the registration
statement being prepared and filed for the Purchased Securities as they defined
in the Registration Rights Agreement dated February 2, 2000 being executed by
the Company and the Consultant simultaneously herewith. Upon registration of
the Consultant's Shares, the number of Consultant's Shares accrued and payable
shall be immediately released to the Consultant as payment for the services of
the Consultant.
4.2 The Company shall also pay the Consultant an advisory fee (the
"Advisory Fee") equal to 10% of the gross value of each financing transaction in
which the Consultant advises the Company. The Advisory Fee shall be payable in
shares of the Company and the Advisory Fee shall be fully earned upon the
execution of a binding agreement for the transaction to which it pertains, and
shall be paid upon the initial funding or closing date of the transaction,
whichever occurs first. The Company shall pay the Consultant an Advisory Fee
for each transaction in which the Consultant has advised or consulted with the
Company during the Term, notwithstanding the parties to such transaction do not
execute a binding agreement until after the end of the Term, or that the
transaction does not close or fund until after the end of the Term.
4.3 The Company shall also pay the Consultant a fee for consultation
and advisory services in regards to merger and acquisition transactions (the
"Acquisition Fee"). The Acquisition Fee shall be determined once an acquisition
target (the "Target") has been selected. The Acquisition Fee will be negotiated
between the Company and the Consultant with respect to the size, and
requirements of each Target. No contact shall take place between the Company
and the Target until the Acquisition Fee has been determined and finalized (the
"Acquisition Fee Agreement"). Each Acquisition Fee Agreement shall be added as
an addendum to this Agreement.
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4.4 The Company shall reimburse the Consultant for all its reasonable
out-of-pocket expenses incurred in the performance of the Consultant's duties
under this agreement.
4.5 The issuance of the shares underlying the Advisory Fee, the
Consulting Fee and the Acquisition Fee shall be exempt from the registration
requirements of the US Securities Act of 1933, as amended (the "Securities Act")
pursuant to SEC Regulation S.
5. MISCELLANEOUS
5.1 Relationship. The relationship between the Company and the
Consultant created by this Agreement is that of independent contractors. The
Consultant is not, by virtue of this Agreement, and shall not for any purpose be
deemed to be hereunder, an officer, employee, agent or affiliate of the Company.
The services to be rendered by the Consultant pursuant to this Agreement do not
include the services or activities of an "investment adviser", as that term is
defined by U.S. federal or state laws and, in performing services under this
Agreement, the Consultant shall not be deemed to be an investment adviser under
such laws.
5.2 Board Member. The Company hereby represents that it is purchasing
Directors and Officers insurance (the "D & O Insurance") for the Company's Board
of Directors and that the insurance will be placed in the next 30 days.
Immediately upon the D & O Insurance being placed, the Company agrees to appoint
and elect a nominee of the Consultant to the Board of Directors of the Company.
Until such nominee is appointed, Robert Kubbernus, or his nominee, shall sit on
the advisory committee to the Company.
5.3 Indemnity. The Company hereby agrees to defend, indemnify, and
hold the Consultant harmless from and against any and all claims, damages,
judgements, penalties, costs, and expenses (including attorney fees and court
costs now or hereafter arising from the enforcement of this clause) arising
directly or indirectly from the activities of the Consultant under this
Agreement, or from the Activities of the Company or any of its shareholders,
officers, directors, employees, agents or affiliates, whether such claims are
asserted by any governmental agency or any other person. This indemnity shall
survive termination of this Agreement.
5.4 Governing Law. This Agreement and the Note shall be governed by,
and construed in accordance with, the laws of the Province of Alberta, Canada.
The courts of the Province of Alberta shall have exclusive jurisdiction for any
action arising out of or related to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of
the date first above written.
The Consultant: The Company:
OXFORD CAPITAL CORPORATION EFINANCIALDEPOT.COM INC.
By /s/ Riaz Mamdani By /s/ John Huguet
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Name Riaz Mamdani Name John Huguet
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Title Chief Financial Officer Title President
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Date signed February 17, 2000 Date signed February 7, 2000
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement"), is made and entered into
as of February 2, 2000 (the "Closing Date"), by and among EFINANCIAL DEPOT.COM,
INC. a Delaware corporation (the "Company"), and OXFORD CAPITAL CORP., a Cayman
Island corporation, as investor (the "Investor"). Capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings ascribed to
them in the Debenture Purchase Agreement and the Purchaser Warrants as described
below.
BACKGROUND
The Company has agreed, upon the terms and subject to the conditions of the
Debenture Purchase Agreement, to issue and sell to the Investor a 6% convertible
debenture in the principle amount of $2,500,000 USD, due February 2, 2003 (the
"Debenture"), a warrant (the "Purchaser Warrant") to purchase 250,000 shares in
the Common Stock of the Company at a price of $5.00 USD per share, exercisable
on or before February 2, 2002, and a placement agents warrant (the "Agents
Warrant") to purchase 50,000 shares of the Common Stock at an exercise price of
$5.00 per share on the later of (i) February 2, 2001 or (ii) the twelve month
anniversary date of the effective registration of the Agent Shares. The
Debenture, the Warrant and the Agents Warrant are hereinafter collectively
referred to as the "Purchased Securities." The Debenture is convertible into
shares of the Company's common stock at a conversion price equal to the the
lesser of (i) 80% of the 5 day average closing bid price of the common stock
prior to the Conversion Date or (ii) $5.00; in no event shall the conversion
price be less than $3.00. The Common Stock issuable upon conversion of the
Debenture is hereinafter called the "Debenture Shares," and the Common Stock
issuable upon exercise of the Warrant is hereinafter called the "Warrant
Shares,"and the Common Stock issuable upon exercise of the Agents Warrant is
hereinafter called the "Agent Shares." To induce Investor to purchase Debenture,
the Company has agreed to file a Registration Statement covering the Debenture
Shares, the Warrant Shares and the Agent Shares under the Securities Act of
1933, as amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "1933 Act"), and applicable state
securities laws.
AGREEMENT
For and in consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Investor hereby agree as
follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following capitalized terms are used with
the meanings hereinafter described:
(a) "INVESTOR" means Oxford Capital Corp. and any transferee or
assignee thereof to whom the Investor assigns its rights under this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9.
(b) "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof, or a governmental agency.
(c) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing one or more Registration Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement(s) by the United States Securities and Exchange Commission (the
"SEC").
(d) "REGISTRABLE SECURITIES" means the Debenture, the Warrant, the Agents
Warrant and any shares of capital stock issued or issuable with respect to the
Debenture Shares, the Warrant Shares, or the Agent Shares including those shares
registrable as a result of any stock split, stock dividend, recapitalization,
exchange, or similar event.
<PAGE>
(e) "REGISTRATION STATEMENT" means a registration statement of the Company
filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Debenture Purchase Agreement.
SECTION 2. REGISTRATION.
(a) MANDATORY REGISTRATION. The Company shall prepare and file with
the SEC a Registration Statement or Registration Statements (as are necessary)
in such form as is available for such a registration, covering the issuance (and
resale, if required by the SEC as a condition of effectiveness) of 200% of the
Debenture Shares and 100% of both the Warrant Shares and Agent Shares, by March
31, 2000 (the "Filing Deadline"). The Company shall have the Registration
Statement declared effective by the SEC by May 31, 2000 (the "Registration
Deadline"). The Company shall permit the registration statement to become
effective within five (5) business days after receipt of a "no review" notice
from the SEC. Such Registration Statement shall be kept current and effective
for a period thirty (30) days following the last to occur of (i) the day on
which the all of the Debenture have been fully converted or paid, and (ii) the
Warrant expires or becomes fully exercised. If a Registration Statement with
respect to the Registrable Securities is not effective on the Registration
Deadline date, the Company agrees to and shall pay liquidated damages to the
Investor in an amount equal to 2% per every 30 day period of the principal
amount of the Debenture until the Registration Statement is effective, or pro
rata portion thereof.
(b) UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement in accordance with Section 2(a), involves an underwritten offering,
the Investor shall have the right to select one legal counsel and an investment
banker or bankers and manager or managers to administer their interest in the
offering, which investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company.
(c) PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration of the
Registration Deadline (as defined above) the Company proposes to file with the
SEC a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act, of any of its securities (other than on
Form S-4 or Form S-8 or their then equivalents relating to securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans) the Company shall promptly send to the Investor, who is entitled
to registration rights under Section 2(a) written notice of the Company's
intention to file a Registration Statement and of the Investor's rights under
this Section 2(c) and, if within twenty (20) days after receipt of such notice,
the Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities the
Investor requests to be registered. No right to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a). The obligations of the Company under this Section
2(c) may be waived by the Investor. If the offering in connection with which
the Investor is entitled to registration under this Section 2(c) is an
underwritten offering, then the Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
<PAGE>
SECTION 3. RELATED OBLIGATIONS.
Whenever the Investor has requested that any Registrable Securities be
registered pursuant to Section 2(c), or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
(a) The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the Registration Deadline), for the registration of Registrable Securities
pursuant to Section 2(a) and use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing and in any event by the Registration Deadline, and
keep the Registration Statement(s) effective pursuant to Rule 415 at all times
until the later of (i) the date as of which the Investor may sell all of the
Registrable Securities without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto) or (ii) the date on which (A) the
Investor shall have sold all the Registrable Securities and (B) none of the
Debenture are outstanding (both (A) and (B) together defined as the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement(s) and the prospectus(es) used in connection with the Registration
Statement(s), which prospectus(es) are to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s). In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within fifteen (15) days after
the necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of determining the sufficiency of the shares
available under a Registration Statement, any restrictions on the convertibility
of the Debenture or exercise of the Warrant shall be disregarded and such
calculation shall assume that the Debenture are then convertible into shares of
Common Stock at the then prevailing Conversion Price (as defined in the
Debenture) and that the Warrant are exercised at the then current exercise
price.
(c) The Company shall furnish to the Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal counsel,
without charge, (i) promptly after the same is prepared and filed with the SEC
at least one copy of the Registration Statement and any amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference, and all exhibits, the prospectus(es) included in such Registration
Statement(s) (including each preliminary prospectus) and all correspondence by
or on behalf of the Company to the SEC or the staff of the SEC and all
correspondence from the SEC or the staff of the SEC to the Company or its
representatives, related to such Registration Statement(s), (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably
request), and (iii) such other documents, including any preliminary prospectus,
as the Investor may reasonably request in order to facilitate the disposition of
the Registrable Securities owned by such Investor.
(d) The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
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United States as any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; PROVIDED HOWEVER, that
the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d) hereof, (B) subject
itself to general taxation in any such jurisdiction, or (C) file a general
consent to service of process in any such jurisdiction. The Company shall
promptly notify the Investor who holds Registrable Securities of the receipt by
the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.
(e) As promptly as practicable after becoming aware of the above events, the
Company shall notify the Investor in writing of the happening of any event, of
which the Company has knowledge, as a result of which, the prospectus included
in a Registration Statement, as then in effect, includes an untrue statement of
a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and promptly prepare a
supplement or amendment to the Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to the Investor (or such other number of copies as such Investor may
reasonably request). The Company shall also promptly notify the Investor in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to the Investor by facsimile on the same day of
such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
(e) The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement, or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment, and to notify the Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof, or its receipt of actual
notice of the initiation, or threatened initiation of any proceeding for such
purpose.
(f) The Company shall permit the Investor a single firm of counsel, to
review and comment upon the Registration Statement(s) and all amendments and
supplements thereto at least seven (7) days prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects.
The Company shall not submit a request for acceleration of the effectiveness of
a Registration Statement(s) or any amendment or supplement thereto without the
prior approval of such counsel, which consent shall not be unreasonably
withheld.
(g) At the request of the Investor, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement (i) if required by an
underwriter, a letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope, and substance as is customarily given in an underwritten public
offering, addressed to the underwriters and the Investor.
<PAGE>
(h) The Company shall make available for inspection by (i) the Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants retained by
the Investor, and (iv) one firm of attorneys retained by all such underwriters
(collectively, the "Inspectors") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the
Company's officers, directors, and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence PROVIDED
HOWEVER, that each Inspector shall hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (A) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (B) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (C) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Investor agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.
(i) The Company shall hold in confidence and not make any disclosure of
information concerning the Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement.
The Company agrees that it shall, upon learning that disclosure of such
information concerning an Investor is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt written
notice to such Investor and allow such Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(j) The Company shall use its best efforts either to secure designation and
quotation of all the Registrable Securities covered by the Registration
Statement on the OTC BULLETIN BOARD, and to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities. The Company shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(1).
(k) The Company shall cooperate with the Investor and, to the extent
applicable, any managing underwriter or underwriters, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the managing underwriter or underwriters, if any, or, if
there is no managing underwriter or underwriters, the Investor may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investor may request. Not later than the date on
which any Registration Statement registering the resale of Registrable
Securities is declared effective, the Company shall deliver to its transfer
Investor instructions, accompanied by any reasonably required opinion of
counsel, that permit sales of unlegended securities in a timely fashion that
complies with then mandated securities settlement procedures for regular way
market transactions.
(l) The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to a Registration Statement.
<PAGE>
(m) The Company shall provide a transfer agent and registrar of all such
Registrable Securities not later than the effective date of such Registration
Statement.
(n) If requested by the managing underwriters or the Investor, the
Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investor agrees should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters, and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to any Registration
Statement if requested by a shareholder or any underwriter of such Registrable
Securities.
(o) The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(p) The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
SECTION 4. OBLIGATIONS OF THE INVESTOR.
(a) At least seven (7) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify the Investor in writing
of the information the Company requires from the Investor if the Investor elects
to have any of the Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of the Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it, and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities, and shall execute such documents in connection with such
registration as the Company may reasonably request.
(b) The Investor, by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
(c) In the event the Investor is determined to engage the services of an
underwriter, the Investor agrees to enter into and perform the Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor notifies the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement(s).
(d) The Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(d), such Investor
will immediately discontinue disposition of Registrable Securities pursuant to
the Registration Statement(s) covering such Registrable Securities until the
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(e) and, if so directed by the Company, the Investor
shall deliver to the Company (at the expense of the Company) or destroy all
copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
<PAGE>
(e) The Investor may not participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell the Investor's Registrable
Securities on the basis provided in any underwriting arrangements (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
SECTION 5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings, or qualifications pursuant
to Sections 2 and 3, including, without limitation, all registration, listing
and qualifications fees, printers and printing fees, accounting fees, fees and
disbursements of counsel for the Company and $1,000.00 USD of fees and
disbursements of one counsel for the Investor, shall be borne by the Company.
SECTION 6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless, and defend the Investor who holds such
Registrable Securities, the directors, officers, partners, employees, and each
Person, if any, who controls the Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and any
underwriter (as defined in the 1933 Act) for the Investor, and the directors and
officers of, and each Person, if any, who controls, any such underwriter within
the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint
or several (collectively, "Claims") incurred in investigating, preparing, or
defending any action, claim, suit, inquiry, proceeding, investigation, or appeal
taken from the foregoing by or before any court or governmental, administrative,
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto ("Indemnified
Damages"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("Blue Sky Filing"), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which the statements therein were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse the Investor and each such underwriter or
controlling person, promptly as such expenses are incurred and are due and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
<PAGE>
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of
or based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c); (ii) with respect to any preliminary prospectus, shall
not inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject thereof (or
to the benefit of any person controlling such person) if the untrue statement or
mission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a violation and such Indemnified
Person, notwithstanding such advice, used (iii) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or to cause
to be delivered the prospectus made available by the Company, and (iv) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9.
(b) In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
or Indemnified Damages to which any of them may become subject, under the 1933
Act, the 1934 Act, or otherwise, insofar as such Claim or Indemnified Damages
arise out of or are based upon any Violation, in each case to the extent, and
only to the extent, that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided howEVER, that the indemnity agreement contained in this
Section 6(b) and Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided further
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investor
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers, and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing expressly for
inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving a Claim such
Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
<PAGE>
the Indemnified Party, as the case may be; provided howEVER, that an Indemnified
Person or Indemnified Party shall have the right to retain its own counsel with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investor, and
such legal counsel shall be selected by the Investor holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
any settlement of any action, claim or proceeding effected without its written
consent, provided however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the Indemnified Party or Indemnified Person, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties,
firms, or corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
(e) The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or Indemnified Damages are incurred.
(f) The indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
SECTION 7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; PROVIDED HOWEVER, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation, and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
SECTION 8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investor to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4.5 of the Debenture
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and
<PAGE>
(c) furnish to the Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act, and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.
SECTION 9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investor to any
transferee of all or any portion of the Debenture, the Warrant, or the
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (A) the name and address of such transferee or
assignee, and (B) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; (v) such
transfer shall have been made in accordance with the applicable requirements of
the Debenture Purchase Agreement; (vi) such transferee shall be an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment occurs subsequent to the
date of effectiveness of the Registration Statement required to be filed
pursuant to Section 2(a), the transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment.
SECTION 10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the
Investor. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon the Investor and the Company.
SECTION 11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices, or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice, or election received from the registered owner of such Registrable
Securities.
(b) Any notices consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If to the Company if to the Investor:
Oxford Capital Corp.
c/o 1013 - 17th Avenue S.W.
Efinancial Depot.Com, Inc.. . . . . . Calgary, Alberta, Canada
150-1875 Century Park East; . . . . . T2T OA7
Century City California . . . . . . . Attention: Riaz Mamdani
90067 Telephone: (403) 508-5055
Facsimile: (403) 508-5058
With a copy that does not
constitute notice to:. . . . . . with a copy (which shall not
constitute notice) to:
Clark,Wilson, Barristers & Solicitors Ian H. Kennedy.
800-885 W.Georgia St. . . . . . . . . Barrister & Solicitor
Vancouver,Canada. . . . . . . . . . . 1013-17th Avenue S.W.,
V6C 3H1 . . . . . . . . . . . . . . . Calgary, Alberta
Attention: David Cowan. . . . . . . . T2T 0A7
Tel: (604) 643-3178 . . . . . . . . . Telephone: (403) 244-0621
Fax: (604) 687-6314 . . . . . . . . . Facsimile: (403) 209-6125
- ------------------------------------- ---------------------------------------------------
</TABLE>
Each party shall provide five (5) day's prior written notice to the other
party of any change in address or facsimile number.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Florida; The parties agree that the courts of the State
of Florida, shall have exclusive jurisdiction and venue for the adjudication of
any civil action between them arising out of relating to this Agreement, and
hereby irrevocably consent to such jurisdiction and venue.
(e) This Agreement and the Debenture Purchase Agreement constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties, or
undertakings, other than those set forth or referred to herein and therein.
This Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof.
(f) Subject to the requirements of Section 9, this Agreement shall
inure to the benefit and of and be binding upon the permitted successors and
assigns of each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
<PAGE>
(i) Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments, and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY:
EFINANCIAL DEPOT.COM, INC.
By: /s/ John Huguet
Name: John Huguet
Title: President
INVESTOR:
OXFORD CAPITAL CORP.
By: /s/ Riaz Mamdani
Name: Riaz Mamdani
Title: Chief Financial Officer
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES
ARE BEING OFFERED PURSUANT TO A SAFE HARBOR FROM REGISTRATION UNDER REGULATION S
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES
OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S PROMULGATED UNDER
THE ACT) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT, PURSUANT TO
REGULATION S OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THE COMPANY IS PROVIDED WITH OPINION OF COUNSEL OR
OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY BE MADE ONLY IN COMPLIANCE WITH THE ACT.
EFINANCIAL DEPOT.COM, INC.
6% CONVERTIBLE DEBENTURE
$2,500,000 USD February 2, 2000
EFINANCIAL DEPOT.COM, INC., a Delaware corporation (the "Company"),
for the value received, hereby unconditionally and absolutely promises to pay to
the order of OXFORD CAPITAL CORP., or holder (collectively, the "Holder"), upon
presentation and surrender of this Debenture to the Company at its office at
150-1875 Century Park East, Century City California, 90067, or such other place
as the Company may designate from time to time, the Principal Sum due under this
Debenture, on February 2, 2003, or if such day is not a regular business day,
then on the next business day thereafter or (the "Maturity Date"), plus interest
at the simple rate of six percent (6%) per annum with all accrued and unpaid
interest due and payable on the Maturity Date or on the date this Debenture is
converted into shares of the common stock pursuant to Section 1.
All dollar amounts set forth in this Debenture are United States
Dollars. A regular business day is a day on which banks in the State of New York
and the Province of Alberta are open for business and a trading day is a day in
which the New York Stock Exchange is open for trading.
<PAGE>
1. PRINCIPAL SUM.
The Principal Sum outstanding at any time shall be Two Million Five Hundred
Thousand ($2,500,000) Dollars less any Principal Sum prepaid through the date of
the calculation and less any Principal Sum which had been converted into Common
Stock as provided for in Section 2 hereof through the date of the calculation.
2. CONVERSION.
(a) The Holder of this Debenture shall have the right, at its
option, beginning on the thirtieth (30th) day after the Closing Date through
5:00 p.m. Alberta, Canada time on the last regular business day immediately
prior to the Maturity Date to convert, subject to the terms and provisions of
this Section 2, any or all of the outstanding Principal Sum of this Debenture.
Conversions made pursuant to this Section 2 shall be made at a price (the
"Conversion Price") per share equal to the lesser of: (i) eighty percent (80%)
of the average closing bid price of the Common Stock of the Company on the
principal market for such Common Stock for 5 days preceding the date a
conversion notice is provided to the Company (the "Conversion Date") or (ii)
five ($5.00) dollars; in no event shall the Conversion Price be lower than
$3.00.
To effect conversion of all or any part of the Principal Sum secured
by this Debenture, the Holder shall present the Company with a written Notice of
Conversion by either registered mail or facsimile on the date of Conversion. In
either case, prior to issuance of previously unissued shares in the Common Stock
of the Company to the Holder, this Debenture must be surrendered at the
principal office of the Company, accompanied by the original Notice of
Conversion duly executed, and, accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company duly executed by the
Holder or its attorney duly authorized in writing to specify whether the Holder
desires interest on the amount of the Principal Sum being converted to be paid
in cash by Company check, or in shares of Common Stock of the Company.
(b) As promptly as practicable after the surrender, as herein
provided, of this Debenture for conversion and the completed and executed Notice
of Conversion, the Company shall deliver or cause to be delivered, to or upon
the written order of the Holder of this Debenture so surrendered: (i)
certificates representing the largest number of fully paid and nonassessable
full shares of Common Stock into which this Debenture may be converted in
accordance with the provisions of this Section 2; (ii) a check in payment for
fractional shares, based on amount in cash equal to such fraction multiplied by
the current "Market Price" as defined in Section 4 hereof; (iii) cash or
additional shares of Common Stock of the Company for the accrued but unpaid
interest due on the Principal Sum being converted through the date of the Notice
of Conversion; and (iv) a replacement Debenture identical to this Debenture,
except as to the issue date and as adjusted to reflect the Principal Amount
actually outstanding after the conversion, if less than the then outstanding
Principal Sum is being converted. Such conversion shall be deemed to have been
made at the close of business on the date that this Debenture shall have been
received by the Company for conversion, with a Notice of Conversion duly
<PAGE>
executed, in satisfactory form for conversion, so that the rights of the Holder
of this Debenture as a Debenture holder as to the Principal Sum being converted
shall cease at such time and, subject to the provisions of this Section 2(b),
the person or persons entitled to receive the shares of Common Stock upon
conversion of this Debenture shall be treated for all purposes as having become
the record holder or holders of such shares of Common Stock (including any
Common Stock issued for interest) at such time and such conversion shall be at
the Conversion Price in effect at such time.
(c) After the registration of the Common Stock underlying
this Debenture, and after the shares of the Common Stock have traded above
$10.00 on each day for 20 consecutive trading days, if there has been no Event
of Default under this Debenture, the principal amount of the Debenture will be
converted in accordance with the conversion terms of Section 2(a) above.
3. INTEREST
At the Holder's election, accrued but unpaid interest must be
paid in Common Stock of the Company in an amount of shares equal to the interest
to be paid in Common Stock divided by the Conversion Price applicable to the
Principal hereunder. Not earlier than the sixtieth (60th ) day and not later
than the thirtieth (30th) day prior to the Maturity Date, the Holder shall
notify the Company if it desires to have the accrued but unpaid interest due on
the Maturity Date paid in shares of Common Stock of the Company. If the Holder
does not give any such notice in a timely manner, the interest at Maturity shall
be paid in cash by Company check.
4. ANTI-DILUTION PROVISIONS.
After February 2, 2000, and so long as this Debenture is
outstanding and not fully exercised, the Company shall not, without the prior
consent of the Holder, issue or sell (i) any Common Stock without consideration
or for a consideration per share less than $3.00; or (ii) issue or sell any
warrant, right, contract, call, or other security or instrument granting the
holder thereof the right to acquire Common Stock without consideration or for a
consideration per share less than $3.00.
5. RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon conversion of this Debenture) or in case of any sale, lease
or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction, cause
effective provisions to be made so that the Holder shall have the right
thereafter by converting this Debenture at any time prior to the payment in full
<PAGE>
of the Debenture, to acquire the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been acquired
upon conversion of this Debenture immediately prior to such reclassification,
change consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Debenture. The foregoing
provisions of this Section 5 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issue of Common Stock covered by the provisions of this
Section 5 hereof.
6. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
The Company shall register the shares of the Common Stock which
may be issued upon the conversion of the principal sum of the Debenture and for
the interest payable thereunder as provided for in Exhibit C to the Debenture
Purchase Agreement, the Registration Rights Agreement.
7. REGULATION S.
This Debenture and the Common Stock issuable upon conversion or
as interest under this Debenture were issued under Regulation S under the
Securities Act of 1933, as amended, and may be transferred only as provided for
in the Debenture Purchase Agreement.
8. EVENTS OF DEFAULT.
If any of one or more of the following described events, or the
events as described in the Debenture Purchase Agreement, occur (each an "Event
of Default") then:
(a) The Company shall fail to pay the principal of, or interest on, this
Debenture within five (5) days after the Holder has given written notice to the
Company that the same has become due; or
(b) The Company shall fail to perform or observe any of the
provisions contained in any other Section of this Debenture or the Debenture
Purchase Agreement and such failure shall continue for more than thirty (30)
days after the Holder has given written notice to the Company; or
(c) Any material representation or warranty made in writing
by or on behalf of the Company in this Debenture shall prove to have been false
or incorrect in any material respect, or omits to state a material fact required
to be stated therein in order to make the statements contained therein, in the
light of the circumstances under which made, not misleading, on the date as of
which made, and the Company shall have failed to cure such false or incorrect
statement within thirty (30) days after the Holder has given written notice to
Borrower; or
(d) The Company shall be adjudicated a bankrupt or insolvent,
or admit in writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or the Company shall apply for or
<PAGE>
consent to the appointment of a receiver, trustee, or similar officer for it or
for all or any substantial part of its property; or such receiver, trustee or
similar officer shall be appointed without the application or consent of the
Company and such appointment shall continue undischarged for a period of thirty
(30) days; or the Company shall institute (by petition, application, answer,
consent or otherwise) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating to
it under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against the Company and shall
remain undismissed for a period of thirty (30) days; or any judgment, writ,
warrant of attachment or execution or similar process shall be issued or levied
against a substantial part of the property of the Company and such judgment,
writ, or similar process shall not be released, vacated or fully bonded within
thirty (30) days after its issue or levy; or
(e) A final judgment for money in excess of Twenty-Five
Thousand ($25,000) Dollars not covered by insurance shall be rendered against
the Company and if, within thirty (30) days after entry thereof, such judgment
shall not have been discharged, satisfied or execution thereof stayed pending
appeal, or if, within thirty (30) days after the expiration of any such stay,
such judgment shall not have been discharged or satisfied; or
(f) The Company shall be enjoined, restrained or in any way
prevented by a court order from continuing to conduct all or any material part
of its business affairs;
THEN, or at any time thereafter, and in each and every case:
(1) Where the Company is in default under the provisions
of Section 8(d) hereof, the entire unpaid principal amount of the Debenture, all
interest accrued and unpaid thereon, and all other amounts payable to the Holder
hereunder shall automatically become and be forthwith due and payable without
offset or counterclaim of any kind and without presentment, demand, protest or
notice of any kind, and without regard to the running of the statute of
limitations, all of which are hereby expressly waived by the Company; and
(2) In any other case referred to in this Section 8, the
Holder may, by written notice to the Company, declare the entire unpaid
principal amount of this Debenture, all interest accrued and unpaid hereon, and
all other amounts payable hereunder to be forthwith due and payable, whereupon
the same shall become immediately due and payable, without offset or
counterclaim of any kind and without presentment, demand, protest or further
notice of any kind, and without regard to the running of any statutes of
limitation, all of which are hereby expressly waived by the Company.
Any declaration made pursuant to Section 8(2) hereof is subject to the
condition that, if at any time after the principal of this Debenture shall have
become due and payable, and before any judgment or decree for the payment of the
moneys so due, or any thereof, shall have been entered, all arrears of interest
upon this Debenture (except that Principal Sum of this Debenture which by such
declaration shall have become payable) shall have been duly paid, and every
Event of Default shall have been made good, waived or cured, then and in every
such case the Holder shall be deemed to have rescinded and annulled such
declaration and its consequences; but no such rescission or annulment shall
<PAGE>
extend to or affect any subsequent Event of Default or impair any right
consequent thereon.
9. CORPORATE OBLIGATION.
It is expressly understood that this Debenture is solely a
corporate obligation of the Company and that any and all personal liability,
either at common law or in equity, or by constitution or statute, of, and any
and all rights and claims against, every stockholder, officer, or director, as
such, past, present or future, are expressly waived and released by the Holder
as a part of the consideration for the issuance hereof.
10. TRANSFER.
Subject to the appropriate provisions of the Act and of Section 7
hereof, this Debenture or any portion of the principal amount hereof in One
Hundred Thousand Dollars ($100,000) increments, or multiples thereof (unless the
entire Principal Sum is being transferred), is transferable on the records of
the Company upon presentation of this Debenture, properly endorsed, at its
principal office; upon such presentation and transfer a new Debenture or
Debentures will be issued; provided, however, no transfer shall be made to any
competitors of the Company. For the purposes of payment and all other purposes,
the Company shall deem and treat the person in whose name this Debenture is
registered as the absolute owner hereof and the Company shall not be affected by
any notice to the contrary.
11. MISCELLANEOUS.
(a) Notwithstanding the foregoing, the Company promises to
pay interest after maturity (whether by acceleration or otherwise, and before as
well as after judgment) at the same rate as above provided prior to maturity on
balances, if any, then outstanding.
(b) Interest under this Debenture shall be computed on the
basis of a thirty (30) day month and a year of 360 days for the actual number of
days elapsed.
(c) In case at any time any Common Stock shall be listed on
any stock exchange or NASDAQ, the Company will list on such exchange or NASDAQ,
and all other exchanges where such stock or other stock, warrants, and
securities at the time issuable upon the conversion of this Debenture may be
listed, and keep listed thereon subject to listing requirements of such exchange
or exchanges, an official notice of issuance upon the conversion of this
Debenture, all shares of common stock and other stock and securities from time
to time issuable upon such conversion.
(d) Unless otherwise specifically proved herein, any notice
required by this Agreement is effective and deemed delivered when faxed to the
numbers set forth herein and receipt of such fax is electronically confirmed.
Any such notice shall also be sent on the day such fax is sent (or if such day
is not a business day, the next business day by overnight courier), properly
addressed. Notices will be sent to the fax numbers and addresses set forth in
this Agreement, unless either party notifies the other of an fax and/or address
change in writing.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be executed in
Vancouver, British Columbia as of the day and year first above written.
EFINANCIAL DEPOT.COM, INC.
By: /s/ John Huguet
-----------------
Its: President
---------
OXFORD CAPITAL CORP.
By: /s/ Riaz Mamdani
------------------
Talk Stock With Me, Inc. is a 100% wholly-owned subsidiary of the Company.
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 11859
<SECURITIES> 51836
<RECEIVABLES> 477920
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 236290
<PP&E> 35176
<DEPRECIATION> 4020
<TOTAL-ASSETS> 267446
<CURRENT-LIABILITIES> 135938
<BONDS> 0
0
0
<COMMON> 12500
<OTHER-SE> 74398
<TOTAL-LIABILITY-AND-EQUITY> 267446
<SALES> 0
<TOTAL-REVENUES> 1197813
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1026875
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 138735
<INCOME-TAX> 75350
<INCOME-CONTINUING> 63385
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<CHANGES> 0
<NET-INCOME> 63385
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</TABLE>
